Date: 01/26/2012
Final
Presentation by PERA
COMMITTEE ON JOINT FINANCE
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11:17 AM -- Presentation by the Public Employees' Retirement Association (PERA)
Mr. Meredith Williams, Executive Director, began a presentation about the Public Employees' Retirement Association (PERA). Mr. Williams was joined by Mr. Greg Smith, General Counsel, and Ms. Jennifer Paquette, Chief Investment Officer. Committee members received a summary of the panel's presentation (Attachment E).
Mr. Williams began by giving his opening remarks and gave a brief overview of PERA. He explained that PERA is generally a substitute for social security for its members. PERA is a hybrid defined benefit plan and runs one of largest defined contribution plans in the public sector, with $2.4 billion managed by its members. PERA also runs the largest health care coverage group in the state of Colorado, as well as providing voluntary life insurance plans. Mr. Williams noted that PERA is the largest pension plan in Colorado, the 23rd largest pension plan in the United States and the 50th largest in the world. Membership in PERA is almost flat with only some growth and very little decline.
In 2010, $908 million was paid into PERA by the state of Colorado, school districts and some local governments. In addition, PERA paid out $3.2 billion in retirement benefits to its members. Mr. Williams spoke briefly about PERA's management and portfolio structures and gave a breakdown of the money that it raises for its pension plan. Of this, 20 percent comes from employers, 20 percent from employees and the balance of 60 percent is from market returns. Currently, PERA's annual payments represents 3.3 percent of total Colorado wage income.
11:29 AM
Ms. Jennifer Paquette, Chief Investment Officer, spoke about PERA's $38 billion investment portfolio and its diversification. She was joined by Mr. Greg Smith, General Counsel, who discussed PERA's assets and liabilities and its unfunded liability. He also spoke about Senate Bill 10-001 which was passed in order to address PERA's unfunded liability. Mr. Smith concluded by talking about the defined contribution plans and a new investment program that was recently implemented.
11:35 AM
Representative Labuda asked for explanation as to why PERA payments in Denver are much higher than payments to other cities and counties in the state and the impact that Denver Public Schools' contribution may have on these figures. Mr. Williams answered that the Denver Public Schools division is better funded than other divisions which have pension obligation bonds that DPS will be paying off in coming years. Representative McCann asked for clarification of the defined benefit plan and defined contribution plan and which employees can choose which plan. Mr. Williams answered that historically, 10-12 percent choose the defined contribution plan in any given year. Representative DelGrosso asked why the defined contribution plan is only available to 20 percent of state employees. Mr. Williams answered that the General Assembly and the Governor set that standard. Representative Kagan asked for explanation of the projection for an 8 percent rate of return needed in order for PERA to be fully funded in 30 years.
11:46 AM
Mr. Smith explained the process for making the 30 year projection and detailed what information is examined in order to make this projection annually. Representative Kefalas asked why PERA's net assets are down $1.3 billion and Mr. Williams explained that this is because PERA pays out approximately $2 for every $1 taken in. The presentation ended with a discussion about current, future, and past rates of return and how that affects projections.