Good governance practices don’t always draw headlines. But staying out of the news may be a reflection of a retirement system that is running smoothly and adhering to standards that protect the best interests of its members and retirees as well as employers and taxpayers.

The National Conference on Public Employee Retirement Systems (NCPERS) recently issued guidelines for governance best practice for public retirement systems. The guidelines serve as a checklist, of sorts, for policies, procedures, and practices of public retirement systems such as Colorado PERA that help ensure stakeholder needs are effectively met.

According to NCPERS, there is a strong link between retirement systems that follow best practices and their performance. Research shows that effective governance may improve long-term investment returns by up to 2.4 percent, annually. And, along with effectively implementing best practices, the need for retirement systems to communicate about how they work to benefit their stakeholders has never been greater.

The NCPERS Best Governance Practices for Public Retirement Systems includes the following categories of best practice, each of which PERA works to achieve.

Governance Manual

According to NCPERS, “a fund should adopt a governance manual that serves as a central repository for the fund’s primary governance documents.” PERA’s Governance Manual, first developed in 2001 and updated on a regular basis as standards change, provides a framework and starting point for our oversight and governance functions, including:

• Summaries of statutes, regulations, and Board practices;
• PERA’s Mission and Vision;
• Board policies, including the Board Performance Evaluation Policy.

Board Practices

Board practices can have a proven impact on performance and risk oversight. The PERA Board of Trustees engages in best practices to ensure strong oversight and plan performance. A few practices are:

• Development of a strategic plan, updated for 2019-2023;
• Undertaking Board evaluations, as referenced in the Governance Manual;
• Conducting actuarial valuations to inform the Board of the fund’s future financial needs;
• Using asset allocation studies to identify asset mixes for meeting future financial needs;
• Voting its proxies.

Board Policies

The PERA Board has adopted several policies designed to guide the retirement system to its stated goals, such as:

• Standards of conduct, ethics and conflict of interest rules, such as those included in the Governance Manual;
• A Board Communications Policy that facilitates effective communications and outlines standards and procedures for trustees and executives, included in the Governance Manual;
• An Investment Policy that includes goals, monitoring procedures, and Board risk tolerances.

Risk Oversight

PERA’s risk management includes policies and assessments that provide accountability:

• Risk assessments (e.g. audits) that test controls and potential outcomes of risk events;
• Early adoption of sensitivity analyses, some of which is included in the CAFR;
• Key measures, such as signal light reporting, that assess risk exposure.

Strategic Planning

Strategic planning is a hallmark of successful organizations. PERA’s Strategic Plan, newly updated in 2019, includes several components. A few examples consist of:

• Goals and performance measures for key functions;
• Review of long-term investment goals, investment risk tolerances, and diversification objectives;
• Succession and leadership development plans and refreshed Board policy.

Reporting: Key Performance and Risk Measures

PERA issues a number of performance and risk reports, many of which are compiled within the annual CAFR. A few highlights:

• The funded ratio as measured by the ratio of fund assets to fund liabilities;
• Net annualized investment returns relative to the return assumption and benchmarks;
• Future benefits owed to members as measured by the actuarial accrued liability;
• Net assets available for benefits.

PERA also reports on the results of its effectiveness with members through the annual CEM Benchmarking review of service and cost, incorporating:

• Timeliness and accuracy of distributions paid to members and beneficiaries;
• Member satisfaction with fund services as measured by surveys and correspondence.

Stakeholder Communications

PERA regularly communicates with members and other stakeholders through the website, publications, PERA on the Issues, and other resources. A few of these include:

• A mission statement that describes the fund’s purpose to members and the public;
• Surveys that measure participant satisfaction, while providing a basis for improvements;
• Updates, letters, annual reports on fund operations and forms for member beneficiaries.

At PERA, we strive to exceed expectations and to provide transparency into complex operations. These policies and practices establish a foundation to ensure that PERA operates as an efficient, trustworthy partner in providing retirement and other benefits to more than 600,000 current and former Colorado public employees.