Retirement insights from a Colorado PERA perspective

A distant view shows a mountainous landscape with sloping peaks, green trees in the foreground, and a cloudy sky above.

The investment staff at Colorado PERA have a large responsibility: managing more than $61 billion for the defined benefit plans and almost $6 billion for the defined contribution plans on behalf of current and former public employees.



We operate a low-cost investment program—management expenses amount to less than one-half of one percent of the total fund—and staff are always looking for ways to improve. One way we reduce costs for members is by managing a large portion of the portfolio internally rather than paying outside managers.



PERA started managing some assets internally in the 1970s, and we’ve been expanding that capability where appropriate over the years. We now internally manage about 60% of all <a href="https://www.copera.org/investments/defined-benefit-db-plan-assets" target="_blank" rel="noreferrer noopener">DB Plan investments</a>.



We estimate we save our members at least $65 million a year in fees by managing PERA Defined Benefit (DB) Plan assets in-house and, through reductions in administration and investment management fees, have achieved an 82% decrease in fees in the PERAPlus 401(k) plan since 2011.



A new strategy PERA’s investment team has been exploring in recent years is unitization.



<h2 style="color:#000000;" class="wp-block-heading has-black-color has-text-color has-medium-font-size">What is unitization?</h2>



Perhaps the easiest way to understand unitized investment products is to think of them like mutual funds—investors pool their resources in a fund which invests in a mix of investments, and each investor owns shares (or units) of the pool. This can make it easier for individual investors to have exposure to assets that are often only available to large institutional investors, since plan participants can own a portion of the overall pool instead of having to buy each underlying asset.



In the context of PERA’s investment program, unitizing offers to participants in the <a href="https://www.copera.org/investments/defined-contribution-dc-plan-investments" target="_blank" rel="noreferrer noopener">PERA Defined Contribution (DC) Plan</a> and the <a href="https://www.copera.org/retirees/peraplus-401-k-457-plans" target="_blank" rel="noreferrer noopener">PERAPlus 401(k) and 457 Plans</a> the opportunity to invest alongside the PERA DB Plan in a combined pool of assets while reaping the benefits of the professional management experience of our staff.



Unlike the DB Plan, participants in the DC Plan and PERAPlus plans make their own investment decisions and select from a variety of white label funds that are overseen by internal and/or external asset managers. One goal of unitization is to increase the amount of assets managed internally, which reduces the amount of money participants pay in fees to those external managers.



“We have a highly skilled team of investment professionals who work every day to be effective and responsible stewards of the DB Plan’s assets,” said Chief Investment Officer/Chief Operating Officer Amy C. McGarrity. “I’m glad we can extend some of that investment management expertise to our DC Plan and PERAPlus participants and potentially lower their investment management fees.”



PERA’s investment team began exploring unitization several years ago and completed work on unitizing the <a href="https://copera.org/pera-on-the-issues/asset-classes-explained-fixed-income" target="_blank" rel="noreferrer noopener">Fixed Income asset class</a> in 2022, producing cost savings for participants in the PERAdvantage Fixed Income fund. In early 2025, staff completed unitization of the <a href="https://copera.org/pera-on-the-issues/asset-classes-explained-global-equity" target="_blank" rel="noreferrer noopener">Global Equity asset class</a>, PERA’s largest, which allows for improved efficiencies in administration.



PERA’s investment team has long-term aspirations, including the potential of eventually unitizing the entire DB Plan portfolio or offering custom-built target retirement date funds.



Unitization is just one way PERA staff are working to innovate and modernize the services we provide to our members and ensure a secure retirement for the hundreds of thousands of current and former public employees who serve Colorado.

Unitization: Leveraging PERA’s Investment Expertise to Benefit Our Participants

The American public continues to hold positive opinions of defined benefit pension plans, according to <a href="https://www.nirsonline.org/reports/what-do-americans-think-about-pensions-for-public-employees/" target="_blank" rel="noreferrer noopener">the latest survey data from the National Institute on Retirement Security</a> (NIRS).



Researchers contacted more than 1,200 adults aged 25 and older across the country to understand public opinion about defined benefit plans like what Colorado PERA offers. They found 86% of survey respondents think all workers should have access to a defined benefit pension, and not just public employees.



In addition, while Americans may be divided politically, the NIRS survey found strong agreement on the value of pensions. More than 80 percent of each political group—Democrats, Republicans, and Independents—voiced their support for pensions.



Unlike a defined contribution plan such as a 401(k), a defined benefit plan like the PERA Defined Benefit Plan provides retirement income a person cannot outlive. That makes for a valuable benefit that can be a powerful tool in maintaining a qualified workforce.



<figure class="wp-block-image size-full"><img decoding="async" loading="lazy" width="2428" height="1414" src="https://content.copera.org/wp-content/uploads/2024/11/nirs-american-attitudes-on-pensions.png" alt="Two pie charts showing results of a survey of Americans' attitudes toward pensions. The left chart shows 82% of Americans agree that pensions are a good way to recruit and retain qualified teachers. The right chart shows 84% of Americans agree that pensions are a good way to recruit and retain qualified public safety employees." class="wp-image-54938" srcset="https://content.copera.org/wp-content/uploads/2024/11/nirs-american-attitudes-on-pensions.png 2428w, https://content.copera.org/wp-content/uploads/2024/11/nirs-american-attitudes-on-pensions-300x175.png 300w, https://content.copera.org/wp-content/uploads/2024/11/nirs-american-attitudes-on-pensions-1024x596.png 1024w, https://content.copera.org/wp-content/uploads/2024/11/nirs-american-attitudes-on-pensions-768x447.png 768w, https://content.copera.org/wp-content/uploads/2024/11/nirs-american-attitudes-on-pensions-1536x895.png 1536w, https://content.copera.org/wp-content/uploads/2024/11/nirs-american-attitudes-on-pensions-2048x1193.png 2048w" sizes="(max-width: 2428px) 100vw, 2428px" /><figcaption class="wp-element-caption">Image courtesy: National Institute on Retirement Security</figcaption></figure>



Defined benefit plans are most common in the public sector today, and the NIRS survey asked respondents whether they agreed that pensions are a valuable tool to recruit and retain workers who provide important public services, such as teachers and public safety workers. The survey found 82% agree that pensions help recruit and retain teachers and 84% agree that they help recruit and retain public safety workers.



Since 1931, Colorado PERA has been helping support Colorado’s public workforce by providing lifetime retirement and other benefits. In addition to the PERA Defined Benefit Plan, PERA members have access to defined contribution plans, health care benefits, and more, ensuring the state’s public workers have the tools they need for a secure retirement.

Survey Finds Strong Support for Public Pensions

Since 1931, Colorado PERA has been providing retirement and other benefits to the public employees who keep our state running. As the workforce and retirement landscape have changed, PERA also has adapted and grown; Colorado’s largest public retirement plan now covers nearly 700,000 current and former public workers.



PERA benefits, including the hybrid defined benefit plan and the option for some members to choose a defined contribution plan, have been valuable in helping public agencies recruit and retain employees for decades. Critics of defined benefit pensions, however, argue that today’s workers would be better served by other types of plans. An upcoming study will help shed light on that debate.



<h2 class="wp-block-heading">Purpose and scope</h2>



During the 2024 legislative session, state lawmakers passed <a href="https://leg.colorado.gov/bills/hb24-1427" target="_blank" rel="noreferrer noopener">House Bill 1427</a>, which&nbsp;calls for the State Auditor, in cooperation with PERA, to enlist an independent actuarial firm experienced with public pensions to conduct a comprehensive study comparing the cost and effectiveness of the PERA Defined Benefit (DB) Plan to alternative plan designs, as well as providing an analysis of certain aspects of PERA’s current&nbsp;defined benefit&nbsp;and&nbsp;defined contribution&nbsp;plans.



The study will be similar in scope and purpose to&nbsp;<a href="https://content.copera.org/key-pera-features-make-colorados-largest-retirement-plan-efficient-and-effective/" target="_blank" rel="noreferrer noopener" class="broken_link">a study that took place following similar legislation in 2014</a>. That study compared various facets of the PERA DB Plan—such as cost per member, contribution rates, income replacement ratio, and&nbsp;portability—to other public and private sector plan types, including Social Security. The study is <a href="http://leg.colorado.gov/sites/default/files/documents/audits/1409s_colorado_public_employees_retirement_association_pera_hybrid_defined_benefit_plan_study.pdf" target="_blank" rel="noreferrer noopener">available online here</a>.



Why refresh the study after a decade? In part, things have changed, and state leaders see value in having updated data. Since the last study, Colorado has seen tremendous growth, the public workforce has changed, and various reforms have put PERA on a path to full funding. This new study will incorporate all those changes to provide a more accurate assessment of PERA’s value to employers and the state as a whole.



While a lot has changed in the past 10 years, one thing that hasn’t is PERA’s commitment to providing retirement security to our members. The previous study concluded that PERA’s plan provides a better benefit at a lower cost than other plans, making it the best option for providing retirement benefits to the state’s public employees. We believe an updated study will show the same results.



<h2 class="wp-block-heading">What’s next?</h2>



The State Auditor and PERA have until the end of October to select an actuarial firm to conduct the study. Once a firm is selected, the study is likely to take several months to complete.



When the study is complete, PERA and the State Auditor will provide a report of the study’s findings to the governor, the Joint Budget Committee, the Legislative Audit Committee, and the House and Senate Finance Committees.



We’ll also provide a summary of the study’s findings here on PERA On The Issues. Make sure you’re <a href="https://www.copera.org/pera-on-the-issues/subscribe">subscribed</a> to our biweekly newsletter to receive all the latest updates.

Why the State is Commissioning a Study on PERA’s Plan Design

<h2 style="color:#000000;" class="wp-block-heading has-black-color has-text-color has-medium-font-size"><a href="https://www.ncpers.org/costs-of-pension-reforms-income-inequality" target="_blank" rel="noreferrer noopener">The Hidden Costs of Pension Reforms: Rising Income Inequality, Lagging Economic Growth | National Conference on Public Employee Retirement Systems</a></h2>



Changes to the defined benefit pension landscape—including the shift from pensions to defined contribution plans like 401(k)s in the private sector—have contributed to worsening income equality among retirees over the years, according to new research. The study, from the National Conference on Public Employee Retirement Systems, also concluded that income inequality has an overall negative effect on the economy by limiting growth.



<h2 style="color:#000000;" class="wp-block-heading has-black-color has-text-color has-medium-font-size"><a href="https://apnews.com/article/interest-rates-prices-inflation-federal-reserve-economy-2cd182eb34a7d6772ff573bec0bcf64d" target="_blank" rel="noreferrer noopener">Jerome Powell Says Fed to Soon Begin Reducing Interest Rates | AP News</a></h2>



Federal Reserve Chairman Jerome Powell confirmed he’s ready to start lowering interest rates. At the Fed’s annual conference in Wyoming, Powell said it’s time for policy to adjust as inflation has eased and the job market has cooled. Though Powell didn’t specify when the central bank will start to lower rates, many experts expect the first cut to come when the Federal Open Market Committee meets in September.



<h2 style="color:#000000;" class="wp-block-heading has-black-color has-text-color has-medium-font-size"><a href="https://www.cpr.org/2024/08/25/colorado-talk-about-dementia-campaign/" target="_blank" rel="noreferrer noopener">Colorado Hopes to Raise Awareness of Dementia, Start Conversations, With New Campaign | Colorado Public Radio</a></h2>



The Colorado Department of Public Health and Environment is launching a new campaign called “Talk About Dementia.” The campaign aims to raise awareness about dementia, including Alzheimer’s disease, which can often go undiagnosed. Since early detection can be important for treatment, officials hope the campaign can help lessen dementia’s impact in the state.



<h2 style="color:#000000;" class="wp-block-heading has-black-color has-text-color has-medium-font-size"><a href="https://www.thinkadvisor.com/2024/08/15/long-term-care-costs-emerge-as-a-top-issue-for-older-americans/" target="_blank" rel="noreferrer noopener">Long-Term Care Costs Emerge as a Top Issue for Older Americans | ThinkAdvisor</a></h2>



Paying for health care is one of the top concerns for retirees and those who are preparing for retirement. A new survey of Americans aged 50 and older found people are especially concerned about the cost of home care, assisted living, and nursing home care. The cost of acute medical care was the second-highest concern, followed by the cost of prescription medications.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



News You Should Know is a digest of news from publications around the nation about finance, investing, and retirement.

News You Should Know: Income Inequality Rises with Decrease in Pension Access, Study Finds

The Colorado Legislature this month approved a bill that directs the Office of the State Auditor to commission an updated study comparing the value of PERA’s&nbsp;hybrid&nbsp;defined benefit&nbsp;(DB) plan to other plan designs.



<a href="https://leg.colorado.gov/bills/hb24-1427" target="_blank" rel="noreferrer noopener">House Bill 1427</a>&nbsp;calls for the State Auditor, in cooperation with PERA, to enlist an independent actuarial firm experienced with public pensions to conduct a comprehensive study comparing the cost and effectiveness of the PERA DB Plan to alternative plan designs, as well as providing an analysis of certain aspects of PERA’s current&nbsp;defined benefit&nbsp;and&nbsp;defined contribution&nbsp;plans.



The study will be similar in scope and purpose to <a href="https://content.copera.org/key-pera-features-make-colorados-largest-retirement-plan-efficient-and-effective/" target="_blank" rel="noreferrer noopener" class="broken_link">a study that took place following similar legislation in 2014</a>. That study compared various facets of the PERA DB Plan—such as cost per member, contribution rates, income replacement ratio, and portability—to other public and private sector plan types, including Social Security. The study concluded that PERA’s plan provides a better benefit at a lower cost than other plans, making it the best option for providing retirement benefits to the state’s public employees.



READ MORE: <a href="https://content.copera.org/key-pera-features-make-colorados-largest-retirement-plan-efficient-and-effective/" target="_blank" rel="noreferrer noopener" class="broken_link">Key PERA Features Make Colorado’s Largest Retirement Plan Efficient and Effective (from 2015)</a>



As Colorado’s public workforce evolves, it’s important that Colorado PERA remain flexible enough to meet the membership’s changing needs. This study will help policymakers assess PERA’s continued value in recruiting and retaining a highly qualified public workforce in the years ahead.



If HB24-1427 is signed into law, the State Auditor and PERA will have until the end of October to select an actuarial firm. When the study is complete, PERA and the State Auditor will provide a report of the study’s findings to the governor, the Joint Budget Committee, the Legislative Audit Committee, and the House and Senate Finance Committees.



In addition to HB24-1427, lawmakers have passed two other PERA-related bills, both of which will expand provisions for PERA members who return to work in retirement. Those bills have been sent to the governor for his signature.



RELATED: <a href="https://content.copera.org/2024-proposed-legislation-status/" target="_blank" rel="noreferrer noopener">2024 Proposed Legislation Status</a>

Lawmakers Pass Bill to Refresh Study on Value of PERA’s Defined Benefit Plan

Generation X – the group of Americans born between 1965 and 1980 &#8212; is often referred to as the “Forgotten Generation.” It’s a smaller group than both the Baby Boomers that came before and the Millennial generation that followed.



With the oldest members of Generation X soon approaching retirement, it’s important to look at where they stand financially. New <a href="https://www.nirsonline.org/reports/genx/" target="_blank" rel="noreferrer noopener">research from the National Institute on Retirement Security</a> (NIRS) finds that many members of Gen X are struggling to meet retirement savings targets and risk having a significantly lower standard of living when they stop working.



<h2 class="wp-block-heading">Access to employer-sponsored retirement plans</h2>



According to the NIRS researchers, the decline in the number of employers offering defined benefit (DB) pension plans is a major factor in Gen X’s retirement readiness. In 1980, more than 80 percent of workers in the private sector had access to a DB plan, according to the U.S. Bureau of Labor Statistics.



Today, few private employers offer pensions to their workers. Most employees only have the option to save for retirement in employer-sponsored defined contribution (DC) plans like 401(k)s or on their own in individual retirement accounts (IRAs). According to NIRS, just 14 percent of Gen Xers were participating in a DB plan as of December 2020.



The potential challenge of relying solely on DC plans is a person’s retirement income depends on how much they contributed over the course of their working years and the investment gains they may have earned over that time.



Since Generation X was the first generation to enter the workforce when DB plans were on the decline, they’re the first to see the effects of that shift on their finances on a large scale.



<h2 class="wp-block-heading">Generation X’s retirement readiness</h2>



The NIRS researchers found that just over half of Gen Xers participated in an employer-sponsored retirement plan in in 2020. Of those contributing to a private account like a 401(k), the average balance was $129,994. The median account balance, which isn’t skewed by high earners, was $10,000 for individuals and $40,000 for households.



Additionally, 40 percent of Gen Xers have accounts with no balance at all, according to NIRS.



The researchers warn that retirees who don’t have enough savings to live on will have to rely on Social Security, which wasn’t designed as a full income replacement. In 2023, the average Social Security benefit is about $1,700 a month.



It’s not all bad news, however. The youngest Gen Xers are in their early 40s, which are often a person’s prime earning years. That means younger members of the generation still have time to bolster their savings and improve their retirement security.



<h2 class="wp-block-heading">How PERA combines the best of DB and DC plans</h2>



The State of Colorado created PERA in August 1931 and since then, PERA has grown to include DB and DC offerings covering more than 670,000 current and former public employees.



The PERA Defined Benefit Plan is available to all PERA members and is designed to provide lifetime income in retirement. The <a href="https://peraontheissues.com/pera-by-the-numbers-a-closer-look-at-the-2022-annual-report/" target="_blank" rel="noreferrer noopener">average monthly benefit was $3,238</a> in 2022.



Some members have a choice between the PERA DB Plan and the PERA DC Plan, which features a variety of low-cost investment options for members who want to invest their retirement funds on their own. Members can also annuitize their account balance at retirement to convert it to regular monthly income.



PERA also offers the optional <a href="https://www.copera.org/peraplus-401-k-457-plans" target="_blank" rel="noreferrer noopener">PERAPlus</a> 401(k) to all members, and some PERA employers also offer the PERAPlus 457 Plan. Both are low-cost options for setting aside extra money for retirement, and both have Roth options for saving after-tax dollars.



Together, PERA’s defined benefit and defined contribution plans help ensure that Colorado’s public employees have the income they need in retirement, regardless of which generation they’re a member of.

How the Shift Away From Pensions Has Affected Gen X’s Retirement Readiness

How well do you know the PERA benefits that Colorado PERA provides?



Whether you&#8217;re new to PERA, or you&#8217;ve been working for a PERA employer for 20 years, it&#8217;s important to know how a monthly benefit is calculated, benefit options and other basics.



The quiz below takes just a few minutes to complete and includes links to helpful information on PERA&#8217;s website.


[ays_quiz id=&#8217;2&#8242;]



<div style="height:42px" aria-hidden="true" class="wp-block-spacer"></div>



Resources for learning more about PERA benefits:



<ul>
<li><a href="https://www.copera.org/benefit-basics" target="_blank" rel="noreferrer noopener">PERA benefit basics</a></li>



<li><a href="https://www.copera.org/pera-frequently-asked-questions" target="_blank" rel="noreferrer noopener">Frequently asked questions (FAQs)</a></li>



<li><a href="https://www.copera.org/video-library" target="_blank" rel="noreferrer noopener">Video library</a></li>



<li><a href="https://www.copera.org/webinars" target="_blank" rel="noreferrer noopener">Webinars</a></li>
</ul>

Quiz: Test Your Knowledge of PERA Benefits

A new report highlights how spending by public sector retirees across the United States helped support jobs and local economies during the tumultuous first year of the COVID-19 pandemic.



In <a href="https://www.nirsonline.org/reports/pensionomics2023/" target="_blank" rel="noreferrer noopener">Pensionomics 2023</a>, researchers from the National Institute on Retirement Security (NIRS) state public and private pension plans paid out nearly $613 billion in retirement benefits in 2020, resulting in $1.3 trillion in total economic output as retirees turned around and spent those dollars. Retirees also paid taxes on those benefits, paying nearly $158 billion to federal, state and local governments. In total, NIRS estimates retiree spending supported nearly 6.8 million U.S. jobs in 2020.



Pension benefits from state and local plans made up more than half of the pension benefits paid that year, totaling more than $334 billion, according to NIRS. In <a href="https://www.nirsonline.org/wp-content/uploads/2023/01/pensionomics2023_CO.pdf" target="_blank" rel="noreferrer noopener">Colorado alone</a>, public sector retirees received $5.5 billion in pension benefits in 2020, translating to $7.9 billion in total economic output and supporting 45,267 jobs. Those jobs represented 1.5 percent of the state’s total workforce.



<h2 class="wp-block-heading">Colorado PERA’s economic impact</h2>



PERA is the largest retirement plan serving public employees in Colorado with nearly 650,000 members.



More recently, in 2021, PERA paid $4.35 billion in retirement benefits to more than 110,000 Colorado retirees. That resulted in $6.8 billion in total economic output and supported 31,449 jobs statewide, <a href="https://www.copera.org/u-s-pension-benefits-played-important-economic-role-in-first-year-of-pandemic" target="_blank" rel="noreferrer noopener" class="broken_link">according to a report by Pacey Economics</a>. In addition, retirees paid $382.2 million in state and local taxes on those PERA benefits.



<blockquote class="wp-block-quote">
READ MORE: <a href="https://peraontheissues.com/pera-benefits-contribute-billions-of-dollars-to-state-economy-support-thousands-of-jobs/" target="_blank" rel="noreferrer noopener">PERA Benefits Contribute Billions of Dollars to State Economy, Support Thousands of Jobs</a>
</blockquote>



The steady stream of income that defined benefit pensions provide is an important economic driver, providing a measure of stability when it’s needed the most. 



“Every month, PERA pays out hundreds of millions of dollars to retired public employees and their beneficiaries across Colorado, and those dollars are spent in their local communities,” said PERA Executive Director Ron Baker. “Retiree and beneficiary spending is a vital part of Colorado’s economy, and the stabilizing effect of that spending has been evident amid the economic uncertainty we’ve experienced in recent years.”

U.S. Pension Benefits Played Important Economic Role in First Year of Pandemic

When planning for retirement, it’s important to have a good sense of one’s income sources, expenses, and the various risks to one’s finances over the course of retirement, which could last for two or three decades.



Researchers have identified five major financial risks retirees face: Longevity risk (living longer than expected and running out of savings), market risk (ups and downs in the market affecting account balances), health risk (unexpected health care costs), family risk (financially supporting relatives), and policy risk (potential changes to benefits like Social Security).



Recent research from the Center for Retirement Research at Boston College finds many retirees have an inaccurate sense of which risks pose the biggest threats, which could leave them unprepared. In <a href="https://crr.bc.edu/briefs/how-well-do-retirees-assess-the-risks-they-face-in-retirement/" target="_blank" rel="noreferrer noopener">a survey of about 20,000 people over the age of 50</a>, retirees routinely underestimated their life expectancy and health care costs, while overestimating the effects of the stock market on their finances.



Survey respondents ranked market risk as the biggest risk they face, followed by longevity and health. In what the study author calls an “objective” ranking, longevity risk tops the list, followed by health and market risks.



As people increasingly rely on defined contribution plans like 401(k)s and IRAs for retirement savings, having an inaccurate understanding of these risks can have serious implications for a retiree’s finances.



Defined benefit retirement plans like the one offered by Colorado PERA use strategies that address these risks, particularly longevity risk, to provide retirement security throughout a member’s retired years.



<h2 class="wp-block-heading">Longevity risk and PERA</h2>



PERA’s defined benefit plan provides a retirement benefit that a retiree cannot outlive. That means when a member retires, PERA will continue to provide monthly income until the retiree dies, regardless of how long they live.



Defined benefit plans accomplish this by pooling funds and thereby sharing risk. All contributions, interest, investment gains and other dollars are held in a trust fund that is used to make benefit payments for members. Because all retirees are drawing income from the same source, they share longevity and market risk. For example, a retiree who lives longer than expected will draw more income from the fund while a retiree who dies sooner than expected will draw less – essentially balancing each other out.



To fund each member’s retirement, defined benefit plans like PERA only have to plan for the average life expectancy of the group, not each individual’s expected lifespan.



Ensuring the defined benefit trust funds have enough money to pay retirement benefits for decades to come means making sure PERA has an accurate picture of its membership and potential changes in the future. PERA must be able to estimate how long members will live, how much of a benefit they’ll earn, and other factors.



That’s where actuaries come in. These highly skilled mathematicians have the important task of calculating the plan’s liabilities (how much money is owed to benefit recipients) and determining how much money the plan will need on hand to meet those liabilities.



<blockquote class="wp-block-quote">
Read more: <a href="https://peraontheissues.com/explaining-the-role-of-actuaries-in-retirement-plans-like-pera/" target="_blank" rel="noreferrer noopener">Explaining the Role of Actuaries in Retirement Plans like PERA</a>
</blockquote>



Among PERA retirees, the average age at which members retired in 2021 was 59, and the average age of death was 83, so PERA may have to pay a retiree benefits for more than 20 years, on average.



Those numbers won’t always be the same, however. Factors such as life expectancy change over time, so it’s important for plans like PERA to periodically review and adjust. PERA embarks on this process every four years with what is known as an experience study, which compares what actually happened in a given time frame against what PERA projected would happen.



PERA&nbsp;<a href="https://peraontheissues.com/2020-experience-study-preparing-for-a-secure-future/" target="_blank" rel="noreferrer noopener">last conducted an experience study</a>&nbsp;in 2020, and the Board of Trustees adopted several new assumptions as a result. This process will take place again in 2024.



In addition to longevity risk, PERA can help members plan for other types of financial risk, as well. The <a href="https://www.copera.org/peraplus-401-k-457-plans" target="_blank" rel="noreferrer noopener">PERAPlus 401(k) and 457 plans</a> provide low-cost options to set aside extra money for retirement. This can help with large or unexpected expenses, such as health care or rising costs of goods and services.



By pooling assets and regularly monitoring and adjusting as needed, PERA can help alleviate the stress associated with retirees’ biggest financial risk and continue to provide reliable monthly income they can’t outlive.

How Retirement Systems Like PERA Plan for the Biggest Financial Risks Retirees Face

Two years into the COVID-19 pandemic, school districts across the country are facing serious shortages of qualified teachers and other staff, and those shortages have led to widespread concern.



In <a href="https://www.nirsonline.org/wp-content/uploads/2022/02/FINAL-2022-Americans-Views-of-Public-School-Teachers-.pdf" target="_blank" rel="noreferrer noopener">a recent survey from the National Institute on Retirement Security</a> (NIRS), 84 percent of people surveyed said they’re worried about shortages of teachers and school staff, and 81 percent said they’re worried about people leaving the profession.



The educator shortage was the topic of a recent forum held by the <a href="https://www.pebc.org/" target="_blank" rel="noreferrer noopener">Public Education and Business Coalition</a> (PEBC), a Denver-based organization that works with school districts, teachers and business leaders across the country to improve public education. Colorado PERA was a sponsor of PEBC’s Colorado Education Workforce Forum.



At the forum, state education officials, district superintendents and business leaders came together to discuss the sobering reality of Colorado’s educator shortage and brainstorm solutions.



In the 2020-2021 school year, there were nearly 7,000 teaching positions to fill in Colorado, but only about 3,000 graduates from teaching programs, according to PEBC. In addition, school districts across the state are dealing with a 16 percent turnover rate and per-student funding that’s well below the national average.



Teacher pay is a major factor in discussions about shortages, and so are benefits — particularly retirement benefits. In the NIRS survey, 90 percent of respondents agreed that teachers and school staff should have access to a pension for retirement security, and 94 percent agreed that elected officials should ensure those pensions are adequately funded.



<h2 class="wp-block-heading">The role of Colorado PERA in attracting and retaining teachers</h2>



Decades ago, it was common for many workers to receive a defined benefit (DB) retirement plan — also known as a pension — from their employer. Today, public employees like teachers and other school employees are among the few who still have access to DB plans. Most other workers have to rely on defined contribution (DC) plans like 401(k)s to save for retirement.



<blockquote class="wp-block-quote">
Related: <a rel="noreferrer noopener" href="https://peraontheissues.com/states-consider-reviving-closed-pensions-in-effort-to-recruit-retain-public-workers/" target="_blank">States Consider Reviving Closed Pensions in Effort to Recruit, Retain Public Workers</a>
</blockquote>



PERA’s hybrid&nbsp;defined benefit&nbsp;plan is a particularly strong recruitment and retention tool because of the value it offers to employees regardless of the length of their career. PERA’s plan design has evolved to serve both long-service employees as well as those who only work for a short time in public employment. For example, every dollar a PERA member contributes to their account is theirs, and they can take those funds with them when they leave PERA-covered employment. This plan design benefits Colorado’s public employees, their employers and the valuable services delivered to Colorado taxpayers.



In the 2022 legislative session that just wrapped up in May, Colorado lawmakers tackled the issue of educator shortages with <a href="https://co.chalkbeat.org/22899633/colorado-education-school-bill-tracker-2022" target="_blank" rel="noreferrer noopener">a number of bills</a> to increase public school funding. They also <a href="https://peraontheissues.com/2022-proposed-legislation-status/" target="_blank" rel="noreferrer noopener">passed two bills</a> that allow some PERA retirees to return to work in school districts dealing with critical shortages.



Solving the teacher shortage in Colorado and elsewhere will require creativity and commitment, and Colorado PERA remains a valuable tool for school districts looking to hire and keep qualified educators.

Tag Archives: