Retirement insights from a Colorado PERA perspective

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The State of Colorado released its annual audit of Colorado PERA’s financial reporting and internal controls, finding no issues that needed attention.



The State presented those findings at a meeting of the Legislative Audit Committee on Monday, Aug. 7. The hearing included presentations from the Office of the State Auditor, the state’s outside auditor, Colorado PERA, and PERA’s actuarial consultants.



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



The State of Colorado hires an outside auditor to conduct the audit of PERA each year. Since 2015, CliftonLarsonAllen has done that work, examining PERA’s financial statements — including the Annual Comprehensive Financial Report — for the year ended Dec. 31, 2022, as well as PERA’s compliance and internal controls.



The auditors gave PERA’s annual report a clean audit with no significant issues or recommendations. In addition, the auditors found no outstanding recommendations from the <a href="https://peraontheissues.com/pera-receives-clean-audit-at-legislative-audit-committee-hearing/" target="_blank" rel="noreferrer noopener">previous year’s audit</a>.



The audit report is <a href="https://leg.colorado.gov/audits/colorado-public-employees-retirement-association-fiscal-year-ended-december-31-2022">available online here</a>.



<blockquote class="wp-block-quote">
RELATED: <a href="https://peraontheissues.com/pera-board-releases-2022-annual-report/" target="_blank" rel="noreferrer noopener">PERA Board Releases 2022 Annual Report</a>
</blockquote>



PERA’s actuarial consultant, The Segal Group, also presented highlights from the annual Signal Light report, which is an analysis intended to help assess the plan’s funding progress and provide a format for communicating this information using a color-coding system similar to a traffic signal. That report is <a href="https://content.copera.org/pera-receives-results-of-2022-financial-audit/" target="_blank" rel="noreferrer noopener">available online here</a>.



PERA will continue to meet with various legislative oversight committees throughout the summer and fall. <a href="https://peraontheissues.com/pera-oversight-underway-at-state-capitol-between-legislative-sessions/" target="_blank" rel="noreferrer noopener">Click here</a> for more on what’s ahead at the Capitol.

PERA Receives Results of 2022 Financial Audit

The Colorado General Assembly wrapped up its legislative work in May, but there’s still plenty of activity happening at the State Capitol.



Every year in between legislative sessions, PERA appears before various legislative committees that oversee PERA and its financial health. It’s an important part of the ongoing review and oversight of PERA and an opportunity to engage with the legislators who can have a direct impact on PERA and its members.



While lawmakers won’t be introducing bills between now and January, they may begin work on new PERA-related legislation they intend to introduce in the next session.



Here’s a look at what to expect this summer and into the fall.



<blockquote class="wp-block-quote">
RELATED: <a href="https://peraontheissues.com/what-roles-do-the-general-assembly-and-board-play-at-pera/" target="_blank" rel="noreferrer noopener">What Roles Do the General Assembly and Board Play at PERA?</a>
</blockquote>



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



The state legislature created the Pension Review Subcommittee in 2018. It’s a subcommittee of the Pension Review Commission, which oversees PERA and the state’s police and firefighter pensions. The Pension Review Subcommittee is charged with reviewing PERA’s financial health and making recommendations to the larger Commission. The Subcommittee comprises four state lawmakers as well as 10 appointed members of the general public with financial experience or knowledge.



The Subcommittee held its first meeting of the year on July 17. Interim Executive Director and Chief Investment Officer Amy C. McGarrity and Public and Government Affairs Manager Michael Steppat gave the Subcommittee an update on PERA’s 2022 financial results and answered questions from Subcommittee members.



The Subcommittee may continue to hold meetings throughout the interim period, with PERA to provide information and answer questions as needed.



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



The Legislative Audit Committee is next up, with a meeting scheduled for Aug. 7.



Every year, the state hires an independent auditor to audit PERA’s financial data and internal controls of the most recent <a href="https://peraontheissues.com/pera-board-releases-2022-annual-report/" target="_blank" rel="noreferrer noopener">Annual Comprehensive Financial Report</a>.&nbsp;The outside auditor will present its findings at the Legislative Audit Committee’s meeting. PERA staff will join PERA’s actuarial consultants at the meeting to discuss the plan’s finances and answer any questions.



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



PERA also appears before the Pension Review Commission in between legislative sessions. The Commission has the responsibility of overseeing PERA and proposing legislation that could affect the plan and benefits. For example, the Pension Review Commission drafted bills in recent years to <a href="https://peraontheissues.com/2023-proposed-legislation-status/" target="_blank" rel="noreferrer noopener">make up the state’s missed 2020 payment</a> of $225 million to PERA.



In addition to the various interim oversight committees, the legislature’s Joint Budget Committee and House and Senate Finance Committees hold annual meetings to discuss PERA’s finances. Those meetings are expected to take place prior to and immediately following the start of the next General Assembly, respectively. 



PERA On The Issues will be following the various interim activities and reporting on any noteworthy developments. Be sure to <a href="https://peraontheissues.com/subscribe" target="_blank" rel="noreferrer noopener">subscribe to our biweekly newsletter</a> to stay updated

PERA Oversight Underway at State Capitol Between Legislative Sessions

While Colorado’s 2022 legislative ended in May, PERA executives, staff, and consultants continue to meet with lawmakers and various legislative oversight committees in the interim.



The meetings are part of the regular review and oversight of PERA that takes place every year.



An important part of that oversight process is the Legislative Audit Committee, which met on August 9. At that meeting, PERA executives joined representatives from PERA’s actuarial consultant, Segal, and an outside auditor to discuss PERA’s financial status and answer questions from committee members.



An audio recording of the meeting is <a href="https://sg001-harmony.sliq.net/00327/Harmony/en/PowerBrowser/PowerBrowserV2/20220809/-1/13557#info_" target="_blank" rel="noreferrer noopener">available online here</a>.



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



Every year, the state hires an independent auditor to audit PERA’s financial data and internal controls. CliftonLarsonAllen, which has been auditing PERA’s financial reports since 2015, presented its audit of the 2021 Annual Comprehensive Financial Report. The auditors gave the report a clean audit with no significant issues.



A summary of the 2021 Annual Comprehensive Financial Report is <a href="https://peraontheissues.com/pera-board-releases-2021-annual-report-at-june-meeting/" target="_blank" rel="noreferrer noopener">available here</a>.



<h4 class="wp-block-heading">Ongoing oversight at the Capitol</h4>



In recent weeks, PERA has also appeared before the Pension Review Subcommittee and Pension Review Commission, which are responsible for overseeing PERA operations and recommending legislation that affects PERA.



The Pension Review Subcommittee and Pension Review Commission will continue to meet throughout the summer and fall, and PERA On The Issues will keep track of any potential new legislation that arises from those meetings.



PERA also reports to the Joint Budget Committee and the Joint Finance Committee.



These regular meetings allow policymakers to learn more about PERA’s financial footing and ask questions of PERA management, ensuring robust oversight and transparency.

PERA Receives Clean Audit at Legislative Audit Committee Hearing

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

In this story:



<ul>
<li>Committee members heard from PERA leaders, external auditors and actuarial consultants</li>



<li>External auditors gave PERA’s 2020 annual report a clean audit with no issues</li>



<li>PERA gets a “green light” on its funding progress</li>
</ul>



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PERA leaders and actuarial consultants appeared before the Colorado General Assembly’s Legislative Audit Committee on Aug. 18. The purpose of the hearing was to review PERA’s <a href="https://content.copera.org/how-its-made-peras-financial-report/" target="_blank" rel="noreferrer noopener">2020 Comprehensive Annual Financial Report</a>, released earlier this summer, and to review the findings of an external audit of the report. Committee members also heard an update from PERA’s actuarial consultants on PERA’s funded status and had the opportunity to ask questions.



Below is a summary of information presented at the hearing. To listen to an audio recording of the full hearing, <a href="https://sg001-harmony.sliq.net/00327/Harmony/en/PowerBrowser/PowerBrowserV2/20210824/67/12036#info_" target="_blank" rel="noreferrer noopener">click here</a>.



<h4 class="wp-block-heading">Results of PERA’s annual audit</h4>



Every year, the Office of the State Auditor hires an independent auditor to review PERA’s financial status and fiscal controls. CliftonLarsonAllen LLP has been auditing PERA’s annual statements since 2015.



For the year that ended Dec. 31, 2020, the auditors gave the annual report a clean audit, with no significant issues or outstanding recommendations.



<a href="https://leg.colorado.gov/sites/default/files/documents/audits/copera_legislative_audit_report_dec_2020.pdf" target="_blank" rel="noreferrer noopener">Click here</a> to read the full audit report.



<h4 class="wp-block-heading">PERA gets a ‘green light’</h4>



As part of its annual financial reporting, PERA enlists actuarial consulting firm Segal to issue an assessment of PERA’s funding progress called Signal Light Reporting. The report uses a simple color-coded system similar to a traffic signal — shades of green, yellow and red — to give a clear representation of whether PERA is on track to eliminate its unfunded liability.



Segal simulates thousands of possible scenarios to test the effects of different variables — like investment returns and public employer payroll changes, for example — on the likelihood of PERA reaching its target of full funding by 2048. The projected results range from dark green (fully funded ahead of schedule) to dark red (insolvent within 20 years). As of Dec. 31, 2020, all five division trust funds were in “green” or “dark green” status, meaning they are expected to be fully funded by 2048.



<figure class="wp-block-image size-large"><img decoding="async" src="https://content.copera.org/pera-receives-clean-audit-positive-funding-assessment-at-committee-hearing/"" class="wp-image-4626"/></figure>



<a href="https://content.copera.org/pera-receives-clean-audit-positive-funding-assessment-at-committee-hearing/" target="_blank" rel="noreferrer noopener">Click here</a> to read the full Signal Light report.



The Legislative Audit Committee is one of several legislative committees and subcommittees that PERA reports to regularly. Others include the Joint Budget Committee, Joint Finance Committee, Pension Review Subcommittee, and Pension Review Commission. These regular meetings with lawmakers allow for robust oversight and transparency into the state’s largest public employee retirement system.

PERA Receives Clean Audit, Positive Funding Assessment at Committee Hearing

PERA presented to the Legislative Audit Committee on July 27. The primary agenda was a review of PERA’s financial returns. PERA staff and outside analysts were on hand to present and answer questions from committee members.



Financial Audit



Every year, an independent auditor hired by the Office of the State Auditor conducts a review of PERA’s financial status and fiscal controls. CliftonLarsonAllen LLP, which has been auditing PERA’s annual statements since 2015, audited the 2019 Comprehensive Annual Financial Report. The auditors gave the 2019 CAFR a clean audit, and committee members heard an overview of results from the annual report. You can read a summary of the 2019 CAFR <a aria-label="undefined (opens in a new tab)" href="https://peraontheissues.com/pera-releases-2019-financial-returns/" target="_blank" rel="noreferrer noopener">here</a>.



Signal Light Reporting



In 2014, the Legislative Audit Committee directed the Office of the State Auditor to contract with an actuarial firm to develop a methodology to simplify the understanding of PERA’s financial status. The result was the development of a tool called Signal Light Reporting, which PERA submits annually to the committee. This report summarizes the funded status of each PERA Division by using a color scale. The scale resembles a stop light, from green, indicating that PERA is projected to be on track to fully funded status, all the way to red. PERA submitted and shared the latest <a label="undefined (opens in a new tab)" href="https://content.copera.org/pera-presents-at-legislative-audit-committee-hearing/" target="_blank" rel="noreferrer noopener">report</a>, which shows that all divisions are on track to reach fully funded status by 2048 (green).



Ongoing Oversight at the Capitol



PERA reports to numerous committees at the State Capitol, including the Legislative Audit Committee, Joint Budget Committee, Joint Finance Committee, Pension Review Subcommittee, and Pension Review Commission. These regular check-ins provide lawmakers the chance to learn more about PERA and ask questions to PERA management. They also provide additional forums in which PERA members can learn more about how PERA works. For those not able to listen to the live broadcast, a recording can be found <a aria-label="undefined (opens in a new tab)" href="https://coloradoga.granicus.com/MediaPlayer.php?view_id=29&amp;clip_id=15519" target="_blank" rel="noreferrer noopener">here</a>.

PERA Presents at Legislative Audit Committee Hearing

PERA staff are committed to providing regular, transparent updates to state legislators about the status of the PERA trust funds and the economic impact of the public employee retirement plan across Colorado.



Currently, four different legislative committees have oversight responsibility of PERA. Each committee held hearings this fall where PERA staff provided <a href="http://coga.prod.acquia-sites.com/sites/default/files/html-attachments/i_pensionrevew_2018a_20180815t100058z1__hearing_summary/Attachment%20B%20-%20PERA%20Presentation.pdf" target="_blank" rel="noreferrer noopener">general updates</a> as well as specific information tailored to the needs of the different committees. Recent presentations to reporting committees in 2018 included:



<ul>
<li><a href="http://leg.colorado.gov/sites/default/files/images/lac_agenda_august_13-14_2018_.pdf" target="_blank" rel="noreferrer noopener">Legislative Audit Committee</a>, held on August 14</li>



<li><a href="http://leg.colorado.gov/content/ipensionrevew2018a2018-08-15t100058z1-hearing-summary" target="_blank" rel="noreferrer noopener">Pension Review Commission</a>, held on August 15</li>



<li><a href="http://leg.colorado.gov/sites/default/files/images/joint_finance_smart_act_agenda_1.pdf" target="_blank" rel="noreferrer noopener">Joint Finance Committee</a> (SMART Act hearings), held on November 26</li>



<li><a href="https://leg.colorado.gov/sites/default/files/fy2019-20_perahrg.pdf" target="_blank" rel="noreferrer noopener">Joint Budget Committee</a>, held on December 4</li>
</ul>



Led by Colorado PERA Executive Director Ron Baker, PERA staff presented information about PERA’s status and impact as well as major developments in 2018.



PERA continues to have significant economic impact around the state. Contributions to the Colorado economy come from $4.1 billion in total Colorado distributions, creating $6.5 billion in economic output. PERA provides retirement and other programs to one in every 10 Coloradans, paying benefits in every Colorado county, including over 25 percent of payroll in some of the state’s most rural counties.



The investment program continues to meet benchmarks through a diverse asset allocation and a long-term investment time horizon, while maintaining low costs by managing more than half of its portfolio internally, saving approximately $40 million annually in investment fees.



Senate Bill 200 (SB 200) significantly improved PERA’s funded status and every division is expected to reach full funding within the next 30 years. Major provisions of the <a href="https://content.copera.org/pera-staff-keep-legislators-prepared-for-2019-legislative-session/" target="_blank" rel="noreferrer noopener">legislation</a>, approved during the 2018 legislative session, include increased contributions, modified benefits, and an <a href="https://www.copera.org/pera-staff-keep-legislators-prepared-for-2019-legislative-session" target="_blank" rel="noreferrer noopener" class="broken_link">automatic adjustment provision</a>.



The automatic adjustment provision in SB 200 is designed to keep each division on schedule to full funding by 2048, with three components that include employer contributions, employee contributions, and the annual increase that can be adjusted over time if PERA falls behind or moves ahead of schedule to reach full funding. The direct distribution from the State’s budget could also be adjusted but cannot exceed the current funding level of $225 million. The first eligible year for any needed adjustments would be on or after July 1, 2020.



No legislative agenda items have been identified by the PERA Board for the upcoming 2019 legislative session.



In addition to the general overview, PERA staff offered more specific information for the various committees. For example, a PERA audit response plan for the Legislative Audit Committee detailed a process of examining current procedures in place for the review of actuarial reports and a review of controls over financial reporting. For the Joint Budget Committee, staff responded to several questions, such as looking for more detail about the automatic adjustment provision of SB 200 and how funded status might trigger an adjustment in the future.



At each hearing, PERA staff reminded legislators of their willingness to serve as a resource during the 2019 session as retirement security and the financial stability of Colorado’s largest public employee retirement plan continue to be priorities.



Stay up-to-date by following <a href="https://www.copera.org/pera-on-the-issues" target="_blank" rel="noreferrer noopener">PERA on the Issues</a> and <a href="https://www.copera.org/pera-staff-keep-legislators-prepared-for-2019-legislative-session" target="_blank" rel="noreferrer noopener" class="broken_link">subscribing to our newsletter</a> for insights throughout the First Regular Session of Colorado’s Seventy-second General Assembly, convening on January 4, 2019.

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