Retirement insights from a Colorado PERA perspective

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Lawmakers in Colorado are moving forward with two PERA-related bill drafts following a summer of legislative activity in interim committees.



PERA leaders and staff have been meeting with legislators throughout the summer to provide updates, answer questions, and provide feedback during this annual period of PERA review and oversight.



<h4 class="wp-block-heading">Drafts of PERA-related bills</h4>



The <a href="https://leg.colorado.gov/committees/pension-review-commission/2024-regular-session" target="_blank" rel="noreferrer noopener">Pension Review Commission</a>, which is responsible for recommending legislation pertaining to PERA and the Fire and Police Pension Association of Colorado, met on Friday, September 27 to finalize two bill drafts related to PERA.



The first, known as Bill A, is similar to a bill from last session that would provide a temporary tax credit for PERA retirees to reduce the impact of inflation. The $700 credit would apply to retirees who are at least 65 years old and have adjusted gross income of no more than $38,000 for single filers or $76,000 for joint filers.



The second draft, Bill B, pertains to PERA studies and reporting. The bill aims to lay out in statute some of the work the PERA Board already does on a regular basis, such as periodic actuarial audits and actuarial experience studies. The bill also would modify the cadence of those reports.



The Commission had been considering a bill to tie to inflation the State’s annual $225 million direct distribution to PERA, based on a recommendation from the Pension Review Subcommittee. Lawmakers decided not to move forward with that bill as one of their official interim committee-recommended pieces of legislation because of its added cost amid a projected shortfall in the state budget. Lawmakers may still decide individually to move forward with any particular bills during the legislative session.



<h4 class="wp-block-heading">Pension Review Subcommittee recommendations</h4>



Throughout the summer, PERA also engaged with the <a href="https://leg.colorado.gov/committees/pension-review-subcommittee/2024-regular-session" target="_blank" rel="noreferrer noopener">Pension Review Subcommittee</a>, which consists of a mix of legislators and members of the public and reports up to the Pension Review Commission. In addition to making recommendations to the Pension Review Commission, the Subcommittee also makes recommendations to the PERA Board and writes an annual <a href="https://leg.colorado.gov/content/recommendations-letter-citizens" target="_blank" rel="noreferrer noopener">letter to the residents of Colorado</a> on PERA’s financial health.



In the course of its work, the Pension Review Subcommittee came up with three recommendations for the PERA Board:



<ol type="1">
<li>Provide more detail on the benchmarks PERA uses to measure performance of the various asset classes in the PERA Defined Benefit Plan portfolio.</li>



<li>Improve transparency around PERA Board meetings by making meeting recordings and materials more easily accessible online.</li>



<li>Study the impact of allowing non-vested PERA members who refund their account to receive their balance plus investment returns instead of the current Board-established 3% compounding interest.</li>
</ol>



The PERA Board discussed the recommendations at its <a href="https://www.copera.org/pera-on-the-issues/pera-board-discusses-strategic-plan-investment-strategy-and-more-at-2024-planning-session" target="_blank" rel="noreferrer noopener">September Planning Session</a> and <a href="https://www.copera.org/news/colorado-pera-responds-to-pension-oversight-committees" target="_blank" rel="noreferrer noopener">agreed to consider all three</a>. Investment staff provided the Subcommittee with the information requested on benchmarks, the Board agreed to archive meeting recordings and public materials online starting in November; meetings are currently streamed live and available upon request. The Board also agreed staff will study the cost of providing market returns when a member refunds their account.



<h4 class="wp-block-heading">What’s next?</h4>



All bill drafts from interim committees go to the Legislative Council Committee for consideration. If approved, lawmakers can then introduce those bills in the next legislative session, which begins on January 8, 2025.



The PERA Board’s next regularly scheduled meeting is set for November 15.

State Lawmakers Pursuing Two PERA-Related Bills in 2025

The <a href="https://leg.colorado.gov/committees/pension-review-commission/2023-regular-session" target="_blank" rel="noreferrer noopener">Pension Review Commission,</a> a legislative panel that meets in between regular legislative sessions, plans to introduce new PERA-related bills in the 2024 Colorado General Assembly.



The Commission has the responsibility of overseeing PERA and proposing legislation that could affect the plan and benefits.&nbsp;It met in October to discuss ideas for legislation, and committee members voted to move forward with two PERA-related bill drafts.



<h4 class="wp-block-heading">PERA-related bill drafts</h4>



The Commission drafted one bill that relates directly to PERA and Plan benefits. Titled <a href="https://leg.colorado.gov/sites/default/files/images/committees/bill_a_24-0395.pdf" target="_blank" rel="noreferrer noopener">Additional PERA Service Retirees for Schools</a>, the bill draft aims to expand the number of PERA retirees who can work for school districts without reductions in their benefits. Under current law, school districts can hire 10 such retirees when there is a critical shortage. The bill draft, if passed, would remove the critical shortage requirement and allow larger districts to hire more retirees.



The other bill draft aims to provide some financial assistance to PERA retirees in the form of a temporary tax credit. That bill draft, <a href="https://leg.colorado.gov/sites/default/files/images/committees/bill_b_24-0396.pdf" target="_blank" rel="noreferrer noopener">PERA Retiree Refundable Income Tax Credit</a>, would provide a tax credit of $700 for qualifying retirees on their tax returns for tax years 2024 and 2025. Lawmakers introduced <a href="https://leg.colorado.gov/bills/hb23-1016" target="_blank" rel="noreferrer noopener">a similar bill last year</a>, but it didn’t pass.



<h4 class="wp-block-heading">What’s next?</h4>



The PERA Board of Trustees typically discusses PERA-related bills after they’re introduced at the Capitol and will take a formal stance on any that could affect PERA’s finances.



Legislators on the Pension Review Commission will introduce their bills in the next legislative session, which begins in January. The bills will follow <a href="https://leg.colorado.gov/sites/default/files/bill_becomes_law_chart_1.pdf" target="_blank" rel="noreferrer noopener">the usual process</a> of making their way through the legislature before passing or failing.



PERA On The Issues will keep track of PERA-related legislation throughout the session and provide updates when they’re available.



<a href="https://peraontheissues.com/subscribe/">Subscribe</a> to our biweekly newsletter to stay in the loop.

Pension Review Commission Eyes Two Bills for 2024 Legislative Session

The Colorado General Assembly wrapped up the 2021 legislative session in June, but legislative work has continued in the ensuing months at the Capitol. Some of that work over the summer and fall involved committees that conduct routine oversight into Colorado PERA and its operations.



PERA and its Board of Trustees appreciate the value of rigorous review and transparency, so staff regularly engage with these legislative panels to provide updates on PERA’s finances, answer questions and listen to feedback from lawmakers and others. Summaries of those activities are included below.



<h4 class="wp-block-heading">Legislative Audit Committee</h4>



The <a href="http://leg.colorado.gov/committees/legislative-audit-committee/2021-regular-session" target="_blank" rel="noreferrer noopener">Legislative Audit Committee</a> met in August to hear an update on PERA’s financial status and receive the results of an independent audit of PERA’s <a href="https://www.copera.org/colorado-pera-board-releases-2020-annual-report" target="_blank" rel="noreferrer noopener" class="broken_link">Comprehensive Annual Financial Report</a>. The Committee heard from PERA Executive Director Ron Baker, Chief Investment Officer Amy C. McGarrity, external auditors, and actuarial consultants.



The auditors gave PERA’s annual report a clean audit with no significant issues or outstanding recommendations.



Read more <a href="https://content.copera.org/pera-oversight-continues-between-legislative-sessions/" target="_blank" rel="noreferrer noopener">here</a>.



<h4 class="wp-block-heading">Pension Review Commission and Pension Review Subcommittee</h4>



The legislature’s <a href="http://leg.colorado.gov/committees/pension-review-subcommittee/2021-regular-session" target="_blank" rel="noreferrer noopener">Pension Review Subcommittee</a>, which was established as part of the PERA reforms of Senate Bill 200 in 2018, consists of legislators and members of the public with expertise in topics such as accounting, economics and investment management.



At its Sept. 10 meeting, the Subcommittee voted to draft a bill for the 2022 legislative session that would make up the legislature’s missed $225 million direct distribution payment to PERA from July 2020. The Subcommittee forwarded that bill to the <a href="http://leg.colorado.gov/committees/pension-review-commission/2021-regular-session" target="_blank" rel="noreferrer noopener">Pension Review Commission</a>, which then forwarded the draft to <a href="http://leg.colorado.gov/committees/pension-review-commission/2021-regular-session" target="_blank" rel="noreferrer noopener">Legislative Council</a> for review. In November, the Legislative Council voted to approve the bill, clearing the way for it to be introduced in the upcoming legislative session, which begins in January.



Read more about that bill <a href="https://peraontheissues.com/legislative-committee-seeks-to-make-up-missed-225m-payment-to-pera/" target="_blank" rel="noreferrer noopener">here</a>.



The Pension Review Subcommittee also conducted an independent review of the actuarial assumptions PERA uses in its financial calculations and reporting. Based on that review, the Subcommittee made three recommendations to the PERA Board regarding PERA’s funding policy and Signal Light methodology and reporting.



At its November meeting, the Board discussed the recommendations in detail and heard from PERA staff as well as PERA’s actuarial consultants. Following the discussion, the Board decided to draft a letter to the Pension Review Subcommittee responding to the recommendations. In the letter, the Board stated it agrees with the Subcommittee that there’s a need for clearer communication in the Signal Light report and the Board will consider implementing changes in future versions of the report. The Board also said it will consider making changes to <a href="https://www.copera.org/despite-changes-in-accounting-standards-pera-remains-on-track" target="_blank" rel="noreferrer noopener" class="broken_link">PERA’s funding policy</a> when it undertakes its planned review of the policy in 2023.



Read the Board’s letter <a href="http://leg.colorado.gov/sites/default/files/images/colorado_pera_board_responses_to_pension_review_subcommittee_recommendations_-_11.29.21.pdf" target="_blank" rel="noreferrer noopener">here</a>.



<h4 class="wp-block-heading">Joint Budget Committee</h4>



On Dec. 9, PERA Executive Director Ron Baker and Chief Investment Officer Amy C. McGarrity appeared before the <a href="http://leg.colorado.gov/committees/joint-budget-committee/2021-regular-session" target="_blank" rel="noreferrer noopener">Joint Budget Committee</a> for that panel’s annual hearing on PERA. Baker and McGarrity provided the Committee with updates on a number of topics — including PERA’s finances and membership, results of <a href="https://peraontheissues.com/2020-experience-study-preparing-for-a-secure-future/" target="_blank" rel="noreferrer noopener">2020’s actuarial experience study</a>, and market performance in 2021 — and answered questions from committee members.



<h4 class="wp-block-heading">What’s ahead in 2022</h4>



The Colorado General Assembly will convene to kick off the 2022 legislative session on Jan. 12. PERA On The Issues will keep track of any proposed legislation that pertains to Colorado PERA, including the draft bill to make up the state’s missed 2020 payment of $225 million, and provide updates throughout the session. If you haven’t already subscribed to our newsletter, <a href="https://www.copera.org/pera-oversight-continues-between-legislative-sessions" target="_blank" rel="noreferrer noopener" class="broken_link">you can do so here</a>.

PERA Oversight Continues Between Legislative Sessions

Editor’s note: On Monday, Nov. 15, the Legislative Council voted to approve the bill, clearing the way for it to be introduced during the regular legislative session, which is set to begin on Jan. 12. PERA On The Issues will continue to monitor the bill and will provide updates regarding its status during the session.



<hr class="wp-block-separator"/>



The Colorado General Assembly’s Pension Review Commission on Tuesday voted to recommend a bill for the 2022 legislative session that would make up the legislature’s missed $225 million direct distribution payment to PERA from July 2020.



Lawmakers <a href="https://peraontheissues.com/pera-related-legislation-sent-to-governor/" target="_blank" rel="noreferrer noopener">enacted legislation</a> to forego the annual $225 million payment to PERA during the height of the COVID-19 pandemic, when the General Assembly cut billions of dollars from the state budget. The state resumed payments in July 2021 but did not make up 2020’s payment.



The Pension Review Commission’s draft calls for the state to make a payment totaling $303.57 million — $225 million plus estimated investment gains, had the money been invested — on July 1, 2022.



Lawmakers recommended using money from the state’s general fund to make the payment, though committee members also suggested using money from a new cash fund the legislature established during the <a href="https://peraontheissues.com/2021-proposed-legislation-status/" target="_blank" rel="noreferrer noopener">2021 legislative session</a>. That fund, which currently has a balance of $380 million, is meant specifically for future payments to PERA.



The draft bill will head next to the Legislative Council before it could be introduced in the 2022 legislative session.



The $225 million direct distribution to PERA is part of a package of reforms enacted under Senate Bill 200 in 2018 and is meant to help PERA pay down its unfunded liability. Also included in Senate Bill 200 was the Automatic Adjustment Provision, which will trigger increases in employee and employer contributions to PERA and reductions to annual increases for benefit recipients in July 2022.

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State Lawmakers Pursuing Two PERA-Related Bills in 2025

Pension Review Commission Eyes Two Bills for 2024 Legislative Session

PERA Oversight Continues Between Legislative Sessions

Legislative Committee Seeks to Make Up Missed $225M Payment to PERA

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