
<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>PERA’s executive team hosted two virtual Town Hall meetings on Wednesday, June 26 to provide updates on PERA and answer questions from members and retirees.</p>



<p>Chief Executive Officer/Executive Director was joined by Chief Investment Officer/Chief Operating Officer Amy C. McGarrity, Chief Benefits Officer Patrick Lane, and Chief Operating Officer Jeremy Hill.</p>



<p>We’ve included clips of some of the executives’ answers below, and full recordings of each Town Hall are available at <a href="https://copera.org/about/pera-town-hall" target="_blank" rel="noreferrer noopener">copera.org/townhall</a>.</p>



<h5 class="wp-block-heading"><strong>How did PERA’s investments perform last year and what is PERA’s financial status?</strong></h5>



<div class="wp-block-advgb-video advgb-video-block full-width" data-video="https://content.copera.org/wp-content/uploads/2024/07/amy-investments-2024.mp4" data-source="local" data-video-attr="controls,playsinline" data-video-preload="metadata"><div class="advgb-video-wrapper full-width no-lightbox"><video class="full-width" height="450" poster="https://content.copera.org/wp-content/uploads/2024/07/amy-investments.png" controls preload="metadata" playsinline><source src="https://content.copera.org/wp-content/uploads/2024/07/amy-investments-2024.mp4"/>Your browser does not support HTML5 video.</video></div></div>



<p>McGarrity began by highlighting PERA’s financial results from 2023, as reported in the recently released 2023 <em>Annual Comprehensive Financial Report</em>.</p>



<p>“For the year ended December 31, 2023, PERA’s investment portfolio earned a positive return of 13.4% net-of-fees,” McGarrity said. “The value of the total PERA Defined Benefit Plan was $61.5 billion at the end of the year, and PERA’s funded status was 69.6%.”</p>



<p>PERA remains on track to meet its funding goals, and as such, there will be no automatic adjustments to member and employer contributions or annual benefit increases. Retirees and beneficiaries will receive a 1% Annual Increase in July 2024 and another 1% in 2025.</p>



<p>Explore PERA’s financial results in an interactive format at <a href="https://copera.org/snapshot" target="_blank" rel="noreferrer noopener">copera.org/snapshot</a>.</p>



<h5 class="wp-block-heading"><strong>As PERA’s new CEO, do you anticipate making any major changes, such as implementing a larger annual benefit increase for retirees?</strong></h5>



<div class="wp-block-advgb-video advgb-video-block full-width" data-video="https://content.copera.org/wp-content/uploads/2024/07/24-andrew-increase.mp4" data-source="local" data-video-attr="controls,playsinline" data-video-preload="metadata"><div class="advgb-video-wrapper full-width no-lightbox"><video class="full-width" height="450" poster="https://content.copera.org/wp-content/uploads/2024/07/andrew-ai.png" controls preload="metadata" playsinline><source src="https://content.copera.org/wp-content/uploads/2024/07/24-andrew-increase.mp4"/>Your browser does not support HTML5 video.</video></div></div>



<p>Roth reiterated that staff and the Board understand the challenge inflation has posed in recent years as the <a href="https://www.copera.org/retirees/benefit-basics-for-retirees/annual-benefit-increases" target="_blank" rel="noreferrer noopener">Annual Increase</a>—which is set in statute and can only adjust up or down based on PERA’s funding progress, has not kept pace.</p>



<p>“I, as Executive Director, do not have the power or authority to make changes to the Annual Increase,” Roth said. “We understand and are doing everything we can to address financial security for our retirees, as is central to our mission.”</p>



<h5 class="wp-block-heading"><strong>Has PERA been planning for the possibility of a recession, and what could that mean for the portfolio?</strong></h5>



<div class="wp-block-advgb-video advgb-video-block full-width" data-video="https://content.copera.org/wp-content/uploads/2024/07/24-amy-recession.mp4" data-source="local" data-video-attr="controls,playsinline" data-video-preload="metadata"><div class="advgb-video-wrapper full-width no-lightbox"><video class="full-width" height="450" poster="https://content.copera.org/wp-content/uploads/2024/07/amy-recession.png" controls preload="metadata" playsinline><source src="https://content.copera.org/wp-content/uploads/2024/07/24-amy-recession.mp4"/>Your browser does not support HTML5 video.</video></div></div>



<p>McGarrity discussed PERA’s strategic asset allocation—which is set by Board—and its focus on long-term performance. In addition, the Board is currently conducting a study of its investment strategy known as an <a href="https://www.copera.org/pera-on-the-issues/asset-liability-study-a-guide-to-building-a-strategic-portfolio" target="_blank" rel="noreferrer noopener">asset/liability study</a>, and that process includes modeling many different scenarios.</p>



<p>“In that 30-year capital market assumption set, they have a variety of market scenarios, there are recessions, there are bull markets,” McGarrity said. “So as it relates to shorter term or medium term economic events…they’re incorporated into those long-term assumptions.”</p>



<h5 class="wp-block-heading"><strong>PERACare premiums have largely held steady over the past few years; will they remain the same next year?</strong></h5>



<div class="wp-block-advgb-video advgb-video-block full-width" data-video="https://content.copera.org/wp-content/uploads/2024/07/24-patrick-peracare.mp4" data-source="local" data-video-attr="controls,playsinline" data-video-preload="metadata"><div class="advgb-video-wrapper full-width no-lightbox"><video class="full-width" height="450" poster="https://content.copera.org/wp-content/uploads/2024/07/patrick-peracare.png" controls preload="metadata" playsinline><source src="https://content.copera.org/wp-content/uploads/2024/07/24-patrick-peracare.mp4"/>Your browser does not support HTML5 video.</video></div></div>



<p>“I’ll be very direct and say, ‘No.’ PERACare premiums will be going up for the 2025 plan year,” Lane said. “Our Medicare Advantage participants have been protected from premium increases for the last three years because of the rate we were able to get guaranteed when we renewed three years ago. Unfortunately, that rate guarantee is expiring this plan year.”</p>



<p>Lane added that regulatory changes have also prompted insurance carriers to raise their rates for the coming plan year. PERA is still working out the details with carriers and expects to provide 2025 plan information in the fall.</p>



<h5 class="wp-block-heading"><strong>What is PERA doing about Social Security’s Windfall Elimination Provision (WEP) and Government Pension Offset (GPO)?</strong></h5>



<div class="wp-block-advgb-video advgb-video-block full-width" data-video="https://content.copera.org/wp-content/uploads/2024/07/24-patrick-wep-gpo.mp4" data-source="local" data-video-attr="controls,playsinline" data-video-preload="metadata"><div class="advgb-video-wrapper full-width no-lightbox"><video class="full-width" height="450" poster="https://content.copera.org/wp-content/uploads/2024/07/patrick-wep-gpo.png" controls preload="metadata" playsinline><source src="https://content.copera.org/wp-content/uploads/2024/07/24-patrick-wep-gpo.mp4"/>Your browser does not support HTML5 video.</video></div></div>



<p>Lane said that since the WEP and GPO are provisions of federal law, any changes would have to come from Congress. And while legislators have introduced various bills related to the issue over the years, lawmakers haven’t come to an agreement on a path forward.</p>



<p>“What would happen if the WEP/GPO were to be repealed, that would mean more money coming out of the Social Security trust fund, and that is really where legislation has failed in the past,” Lane said. “I think there are a lot of members of Congress who are interested in the subject and are open to the conversation, but they have yet to reach an agreement on how to actually fund that additional money that would be coming out of the trust fund.”</p>



<p>We follow this issue closely and will provide any updates on federal WEP/GPO legislation when we can.</p>



<h5 class="wp-block-heading"><strong>Where do you see PERA headed in the future and how can I be sure I will receive my full benefit when I retire?</strong></h5>



<div class="wp-block-advgb-video advgb-video-block full-width" data-video="https://content.copera.org/wp-content/uploads/2024/07/24-andrew-pera-future.mp4" data-source="local" data-video-attr="controls,playsinline" data-video-preload="metadata"><div class="advgb-video-wrapper full-width no-lightbox"><video class="full-width" height="450" poster="https://content.copera.org/wp-content/uploads/2024/07/andrew-pera-future.png" controls preload="metadata" playsinline><source src="https://content.copera.org/wp-content/uploads/2024/07/24-andrew-pera-future.mp4"/>Your browser does not support HTML5 video.</video></div></div>



<p>“We have been delivering benefits for almost a century, and we are focused on doing the exact same thing for the next century; your benefits will be here,” Roth said. “Colorado PERA is here for its members and we look forward to serving you as we move into the future together.”</p>



<p>For full recordings of both Town Halls, visit <a href="https://copera.org/about/pera-town-hall" target="_blank" rel="noreferrer noopener">copera.org/townhall</a>.</p>


CEO Andrew Roth, Executives Answer Questions in PERA Town Halls


<p>Every month retired public employees across the state receive their benefit payments from Colorado PERA. Retirees then spend their income in their communities, supporting local economies and jobs and providing an important stabilizing economic force.</p>



<p>In 2023, PERA paid $4.56 billion in benefits to 114,432 retirees living in Colorado, resulting in $7.1 billion in total economic output and supporting 28,525 jobs in the state, according to <a href="http://copera.org/pacey-report-2024" target="_blank" rel="noreferrer noopener">a newly released report</a> from Boulder-based Pacey Nehls Economic Consulting. The <em>Economic and Fiscal</em> <em>Impacts</em> report also found PERA retirees paid nearly $382 million in state and local taxes on those benefits, supporting schools, roads, and other vital services.</p>



<h4 class="wp-block-heading"><strong>The multiplier effect</strong></h4>



<p>When retirees spend their pension income, it sets off a multiplier effect as businesses then spend money to stock more inventory and hire staff, employees of those businesses spend their own income, and governments collect taxes on all that spending. The result is every dollar in PERA benefits grows as it cascades through the economy.</p>



<p>This cycle of spending illustrates the economic measure of “value-added,” which counts only the additional production of goods and services resulting from PERA distributions rather than total output.</p>



<p>Pacey Nehls estimates a PERA retiree’s economic output multiplier at 1.56, meaning an extra 56 cents are generated in the economy for every dollar a retiree spends. In total, PERA retiree spending resulted in $3.39 billion in added economic value statewide last year.</p>



<h4 class="wp-block-heading"><strong>The stabilizing effect</strong></h4>



<figure class="wp-block-image size-large"><img decoding="async" loading="lazy" width="1024" height="496" src="https://content.copera.org/wp-content/uploads/2024/07/pera-distributions-per-capita-1024x496.png" alt="A chart showing annual PERA retirement distributions per capita for various regions in 2009 and 2023. Colorado statewide: $480 per capita in 2009, $780 per capita in 2023. Metro Denver: $412 per capita in 2009, $708 per capita in 2023. Colorado Springs: $491 per capita in 2009, $735 per capita in 2023. Pueblo-Southern Mountains: $1,007 per capita in 2009, $1,555 per capita in 2023. San Luis Valley: $647 per capita in 2009, $1,155 per capita in 2023. Southwest Mountain: $496 per capita in 2009, $775 per capita in 2023. Western: $507 per capita in 2009, $879 per capita in 2023. Mountain: $363 per capita in 2009, $654 per capita in 2023. Northern: $567 per capita in 2009, $809 per capita in 2023. Eastern: $531 per capita in 2009, $996 per capita in 2023." class="wp-image-52009" srcset="https://content.copera.org/wp-content/uploads/2024/07/pera-distributions-per-capita-1024x496.png 1024w, https://content.copera.org/wp-content/uploads/2024/07/pera-distributions-per-capita-300x145.png 300w, https://content.copera.org/wp-content/uploads/2024/07/pera-distributions-per-capita-768x372.png 768w, https://content.copera.org/wp-content/uploads/2024/07/pera-distributions-per-capita.png 1416w" sizes="(max-width: 1024px) 100vw, 1024px" /><figcaption class="wp-element-caption">Regional per capita annual PERA retirement distributions in 2009 and 2023</figcaption></figure>



<p>The consistent flow of billions of dollars in PERA retirement benefits into communities across the state every year helps add stability to the state and local economies. This stabilizing effect is especially strong in some of Colorado’s rural areas, where public employees make up a larger portion of county payroll and their retirement benefits are higher per capita.</p>



<p>For example, the Denver metro area has the most overall PERA distributions in Colorado at more than $2.3 billion last year, which equates to $708 per person. Meanwhile, the Pueblo-Southern Mountain region’s $382 million in PERA benefits comes out to $1,555 per person.</p>



<p>The stabilizing effect of PERA benefits was especially helpful <a href="https://www.copera.org/pera-on-the-issues/u-s-pension-benefits-played-important-economic-role-in-first-year-of-pandemic" target="_blank" rel="noreferrer noopener">during the COVID-19 pandemic</a>. When businesses, schools, governments, and other entities shut down or greatly reduced staff due to the health emergency, PERA continued to pay benefits to retirees across the state, providing consistent, reliable money to local economies when other economic activity was lower than usual.</p>



<p>For more information, including detailed breakdowns by region and county, <a href="http://copera.org/pacey-report-2024" target="_blank" rel="noreferrer noopener">download the <em>Economic and Fiscal Impacts</em> report here</a>.</p>


Measuring the Impact of $4.5B+ in Annual Retirement Benefits in Colorado


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



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



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



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



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



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



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



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


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


<p>How well do you know the PERA benefits that Colorado PERA provides?</p>



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



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


<p>[ays_quiz id=&#8217;2&#8242;]</p>



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



<p><strong>Resources for learning more about PERA benefits:</strong></p>



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



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



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



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


Quiz: Test Your Knowledge of PERA Benefits


<p><em>Editor&#8217;s note: Updated forms are <a href="https://content.copera.org/irs-to-begin-using-updated-form-w-4p-and-new-form-w-4r-in-2023/" target="_blank" rel="noreferrer noopener">now available online at copera.org</a>.</em></p>



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



<p>The IRS is implementing some changes to tax withholding forms in 2023 that could affect retirees who receive benefit payments from plans like Colorado PERA.</p>



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



<p>In 2020, the IRS began requiring employers to use a new version of Form W-4, which employees fill out to tell their employer how much to withhold from their paychecks. The updated form was a result of the Tax Cuts and Jobs Act of 2017, which made a number of significant changes to tax law, including eliminating personal exemptions. Instead of using complicated worksheets and declaring a number of withholding allowances, employees now fill out the form with the relevant information, and employers calculate the appropriate amount of tax to withhold.</p>



<p>The updated form is intended to ensure employers withhold a more accurate amount from workers’ paychecks. The result is fewer people who either owe money to the IRS or who receive large refunds at tax time.</p>



<h4 class="wp-block-heading"><strong>Updated W-4P and new W-4R</strong></h4>



<p>Following the tax code changes from the Tax Cuts and Jobs Act and the updated W-4 form, the IRS is also updating Form W-4P, which is used to determine tax withholdings for pension and annuity accounts.</p>



<p>While the old form covered both one-time distributions and recurring payments, there are now two forms. Form W-4P is only for recurring payments such as monthly PERA benefit payments, while Form W-4R is for one-time or lump-sum distributions such as refunds or rollovers.</p>



<p>Like the W-4, the W-4P form no longer allows tax filers to adjust their withholdings by electing a specific number of withholding allowances. Instead, the W-4P form has new input fields for increasing or decreasing the amount to withhold, including fields for tax credits and deductions.</p>



<h4 class="wp-block-heading"><strong>What the changes mean for PERA retirees</strong></h4>



<p>PERA retirees and benefit recipients who are currently receiving ongoing PERA benefit payments and who do not wish to make changes to their federal tax withholding elections are not required to file a new form. However, PERA recommends completing a new W-4P form for 2023 to ensure the appropriate tax amount is withheld.&nbsp;</p>



<p>If a filer makes no changes to their federal tax withholding elections, PERA will use the IRS method to bridge their tax table elections over to the new methodology as of January 1, 2023. This bridging, in most cases, will adjust their withholding accordingly. If a person’s current election is to withhold zero federal tax, a flat dollar amount tax or flat percentage tax, those elections will remain the same, but may be incorrect withholding amounts under the new IRS guidelines, which is why PERA recommends submitting the new W-4P form for 2023.</p>



<p>PERA anticipates retirees and benefit recipients will be able to update their tax withholding elections <a href="https://www.copera.org/member-and-retiree-forms" target="_blank" rel="noreferrer noopener">online and by paper forms</a> in mid-December 2022 for changes to take effect January 1, 2023.</p>



<p>Please note that PERA cannot provide tax advice, including advice about how to complete these forms. If you have questions about your particular situation, please contact a tax or legal advisor.</p>



<p>For more information on taxes and PERA benefits, visit <a href="https://www.copera.org/taxes-on-benefits" target="_blank" rel="noreferrer noopener">copera.org</a>.</p>


IRS to Begin Using Updated Form W-4P and New Form W-4R in 2023


<p>Every month, Colorado PERA distributes millions of dollars in retirement benefits to more than 110,000 retirees living in Colorado. Those retirees spend their retirement income in their communities, contributing to the local and regional economies and supporting thousands of jobs.</p>



<p>The economic effects of PERA retiree spending are the focus of a recently released report, <a href="https://www.copera.org/u-s-pension-benefits-played-important-economic-role-in-first-year-of-pandemic" target="_blank" rel="noreferrer noopener" class="broken_link"><em>Colorado PERA’s Economic and Fiscal Impacts</em></a><em>,</em> prepared by Boulder-based Pacey Economics.</p>



<p>In 2021, PERA paid $4.35 billion in retirement benefits to more than 110,000 Colorado retirees, resulting in $6.8 billion in total economic output and supporting 31,449 jobs statewide, according to the report. In addition, retirees paid $382.2 million in state and local taxes on those PERA benefits.</p>



<h4 class="wp-block-heading"><strong>The multiplier effect</strong></h4>



<p>Every dollar a retiree receives from PERA is a dollar they can spend on goods and services in their community — at the grocery store, restaurants, retail stores and other businesses. That spending sets off a multiplier effect as businesses then spend money to stock more inventory and hire more staff. The result is that original PERA dollar continues to be invested in the local community as businesses and their employees also purchase goods and services.</p>



<p>This cycle of spending illustrates the economic measure of “value-added,” which counts only the additional production of goods and services resulting from PERA distributions rather than total output.</p>



<p>Pacey Economics estimates a PERA retiree’s economic output multiplier at 1.56, meaning an extra 56 cents are generated in the economy for every dollar a retiree spends. In total, PERA retiree spending resulted in $3.16 billion in added economic value statewide last year.</p>



<h4 class="wp-block-heading"><strong>PERA benefits as a stabilizing force</strong></h4>



<p>PERA distributions are a source of regular, reliable income for the thousands of Colorado retirees who receive them. That consistent flow of income is especially helpful to local and regional economies during times of uncertainty and downturn.</p>



<p>“Retiree and beneficiary spending is a vital part of Colorado’s economy,” said PERA Executive Director Ron Baker. “The stabilizing effect of that spending has been evident amid the economic uncertainty we’ve experienced in recent years.”</p>



<p>While the Denver metropolitan area has the largest number of benefit recipients, the impact of PERA benefits is especially large in rural areas of Colorado, where there may be lower economic activity. In rural parts of the state, PERA distributions are higher per capita and they make up a larger portion of county payroll.</p>



<p>For example, in Custer County, PERA retirees received more than $7 million in retirement distributions in 2021, representing more than 37 percent of payroll. In Denver County, $383,118,000 in PERA distributions amounted to just over 1 percent of payroll. Statewide, PERA benefits make up 2.9 percent of payroll.</p>



<p>For more information, including detailed breakdowns by region and county, <a href="https://www.copera.org/u-s-pension-benefits-played-important-economic-role-in-first-year-of-pandemic" target="_blank" rel="noreferrer noopener" class="broken_link">download the full report here</a>.</p>


Tag Archives:

CEO Andrew Roth, Executives Answer Questions in PERA Town Halls

Measuring the Impact of $4.5B+ in Annual Retirement Benefits in Colorado

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

Quiz: Test Your Knowledge of PERA Benefits

IRS to Begin Using Updated Form W-4P and New Form W-4R in 2023

PERA Benefits Contribute Billions of Dollars to State Economy, Support Thousands of Jobs

Subscribe to PERA On The Issues