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.

Retirees play a vital role in the economy. They purchase goods and services, serve in important volunteer and part-time roles, and pay taxes. Retirees who receive a pension provide a level of stability and support to their communities. A recent PERA On the Issues <a rel="noreferrer noopener" href="https://peraontheissues.com/pera-and-rural-colorado/" target="_blank">story highlighted</a> the impact retirees with a pension have in rural areas of Colorado.



A <a rel="noreferrer noopener" href="https://www.ncpers.org/files/NCPERS%20Unintended%20Consequences_2020_Update_WEB_FINAL.pdf" target="_blank">new report</a> published by the National Conference on Public Employee Retirement Systems examines the economic impact of pensions in a new way. It includes the economic impact retiree spending has while adding the economic impact pension dollars have before reaching retirees, in the form of investment dollars at work.



Here are the numbers, which use 2018 data from public pensions systems across the country:



<ul><li>The investment of pension fund assets contributed $872 billion to the US economy</li><li>These investments led to $178 billion in state and local revenues ($647 million in Colorado)</li><li>Retirees received $335 billion in benefit checks ($5.6 billion in Colorado)</li><li>Retiree spending added $836 billion to the economy ($14 billion in Colorado)</li><li>The benefit to state and local revenues from retiree spending equaled $162 billion ($2.4 billion in Colorado)</li></ul>



Researchers then compared contributions employees and employers make to pension funds to the economic output of pension investments and retiree spending. They state: “Pension funds generated $179.4 billion more in revenues than taxpayers contributed to the pension funds.” In Colorado, the net state and local revenue attributable to public pensions was $1.3 billion.

Pension Dollars: A Net Benefit to State and Local Economies

Retirees who are in a pension plan have a “deep economic impact” in supporting small towns and rural communities, according to research released in March 2020 by the National Institute on Retirement Security (NIRS). The <a href="https://www.nirsonline.org/wp-content/uploads/2020/03/NIRS_2020_RuralReport_final.pdf" target="_blank" rel="noreferrer noopener">research</a> points to Colorado as an example of this nationwide observation.



The Retiree Effect



The NIRS study, which collected data from 19 states, found that while a majority of retirees with pensions concentrate in urban areas, the steady stream of income for those who live in small towns and rural areas make up a larger percentage of personal income.



The study suggests that small-town counties, which are generally those with fewer than 50,000 people, benefit the most from pension income. This is measured in two ways. First, monthly pension income is compared to the total personal income in each county. Second, monthly pension income is measured against each county’s GDP. Compared to metro areas, rural-area pensions make up a higher share of total personal income, though a lower share of GDP, likely due to high value of land, farm equipment, and goods found in many rural areas.



<figure class="wp-block-table"><table><tbody><tr><td>Type of County</td><td>Pension benefits as a share of GDP</td><td>Pension benefits as a share of personal income</td></tr><tr><td>Metro</td><td>1.17%</td><td>1.26%</td></tr><tr><td>Micro</td><td>1.89%</td><td>1.98%</td></tr><tr><td>Rural</td><td>0.92%</td><td>1.73%</td></tr></tbody></table></figure>



There is no single reason behind these trends, though the authors do state: “Many public employees form strong connections to their local communities and choose to remain there after they retire. This means that their pension benefit dollars also stay in that community.”



The Colorado Impact



The county-level data needed to conduct this study nationwide only recently became available. But Coloradans have had access to statewide data for years via similar reports prepared by Pacey Economics. The <a rel="noreferrer noopener" href="https://content.copera.org/pera-and-rural-colorado/" target="_blank">2018 report</a> shows that Colorado’s economy largely mirrors the nationwide trend. In fact, PERA retirees play an economic role in rural communities and small towns that exceeds the national averages.


<div class="wp-block-image">
<figure class="aligncenter size-large"><img decoding="async" src="https://content.copera.org/pera-and-rural-colorado/"" class="wp-image-3070"/><figcaption class="wp-element-caption">PERA retirement distributions relative to payroll by county Source: Colorado PERA Economic and Fiscal Impacts, 2018</figcaption></figure></div>


The report also states that “reliable, predictable income [allows] for an ‘automatic stabilizing effect’ on state, regional, and local economies, especially in economic downturns.”



PERA expects the 2019 report from Pacey Economics to be released soon. While the particular figures vary from year to year, the importance retirees play in their communities remains steady.

PERA and Rural Colorado

As the oldest millennials begin to enter their 40s, the topic of retirement increasingly becomes an important topic. Understanding such a large number of people—millennials includes everyone between 24 and 39, though those parameters can vary—has limitations. But studying the views, values, and behaviors of different generations can bring insight into what retirement might look like decades from now. 



Millennials do care
about retirement



It’s easy to find a meme or <a href="https://money.cnn.com/2017/05/15/news/millennials-home-buying-avocado-toast/index.html" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">cultural reference</a> that pokes fun at millennials for valuing immediacy at the expense of planning for the future. But research shows that millennials actually are focused on tomorrow. One <a href="https://www.businessinsider.com/millennials-saving-for-retirement-nearly-surpasses-gen-x-2019-11" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">study</a> shows that nearly half of millennials have a retirement savings account. Whether that number means the glass is <a href="https://www.nytimes.com/2020/01/31/opinion/sunday/student-loans-retirement-millennials.html" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">half full</a> or <a href="https://www.marketwatch.com/story/do-millennials-really-deserve-a-gold-star-for-retirement-saving-2020-02-18?mod=mw_latestnews" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">half empty</a> is up for interpretation, but, according to <a href="https://www.businessinsider.com/millennials-saving-for-retirement-nearly-surpasses-gen-x-2019-11" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">some</a>, it’s at least on par with the generation ahead of them.



Generational
differences exist, but so do generational similarities



Separating people into groups might suggest that the differences among them are more numerous and dramatic than they might actually be. Research released last year <a href="https://transamericacenter.org/docs/default-source/retirement-survey-of-workers/tcrs2019_sr_what_is_retirement_by_generation.pdf" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">shows</a> that 76 percent of millennials “discuss saving, investing, and planning for retirement with family and close friends,” which is slightly higher than generation X and baby boomers. They talk with financial advisors at about the same rate as generation X and baby boomers. That being said, more millennials say they are procrastinating on taking necessary action on retirement than older generations. 



Millennials also think about long-term issues: They are concerned about their health in old age and place a high value on access to an employer-based retirement plan at the same rate as the other two generations mentioned in the study. Millennials who participate in a workplace retirement plan contribute a median amount of 10 percent of annual salary (however some experts <a href="https://www.cnbc.com/2019/10/23/millennials-need-to-save-an-huge-percent-of-paycheck-to-retire-at-65.html" target="_blank" rel="noreferrer noopener" aria-label=" (opens in a new tab)">say</a> that millennials should be saving at least 15 percent, due in part to increasing longevity rates). 



Millennials value
stability, community



A new study about <a rel="noreferrer noopener" aria-label=" (opens in a new tab)" href="https://www.nirsonline.org/reports/state-and-local-employees-views-their-jobs-pay-and-benefits/" target="_blank">Millennials who work for state and local governments</a> indicate that they value serving their community, as well as the benefits they receive as employees. Nearly 90 percent are “satisfied with the ability to serve the public,” and nearly three quarters said a pension benefit was a major reason they chose their job. Nearly all respondents said pensions provided an incentive to make public service a career, and most are confident they will be financially secure in retirement. 



The bottom line for
PERA members



It’s never too soon to start planning for retirement, even if the plan gets revised from time to time. This holds true for the more than 80,000 PERA members who are under 40. PERA members automatically make monthly contributions to fund their retirement, and PERAPlus allows members to take control of additional retirement savings. The lifetime nature of a Defined Benefit helps offset longevity risk (outliving retirement income), and being able to continue building a benefit at any of hundreds of employers in Colorado gives people the ability to serve their community, build a career, and feel financially secure in retirement.

Millennials, and Their Attitudes Toward Retirement

Recruiting, retaining, and providing for great workers: How PERA portability makes it a good deal for employees at any point in their careers



Retirement plans have modernized over time to attract and retain valuable human capital assets.



Employee turnover is a statistic that is used to gauge the desirability of a work environment. Employers like to retain good employees because it’s expensive to recruit and train new employees. Benefits, such as paid time off, health care packages, and even retirement plans play an important role in attracting and retaining great employees, which reduces employee turnover. Improving the efficiency and effectiveness of the workforce by having loyal and productive employees ultimately improves the employer’s bottom line, or in the case of public employers, the delivery of public services.



Because retirement savings are accrued over the course of a career but are actually used after a career is over, employers have to consider both the current value of the retirement benefit to today’s employees as well as the value it will provide in the future, when employees have long since stopped working and come to depend on retirement savings for income. This is true regardless of whether an employee plans to quickly gain experience and then advance to a new position or hopes to stay with the same employer for decades.



PERA’s <a href="http://www.nasra.org/hybrid">hybrid defined benefit plan</a> is a particularly strong recruitment and retention tool because of the value it offers to employees regardless of the length of their career. While some critics claim that retirement plans like PERA shortchange employees who do not work a full career, if they look closely at PERA’s plan design, they will see how PERA has evolved to serve both long-service employees as well as those who only work for a short time in public employment. That’s not according to PERA, but what an <a href="https://www.copera.org/financial-security-future-retirees" class="broken_link">independent, third-party firm</a> reporting to the Colorado General Assembly’s Legislative Audit Committee found.



A <a href="http://leg.colorado.gov/sites/default/files/documents/audits/1409s_colorado_public_employees_retirement_association_pera_hybrid_defined_benefit_plan_study.pdf">recent analysis</a> of the PERA Hybrid DB Plan design was conducted by an independent actuarial firm at the direction of the General Assembly’s Legislative Audit Committee. This review, performed by the firm Gabriel, Roeder, Smith &amp; Company (GRS) and the Office of the State Auditor, found a high degree of portability and value in the PERA Hybrid DB Plan, noting, “This study could find no plan that provides a more effective level of benefits than the PERA Hybrid Plan.”



The Colorado PERA Defined Benefit (DB) Plan has changed over time to meet the needs of Colorado’s public employers. In the 1990s, PERA employers were competing for employees who often went to work for employers who offered defined contribution (DC) plans where employees immediately <a href="http://www.investopedia.com/terms/v/vesting.asp">vested</a> in both their and their employer’s contributions to a DC retirement account. One of the key features of DC retirement accounts was their <a href="http://www.investopedia.com/terms/p/portability.asp">portability</a> – that is, employees could take the savings from their retirement accounts with them when they changed employers and presumably continue to grow their retirement savings in a new job.



Because it was difficult to retain a talented public workforce when competing with private sector employers during this time, the Colorado General Assembly modified the PERA DB Plan design to allow for similar rights to employer contributions that were in DC plans. Today, because of these and other changes made by the Colorado Legislature over the years in response to Colorado’s changing public workforce, the PERA DB Plan is the lowest cost way of providing retirement savings for public employees – no matter the length of their career.



The GRS report illustrates these findings.


<div class="wp-block-image">
<figure class="alignleft"><a href=""><img decoding="async" src="https://content.copera.org/pera-portability-good-deal-employees/"PERA Portability" class="wp-image-325"/></a></figure></div>


According to the <a href="http://www.nirsonline.org/index.php?option=com_content&amp;task=view&amp;id=937&amp;Itemid=76">National Institute for Retirement Security</a> (NIRS) in its report, “<a href="https://www.copera.org/research-can-use" class="broken_link">Preserving Retirement Income Security for Public Sector Employees</a>,” when it comes to financing retirement, Americans have two key concerns, “a steady and adequate retirement income that won’t run out, and the ability to move retirement plans from job to job.”



NIRS goes on to document how nearly all state retirement systems allow for the preservation of retirement income benefits even for employees who change jobs. But the GRS study shows that in Colorado, a member who earns PERA retirement benefits for even just three years will accrue more savings than another type of retirement savings plan would provide.



Retirement savings plans are just one component of an employee’s total package of salary, leave, health care, and other benefits. But it’s a critical piece in attracting great employees to public service and keeping them on board for successful careers.



PERA on the Issues posts are written and compiled by the staff of Colorado PERA under the direction of Executive Director Greg Smith and the PERA Board of Trustees. We encourage you to comment with your thoughts and feedback.

PERA Portability = Good Deal for All Employees

A report released by the <a href="http://www.nirsonline.org/">National Institute on Retirement Security</a> (NIRS) found total spending by retirees in the U.S. delivers over one trillion dollars in economic output and sustains more than 7 million jobs based on 2014 data.



Drilling down further, NIRS researchers looked at retiree spending in Colorado and found 41,000 jobs created and $6 billion in economic impact. [Read more about the economic impacts in Colorado from the <a href="https://content.copera.org/retiree-spending-boosts-colorados-economy-sustains-jobs/">NIRS Colorado Fact Sheet</a>.]



These findings reinforce <a href="https://www.copera.org/public-pension-plan-educators-get-educated" class="broken_link">Pacey Economics</a>’ results released last year that show how PERA retiree spending supports 29,000 jobs and generates $5.2 billion in economic output in the state.



For more details on the NIRS study:



Download the report <a href="https://www.copera.org/retiree-spending-boosts-colorados-economy-sustains-jobs" class="broken_link">here</a>.



Download the PowerPoint presentation <a href="https://content.copera.org/retiree-spending-boosts-colorados-economy-sustains-jobs/">here</a>.



Download a report infographic <a href="https://www.copera.org/retiree-spending-boosts-colorados-economy-sustains-jobs" class="broken_link">here</a>.



A map with each state fact sheet is available <a href="http://www.nirsonline.org/index.php?option=com_content&amp;task=view&amp;id=939&amp;Itemid=126">here</a>.



Listen to a replay of the webinar <a href="https://youtu.be/ljo4z9UGlpc">here</a>.



PERA on the Issues posts are written and compiled by the staff of Colorado PERA under the direction of Executive Director Greg Smith and the PERA Board of Trustees. We encourage you to comment with your thoughts and feedback.

Retiree spending boosts Colorado’s economy, sustains jobs

After five years of shared sacrifice, PERA is making progress toward becoming fully funded. That’s according to a new <a href="https://www.copera.org/new-report-compares-inflation-to-annual-increase" target="_blank" rel="noreferrer noopener" class="broken_link">report PERA released</a><a href="https://www.copera.org/new-report-compares-inflation-to-annual-increase" class="broken_link">&nbsp;</a> as required by Senate Bill 10-001.



Known as SB 1, this landmark legislation was a response to the Great Recession that required sacrifice from members, retirees, and employers alike in order to return PERA to long-term sustainability.



The report shows that PERA has saved about $15 billion to date in unfunded liability as a result of SB 1 changes. Over 90 percent of that savings is a result of the reduction of the Annual Increase. But even with the reduction, PERA benefit recipients have kept up with inflation over the last five years.



For PERA’s two largest member divisions, the State and School Divisions, the actuarial funded ratios, or the ratios between PERA’s assets and promised benefits, are slightly ahead of the original projections made when SB 1 went into effect five years ago.



Take a look at a brief <a href="https://www.copera.org/five-years-after-the-great-recession-pera-continues-progress-toward-full-funding" target="_blank" rel="noreferrer noopener" class="broken_link">fact sheet</a>&nbsp;explaining how SB 1 has allowed PERA to continue delivering the benefits earned by Colorado’s public workforce, making Colorado stronger for everyone.

Five Years After the Great Recession, PERA Continues Progress Toward Full Funding

In the last year, PERA has benefitted from the release of three studies conducted by neutral, outside experts examining aspects of the benefit and funding structure for Colorado’s retirement plan for public employees. These studies are the result of legislation supported by the <a href="https://www.copera.org/recap-of-pera-boards-june-2021-meeting" target="_blank" rel="noreferrer noopener" class="broken_link">PERA Board of Trustees</a> and enacted by the Colorado General Assembly in 2014 (<a href="http://www.leg.state.co.us/clics/clics2014a/csl.nsf/fsbillcont3/DE9404F7F0E17CC587257C600001DF7C?Open&amp;file=214_enr.pdf" target="_blank" rel="noreferrer noopener">Senate Bill 14-214</a>).



Together, the Sensitivity Analysis from <a href="http://pensiontrusteeadvisors.com/" target="_blank" rel="noreferrer noopener">Pension Trustee Advisors</a>, the Plan Design study from <a href="https://content.copera.org/independent-studies-offer-expertise-and-insight/" target="_blank" rel="noreferrer noopener">Gabriel, Roeder, Smith &amp; Company</a>, and the Retirement Benefits study by <a href="http://us.milliman.com/" target="_blank" rel="noreferrer noopener">Milliman</a>, provide a useful roadmap for the PERA Board of Trustees along with PERA members, Colorado policy makers, and taxpayers to work together for a sustainable public retirement system in the years and decades ahead.



<a href="https://www.copera.org/poked-prodded-and-perused-pera-passes" target="_blank" rel="noreferrer noopener" class="broken_link">Pension Trustee Advisors Sensitivity Analysis</a>



Released on October 19 by the <a href="https://www.copera.org/independent-studies-offer-expertise-and-insight" target="_blank" rel="noreferrer noopener" class="broken_link">Colorado Office of the State Auditor</a> and reviewed by the General Assembly’s Legislative Audit Committee, this analysis looks at the various components used in determining PERA’s financial health. The report’s findings demonstrate that the PERA Hybrid Defined Benefit Plan is on track to be fully funded, with all five of PERA’s trust funds projected to achieve fully funded status over time. The study also shows that actuarial assumptions PERA uses as it makes projections and manages the plan are reasonable.



A second, critical objective of the study was to develop an understandable format for communicating PERA’s progress toward becoming fully funded, meaning that the plan is moving toward accumulating assets equal to its accumulated obligations.



To fulfill this objective, the PTA analysis includes a signal light methodology designed to expand how PERA reports on its funded status as well as the likelihood of achieving its full funding objectives.



This methodology indicates that the four largest of PERA’s five division trust funds are sustainable and on a path to full funding, receiving a “green light.” The 600-member Judicial Division received a “yellow light.”



The report notes the significant impact of the shared sacrifice required of PERA retirees, members, and taxpayers as a result of bipartisan legislation enacted in 2010 (<a href="https://www.copera.org/preview?pageid=41010" target="_blank" rel="noreferrer noopener">Senate Bill 10-001</a>). If the signal light reporting method had been in place in 2009 during the Great Recession, it would have shown all Divisions in orange or red, meaning that PERA would be unable to pay benefits in fewer than 30 years.



Under the signal light methodology, changes from the reforms implemented as a result of that legislation moved the fund from red status to green.



Moving forward, PERA plans to incorporate the new and unique signal light methodology to enhance its reporting on funding progress.



Read the PTA <a href="https://www.copera.org/poked-prodded-and-perused-pera-passes" target="_blank" rel="noreferrer noopener" class="broken_link">report</a>.



<a href="http://leg.colorado.gov/audits/colorado-public-employees-retirement-association-pera-hybrid-defined-benefit-plan-actuarial">Gabriel, Roeder, Smith &amp; Company Plan Design Study</a>



In July, the <a href="http://leg.colorado.gov/agencies/office-of-the-state-auditor" target="_blank" rel="noreferrer noopener">Colorado Office of the State Auditor</a> released an independent evaluation of PERA comparing the costs and effectiveness of PERA’s defined benefit plan to alternative plans in the public and private sector.



Nationally recognized actuarial firm Gabriel, Roeder, Smith &amp; Company (GRS) looked specifically at PERA’s Hybrid Defined Benefit Plan and compared it to alternative plans in the public and private sectors. Their evaluation came to the overall conclusion that “Colorado’s largest public employee pension system is the most efficient and effective a state could have,” as GRS officials told members of the Legislative Audit Committee.



In short, the PERA plan design costs less and provides more for nearly all types of public workers, regardless of the age when they start or leave public employment.



As the report to the audit committee notes, PERA’s hybrid plan is “more efficient and uses dollars more effectively than the other types of plans in use today.”



See the PERA on the Issues <a href="https://www.copera.org/fordham-institute-gets-wrong" target="_blank" rel="noreferrer noopener" class="broken_link">story</a>.



Read the GRS <a href="https://peraontheissues.com/wp-content/uploads/2017/02/1409S-Colorado-Public-Employees-Retirement-Association-PERA-Hybrid-De...-1.pdf">report</a>.



<a href="https://www.copera.org/poked-prodded-and-perused-pera-passes" target="_blank" rel="noreferrer noopener" class="broken_link">Milliman Retirement Benefits Study</a>



In January of this year, the <a href="https://www.colorado.gov/dpa" target="_blank" rel="noreferrer noopener">Colorado Department of Personnel and Administration</a> released the results of the 2015-2016 survey of state employee total compensation conducted actuarial firm Milliman.



The Colorado General Assembly had asked for this year’s salary survey to include the value of the PERA retirement benefit. Specifically, <a href="http://www.leg.state.co.us/clics/clics2014a/csl.nsf/fsbillcont2/DE9404F7F0E17CC587257C600001DF7C/$FILE/214_enr.pdf" target="_blank" rel="noreferrer noopener">Senate Bill 14-214</a> required a comparison between the retirement package provided to state employees through PERA to retirement packages offered by both private companies and other states.



When compared to 19 other states and four private sector entities including the University of Denver and SCL Health System, the value of the PERA benefit is 1 percent above the median plan value of 14.7 percent.



As the Milliman report concludes, “The State’s offerings are generally consistent with market trends of survey participants.”



Read the Milliman <a href="https://www.copera.org/poked-prodded-and-perused-pera-passes" target="_blank" rel="noreferrer noopener" class="broken_link">report</a>.



Looking to the Future



As a result of these studies, important conversations will be informed by the analysis of neutral experts familiar with the complex variables impacting a retirement plan with over 500,000 members and retirees.



These public employees include Colorado’s teachers, state troopers, and highway workers. Their work contributes to the quality of life in Colorado’s communities.



Independent, critical evaluations of PERA such as these studies provide will help ensure PERA is sustainable for the long term, providing an economic engine for Colorado and protecting a secure retirement for all public employees.



<blockquote class="wp-block-quote">
<a href="https://peraontheissues.com/wp-content/uploads/2015/10/StudiesHandout-1.pdf">Independent Studies Offer Expertise and Insight</a>
</blockquote>

Independent Studies Offer Expertise and Insight

<blockquote class="wp-block-quote">
Even short-term public employees benefit from PERA’s unique plan design.
</blockquote>



As the state’s largest retirement plan, Colorado PERA sees its fair share of news headlines. But to make sense of the issues affecting PERA, it’s often important to go beyond the headlines and understand how PERA works for its members, retirees, public employers, and Colorado taxpayers.



In July, the Colorado Office of the State Auditor released an <a href="http://leg.colorado.gov/sites/default/files/documents/audits/1409s_colorado_public_employees_retirement_association_pera_hybrid_defined_benefit_plan_study.pdf" target="_blank" rel="noreferrer noopener">independent evaluation of PERA</a> comparing the costs and effectiveness of PERA’s defined benefit plan to alternative plans in the public and private sector.



Nationally recognized actuarial firm Gabriel, Roeder, Smith &amp; Company (GRS) looked specifically at PERA’s Hybrid Defined Benefit (DB) Plan and compared it to alternative plans in the public and private sectors. Their evaluation came to the overall conclusion that “Colorado’s largest public employee pension system is the most efficient and effective a state could have,” as GRS officials told members of the Legislative Audit Committee in July of 2015.



The GRS report includes information on PERA’s membership as well as the costs to members and employers. It also outlines the benefits that members receive including a monthly retirement benefit as well as ancillary benefits like disability and access to health care for retirees.



Colorado PERA offers the retirement plan of choice for the state’s public workers. At its core, PERA acts on behalf of its 500-plus employers who have opted to offer their public employees a <a href="http://www.nasra.org/hybrid" target="_blank" rel="noreferrer noopener">hybrid defined benefit retirement plan</a> rather than Social Security. A smaller number of PERA members also have an option to choose the PERA Defined Contribution (DC) plan instead of the Hybrid Defined Benefit Plan. Like Social Security, the PERA hybrid plan design includes disability and survivor benefits. All members contribute at least 8 percent of every paycheck to their own unique accounts which currently earn 3 percent interest. Members who leave PERA-covered employment before retirement receive employer matching contributions under applicable vesting schedules, which is very similar to many defined contribution plan designs.



The PERA Hybrid Defined Benefit Plan had over 529,140 total members as of December 31, 2014 The chart below breaks down PERA membership by active members, retirees and beneficiaries, inactive vested members (with five years of service or more) and non-vested inactive members (with less than five years of service).



PERA offers a monthly benefit, for life, at retirement. Participants in the PERA Hybrid Defined Benefit plan are eligible for a monthly retirement benefit once they reach age 65, regardless of how long they worked for a PERA employer. Participants are not required to have at least five years of service before earning eligibility for a monthly retirement benefit, a common misconception. For example, a 25-year old teacher who works for a year can leave his or her account at PERA until turning 65, and then receive a guaranteed monthly lifetime benefit. This is in contrast with a 401(k) plan participant who could withdraw from an account until there is no balance remaining. With a defined benefit plan, a monthly benefit will be paid for life.



Benefits for retirement-eligible members are calculated in one of two ways. The Service Retirement Formula is based on a member’s years of service and highest average salary, while a Money Purchase Annuity is based on a member’s account balance including an employer match and interest. Like with an annuity, the average life expectancy is also part of the calculation.



Retiring members who have reached retirement eligibility age receive whichever calculation is greatest. For members at age 65 with less than five years of service, the Money Purchase annuity calculation is used.



PERA benefits go beyond a traditional pension payment. PERA is much more than a hybrid DB plan. A summary chart of PERA Hybrid Defined Benefit Plan provisions and benefits for all employees hired on or after January 1, 2011, is below. (Benefits for PERA members hired before 2011 are similar but vary based on an employee’s first date of hire.)



PERA retirees can access PERACare, PERA’s health benefits program. Even as the Colorado and U.S. health care markets evolve, this benefit allows access to group insurance rates for a variety of health care plans offered by recognized providers. The cost of premiums in PERACare is offset based on the number of years a member worked for a PERA employer. Disability and survivor benefits are also available for many members.



Those critical of public defined benefit plans in general, and of PERA in particular, should recognize the independent findings of GRS as presented to the Colorado General Assembly’s Legislative Audit Committee.



Stay tuned for more on PERA’s portability provisions from the <a href="https://www.copera.org/fordham-institute-gets-wrong" class="broken_link">GRS study</a>.

Key PERA Features Make Colorado’s Largest Retirement Plan Efficient and Effective

The Colorado Pension Project (CPP) recently posted a column regarding PERA from TeacherPensions.org and Bellwether Education Partners, national organizations headquartered in Boston, MA. Prior to its posting, Colorado PERA had the opportunity to review the material and subsequently raised concerns with CPP about inconsistencies and mischaracterizations contained within the piece. Unfortunately, CPP went ahead and posted their version without revising their statements.



Colorado’s hybrid defined benefit plan and optional defined contribution plans provide Colorado’s teachers and public workforce with portability and the option to change and advance in their careers either in the public or private sector. Members who leave their retirement savings with PERA accrue benefits with interest and an employer match until they are eligible for retirement. At that time, they can receive a guaranteed monthly income for the rest of their life – without fear they will lose money due to stock market drops or that their savings will run out. Additionally, if life events intervene, these workers have the option to cash out or roll over their savings into other qualified savings plans.



The State of Colorado has commissioned an independent actuarial firm, retained by the State Auditor’s Office, to conduct studies that will compare the costs and benefits of the different retirement savings options with those provided by PERA’s hybrid defined benefit savings plan. The PERA Board supports this process which will make comparisons of alternative plan designs considering a variety of career patterns. To the extent these studies identify employees, employers or career patterns that are not well served by the existing PERA hybrid DB system, policy makers will be well positioned to have an informed discussion of alternatives and the cost of those alternatives.



The goal of the General Assembly’s reforms enacted in 2010 was for PERA to achieve fully funded status – thus ensuring retirement security – with sensitivity to the equitable distribution of costs and burdens associated with the reforms. The “potential solutions for Colorado” outlined in the CPP white paper come with significant increased costs while not appearing to materially enhance retirement security nor meaningfully improve Colorado’s ability to attract and retain a talented public workforce.



Retirement savings and security is an important conversation we should be having, and Colorado PERA is proud to be a resource and voice for how our unique plan design serves the teachers and public employees of Colorado. Colorado PERA wants to ensure our members, policymakers, community leaders and stakeholders have correct information when discussing this important topic.

Conversations About Colorado’s Public Employee Retirement System Should Include PERA Input and Be Fact-Based

The <a href="http://www.nirsonline.org/" target="_blank" rel="noreferrer noopener">National Institute on Retirement Security</a> (NIRS) evaluated the experience of teachers in Washington and Ohio in selecting different retirement plans. Their finding: “teachers prefer a stand-alone defined benefit pension when given a choice between a pension plan or a plan that combines a defined contribution account with a pension.” <a href="https://www.copera.org/new-research-shows-teachers-prefer-defined-benefit-retirement-plans" target="_blank" rel="noreferrer noopener" class="broken_link">Read the case studies.</a>

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