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.

<h4 class="wp-block-heading"><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></h4>



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.



<h4 class="wp-block-heading"><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></h4>



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.



<h4 class="wp-block-heading"><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></h4>



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.



<h4 class="wp-block-heading"><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></h4>



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

<h4 class="wp-block-heading"><a href="https://www.usatoday.com/story/news/health/2024/02/01/biden-administration-launches-medicare-drug-price-negotiations/72411019007/" target="_blank" rel="noreferrer noopener">Medicare Drug Price Negotiations Kick Off with Price Offers on These 10 Drugs | USA Today</a></h4>



The federal government’s long-awaited drug price negotiations are now underway. The government isn’t releasing its initial offers, but it has released the initial list of drugs in question. The final negotiated prices will take effect in 2026.



<h4 class="wp-block-heading"><a href="https://www.cbsnews.com/news/fed-chair-jerome-powell-interest-rates-60-minutes-transcript/" target="_blank" rel="noreferrer noopener">Fed Chair Jerome Powell Shares Why Fed Hasn&#8217;t Yet Cut Interest Rates | CBS News</a></h4>



Many experts expect the Federal Reserve to begin cutting interest rates this year, but Chair Jerome Powell say the Fed isn’t ready to do so just yet. While prices aren’t rising as quickly as they had been, Powell says he wants to see more evidence that inflation is down and staying down.



<h4 class="wp-block-heading"><a href="https://www.adn.com/politics/alaska-legislature/2024/01/31/alaska-senate-advances-public-sector-pension-plan-to-address-recruitment-and-retention-crisis/" target="_blank" rel="noreferrer noopener">Alaska Senate Advances Public-Sector Pension Plan to Address Recruitment and Retention Crisis | Anchorage Daily News</a></h4>



Alaska closed its public employee pension plan in 2006, and since then the state has struggled to attract and retain workers in important roles like teachers, firefighters, and police officers. A bill that would create a new pension plan is now making its way through the state legislature. It has passed the Senate and how heads to the House for further deliberation.



<h4 class="wp-block-heading"><a href="https://www.cnn.com/2024/02/05/economy/loud-budgeting-financial-trend-tiktok/index.html" target="_blank" rel="noreferrer noopener">Loud Budgeting is In, Quiet Luxury is Out. Meet the TikToker Who Started the Financial Trend | CNN Business</a></h4>



You may have heard the term “quiet luxury,” but younger generations are starting to embrace its opposite—loud budgeting. It started out with a joke on TikTok, but creating a budget and being vocal about it with your friends is the new trend among those looking to get their finances in order.



<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: Medicare Begins Drug Price Negotiations

<h4 class="wp-block-heading"><a href="https://www.npr.org/sections/health-shots/2023/10/04/1203417818/medicare-drug-price-negotiations-begin" target="_blank" rel="noreferrer noopener">Drugmakers Will Negotiate with Medicare on Price. But They&#8217;re Suing, Too | NPR</a></h4>



Major drug manufacturers say they will participate in Medicare’s new drug price negotiation program. The government has identified the first 10 drugs for which it aims to lower prices under the program. At the same time, drugmakers are fighting the program, arguing that lowering prices will cut into their research and development budgets.



<h4 class="wp-block-heading"><a href="https://www.insiderintelligence.com/content/colorado-passes-law-regulating-ai-in-insurance" target="_blank" rel="noreferrer noopener">Colorado Cracks Down on AI Discrimination in Life Insurance | Insider Intelligence</a></h4>



Beginning next month, life insurance companies in Colorado will be prohibited from using artificial intelligence (AI) and other technologies in a way that leads to discrimination based on protected characteristics such as race and gender. Colorado is the first state to enact such a law specific to the use of emerging technologies in insurance underwriting.



<h4 class="wp-block-heading"><a href="https://content.copera.org/news-you-should-know-drug-manufacturers-agree-to-medicare-drug-negotiations/" target="_blank" rel="noreferrer noopener">Auto Workers Aren&#8217;t Striking Only For Higher Wages. They Want Their Pensions Back, Too | Bloomberg via Yahoo! Finance</a></h4>



Members of the United Auto Workers union are on strike across the country, asking for higher wages but also the return of defined benefit pensions. While workers hired before the Great Recession have access to a pension, newer workers don’t. Automakers say the costs of reopening their pension plans are too high, but unions argue the companies can afford to once again offer the valuable benefit.



<h4 class="wp-block-heading"><a href="https://www.cnbc.com/2023/10/06/401k-to-ira-rollovers-new-labor-department-rule-likely-to-raise-investor-protections.html" target="_blank" rel="noreferrer noopener">401(k)-to-IRA rollovers: Government likely to raise saver protections |CNBC</a></h4>



It’s common for workers who leave a job to take their 401(k) account balance with them and roll it over into another account such as an IRA. But workers who seek out advice on rollovers might not always get the best advice. That’s because rollover advice can fall outside the legal guidelines for fiduciaries, who are required to act in their clients’ best interests. Experts expect the federal government to issue a new rule soon to close those loopholes.



<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: Drug Manufacturers Agree to Medicare Price Negotiations

<h4 class="wp-block-heading">A digest of news from publications around the nation about finance, investing, and retirement</h4>



<a href="http://money.com/money/5652452/401k-investing-strategies/" class="broken_link">Your 401(k) is just one piece of the retirement puzzle. Here&#8217;s the right place for it&nbsp;|</a><a href="http://money.com/">Money</a>



There’s no shortage of advice about how to invest your
401(k). But if you have not just a 401(k) but also other savings vehicles —
like an IRA, brokerage account, investment property, or even a pension — those
rules might not apply. Particularly in a volatile economic climate like the one
investors face today, a big-picture strategy with a focus on diversification
can help you maximize your investment earnings and even save on taxes.



<a href="https://www.marketwatch.com/story/9-ways-californias-new-retirement-plan-changes-the-retirement-savings-landscape-2019-08-16">9 ways California’s new retirement plan changes the retirement savings landscape&nbsp;|</a><a href="https://www.marketwatch.com/">MarketWatch</a>



On July 1, private-sector employers in California gained
access to an innovative new program that enables them to facilitate retirement
savings for employees. In a state where half of all private-sector workers do
not have a retirement savings account or participate in a pension, CalSavers
stands to make a significant difference in the lives of everyday workers. 



And this landmark program won’t just benefit Californians;
it changes the retirement landscape in important ways nationwide: When the
largest state enacts innovative new policies, lawmakers and the financial
services industry sit up and take notice.



[Read more from PERA on the Issues about Colorado’s efforts
to study private sector retirement savings plans <a href="https://content.copera.org/colorado-pera-chief-investment-officer-and-internal-audit-director-appointed-to-state-boards/">here</a>.]



<a href="https://www.cnbc.com/2019/08/25/the-benefits-of-delaying-retirement-to-70-according-stanford-research.html">Here’s how much more money you’d have if you delayed retirement until 70, according to Stanford researchers&nbsp;|</a><a href="https://www.cnbc.com/">CNBC</a>



A <a href="https://www.soa.org/globalassets/assets/files/resources/research-report/2019/viability-spend-safely.pdf">report</a>
from the <a href="http://longevity.stanford.edu/">Stanford
Center on Longevity</a> and <a href="https://www.soa.org/">Society
of Actuaries</a> suggests that the typical American would benefit from
a later retirement age. After analyzing 292 different retirement income
strategies, the research team identified the best way for most people to withdraw
their money in retirement: It’s called the&nbsp;<a href="https://www.cnbc.com/2018/01/23/stanford-center-on-longevity-calls-this-the-best-retirement-strategy.html">“spend safely
in retirement strategy”</a>&nbsp;(SSiRS) and involves delaying
Social Security payments until age 70, which could mean working longer. 



To show just how powerful it can be, the research team
gave one example of a hypothetical, 62-year-old middle-income couple earning a
combined $100,000 with $350,000 in retirement savings. If the couple retired at
62, their annual income, including Social Security benefits and the amount they
draw down from their retirement savings, would be $37,585. If they worked
full-time until age 70, their annual income would be nearly double: $70,755.



<a href="https://www.courier-journal.com/story/news/politics/2019/08/26/kentucky-official-says-pension-plan-may-have-turned/2118599001/">Kentucky pension official says worst-funded state plan may have finally turned around&nbsp;|</a><a href="http://www.courier-journal.com/">Courier-Journal</a>



The trend that has seen Kentucky’s
worst-funded pension plan getting deeper in debt each year may have come to an
end, according to Rich Robben, executive director of the Office for Investments
at Kentucky Retirement Systems (KRS). The KRS plan that provides retirement
benefits for state workers in nonhazardous jobs has $13.6 billion in unfunded
liabilities and is considered to be the worst-funded public pension plan in
America. A huge increase in the amount employers are required to pay to the
plan beginning in 2018-19 produced a positive cash flow of $237.7 million for
the plan in the fiscal year that ended June 30. 



<a href="https://www.fool.com/retirement/2019/08/25/3-signs-youre-ready-to-retire.aspx">3 signs you’re ready to retire</a>&nbsp;|<a href="http://www.fool.com/">The Motley Fool</a>



Retirement
is something many workers dream about for decades. And for some it can&#8217;t come
soon enough – half of American adults say they would like to retire by age 60,
a <a href="https://content.copera.org/retirement-roundup-your-401k-is-just-one-piece-of-the-retirement-puzzle/">survey</a>
from the Harris Poll and TD Ameritrade found. However, not everyone is ready to
retire, no matter how prepared they think they are.



Retirement
takes a lot of planning, and choosing when to retire is a decision that
shouldn&#8217;t be made lightly. Before you leave your job for good, make sure you&#8217;ve
considered three factors to ensure you&#8217;re really ready to retire: you have a
withdrawal plan; you&#8217;ve thought about how you&#8217;ll cover health care costs; and
you&#8217;ve decided when you&#8217;re going to claim benefits.

Retirement Roundup: Your 401(k) is just one piece of the retirement puzzle

For the past several years, public pension reform has been a
hot topic as states and municipalities wrestle with how to keep their
retirement plans funded. As many Colorado PERA members and retirees know, 2018
saw the Colorado General Assembly pass a <a href="https://content.copera.org/the-year-so-far-in-public-pension-reform/">significant
reform bill</a>, and numerous other states followed suit in 2019. Here’s a
sampling of the new efforts as of mid-year.



Arkansas



<a href="https://content.copera.org/the-year-so-far-in-public-pension-reform/">State Highway Employees’ Retirement System</a>



March 2019



Increased employee contributions over two years, from 6.0
percent to 7.0 percent by July 2020. Increased employer contributions from 12.9
percent to 14.9 percent starting July 2019.



Kentucky



<a href="https://kyret.ky.gov/Pages/index.aspx">Employees
Retirement System</a>



Pending as of June 2019



The Bluegrass State has been debating a variety of pension
reform options for about two years. In early June, <a href="https://www.copera.org/the-year-so-far-in-public-pension-reform" class="broken_link">thestate Supreme Court ruled against</a> the governor’s attempts to keep a financial
analysis from public disclosure, and <a href="https://www.copera.org/the-year-so-far-in-public-pension-reform" class="broken_link">thegovernor has indicated</a> that a special session of the state legislature may
be necessary later this year to resolve various disputes.



New Mexico



<a href="https://www.nmerb.org/" class="broken_link">Educational Retirement
Board</a>



April 2019



Comprehensive legislation changed the salary thresholds that
determine employee contribution rates; increased employer contribution rates
from 13.9 percent to 14.5 percent starting July 2019; changed years-of-service
multipliers and highest average salary (HAS) guidelines for new hires; increased
minimum retirement age for new hires; and changed return-to-work rules.



North Dakota



<a href="https://ndpers.nd.gov/">Public Employees Retirement
System</a>



April 2019



Eliminated retiree health insurance credit for new hires
after January 2020; redirects employer contributions of 1.14 percent of salary
to the retirement plans; modified HAS calculations for retirees after January
2020; and reduced the HAS multiplier from 2 percent to 1.75 percent.



Oregon



<a href="https://www.oregon.gov/PERS/Pages/index.aspx">Public
Employees Retirement System</a>



May 2019



<a href="https://www.ai-cio.com/news/oregon-pension-reform-squeaks-legislature/">Extends</a>
the fund’s minimum payment schedule by eight years; redirected a portion of
employee contributions (depending on hire date) into an account that supports
pension benefits; cut 30-year employees’ overall benefits by 1 to 2 percent for
those making more than $30,000 per year; mandated a one-time, $100 million
contribution to an “incentive fund” that will provide a 25 percent match to
extra employer contributions; gave employees more control over investment
allocations; removed certain limits on working after retirement; and directed
some proceeds from the Oregon Lottery to the employer incentive fund.



Other developments:



In March 2019,
California’s <a href="https://www.latimes.com/local/lanow/la-me-ln-pension-court-20190304-story.html">state
Supreme Court upheld 2012 reforms</a> that curtailed the purchase of service
credits and raised employee health care contributions.



In June 2019, <a href="https://www.ai-cio.com/news/ohio-teachers-pension-sued-eliminated-colas/">two
retired teachers sued</a> the State Teachers Retirement System of Ohio over the indefinite elimination of
annual increases for retirees. The plaintiffs are seeking to certify their suit
as a class action.



In June 2019, Rhode
Island’s <a href="https://turnto10.com/politics/ri-supreme-court-upholds-pension-reform-in-cranston">state
Supreme Court upheld</a> the city of Cranston’s 2013 reforms that suspended
cost-of-living adjustments, increased retirement ages, and introduced a hybrid
DB/DC plan.

The year (so far) in public pension reform

PERAtour, the statewide community outreach effort that took place throughout 2017 to address PERA’s current funded status and risk profile, concluded its final phase of community meetings and programming in late 2017.



PERA is now working with legislators from both parties to develop a bill that reflects the PERA Board of Trustees’ proposed reforms to the plan. The legislation will be introduced to the Colorado General Assembly during the 2018 session.



To remain up-to-date as this critical bill makes its way through the legislative process, visit the <a href="https://www.copera.org/peratour-resources" target="_blank" rel="noreferrer noopener" class="broken_link">“Legislation”</a> section of PERA on the Issues regularly and <a href="https://content.copera.org/legislation-to-reduce-peras-risk-profile-introduced/" target="_blank" rel="noreferrer noopener">sign up</a> to receive our bi-weekly newsletter.



If you wish to learn more about PERAtour, the PERA Board’s recommended package of reforms, and PERA’s financial health, we invite you to explore the resource library below.



VIDEOS



<a href="https://www.youtube.com/watch?v=SH9R6ZqDqfw" target="_blank" rel="noreferrer noopener">LEADING CHANGE, LASTING SECURITY</a>



A video shared at community meetings during the second phase of PERAtour that looks at the proactive steps PERA is taking to address the long-term sustainability of the plan for the hundreds of thousands of Coloradans who depend on it for their retirement security.



<a href="https://www.youtube.com/watch?v=zcSXNjP6NkA" target="_blank" rel="noreferrer noopener">A BRIEF HISTORY…WITH PERA</a>



A video shared at community meetings during the first phase of PERAtour that takes an animated look back at PERA’s history from 1998 to the present.



PRESENTATIONS



<a href="https://content.copera.org/peratour-resources/" target="_blank" rel="noreferrer noopener">PERATOUR: A STATEWIDE CONVERSATION</a>



A presentation shared at community meetings during the second phase of PERAtour that reviews the principles, priorities, and process followed by the PERA Board and provides an overview of the Board’s recommended package of reforms designed to address PERA’s financial health and funded status.



MATERIALS



<a href="https://www.copera.org/peratour-resources" target="_blank" rel="noreferrer noopener" class="broken_link">PERA BOARD’S RECOMMENDED PACKAGE TO PROTECT PERA’S LONG–TERM HEALTH</a>



An outline of the PERA Board’s recommended package of reforms that will impact all PERA membership if passed by the State Legislature.



<a href="https://www.copera.org/peratour-resources" target="_blank" rel="noreferrer noopener" class="broken_link">POLLING RESPONSES TO CORE PRINCIPLES</a>



A synopsis of the feedback received from participants during the first phase of PERAtour community meetings across the state when asked to weigh in on core principles that should guide the PERA Board’s consideration of reforms to the plan.

PERAtour resources

The PERA Board of Trustees has recommended <a href="https://content.copera.org/board-proposal-calls-for-clarity-in-salary-parity-in-benefits/" target="_blank" rel="noreferrer noopener">reforms to PERA</a> designed to reduce the overall risk profile of the plan and improve PERA’s funded status. In light of these recommendations, it can be helpful to see how PERA as it exists today compares to similar plans across the country and how the Board’s proposal for future changes might compare as well. Comparing the PERA benefit to that of public employees in others states can also help ensure that Colorado’s public employers can attract and retain talented employees.



In a time of shifting economic and fiscal realities, PERA is not alone in considering reforms that will impact funding levels and benefit structures over time. <a href="http://www.governing.com/news/headlines/tns-kentucky-pension-reforms-worse.html" target="_blank" rel="noreferrer noopener">Significant changes</a> have been proposed to Kentucky’s public pension systems, and in Ohio, the board of the retirement plan for teachers <a href="https://www.copera.org/colorado-pera-plan-design-compared-to-other-non-social-security-public-employee-retirement-plans" target="_blank" rel="noreferrer noopener" class="broken_link">recently reduced</a> the cost-of-living adjustment to zero.



(More information on the Board’s recommendation is available at a dedicated website, <a href="https://www.copera.org/colorado-pera-board-endorses-package-reforms" target="_blank" rel="noreferrer noopener" class="broken_link">PERAtour</a>.)



Looking at various features of similar public pension plans across the United States – that is, large public plans with members who, for the most part, do not participate in Social Security – shows that PERA is somewhat typical. Features such as member and employer contribution rates, cost of living adjustments (COLAs) or automatic increases, and benefit multipliers vary across plans, but Colorado’s plan tends to fall in the middle of a range of these features.



The charts below indicate how these public retirement plans compare, and where PERA fits in – both today and if the Board’s proposal were to be implemented in the future.



One area where PERA is an outlier is in excluding Section 125 and 132, or so-called “Cafeteria Plan” and flexible spending account deductions from PERA-includable salary. In a survey conducted by the <a href="http://www.nasra.org/" target="_blank" rel="noreferrer noopener">National Association of State Retirement Administrators</a>, Colorado is the only one of 28 plans surveyed that excludes these deductions.



(It should be noted that the data presented here are simplified for purposes of this discussion and caution must be used in interpreting the information. For example, in Colorado, State Troopers pay a higher employee contribution because they can retire sooner than other members. While a few of those exceptions are noted, in most cases the most common or average data point for a given plan is used. Our sources include data compiled by PERA staff in February of 2017 and comparison data from the <a href="https://www.copera.org/colorado-pera-plan-design-compared-to-other-non-social-security-public-employee-retirement-plans" target="_blank" rel="noreferrer noopener" class="broken_link">Wisconsin Legislative Council</a> from December, 2016.)



<figure class="wp-block-table"><table><tbody><tr><td colspan="2">Member contribution rate by state</td></tr><tr><td>State</td><td>Rate as percent of payroll</td></tr><tr><td>Connecticut Teachers</td><td>6</td></tr><tr><td>Alaska Public Employees</td><td>6.75</td></tr><tr><td>Maine</td><td>7.65</td></tr><tr><td>Colorado (current)*</td><td>8</td></tr><tr><td>Louisiana State Employees</td><td>8</td></tr><tr><td>Louisiana Teachers</td><td>8</td></tr><tr><td>Illinois State Universities</td><td>8</td></tr><tr><td>Alaska Teachers</td><td>8.65</td></tr><tr><td>Illinois Teachers</td><td>9</td></tr><tr><td>Kentucky non-University</td><td>9.105</td></tr><tr><td>California</td><td>9.205</td></tr><tr><td>Colorado proposal*</td><td>10-11</td></tr><tr><td>AVERAGE of current plans</td><td>10.34</td></tr><tr><td>Massachusetts State Employees</td><td>11</td></tr><tr><td>Massachusetts Teachers</td><td>11</td></tr><tr><td>Ohio Public Employees</td><td>14</td></tr><tr><td>Ohio School Employees</td><td>14</td></tr><tr><td>Ohio Teachers</td><td>14</td></tr><tr><td>Nevada</td><td>14.5</td></tr><tr><td>Missouri</td><td>14.5</td></tr><tr><td>Texas</td><td>15.1</td></tr></tbody></table></figure>



*Note that Colorado State Troopers currently contribute 10 percent of payroll. The Board proposal would increase contributions for members hired before January 1, 2020, by an additional 3 percent above current contribution rates and for those hired on or after January 1, 2020, by an additional 2 percent. This is because for new hires starting in 2020, and for members with less than five years of service credit as of January 1, 2020, more years of salary will be considered to calculate an average salary used to determine the total retirement benefit and the retirement age will be higher.



<figure class="wp-block-table"><table><tbody><tr><td colspan="2">Employer contribution rate by state</td></tr><tr><td>State</td><td>Rate as percent of payroll</td></tr><tr><td>Massachusetts State Employees</td><td>12.41</td></tr><tr><td>Ohio Public Employees</td><td>14</td></tr><tr><td>Ohio School Employees</td><td>14</td></tr><tr><td>Ohio Teachers</td><td>14</td></tr><tr><td>Missouri</td><td>14.5</td></tr><tr><td>Nevada</td><td>14.5</td></tr><tr><td>Texas</td><td>15.1</td></tr><tr><td>Colorado (current)*</td><td>19.13</td></tr><tr><td>Maine</td><td>19.29</td></tr><tr><td>Massachusetts Teachers</td><td>19.61</td></tr><tr><td>Colorado (proposed)*</td><td>21.13</td></tr><tr><td>Alaska Public Employees</td><td>24.84</td></tr><tr><td>Louisiana Teachers</td><td>26.3</td></tr><tr><td>California</td><td>26.58</td></tr><tr><td>Alaska Teachers</td><td>29.27</td></tr><tr><td>Connecticut Teachers</td><td>30.35</td></tr><tr><td>Kentucky non-University</td><td>30.755</td></tr><tr><td>Illinois Teachers</td><td>36.64</td></tr><tr><td>Louisiana State Employees</td><td>37.8</td></tr><tr><td>Illinois State Universities</td><td>45</td></tr></tbody></table></figure>



*More detailed information on PERA contribution rates may be found in this <a href="https://www.copera.org/real-return-investments-for-inflation-protection" target="_blank" rel="noreferrer noopener" class="broken_link">fact sheet</a>. Note that while the SAED is paid by employers, it is to be funded by foregone wage increases. The figure here is for the State Division, the AED and SAED, minus 1.02 percent which is dedicated to the Health Care Trust Fund. Contribution rates shown in this table generally reflect teachers, higher education faculty, school employees, and regular state employees.



The multiplier in a defined benefit plan is a factor used to determine the monthly benefit. An example of PERA’s multiplier is 2.5 percent times years of service times the Highest Average Salary (HAS). For a member with 30 years of service credit, the monthly benefit would be 75 percent (30 times 2.5 percent) multiplied by the HAS. (The PERA Board reviewed changes to the multiplier, but decided to maintain the current 2.5 percent factor.)



<figure class="wp-block-table"><table><tbody><tr><td colspan="2">Benefit multiplier by state</td></tr><tr><td>State</td><td>Benefit multiplier*</td></tr><tr><td>Maine</td><td>2</td></tr><tr><td>Connecticut Teachers</td><td>2</td></tr><tr><td>Ohio Teachers</td><td>2.2</td></tr><tr><td>Illinois State Universities</td><td>2.2</td></tr><tr><td>Illinois Teachers</td><td>2.2</td></tr><tr><td>Nevada</td><td>2.25</td></tr><tr><td>Texas</td><td>2.3</td></tr><tr><td>California</td><td>2.4 (varies by age)</td></tr><tr><td>Alaska Public Employees</td><td>2.5 (varies by service)</td></tr><tr><td>Alaska Teachers</td><td>2.5 (varies by service)</td></tr><tr><td>Colorado (current and proposed)</td><td>2.5</td></tr><tr><td>Louisiana State Employees</td><td>2.5</td></tr><tr><td>Louisiana Teachers</td><td>2.5</td></tr><tr><td>Massachusetts State Employees</td><td>2.5</td></tr><tr><td>Massachusetts Teachers</td><td>2.5</td></tr><tr><td>Ohio Public Employees</td><td>2.5 (varies by service)</td></tr><tr><td>Ohio School Employees</td><td>2.5 (varies by service)</td></tr><tr><td>Missouri</td><td>2.5</td></tr><tr><td>Kentucky non-University</td><td>3 (varies by service)</td></tr></tbody></table></figure>



*Where noted, plans have variable multipliers based on age or years of service at retirement. Those listed are the highest possible multipliers earned.



<figure class="wp-block-table"><table><tbody><tr><td colspan="3">Annual increase provisions by state</td></tr><tr><td>State</td><td>Rate as percent of payroll</td><td>Notes*</td></tr><tr><td>Ohio Teachers</td><td>0</td><td>Fixed/Simple</td></tr><tr><td>Texas</td><td>0</td><td>Ad hoc</td></tr><tr><td>Illinois Teachers</td><td>1.25</td><td>Indexed/Simple</td></tr><tr><td>Illinois State Universities</td><td>1.375</td><td>Indexed/Simple</td></tr><tr><td>Colorado (proposed)</td><td>1.5</td><td>Fixed/Compound</td></tr><tr><td>Kentucky non-University</td><td>1.5</td><td>Fixed/Compound</td></tr><tr><td>Louisiana State Employees</td><td>1.5</td><td>Ad hoc/Typically simple</td></tr><tr><td>Louisiana Teachers</td><td>1.5</td><td>Ad hoc/Typically simple</td></tr><tr><td>Missouri</td><td>1.5</td><td>Indexed/Compound</td></tr><tr><td>Connecticut Teachers</td><td>1.75</td><td>Indexed/Compound</td></tr><tr><td>Alaska Public Employees</td><td>1.95</td><td>Indexed/Compound</td></tr><tr><td>Alaska Teachers</td><td>1.95</td><td>Indexed/Compound</td></tr><tr><td>California</td><td>2</td><td>Fixed/Simple</td></tr><tr><td>Colorado (current)</td><td>2</td><td>Fixed/Compound</td></tr><tr><td>Maine</td><td>2.2</td><td>Indexed/Compound</td></tr><tr><td>Massachusetts State Employees</td><td>3</td><td>Ad hoc, Indexed/Simple</td></tr><tr><td>Massachusetts Teachers</td><td>3</td><td>Ad hoc, Indexed/Simple</td></tr><tr><td>Nevada</td><td>3</td><td>Indexed/Compound</td></tr><tr><td>Ohio Public Employees</td><td>3**</td><td>Fixed/Simple</td></tr><tr><td>Ohio School Employees</td><td>3</td><td>Fixed/Simple</td></tr></tbody></table></figure>



*Annual increase provisions vary by state. Those that are indexed are tied to various measures, including <a href="https://www.copera.org/real-return-investments-for-inflation-protection" target="_blank" rel="noreferrer noopener" class="broken_link">Consumer Price Index</a> (CPI), or <a href="https://www.ssa.gov/oact/cola/colaseries.html" target="_blank" rel="noreferrer noopener">Social Security benefit increases</a>. Ad hoc increases may be recommended by a board or set by the state legislature. The COLA PERA pays is compounding, increasing the base benefit each year. However, some systems pay COLAs that are not compounded (simple interest) and do not increase the base benefit for the next year’s COLA payment.



**This figure does not reflect the recent decision of the Ohio Public Employees Retirement System to recommend a reduction in its cost of living adjustment to a 2.25 percent cap.

Colorado PERA Plan Design Compared to Other Non-Social Security Public Employee Retirement Plans

A digest of timely information and insight about finance, investing, and retirement.



<a href="https://www.marketwatch.com/story/this-is-why-you-shouldnt-count-on-social-security-2017-10-27" target="_blank" rel="noreferrer noopener">This is why you shouldn’t count on Social Security |</a>&nbsp;<a href="http://www.marketwatch.com" target="_blank" rel="noreferrer noopener">MarketWatch</a>The Social Security system is expected to be exhausted by the early 2030s, experts say. Americans are still paying into the system every paycheck. What will happen, however, will be a cut to the benefits Americans receive. The government has noticed. The Social Security Administration put out a note last year saying Social Security and Medicare are both facing long-term shortfalls under the current structure, and that they together accounted for 42 percent of federal program expenditures in the fiscal year of 2016. In its 82 years, Social Security alone has collected almost $20 trillion — and it’s already paid out $17.1 trillion, leaving about $2.8 trillion in its two accounts (the Old-Age and Survivors Insurance Trust Fund and the Disability Insurance Trust Fund) at the end of last year. The government expects the accounts to steadily decline until they are depleted in 2034. Last December, the House Ways and Means Social Security Subcommittee Chairman proposed a 31 percent cut in benefits as one way to relieve this over-exhaustion.



<a href="https://www.cnbc.com/2017/10/27/what-the-battle-over-401k-plans-means-for-your-retirement.html" target="_blank" rel="noreferrer noopener">What the battle over 401(k) plans means for your retirement</a> |&nbsp;<a href="https://www.cnbc.com" target="_blank" rel="noreferrer noopener">CNBC</a>Any changes to taxes on your 401(k) savings won&#8217;t change two key tenets of planning for retirement: Save early and save as much as possible. That&#8217;s according to retirement experts even as 401(k) plans have gotten drawn into the tax-reform debate in Washington. Right now, workers who have access to 401(k) plans will be able to invest up to $18,500 next year, while participants age 50 and over will be able to put away $6,000 more. Under current rules, investors will not pay taxes on those contributions until a later date. That could all change if some lawmakers have their way. Limits for pretax contributions to 401(k) plans could be lowered to $2,400 as Congress looks to make up for other tax cuts.



<a href="https://www.copera.org/retirement-roundup-dont-count-on-social-security" target="_blank" rel="noreferrer noopener" class="broken_link">Op-Ed: There’s a better solution on pensions |</a>&nbsp;<a href="https://content.copera.org/retirement-roundup-dont-count-on-social-security/" target="_blank" rel="noreferrer noopener">Lexington Herald-Leader</a>Proposed pension reforms in Kentucky leave in place the huge unfunded liability of anywhere from $33 billion to $84 billion. The General Assembly and local governments will have to find about $1 billion and $400 million, respectively, of additional revenue (taxes) or spending cuts each year, causing additional strains on Kentucky’s beleaguered public institutions and services. The impoverished state, full of talented and industrious citizens, will only be further impoverished. When the next downturn in the economy occurs, Kentucky’s bond ratings will be further reduced.



<a href="https://www.forbes.com/sites/robertlaura/2017/10/30/the-difference-between-retirement-and-successful-aging/#60711556b239" target="_blank" rel="noreferrer noopener">The Difference Between Retirement and Successful Aging |</a>&nbsp;<a href="http://www.forbes.com" target="_blank" rel="noreferrer noopener">Forbes</a> While retirement may provide more time to work out and prepare healthier meals, it doesn’t come with any special fairy dust that suddenly provides extra motivation, desire, or discipline. In fact, retirement tends to magnify the existing behaviors and habits of people, not change them. Therefore, retirement doesn’t foster or lead to successful aging; it can actually work against it.



<a href="https://www.plansponsor.com/americans-greatest-fear-aging-covering-ltc-costs/" target="_blank" rel="noreferrer noopener">Americans’ Greatest Fear About Aging is Covering Long Term Care Costs |</a>&nbsp;<a href="https://www.plansponsor.com/" target="_blank" rel="noreferrer noopener">PLANSPONSOR</a>Not having enough money to pay for health care or long-term care is the greatest fear adults have about aging, Genworth found in a survey of 1,200 people. Despite these overwhelming apprehensions, only 20 percent of Americans have taken any steps towards figuring out how to finance or actually financing long-term care costs. In addition, only 50 percent feel they should be responsible for their own care as they age, with the remainder feeling it is the responsibility of the government, their family or community or faith-based organizations.



<a href="https://www.copera.org/retirement-roundup-dont-count-on-social-security" target="_blank" rel="noreferrer noopener" class="broken_link">Ted Benna, father of the 401(k), thinks tax reform that favors Roth plans is ‘pretty stupid’</a>&nbsp;|&nbsp;<a href="https://content.copera.org/retirement-roundup-dont-count-on-social-security/" target="_blank" rel="noreferrer noopener">Pensions &amp; Investments</a> Ted Benna was a pioneer of the 401(k) plan, having developed the concept of pre-tax 401(k) deferrals. He adopted the first-ever 401(k) savings plan in 1981 for the Johnson Cos., where he worked as a retirement benefit consultant. Now, debate is swirling on Capitol Hill to reduce the pre-tax contribution limit from the current $18,000 annual limit as part of a Republican tax reform package set to be unveiled this week. Any contributions beyond the pre-tax limit would be mandated to go to Roth, or after-tax, accounts, a policy known as “Rothification.”



“I think it&#8217;s pretty stupid in terms of retirement policy,” Mr. Benna, now a consultant at an eponymous firm, told <a href="http://www.investmentnews.com/" target="_blank" rel="noreferrer noopener">InvestmentNews</a>. “There&#8217;s major concern about a retirement crisis that&#8217;s staring us in the face. (The 401(k) plan) is the plan, whether people like it or hate it, that&#8217;s the primary way for the average American to be saving for retirement.”

Retirement Roundup: Don’t Count on Social Security

Earlier this year, Colorado PERA <a href="https://www.copera.org/changing-demographics-market-conditions-addressed-peratour" target="_blank" rel="noreferrer noopener" class="broken_link">held telephone town halls and a series of meetings in communities across the state</a>. The purpose of the meetings was to inform and listen to members, retirees, employers, and taxpayers about reducing PERA’s risk profile while maintaining a sustainable retirement for Colorado’s public employees and strengthening the Colorado economy.



This outreach effort, called <a href="https://www.copera.org/pera-earned-7-3-percent-return-2016" target="_blank" rel="noreferrer noopener" class="broken_link">PERAtour</a>, came after a review process indicated that changing demographics and market conditions had <a href="https://www.copera.org/colorado-pera-board-endorses-package-reforms" target="_blank" rel="noreferrer noopener" class="broken_link">increased the risk profile of each of the PERA divisions</a>, extending the period until PERA reaches full-funded status well beyond 30 years.



At the same time, PERA launched a dedicated website, peratour.org, dedicated to providing factual information about changes to external conditions, gathering feedback from members, retirees, taxpayers, and interested citizens, and reporting the opinions that participants shared in person, by phone, and online.



There is a wealth of information available on the website, and several highlights from PERAtour are listed below.



<a href="https://www.copera.org/one-stop-shop-peratour-changes-pera" target="_blank" rel="noreferrer noopener" class="broken_link">PERAtour: A statewide conversation</a>



<ul>
<li>A <a href="https://www.youtube.com/watch?v=6X0uA6HdViQ&amp;feature=youtu.be" target="_blank" rel="noreferrer noopener">narrated</a> or <a href="https://www.copera.org/one-stop-shop-peratour-changes-pera" target="_blank" rel="noreferrer noopener" class="broken_link">self-directed presentation</a> providing an overview of the purpose and process for PERAtour.</li>
</ul>



<a href="https://www.youtube.com/watch?v=5yUznXdQhhg&amp;feature=youtu.be" target="_blank" rel="noreferrer noopener">Narrated Board presentation</a>



<ul>
<li>A video presentation made available to the <a href="https://content.copera.org/colorado-pera-board-election-reminder/" target="_blank" rel="noreferrer noopener">PERA Board of Trustees</a> in June, including a recap of what was learned from the PERAtour community meetings.</li>
</ul>



<a href="https://content.copera.org/one-stop-shop-peratour-changes-pera/" target="_blank" rel="noreferrer noopener">“What we’ve heard”</a>



<ul>
<li>A series of blog posts summarizing feedback from meeting attendees.</li>



<li><a href="https://www.copera.org/senate-bill-1-conditions-different" target="_blank" rel="noreferrer noopener" class="broken_link">Feedback on the principles and priorities that should guide potential future changes to PERA</a></li>



<li><a href="https://www.copera.org/one-stop-shop-peratour-changes-pera" target="_blank" rel="noreferrer noopener" class="broken_link">Retirement benefits should treat all employees fairly</a></li>



<li><a href="https://content.copera.org/one-stop-shop-peratour-changes-pera/" target="_blank" rel="noreferrer noopener">A deep commitment to public service</a></li>



<li><a href="https://content.copera.org/one-stop-shop-peratour-changes-pera/" target="_blank" rel="noreferrer noopener">Keeping up with inflation in retirement</a></li>



<li><a href="https://content.copera.org/one-stop-shop-peratour-changes-pera/" target="_blank" rel="noreferrer noopener">Participants concerned about changing workforce</a></li>
</ul>



<a href="" target="_blank" rel="noreferrer noopener">Support for core principles, by the numbers</a>



<ul>
<li>An infographic showing the level of support for core principles to guide any potential future changes to PERA.</li>
</ul>



<a href="https://www.youtube.com/embed/k_6d5a82drA" target="_blank" rel="noreferrer noopener">What our members have to say</a>



<ul>
<li><a href="https://www.youtube.com/embed/5Pj_9_de1xs" target="_blank" rel="noreferrer noopener">Linda</a>, <a href="https://www.youtube.com/embed/x8u4lk1gdX0" target="_blank" rel="noreferrer noopener">Anne</a>, <a href="https://www.youtube.com/embed/k_6d5a82drA" target="_blank" rel="noreferrer noopener">Steve</a>, and <a href="https://www.youtube.com/embed/yk9rULN3QSk" target="_blank" rel="noreferrer noopener">John</a>, all PERA retirees, share their thoughts about what they heard during PERAtour community meetings.</li>
</ul>



<a href="https://www.youtube.com/watch?v=iJAaMIfTOfw&amp;feature=youtu.be" target="_blank" rel="noreferrer noopener">PERAtour: Denver</a>



<ul>
<li>A full-length video recording of a PERAtour meeting in Denver, including Executive Director Greg Smith’s responses to questions asked by attendees.</li>
</ul>

Tag Archives: