PERA board lowers expected rate of return on investments

November 15, 2013 Updated: November 15, 2013 at 5:50 pm

DENVER - The Board of Trustees overseeing Colorado's public retirement system voted Friday to lower the expected return on investment for the $45 billion fund.

Lowering the assumed rate of return from 8 percent to 7.5 percent will have an impact on the Public Employees' Retirement Association long-term outlook as it tries to predict future financial solvency.

State Treasurer Walker Stapleton, who sits on the board, has been a vocal proponent for two years of lowering the assumption to a level he says is more realistic. The vote Friday was split 8-7. In 2011, the board voted 10-5 to keep the 8 percent rate of return.

"This is a great, common sense step toward ensuring the safe retirement of 300,000 public servants," Stapleton said. "We have seen Democrats, Republicans and Independents across the country take up meaningful reforms to deal with their underfunded pensions."

PERA has an unfunded liability of $23 billion - meaning the retirement benefits it owes to retired and current state employees exceeds projected revenue.

But lawmakers implemented reforms in 2010 that reduced retiree benefits, increased plan costs for current employees and employers and put the pension on track to be fully funded within 40 years. Currently the pension plan is 62 percent funded.

"The shared sacrifice of all stakeholders in the PERA system has resulted in long-term sustainability for the PERA system," said a news release issued by PERA.

But Stapleton, a Republican, has maintained those projections were based on the faulty assumption of an 8 percent return on stocks, bonds and other investments.

Supporters of the assumption point to PERA's strong financial track record. The retirement system earned 12.9 percent return on investment in 2012, an average of 8.4 percent over the past 10 years and 9.4 percent over the last 30 years.

Stapleton has argued that was during some of the best economic boom years the U.S. has ever seen - Great Recession aside.

Several other states use an assumed 8 percent return on investment for their actuarial calculations, but a number of states have lower rates.

The board also voted to lower the assumed rate of inflation from 3.5 percent to 2.8 percent.


Contact Megan Schrader


Twitter: @CapitolSchrader

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