PERA addresses new economic and demographic realities.

The PERA Board of Trustees met on Friday, January 20, and received updated information from their actuaries regarding the trust funds’ amortization period, or the amount of time it will take for each division trust to become fully funded. This action follows the regular and rigorous review process started late last year when the Board adopted new mortality tables to reflect longer life expectancies, and lowered the expected rate of return to better reflect anticipated market conditions.

The new amortization periods increased between 14 years to 31 years, depending on the Division. This increase is on top of the approximately 40-year amortization periods that existed at the end of 2015. The new projections show that PERA is able to pay benefits over the extended time period, but may not be able to withstand a significant market downturn (like in 2008-2009). Changes in demographics (people are living longer) and economics (expected market returns) have extended the period until PERA reaches full-funded status, increasing the risk facing members, taxpayers, and Colorado.

All major Divisions are stable, solvent, and able to pay all benefits in perpetuity. While economic and demographic conditions have changed, this is not 2009 and PERA is not running out of money.

The amortization period of the Judicial Division is much longer than other divisions. It is expected legislation will be introduced this year to address the Judicial Division’s funded status. The Judicial Division is PERA’s smallest member division with 700 active, inactive, and retired members.

The continued health of PERA is vital for the security of our members and the economic stability of communities throughout Colorado. To ensure PERA’s sustainability, the PERA Board has directed staff to embark on an effort to educate and engage a range of stakeholders on the topic of PERA’s funded status and what might be done to improve it. This effort will take place during the course of the year and there will be ample opportunities for members, policy makers, taxpayers and others to participate. More information will be forthcoming.

• See the previous PERA on the Issues article on the impact of assumption changes.
• Stakeholder Outreach Agenda

Important terms for understanding PERA’s amortization period:

• Amortization period – the time it will take to achieve 100 percent funded status.
• Solvent – the trusts have enough money to pay benefits throughout the amortization period.
• Insolvent – the trusts are projected to be depleted in the future.
• Exhaustion – same as insolvent; the trusts are projected to be depleted in the future.

PERA on the Issues posts are written and compiled by the staff of Colorado PERA under the direction of Executive Director Greg Smith and the PERA Board of Trustees. We encourage you to comment with your thoughts and feedback.