1

Tara May, Chief Communications Officer

Colorado PERA UpdateColorado School Finance ProjectFebruary 17, 2017

What’s New?

2

Today’s Agenda

1. PERA Board Responsibilities and Recent Actions

2. Funded Status & Implications

3. Relevant Legislation

Board of Trustees

Oversees investments, benefits administration, and monitors actuarial assumptions and

performance

General Assembly

Sets benefit and contribution structure

PERA’s Governance Structure

3

Global Equities55.2%

Private Equity8.3%

Cash & Short-Term

2.5%

Fixed Income22.3%

Real Estate9.0%

Opportunity Fund2.7%

$43.0 Billion Market ValueAs of November 30, 2016

Investment Asset Allocation

Asset allocation policy unanimously approved by Board on June 21, 2016

More than

55 percent of

assets managed directly by PERA staff

1.5%

7.4% 7.5%

6.0%

7.6%8.6% 8.7%

9.5%

0%

4%

8%

12%

16%

1-Year 3-Year 5-Year 10-Year 20-Year 25-Year 30-Year 35-Year

7.25%

* 1-, 3-, 5-, and 10-year returns are net of fees 20-, 25-, 30-, and 35-year returns are gross of fees

Annualized investment returns for

period ending December 31, 2015*

Investing for Long Term

4

Late 2016 Board Activities

September

Actuarial Impact

Analysis

Discuss Review Experience Study

and discuss assumptions

Actuarial Workshop

October

Conditions Are Changing

People are Living Longer

• Increase in lifespan an average of ayear…over hundreds of thousands employees

• Especially prominent in “white collar” professions

Economic Realities are

Changing• The market future

isn’t yielding same returns as just 10 years ago

5

Setting the Rate of Return

Assumed rate of return

• Investment return and inflation

• Helps estimate future financial health

Board established

• PERA Board sets the assumed rate of return

• Lowered rate in 2008, 2013, and 2016

• Consultation with external and internal experts

7.25%Projected

rate over a 30-year period

November Board Action

• For several divisions, life expectancy is increasing

• PERA is paying retirement benefits longer

Adopted New Mortality Tables

• Changed expected investment rate of return from 7.5% to 7.25%

• PERA is not expected to generate as much investment income as previously projected

Lowered Rate of Return

• PERA to engage with a range of stakeholders across the state on PERA’s funded status

Endorsed a Listening and Learning Tour

6

2016 Board & Staff Activities

September

Actuarial Impact

Analysis

Discuss

October

Review Experience Study

and discuss assumptions

Actuarial Workshop

November

Board Meeting

Take action on actuarial

assumptions, as needed

December

JBC and SMART Hearing

Present Signal Light Report

and plan updates

State Division31.7%

School Division51.8%

Local Gov’t

Division8.5%

Judicial Division

0.6%

DPS Division

7.4%

2014 Signal Light Indicator

Signal Light Indicator

Weighted by Market Value of Assets

As of December 31, 2014, for each PERA division,

reflecting the SB 1 reforms and applying PERA’s set of actuarial assumptions as of

the end of 2014

7

State Division31.5%

School Division51.9%

Local Gov’t

Division8.6%

Judicial Division

0.7%

DPS Division

7.3%

2015 Signal Light Indicator

Signal Light Indicator

Weighted by Market Value of Assets

As of December 31, 2015, for each PERA division, reflecting the SB 1 reforms and applying

PERA’s set of actuarial assumptions at end of 2015, results may change based upon recent assumption

adjustments

Where Is PERA Today?

Amortization period longer than desired

• 54.9 years to fully funded status in State division

• 74.6 years to fully funded in School division

Benefits secure

• Forecasted to pay benefits in perpetuity

• Different circumstance than 2009, when PERA supported SB1 that reduced benefits for all retirees and members

Amortization Period

Length of time to achieve full

funding

8

2016: Projection of Funded Status2015 (Post SB 10-001)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2010 2015 2020 2025 2030 2035 2040 2045 2050 2055

— A1 [Pre-SB 1, Projections as performed in 2010 at an 8.0% discount rate and assumed LTROR, Run at 12/31/2009]

Fu

nd

ed

Ra

tio %

Year Beginning

School Division

Before SB 10-001:

insolvent by 2036

— D [Post-SB 1, based on the 12/31/2015 actuarial valuation results considering revised assumptions adopted 11/18/2016]

Current amortization period for the School Division is 74.6 years

Planning for the Future

Address Legacy Issues

• Reduce the unfunded liability

Plan for the Modern Workforce

• Leverage best practices and efficiencies

• Update the plan design to reflect economic and demographic realities

9

2017 Engagement Tour

Goal = encourage productive and factual conversation about PERA

• Ensure understanding and reduce confusion around PERA’s financial status

• Fortify and build relationships with key stakeholders

• Develop shared principles upon which any policy changes may occur

Tactical Outreach to Ensure Audience and Statewide Diversity

» Members/Retirees

» Employers

» Business Organizations

» Taxpayers

» Media

18

Denver

Pueblo

Grand JunctionColorado Springs

Durango

Fort CollinsGreeley

SterlingFort Morgan

10

Timeline: Key Activities

Legislative Update

Senate Bill 17-113

Cap Employer Contribution Rates For PERA

Senate Bill 17-158

Modify Composition Of PERA Board Of Trustees

House Bill 17-1114

State Treasurer’s Authority To Access PERA Information

House Bill 17-1176

PERA Retirees Employed By Rural School Districts

11

www.copera.org

PERA on the Issues www.peraontheissues.com

The Dime www.thedimecolorado.com

Join the Conversation