PERA Board Adopts Updated Actuarial Assumptions Following Experience Study

DENVER—The Colorado PERA Board of Trustees has adopted a series of revised actuarial assumptions following the conclusion of a three-to-four month study comparing current actuarial assumptions to actual plan experience.

The PERA Defined Benefit Plan and health care plans utilize various assumptions to project the long-term cost of providing benefits. Assumptions include factors such as investment return, price inflation, payroll growth, and life expectancy. Those assumptions are key to the calculations and projections that underly PERA’s annual actuarial valuations and Annual Comprehensive Financial Report (ACFR).

Every four years, the Board reviews and refines its assumptions through an actuarial experience study. The Board’s actuarial consultant, Segal, performed the study comparing the Plan’s current actuarial assumptions to the economic outcomes and member behaviors experienced by the plan during the study period from January 1, 2020, to December 31, 2023.

As a result of the analysis, Segal recommended adjustments to several demographic assumptions, as follows:

• Salary scale assumptions were altered to better reflect actual recent experience.
• Assumed rates of termination, retirement, and disability were revised to more closely reflect actual experience.
• Mortality base tables were retained with revised adjustments for credibility and gender, where applicable, and the applied generational projection scale was updated for all groups.
• Administrative expense load was increased from 0.40% to 0.45%, as a percentage of covered payroll.
• Assumed annual membership growth (for projection purposes only) was decreased for the School, Local Government, and DPS Divisions.

Segal recommended retention of the current economic assumptions, including the long-term expected rate of return (7.25%), price inflation (2.3%), and wage inflation (3.0%).

In addition, Segal recommended revised assumptions for the Health Care Trust Funds, which provide health care subsidies for PERACare plan participants.

The Board voted unanimously to adopt all recommendations for the five Division Trust Funds and the two Health Care Trust Funds.

Segal estimates the new assumptions will have modest effects on PERA’s funded status, but the full impact of the new assumptions won’t be clear until PERA releases its December 31, 2024, actuarial valuations and 2024 ACFR. Those reports are in progress and will be available following the Board’s June 27 meeting.

“The PERA Board is committed to regular and rigorous review of its actuarial assumptions and PERA remains focused on meeting our funding goals and providing retirement security to Colorado’s public workforce for many decades to come,” said PERA CEO/Executive Director Andrew Roth.

The actuarial experience study reports are available online at copera.org.

Colorado PERA provides retirement and other benefits to over 700,000 current and former teachers, State Troopers, corrections officers, snowplow drivers, and other public employees who provide valuable service to all of Colorado. PERA is a vital and stable contributor to Colorado’s economy, distributing $4.55 billion in benefits in 2023 to more than 114,000 retirees who live in Colorado.