
<p>Retirement insights from a Colorado PERA perspective</p>



<p></p>


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


<p>At Colorado PERA, we invest for one purpose: To provide retirement benefits to PERA members for generations to come.</p>



<p>It’s not just our mission, it’s our passion. And it’s the reason we prioritize financial value—not personal or political values—in our investment decisions.</p>



<h4 class="wp-block-heading"><strong>Fiduciary duty</strong></h4>



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<iframe loading="lazy" title="Prioritizing Financial Value Over Personal or Political Values" src="https://player.vimeo.com/video/863343330?dnt=1&amp;app_id=122963" width="640" height="360" frameborder="0" allow="autoplay; fullscreen; picture-in-picture; clipboard-write"></iframe>
</div></figure>



<p>PERA serves nearly 700,000 current and former public employees who have worked hard to make our Colorado communities better places to live. Each of those members counts on PERA to provide a retirement benefit they cannot outlive.</p>



<p>The PERA Board and staff have a fiduciary duty to those members. That means we’re required by law to act solely in the interest of members and benefit recipients, and we must manage the trust funds only for their financial benefit. We make every investment decision with that duty in mind.</p>



<p>Each PERA member is unique, with their own personal values that guide them. It would be impossible to invest based on personal or political values of our individual members or stakeholders. Our fiduciary duty demands that we do what’s right for the membership as a whole, and that means focusing on financial value.</p>



<h4 class="wp-block-heading"><strong>Prioritizing financial value</strong></h4>



<p>Our sole investment goal is to pursue the best risk-adjusted returns for our members. That means when we’re researching a possible investment opportunity or assessing an asset we already hold, our focus is on that investment’s ability to earn money over the long term.</p>



<p>We sometimes hear from stakeholders and others who want us to invest in some segments of the market or divest—sell our investments—from others based on their individual preferences or political beliefs.</p>



<p>That would be contrary to our mission and our fiduciary duty. Our approach involves finding companies, properties and investment funds that we believe will be competitive over time, allowing them to be profitable and generate returns to the portfolio.</p>



<p>Investing based on the financial interest of the whole PERA membership is our fiduciary duty, and we take it seriously because our hard-working members depend on us for their financial future.</p>



<p><strong>Learn more about Investment Stewardship:</strong></p>



<ul>
<li><a href="https://copera.org/investment-stewardship-report" target="_blank" rel="noreferrer noopener">Investment Stewardship Report</a></li>



<li><a href="https://copera.org/stewardship-snapshot" target="_blank" rel="noreferrer noopener">Digital Snapshot</a></li>



<li><a href="https://www.copera.org/stewardship-videos" target="_blank" rel="noreferrer noopener">Video Library: Investment Stewardship</a></li>



<li><a href="https://www.copera.org/pera-on-the-issues/asset-classes-explained-global-equity" target="_blank" rel="noreferrer noopener">Asset Classes Explained</a></li>
</ul>


How PERA Prioritizes Financial Value Over Personal or Political Values


<p>In our recent <a href="https://peraontheissues.com/test-your-knowledge-of-pera-benefits/" target="_blank" rel="noreferrer noopener">quiz about PERA benefits</a>, there was one question that seemed to trip a lot of people up, and it had to do with the PERA Board of Trustees:</p>



<p>Which of the following is the PERA Board of Trustees responsible for setting?</p>



<ul>
<li>A: Employee and employer contribution rates</li>



<li>B: Annual benefit increase amounts</li>



<li>C: Benefit eligibility requirements</li>



<li>D: All of the above</li>



<li><strong>E: None of the above</strong></li>
</ul>



<p>The correct answer is E: None of the above. While the Board is tasked with overseeing PERA operations, it isn’t directly responsible for setting many of the benefits that members receive.</p>



<p>PERA governance and operations are split between three main entities: The state legislature, the PERA Board, and PERA staff.</p>



<h4 class="wp-block-heading"><strong>The legislature and state law</strong></h4>



<p>The state legislature established PERA as an instrumentality of the state in 1931. PERA and its benefits continue to be governed under Title 24, Article 51 of the Colorado Revised Statutes, also known as <a href="https://content.copera.org/what-roles-do-the-general-assembly-and-board-play-at-pera/" target="_blank" rel="noreferrer noopener">PERA Law</a>.</p>



<p>State statute lays out in detail the various provisions that determine who receives PERA benefits, when, and how much they receive, including:</p>



<ul>
<li>Contribution amounts</li>



<li>How service credit can be accrued and purchased</li>



<li>Benefit options and eligibility</li>



<li>Annual benefit increases</li>
</ul>



<p>Because the legislature is responsible for setting benefits, any changes to PERA benefits must also happen at the State Capitol. Change happens when lawmakers bring forth a bill, which then makes its way through the <a href="https://www.youtube.com/watch?v=WLOeY1h1TFo" target="_blank" rel="noreferrer noopener">legislative process</a> with a majority vote in the House and Senate, along with the governor’s signature. Neither the Board nor PERA staff have the power to change any of the provisions set in statute.</p>



<p>So far this year, lawmakers have introduced more than a half-dozen bills pertaining to PERA and its members. <a href="https://peraontheissues.com/2023-proposed-legislation-status/" target="_blank" rel="noreferrer noopener">Click here</a> for the latest on where those bills stand.</p>



<p>The legislature also conducts routine oversight of PERA. Various legislative panels meet regularly with PERA leadership and staff, including the Legislative Audit Committee, the House and Senate Finance Committees, the Joint Budget Committee, the Pension Review Commission and the Pension Review Subcommittee.</p>



<h4 class="wp-block-heading"><strong>The PERA Board of Trustees</strong></h4>



<p>The <a href="https://www.copera.org/about/board-and-leadership" target="_blank" rel="noreferrer noopener">PERA Board</a> is made up of 16 members: three Trustees appointed by the Governor and confirmed by the Senate; four members from the School Division; three members from the State Division; one member from the Local Government Division; one Judicial Division member; two PERA retirees; a non-voting representative from the DPS Division; and the State Treasurer as an ex officio, voting member. As fiduciaries, the Board has a responsibility to act in the best interests of PERA members.</p>



<p>While the legislature sets benefits and other important plan provisions, the PERA Board is responsible for administering those benefits and overseeing PERA operations and management. The Board’s <a href="https://www.copera.org/about/board-of-trustees" target="_blank" rel="noreferrer noopener" class="broken_link">Governance Manual</a>, which adheres to best practices in public pension governance, defines these responsibilities. They include:</p>



<ul>
<li>Setting rules and policy for PERA administration</li>



<li>Establishing organizational priorities and strategies</li>



<li>Overseeing PERA’s investment program</li>
</ul>



<p>The Board also reviews and releases various important reports each year. That includes the <em>Annual Comprehensive Financial Report </em>(ACFR), which provides details about PERA’s financial status, funded status and membership statistics. The ACFR will be available following the Board’s June meeting.</p>



<h4 class="wp-block-heading"><strong>PERA staff</strong></h4>



<p>While the legislature and Board establish policy and rules, PERA staff are responsible for administering plan benefits and managing day-to-day operations. PERA currently employs approximately 300 people who work every day to meet the goals set out in the Board’s <a href="https://www.copera.org/what-roles-do-the-general-assembly-and-board-play-at-pera" target="_blank" rel="noreferrer noopener" class="broken_link">strategic plan</a>. Some of those duties include:</p>



<ul>
<li>Processing employee and employer contributions</li>



<li>Managing PERA’s investments</li>



<li>Distributing retirement payments and other benefits</li>



<li>Member communications and education</li>
</ul>



<p>Providing retirement and other benefits to nearly 650,000 members is a big job, and it’s one we take seriously. The state legislature, PERA Board, and PERA staff all play important roles in making sure Colorado’s public employees will be able to receive reliable retirement income today and for generations to come.</p>


What Roles Do the General Assembly and Board Play at PERA?


<p>The PERA Board of Trustees met for its last meeting of 2022 on Nov. 18. The Board heard updates from PERA staff and consultants, and considered several important issues, including the next Board election, the member contribution interest rate, the results of the actuarial audit, and the Board’s strategic planning process.</p>



<h4 class="wp-block-heading"><strong>2023 Board election</strong></h4>



<p>The Board approved the calendar for the 2023 Board election, where four seats will be up for election:</p>



<ul>
<li><strong>School Division</strong> – currently held by JB Phillips</li>



<li><strong>Local Government Division</strong> – currently held by Trina Ruhland</li>



<li><strong>Judicial Division</strong> – currently held by Hon. Rebecca R. Freyre</li>



<li><strong>Retiree</strong> – currently held by Timothy M. O’Brien</li>
</ul>



<p>Candidacy application will begin January 3 and the election will be held in May</p>



<h4 class="wp-block-heading"><strong>Member contribution interest rate</strong></h4>



<p>By statute, the PERA Board is required to set the interest rate paid on PERA Defined Benefit (DB) Plan accounts. In 2020, the Board <a href="https://content.copera.org/recap-of-the-pera-boards-november-2022-meeting-2/" target="_blank" rel="noreferrer noopener">updated their policy</a> regarding the setting of the interest rate. The policy reflects the Board’s principles and evaluates the interest rate as a component of members’ overall retirement benefit. Based on the guidance provided in the policy, the Board voted to keep the current rate of 3% (compounded annually) for 2023.</p>



<p>If a PERA member leaves PERA-covered employment and requests a refund of their DB account, they receive their contributions, the interest earned on that balance, and any applicable employer match. If that member keeps their account with PERA, however, their balance will continue to accrue interest and the member will be eligible for a lifetime monthly benefit when reaching retirement eligibility.</p>



<h4 class="wp-block-heading"><strong>Results of actuarial audit</strong></h4>



<p>The Board heard the results of <a href="https://content.copera.org/recap-of-the-pera-boards-november-2022-meeting-2/" target="_blank" rel="noreferrer noopener">an independent audit</a> of the work of PERA’s actuarial consultants, The Segal Group, Inc. The audit, by consulting firm Buck Global, LLC, found that Segal’s actuarial assumptions and methods are sound and in compliance with actuarial standards of practice.</p>



<blockquote class="wp-block-quote">
<p><strong>Related:</strong> <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></p>
</blockquote>



<h4 class="wp-block-heading"><strong>Strategic plan update</strong></h4>



<p>Executive Director Ron Baker spoke about how the Board is continuing with its yearlong process to develop a new strategic plan to guide the organization and emphasized the current plan’s four key goals: (1) To fortify PERA’s financial resilience and adaptability, (2) to elevate PERA’s identity among stakeholders to that of a partner, (3) to strengthen organizational health and performance, and (4) to improve retirement security through “best fit” products, services, and education.</p>



<p>The Board will continue working on a draft plan throughout 2023, with the goal of adopting a new strategic plan for 2024 – 2029 by the end of the year. The strategic plan will guide the efforts of PERA staff.</p>


Recap of the PERA Board’s November 2022 Meeting


<p>If you follow the stock market and investing news, you may have noticed a term that’s been gaining in popularity in recent years: ESG.</p>



<p>ESG is an acronym for environmental, social, and governance factors. It’s a widely used caption for labeling non-traditional aspects of a business that may have a financial impact on a company and its investors.</p>



<p>The term “ESG” is sometimes used to describe business or investment strategies perceived to have a global sustainability focus. However, that may be a misnomer. &nbsp;</p>



<h4 class="wp-block-heading"><strong>Evaluating business practices through an ESG lens</strong></h4>


<div class="wp-block-image">
<figure class="alignright size-large is-resized"><a href="https://content.copera.org/wp-content/uploads/2022/10/ABCDESG-graphic.png"><img decoding="async" loading="lazy" src="https://content.copera.org/wp-content/uploads/2022/10/ABCDESG-graphic.png" alt="An infographic illustrating PERA's approach to ESG." class="wp-image-44041" width="306" height="396" srcset="https://content.copera.org/wp-content/uploads/2022/10/ABCDESG-graphic.png 612w, https://content.copera.org/wp-content/uploads/2022/10/ABCDESG-graphic-232x300.png 232w" sizes="(max-width: 306px) 100vw, 306px" /></a><figcaption class="wp-element-caption">Click to view infographic</figcaption></figure></div>


<p>Rather than being a one-size-fits-all way to describe a company or investor, ESG is intended to be a way to describe nuanced inputs, outputs, and operations that can affect the environment, society, and/or business governance. These factors may or may not be financially relevant to a company and its investors.</p>



<p>Take a soda company for example. The company’s usage of water, an important ingredient in soda and other drinks, makes it neither an ESG nor non-ESG company. Instead, water could be considered a financially relevant input with implications for business that can be labeled through an ESG lens. Water is a natural resource, and it therefore can be considered an environmental factor. How the company accesses and uses that water in relation to the local community can be considered a social factor, and how the company adapts its strategy to changing supply, demand, regulation, and technology could be considered a governance factor.</p>



<p>How the company approaches these and many other elements of its business can affect its ability to remain competitive in its industry. Competitiveness and profitability are important to companies and their investors, and ESG is just one way to label various factors that may influence long-term financial outcomes.</p>



<p>As investors managing the retirement funds for nearly 700,000 members and retirees, it’s important for PERA to consider financially relevant factors when managing the portfolio, regardless of how they are labeled, or whether they may also have non-financial impacts.</p>



<h4 class="wp-block-heading"><strong>PERA’s investment approach</strong></h4>



<p>PERA invests with one objective: to provide present and future benefits for our members and their beneficiaries. To that end, our approach to <a href="https://www.copera.org/investment-stewardship" target="_blank" rel="noreferrer noopener">Investment Stewardship</a> is to seek out investments that are expected to provide the best risk-adjusted returns. PERA values financial sustainability first and foremost, and we do not invest to suit the personal beliefs of any one person or entity.</p>



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<iframe loading="lazy" title="Risks and Opportunities" src="https://player.vimeo.com/video/756477551?dnt=1&amp;app_id=122963" width="640" height="366" frameborder="0" allow="autoplay; fullscreen; picture-in-picture; clipboard-write"></iframe>
</div></figure>



<p>PERA staff consider a wide variety of financially relevant factors when deciding what to include in the portfolio, including some that can be labeled as environmental, social, or governance-related. As of Dec. 31, 2023, PERA staff managed approximately 60 percent of the Fund in-house with most of those assets in actively managed portfolios using this integrative approach. PERA does not have any ESG-centric investment requirements and does not screen investments based on any specific ESG criteria.</p>



<p>“As ESG terminology becomes more prominent, it’s important that our members know PERA’s priority is maximizing long-term, risk-adjusted returns so we can continue paying benefits for decades to come,” said PERA Director of Investment Stewardship Tara Stacy. “By focusing on financial sustainability in our investment decisions, we uphold the fiduciary duty we owe to PERA members and their beneficiaries.”</p>



<p>For PERA members in the Defined Contribution Plan or a PERAPlus 401(k) or 457 plan who want to invest their own savings in companies that are screened on ESG criteria, PERA offers the <a href="https://www.copera.org/pera-on-the-issues/peradvantage-sri-fund-a-sustainable-investing-option-for-401k-457-and-dc-plan-participants" target="_blank" rel="noreferrer noopener">PERAdvantage Socially Responsible Investment Fund</a>. The SRI Fund is designed for long-term performance through investment in companies that have demonstrated leadership in ESG-related practices — that is, companies that have shown an ability to manage risks and take advantage of opportunities associated with environmental, social and governance issues. Participants may also choose from a large variety of investments within the self-directed brokerage option.</p>



<p>To learn more about how PERA integrates various financially material factors into its investment decisions, read the Investment Stewardship Report, <a href="https://www.copera.org/investment-stewardship" target="_blank" rel="noreferrer noopener">available online here</a>.</p>


ESG: Making Sense of Alphabet Soup


<p>October is National Retirement Security Month — a time to examine one’s financial situation, assess progress toward retirement savings goals, make plans to get on track, or make a goal and get started.</p>



<p>Retirement security is at the core of everything we do and everything we offer at PERA. This commitment is reflected in our mission statement: To provide retirement security for our members while ensuring the sustainability of the fund.</p>



<p>In 2021, PERA paid $4.35 billion in retirement benefits to more than 110,000 Colorado retirees. Each of those retirees can rely on receiving regular income from PERA’s Defined Benefit Plan for as long as they live.</p>



<p>Some PERA employers offer a choice between the Defined Benefit (DB) Plan and the Defined Contribution (DC) Plan, and PERA members also have access to optional PERAPlus 401(k) and 457 plans to save more for retirement. Knowing what combination of plans to choose can be challenging.</p>



<p>To help members further bolster their retirement knowledge and security, PERA launched an online <a href="https://www.copera.org/financial-wellness-library?utm_source=POTI&amp;utm_medium=email&amp;utm_campaign=10-12-22" target="_blank" rel="noreferrer noopener">Financial Wellness Library</a> with a regularly updated collection of articles on retirement planning. These articles put into perspective the many factors that can impact saving for retirement, while providing suggestions that make the planning a little easier.</p>



<h4 class="wp-block-heading"><strong>Financial Wellness Library</strong></h4>



<p>The educational content in PERA’s Financial Wellness Library is split into numerous sections, including: creating a budget, investing basics, preparing for life events, protecting your assets, saving and planning, getting ready to retire, and activities in retirement as well as links to PERA benefits and tools to help you achieve your financial goals.</p>



<p>There’s also a link to additional financial wellness content from <a href="https://www.empower.com/learning_center/#/">Empower Retirement</a>, PERA’s partner in administering the PERAPlus 401(k), 457 and DC plans.</p>



<p>In addition to general financial literacy information, the library includes articles to help you get more familiar with your PERA benefits and how they can help you meet your goals:</p>



<ul>
<li><strong>Get the Most Out of PERA: View Your Member Dashboard:</strong> Learn about the features available when you log into your member account on copera.org, including checking your account balance, seeing your estimated monthly retirement benefit, submitting forms and more.</li>



<li><strong>PERA is With You Every Step of the Way Throughout Your Career: </strong>Whether you’re new to PERA or getting ready to retire, we have resources available to help you make the most of your benefits.</li>



<li><strong>The Benefits of PERA Membership Start Well Before You Retire:</strong> PERA is more than just a retirement plan; we also offer survivor and disability benefits, voluntary savings plans and more.</li>



<li><strong>Four Things New Members Should Do:</strong> If you’re new to PERA, this is a great place to start on your path to retirement security.</li>
</ul>



<p>Visit <a href="https://www.copera.org/financial-wellness-library?utm_source=POTI&amp;utm_medium=email&amp;utm_campaign=10-12-22" target="_blank" rel="noreferrer noopener">copera.org/financial-wellness-library</a> to learn more.</p>



<p><strong>Additional reading:</strong></p>



<ul>
<li><a href="https://peraontheissues.com/what-retirement-security-means-to-pera-members/" target="_blank" rel="noreferrer noopener">What ‘Retirement Security’ Means to PERA Members</a></li>



<li><a href="https://peraontheissues.com/survey-millennials-gen-x-especially-pessimistic-about-retirement-prospects/" target="_blank" rel="noreferrer noopener">Survey: Millennials, Gen X Especially Pessimistic about Retirement Prospects</a></li>



<li><a href="https://peraontheissues.com/how-retirement-systems-like-pera-plan-for-the-biggest-financial-risks-retirees-face/" target="_blank" rel="noreferrer noopener">How Retirement Systems Like PERA Plan for the Biggest Financial Risks Retirees Face</a></li>



<li><a href="https://peraontheissues.com/pera-offering-new-lifetime-income-options-to-dc-plan-participants/" target="_blank" rel="noreferrer noopener">PERA Offering New Lifetime Income Options to DC Plan Participants</a></li>
</ul>


Financial Education Resources for National Retirement Security Month


<p>This year, as part of its regular review process, the Colorado PERA Board of Trustees will enlist an outside firm to conduct an audit of the methods and assumptions PERA’s actuaries use in their calculations.</p>



<p>But what is an actuary and what do they do?</p>



<p>Actuaries are highly skilled mathematicians who help pension plans, insurance companies, and other financial organizations plan for the future based on historical and anticipated demographic, trend, and financial data. In short, actuaries aim to predict the future as accurately as possible.</p>



<h4 class="wp-block-heading"><strong>What does an actuary do for a retirement system like PERA?</strong></h4>


<div class="wp-block-image">
<figure class="alignright size-large is-resized"><img decoding="async" loading="lazy" src="https://content.copera.org/explaining-the-role-of-actuaries-in-retirement-plans-like-pera/" alt="" class="wp-image-5035" width="205" height="256"/><figcaption class="wp-element-caption">PERA Senior Actuary Koren Holden</figcaption></figure></div>


<p>A retirement system could not function without actuaries. At Colorado PERA, Senior Actuary Koren Holden works with third party actuaries to make sure the Board and PERA leadership have an accurate understanding of PERA’s financial health.</p>



<p>“I act as a liaison between the PERA Board and Executive Team and the Board’s external actuarial service provider,” Holden said. “I am responsible for completion and timely delivery of all the requested actuarial work (i.e., actuarial valuations, special calculations, periodic actuarial studies, etc.) and also responsible for the initial review of all actuarial work to ensure completeness and reasonability.”</p>



<p>In order to pay benefits to retirees for decades to come, retirement plans like PERA need to make predictions about various factors that will determine how much money the plan needs to have on hand to pay those benefits. Actuaries develop those predictions — called actuarial assumptions — and calculate the effects they may have on the plan’s finances.</p>



<h5 class="wp-block-heading"><strong>Actuarial assumptions</strong></h5>



<p>Pension plan assumptions fall into two categories: demographic and economic assumptions. Demographic assumptions attempt to accurately anticipate events that occur over the lifetime of plan participants, which can influence the amount and timing of benefits. They include:</p>



<ul>
<li>Life expectancy (how long will plan participants live?)</li>



<li>Rates of retirement (when will plan participants retire?)</li>



<li>Mortality trends (how many participants will die before/after receiving a benefit?)</li>



<li>Salary growth (how quickly and by how much will salaries change for different groups of employees?)</li>
</ul>



<p>Economic assumptions attempt to anticipate financial factors that can impact the cost of future benefits and the rate at which they are funded, such as:</p>



<ul>
<li>Inflation (what will be the rate of consumer inflation in the future?)</li>



<li>Investment rate of return (how much investment income will the fund earn?)</li>
</ul>



<p>Per Colorado statute, all actuarial assumptions recommended by the actuary are subject to approval by the PERA Board. Actuaries make recommendations to the Board, and the Board adopts them or requests further analysis and revised recommendations to be considered later.</p>



<h5 class="wp-block-heading"><strong>Annual actuarial valuations</strong></h5>



<p>Actuaries conduct comprehensive studies known as annual actuarial valuations to evaluate funding progress and the impact of year-to-year changes on a pension plan’s finances. A valuation provides a summary of the plan’s funded status, funding period and recommended contribution rates, and often includes accounting information as required under the Governmental Accounting Standards Board (GASB) statements for public pension plans. In order to perform the valuation and provide this information, the actuary takes into consideration contributions, investment returns, demographic changes, retirements, withdrawals, economic factors, deaths, hires, and other system data.</p>



<p>The annual actuarial valuation is the backbone of the Annual Comprehensive Financial Report, a pension plan’s required public report of financial health.</p>



<p><a href="https://www.copera.org/financial-reports-and-studies" target="_blank" rel="noreferrer noopener">Click here</a> to read the latest Colorado PERA actuarial valuation and Annual Comprehensive Financial Report.</p>



<h5 class="wp-block-heading"><strong>Experience analysis</strong></h5>



<p>An experience study compares the actual experience of the plan to the predictions made by the actuarial assumptions, including rates of death, retirement, separation from service, disability and salary increases. The comparison of actual results to predicted results demonstrates to actuaries which assumptions need to be revised to more accurately reflect true demographic and economic conditions. The experience analysis is the foundation for the annual actuarial valuation in that it determines the appropriate assumptions to be applied within the annual actuarial valuation.</p>



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



<h5 class="wp-block-heading"><strong>Other analyses</strong></h5>



<p>In addition to the pension plan’s annual actuarial valuation and periodic experience analyses, an actuary also performs special studies as needed and/or required by law. For instance, if <a href="https://peraontheissues.com/2022-proposed-legislation-status/" target="_blank" rel="noreferrer noopener">proposed state legislation</a> will be making changes to benefit provisions, an actuarial analysis of the proposed change would be necessary to determine the financial effect of the change.</p>



<p>Actuaries provide invaluable expertise to retirement systems like Colorado PERA, ensuring the Board and stakeholders have an accurate picture of the organization’s financial health and the road ahead.</p>



<p>“I love numbers, but my main passion for the work I perform here at PERA is being part of a dedicated team that serves my community as well as the entire state of Colorado,” Holden said. “I like the feeling that all of us at PERA are helping ensure a stable and dignified retirement for the teachers and many other public servants by promoting, promulgating, and defending a strong defined benefit retirement program (not to mention health care access), as the best means to deliver this vision.”</p>


Explaining the Role of Actuaries in Retirement Plans like PERA


<p>The Colorado PERA Board of Trustees resumed meeting in person for its March meeting, convening at PERA’s headquarters in Denver on Friday, March 18.</p>



<p>The Trustees discussed a number of important topics, including the upcoming Board election, PERA-related legislative activity, and PERA’s investments.</p>



<h4 class="wp-block-heading"><strong>Board election</strong></h4>



<p>Four seats on the Board are up for election this year, and members interested in serving as a PERA trustee were able to submit their candidate packets in January and February. At this month’s meeting, the Board received an update on candidates for the four open seats and voted to move forward with elections for the School Division and State Division seats.</p>



<p>Current trustee Ramon Alvarado is running uncontested for the Higher Education seat in the State division, so the Board voted to appoint him to another term and forego an election for that seat. In the Local Government division, the Board will form an <em>ad hoc</em> committee to identify possible candidates for appointment to that seat, since there are no candidates running for the position.</p>



<p>Ballots will be mailed in early May and members of the School and State divisions will be able to vote for their respective Board seats.</p>



<h4 class="wp-block-heading"><strong>Legislative update</strong></h4>



<p>PERA Executive Director Ron Baker and Public and Government Affairs Manager Michael Steppat provided the Board with an update on several pieces of PERA-related legislation that have been making their way through the Colorado General Assembly this session.</p>



<p>Lawmakers passed two bills that will expand the ability for PERA retirees to work after retirement without a reduction in benefits — <a href="https://leg.colorado.gov/bills/hb22-1057" target="_blank" rel="noreferrer noopener">HB22-1057</a> and <a href="https://leg.colorado.gov/bills/hb22-1101" target="_blank" rel="noreferrer noopener">HB22-1101</a> — and Gov. Polis signed them into law.</p>



<p><a href="https://leg.colorado.gov/bills/hb22-1029" target="_blank" rel="noreferrer noopener">HB22-1029</a>, which would make up the state’s annual $225 million payment to PERA that was foregone in 2020 due to pandemic-related budget cuts, has been introduced in the House but it’s not yet scheduled for a hearing. Steppat said he expects to see lawmakers take action on that bill in the coming weeks.&nbsp;</p>



<p><a href="https://peraontheissues.com/2022-proposed-legislation-status/" target="_blank" rel="noreferrer noopener">Click here</a> for the latest bill status updates.</p>



<h4 class="wp-block-heading"><strong>Actuarial audit</strong></h4>



<p>This year, the Board will hire an outside firm to conduct an audit of PERA’s actuarial methods and assumptions — which PERA uses for calculations such as projecting liabilities — as part of its regular review process. The Board reviewed four firms that submitted proposals and voted to select Buck, which has extensive experience with public plans and previously performed an audit for PERA in 2009.</p>



<p>Buck will perform the audit throughout the spring and summer, and then present the results to the PERA Board at its November meeting.</p>



<h4 class="wp-block-heading"><strong>Fiduciary counsel review</strong></h4>



<p>The Board is also undertaking a review of the outside legal consultant who serves as fiduciary counsel to the Board, providing annual fiduciary training and giving advice as needed. The Board reviewed multiple finalists and voted to select Suzanne Dugan of Cohen Milstein Sellers &amp; Toll, PLLC as fiduciary counsel going forward.</p>



<h4 class="wp-block-heading"><strong>Market and investments update</strong></h4>



<p>PERA Chief Investment Officer Amy C. McGarrity provided the Board with an update on economic conditions and <a href="https://peraontheissues.com/staying-the-course-peras-approach-to-market-volatility/" target="_blank" rel="noreferrer noopener">market volatility</a> so far this year, as well as other topics involving PERA’s investments, including Russia-based assets.</p>



<p>On Feb. 24, Colorado Gov. Jared Polis made a request to the PERA Board that is consistent with what has been included in the federal mandates pertaining to sanctions on Russian-owned assets. U.S. sanctions remain fluid and include a combination of freezing assets, divesting of assets and not investing additional funds in Russian assets. PERA is reviewing and preparing to implement the federal mandates within the required time specifications. As of Feb. 24, PERA had $8 million in total invested in Sberbank, OGK-2, Gazprom, Mosenergo, and Rosneft Oil. As of Mar. 18, PERA’s portfolio (preliminary and unaudited) is $60,992,000,000.</p>



<p>McGarrity also provided an update on PERA’s implementation of <a href="https://leg.colorado.gov/bills/hb16-1284" target="_blank" rel="noreferrer noopener">HB16-1284 (Divest From Companies With Prohibitions Against Israel)</a>.</p>



<p>In 2021, Ben &amp; Jerry’s <a href="https://www.benjerry.com/about-us/media-center/opt-statement" target="_blank" rel="noreferrer noopener">issued a statement</a> that it would withdraw its products from the Israeli-occupied West Bank because the occupation was inconsistent with company values. To comply with HB16-1284, PERA will be assessing its investments in Unilever (as the parent company of Ben &amp; Jerry’s) and engaging further with the company.</p>



<p>As of Feb. 28, 2022, PERA has $42 million invested in Unilever equities and bonds.</p>



<p>The <a href="https://content.copera.org/pera-board-discusses-election-investments-at-march-meeting/" target="_blank" rel="noreferrer noopener">PERA Board voted unanimously</a> to add Unilever to its <a href="https://content.copera.org/pera-board-discusses-election-investments-at-march-meeting/" target="_blank" rel="noreferrer noopener">Restricted Companies List</a>. PERA will begin a 180-day process to engage with Unilever in accordance with the Board’s decision. Upon completion of the engagement, and as applicable, PERA will divest of its Unilever holdings within 12 months if not satisfied with the responses to the assessment.</p>



<p></p>


PERA Board Discusses Election, Investments at March Meeting


<p>The year has gotten off to a rocky start in the stock market, as concerns about the economy, inflation, and the Russia-Ukraine conflict have led to a series of ups and downs in the major stock indexes.</p>



<p>PERA’s investment staff, led by Chief Investment Officer Amy C. McGarrity, manages a portfolio of more than $60 billion (as of Sept. 30, 2021) on behalf of PERA members and retirees. While staff monitor market activity and trends, PERA’s investment focus is on the long-term.</p>



<p>McGarrity recently participated in a discussion with other CIOs at the Council of Institutional Investors’ spring conference, where she and the other panelists spoke about the challenges of investing in today’s market environment and the importance of a strategic, diversified portfolio.</p>



<p>“We are in the business of providing retirement security, so we invest strategically,” McGarrity said. “We don’t try to predict what the markets will do from day-to-day, but instead we remain invested in our primary asset classes throughout the market cycle, with a focus on long-term returns.”</p>



<h4 class="wp-block-heading"><strong>Strategic asset allocation</strong></h4>



<div class="wp-block-image"><figure class="alignright size-medium"><a href=""><img decoding="async" src="" alt="Pie chart showing PERA's preliminary, unaudited asset allocation as of Sept. 30, 2021: 58.8% global equity, 19.5% fixed income, 8.7% private equity, 7.8% real estate, 4.7% alternatives, 0.5% cash" class="wp-image-4939"/></a><figcaption>PERA&#8217;s preliminary, unaudited asset allocation as of Sept. 30, 2021 (click to enlarge)</figcaption></figure></div>



<p>The PERA Board of Trustees sets PERA’s <a href="https://www.copera.org/investments" target="_blank" rel="noreferrer noopener">strategic asset allocation</a>, which dictates how the fund’s portfolio should be split between various types of investments like stocks, bonds, and real estate. Those investments carry different levels of risk (potential for loss in value) and potential return (gain in value). For example, stocks can generate strong returns but often come with a higher level of risk, while bonds typically generate lower returns but also have a lower level of risk.</p>



<p>The result is a diverse mix of investments with varying levels of risk that can help protect the overall portfolio during times of market volatility.</p>



<p>While the stock market may go up or down in a given year, PERA’s strategic asset allocation was developed with the goal of ensuring PERA’s investments will generate value over the course of several decades, regardless of what happens in any one year.</p>



<h4 class="wp-block-heading"><strong>Focusing on the long-term</strong></h4>



<p>Being invested for the long-term means being exposed to the ups and downs of market cycles. Downturns are expected, and the swiftness with which they can occur often overshadows the rise in markets, even though positive market environments typically outweigh the negative impact of historical downturns.</p>



<p>For example, in early 2020, global equity markets saw steep losses as COVID-19 spread around the world. By the end of the year, the markets had rebounded and even posted gains.</p>



<p>PERA’s assumed rate of return — one of the key numbers PERA uses to forecast how much money the fund will have on hand to pay benefits in the future — is 7.25 percent. While the actual return in a given year may be higher or lower than 7.25 percent, the goal is to meet the assumed rate of return over a period of 30 or more years. PERA’s annualized return over the past 10 years is 9.4 percent. By maintaining a well-diversified portfolio of assets and a focus on long-term returns, PERA is well-positioned to weather ups and downs in the markets and continue providing lifelong monthly benefits to current and future retirees.</p>


Staying the Course: PERA’s Approach to Market Volatility


<p>In today’s ever-changing world, the ability to adapt is an important ingredient for success. At Colorado PERA, adaptability is key to making sure the Association can continue to meet the changing needs of its diverse membership.</p>



<p>Over the past several years, PERA’s Communications Division has been using data from a survey of members and retirees to identify segments of PERA membership whose needs weren’t being adequately met and to pinpoint other opportunities for improvement.</p>



<p>The survey is a vital tool for PERA to ensure its communications are member-focused and fulfill the Board’s strategic goals, which include elevating PERA’s identity among stakeholders to that of a partner, and improving retirement security outcomes through best-fit products, services and education.</p>



<h4 class="wp-block-heading" id="changes-resulting-from-2019-survey"><strong>Changes resulting from 2019 survey</strong></h4>



<p>The member satisfaction survey, conducted in 2019, aimed to assign PERA a rating that would approximate a Net Promoter Score (NPS). An NPS is a simple way of gauging the likelihood of a company’s customers recommending that company to friends and colleagues, with scores ranging from -100 (unlikely) to +100 (likely). The survey responses of nearly 18,000 members established PERA’s NPS as 5, and while that’s a positive score consistent with other member-based financial services organizations, it revealed several important opportunities for improvement.</p>



<h5 class="wp-block-heading" id="more-personalized-tailored-content"><strong>More personalized, tailored content</strong></h5>



<p>A major takeaway from the survey results was that PERA has too often taken a one-size-fits-all approach to communications, rather than tailoring content to fit different members’ and retirees’ needs. As a result, PERA’s communications team has been focused on segmenting its website content, emails and other communications by life and career stage — <a href="https://www.copera.org/new-members" target="_blank" rel="noreferrer noopener">new to PERA</a>, <a href="https://www.copera.org/mid-career" target="_blank" rel="noreferrer noopener">mid-career</a>, <a href="https://www.copera.org/ready-to-retire" target="_blank" rel="noreferrer noopener">ready to retire</a>, <a href="https://www.copera.org/retirees" target="_blank" rel="noreferrer noopener">retired</a> — as well as creating more content specifically for those audiences.</p>



<h5 class="wp-block-heading" id="simpler-language"><strong>Simpler language</strong></h5>



<p>Similarly, PERA members and retirees have expressed a need for simpler, more accessible language from PERA. Much of the terminology around retirement benefits — and finance in general — can be complex and difficult to understand. PERA staff regularly review and update publications, website content and other communications, and part of that review now includes identifying language that can be made more approachable.</p>



<p>This is an ongoing effort and PERA staff will continue to look for opportunities to simplify the language it uses to explain PERA benefits and services.</p>



<h5 class="wp-block-heading" id="expanded-use-of-social-media"><strong>Expanded use of social media</strong></h5>



<p>In an effort to meet more PERA members where they are, PERA has been working to expand its presence on social media to complement its other communications channels. That includes launching <a href="https://www.facebook.com/ColoradoPERA/" target="_blank" rel="noreferrer noopener" class="broken_link">Facebook</a> and <a href="https://www.copera.org/dont-lose-track-of-your-future-benefits" target="_blank" rel="noreferrer noopener">Instagram</a> profiles and using those platforms <a href="https://peraontheissues.com/inaugural-facebook-live-event-attracts-hundreds/" target="_blank" rel="noreferrer noopener">to engage more directly with PERA members and retirees</a>.</p>



<h5 class="wp-block-heading" id="website-updates"><strong>Website updates</strong></h5>



<p>PERA’s website is a vital tool for its members, retirees, and other stakeholders, and it was a clear area of opportunity to make some improvements. PERA staff used feedback from the survey to build a redesigned website that’s more user-friendly, including an updated account dashboard that displays a member’s account balance, estimated monthly benefit, and more. The new site <a href="https://peraontheissues.com/pera-launches-redesigned-website-with-better-navigation-other-improvements/" target="_blank" rel="noreferrer noopener">launched in mid-January</a>.</p>



<h4 class="wp-block-heading" id="preparing-for-the-next-survey"><strong>Preparing for the next survey</strong></h4>



<p>A key step in assuring PERA meets its member expectations is to measure the effectiveness of the various changes and initiatives that have taken place since the first survey.</p>



<p>Planning is underway for a follow-up NPS survey, which will take place this spring. From that survey, PERA will be able to formulate an updated score and determine not only whether those changes are working, but also identify areas where staff should continue to focus their efforts in the future.<ins></ins></p>



<p>“We hope everyone who receives the survey will participate, so we can get an accurate measure of how we’re doing and whether we’re meeting member expectations,” said PERA Senior Director of Communications Patrick von Keyserling. “We look forward to seeing the results and continuing to evolve based on your feedback.”</p>


We Heard You: Responding to Member Feedback


<p><em>In this story:</em></p>



<ul>
<li><em>CEM Benchmarking report finds PERA’s administrative costs in 2020 were lower than the average of its peer group</em></li>



<li><em>PERA’s service score reflects challenges of COVID-19 pandemic</em></li>



<li><em>PERA remains committed to improving service to members, retirees</em></li>
</ul>



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



<p>Despite the challenges of the COVID-19 pandemic, Colorado PERA continued to provide a high level of service to its members at a low cost in 2020, according to the latest report from CEM Benchmarking.</p>



<p>The report, which is released every year, compares PERA to other large public pension systems around the United States and the world on two key measures: administrative costs and the quality of service members receive. PERA consistently ranks among the top of its peer group of similarly sized pension systems.</p>



<h4 class="wp-block-heading"><strong>How PERA’s costs compare to other public pension plans</strong></h4>



<p>PERA’s pension administration costs in 2020 totaled $31.4 million, for a cost of $48 per member. That’s lower than the average of $62 per member for PERA’s peer group. In particular, PERA spends less than its peers on front-office staff, information technology and major projects.</p>



<p>PERA’s administration costs have been decreasing since 2018, when the cost per member was $52, while peer organizations have increased slightly.</p>



<h4 class="wp-block-heading"><strong>Impact of COVID-19</strong></h4>



<p>CEM Benchmarking measures service quality from the perspective of a PERA member, looking at factors such as how long it takes to reach a customer service representative on the phone, and how many of those calls result in a desired outcome.</p>



<p>Like other public pension systems, PERA saw some effects of the COVID-19 pandemic reflected in its service score in 2020. Economic uncertainty led to an increase in calls from members inquiring about retirement, and that resulted in longer wait times for PERA’s Customer Service Center, as well as longer call duration.</p>



<p>As a result, PERA’s total service score dipped slightly to 82 out of 100, which was equal to its peer group but higher than the average of 76 for all pension systems included in the report.</p>



<h4 class="wp-block-heading"><strong>Continuing to build on a tradition of service</strong></h4>



<p>The customer service center is a cornerstone of PERA’s operations, providing important information and assisting members and retirees on a daily basis. As PERA continues to work <a href="https://peraontheissues.com/pera-board-continues-to-press-for-innovation/" target="_blank" rel="noreferrer noopener">toward fulfilling the Board’s vision of innovation in service delivery</a>, PERA’s customer service team strives to build on its tradition of service quality and dependability.</p>



<p>PERA hired a new director of customer service in September. Philip Hill has more than 25 years of experience in customer service call centers, more than half of which has been in retirement services and human resources.</p>



<p>Hill said his focus will be on making sure PERA’s customer service representatives have everything they need to continue meeting members’ needs in the future.</p>



<p>“In customer service, we consistently look at our methods to make sure we are providing the best service possible,” he said. “We need to continue to maximize our knowledge and availability to our callers through all the tools available to us. This is a great team that wants to do their best for each caller and provide world-class customer service.”</p>


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