Date: 12/15/2014
Final
Public Employees' Retirement Association SMART Act Hearing
COMMITTEE ON JOINT FINANCE
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09:07 AM -- Public Employees' Retirement Association SMART Act Hearing
The committee was called to order. The chair introduced new legislators in attendance and appointed to the 2015 Finance Committees. Mr. Greg Smith, Executive Director, and Ms. Jennifer Paquette, Chief Investment Officer, both representing the Public Employees' Retirement Association (PERA), came to the table to discuss PERA's financial performance during the last fiscal year. Committee members received a packet of materials summarizing PERA's mission and performance during the last year (Attachment A). Mr. Smith walked the committee through various handouts included in the packet of materials. Mr. Smith discussed the assumed rate of return on PERA's investments for 2015. He explained that the assumed rate of return is a measure of how much PERA anticipates earning from its investments over a 30-year period. Mr. Smith addressed a question from the committee about the primary asset class contributing to the 15 percent earnings during the last fiscal year. He next provided information about the statutory provisions controlling PERA and the difference between the defined benefit and defined contribution (or 401K) retirement plan options.
Attachment A can be viewed at State Archives.
09:21 AM
Discussion continued on the topic of defined benefit and defined contribution plans and the merits of each. Mr. Smith explained that an individual can change his/her selected plan one time after the first year of employment and before the sixth year of employment. Discussion continued on the topic of the plan options and how plan selection effects expectations related to anticipated returns on investment.
09:30 AM
Mr. Smith continued his presentation with a discussion about the number of contributors, retirees, and amounts contributed and distributed during the last fiscal year. He also provided an historic overview of asset distribution by retiree class and geographic location.
09:38 AM
Ms. Paquette continued the presentation with an overview of the investment asset allocation. She responded to a question from the committee about potential investments in hedge funds. Discussion continued on the topic of specific investments made by PERA. Mr. Smith returned to the topic of the rate of return on PERA's investments. He compared public and private rates of return. He responded to a question from the committee about a reporting requirement created under Senate Bill 10-001, which requires PERA to submit a report concerning the funding status of its plans to the General Assembly on January 1, 2016, and every five years thereafter.
09:55 AM
Mr. Smith discussed the funded status and amortization of the PERA fund, and responded to questions on the leading drivers of the increase in the amortization period to full funding that PERA has adopted. Mr. Smith spoke to Governmental Accounting Standards Board (GASB) Statements Number 67 and 68, which affect pension standards reporting for PERA beginning in 2013. He responded to questions on the impact of these statements, and said that the stated intention of the GASB statements was to increase transparency. He responded to another question about the anticipated adjustments to solvency or percentage of assets paid under new GASB standards. Discussion ensued on this topic.