Pera Update Dennis Gatlin, Field Education Services Director

What is Colorado PERA? As of December 2013

» Instrumentality of the state, founded on August 1, 1931 » Hybrid defined benefit retirement plan qualified under IRC 401(a) » Substitute for Social Security » Administers: • Defined benefit plan, including disability and survivor benefit programs • One of the country’s largest public 401(k), 457, and DC Choice Plans (combined assets of $3.3 billion) • Health care, dental, and vision plans for largest coverage group in the state (over 155,000 lives) • Life insurance plan » Largest pension fund in Colorado, 22nd largest public plan in United States PERA UPDATE DENNIS GATLIN, FIELD EDUCATION SERVICES DIRECTOR

PERA is Transparent PERA Membership January 31, 2015

» All Board meetings are public meetings and each agenda has time set aside for public comment » PERA reports annually to the Joint Finance Committee, Joint Budget Committee, and Legislative Audit Committee of the Colorado General Assembly and the Governor » PERA is audited annually by a firm selected by the State Auditor whose findings are reported to the Legislative Audit Committee » PERA’s Comprehensive Annual Financial Report (CAFR) is used as a model for other public pension plans, winning the GFOA financial reporting excellence award for the last 28 consecutive years » 2013 annual financial audit found no material weaknesses in PERA’s internal controls, accounting policies, and practices; no recommendations » PERA’s website is an excellent resource for plan and financial information

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PERA Financial Recap 25-Year History of Assets and Distributions In billions

Beginning Balance January 1, 1989 $8.0

Employer Contributions 13.6

Member and Other Contributions 12.9

Investment Income 49.1

Denver Public Schools’ Plan Transfer 2.8 Benefit and Refund Payments (42.1)

Administrative Expenses (0.5)

Ending Balance December 31, 2013 $43.8

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1 PERA Benefit Distributions and Distributions Relative to Payroll by County PERA provides Total Distributions = $3,506,760,242 to 90,155 $3.35 billion Colorado residents • $4.78 billion economic output • 26,000 jobs statewide in annual retirement benefit payments • $282.4 million state and local tax revenue

$1,932,780 $164,540,245 $264,129,801 $18,762,305 Benefit payments $6,891,693 $2,572,680 in total economic output $966,852 result in $4.78 billion (all goods and services transactions) $18,388,500 $12,441,189 $10,164,772 $40,812,593 $5,235,760 $3,683,907 $180,551,126 $5,690,546

$342,917,077 $3,731,895 $11,467,321 $346,400,357 $25,752,967 Creates Adds $2.07 to the $14,761,058 $501,004,439 $4,738,225 State’s gross $3,985,206 $115,297,154 $8,387,945 domestic

$412,866,137 $1,405,345 billion product

$4,904,948 $1.12 billion $24,128,987

$11,061,862 $18,671,413

$29,263,524 $24,569,492 $62,281,274 $1,090,741 $2,902,913 Percentage of payroll data from in labor $5,312,654 $215,643,197 2011 County Business Patterns, $2,537,719 $2,359,294 Produces $2,978,616 U.S. Census Bureau adjusted $16,718,846 $9,172,462 income $1,356,426 to 2013 dollars, calculation from $6,498,908 Pacey & McNulty $490,777 $9,553,322 $282.4 million

$15,669,390 $678,742 Annual benefit payments as of $15,210,118 $2,643,242 in state and local tax revenue $37,908,777 $4,981,837 $7,374,599 December 31, 2014 (unaudited) Sustains $2,699,869 jobs

Positively Impacting Colorado’s Economy Colorado’s Impacting Positively 25,923 statewide 7 8 7 As of October 2013

Investment Asset Allocation PERA’s Colorado Investments January 31, 2015

» Over $572 million invested in companies and properties domiciled in the state » More than 55 percent of assets managed directly by PERA staff » An additional $50 million is allocated to the Colorado Mile High Fund for private equity investments in the state

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Investing for Long Term Annualized investment returns for periods ending PERA Board Authority December 31, 2013

» Limited to implementing statutes adopted by the General Assembly » Oversight • Investment of assets • Administration of benefits • Collection of contributions » Monitors actuarial assumptions and performance 7.5%

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2 Senate Bill 10-001 Puts PERA Back PERA’s Investment Return Expectation on Track

» PERA Board designed the reforms that became SB 10-001 » Used for estimating investment return over a 40-year horizon and for » Shared sacrifice – 90 percent of changes come from current and future calculating PERA’s funded status members and retirees » As a long-term institutional investor, PERA will usually earn higher returns » All Divisions are expected to be fully funded than individuals • Pre-SB 10-001, most Divisions projected to be out of money as early » PERA’s CAFR (pages 43–45) shows impact on funding of a decrease or as 2029 increase in return » Litigation status » Reasonable minds can differ on what future returns might be, but sensitivity analysis shows PERA is sustainable under a wide range of return assumptions

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Comparative Rates of Return – Public Comparative Rates of Return – Private

6.50% DC Police & Fire Colorado Fire & Police 7.65% Florida RS Washington PERS North Dakota Teachers DC Teachers Delaware State Employees Maryland Teachers Washington Teachers Nebraska Schools Georgia ERS Maryland PERS Washington School Nevada Regular Employees 6.75% Indiana Teachers Georgia Teachers Employees Nevada Police Officers & 5.80% General Motors Co. 7.00% Citigroup Inc. JPMorgan Chase & Co. PepsiCo Inc. Rockwell Automation Inc. Indiana PERF Iowa PERS 7.75% Hawaii ERS Firefighters Kraft Foods Group Inc. Motorola Solutions Inc. Exelon Corp. Deere & Co Parker-Hannifin Corp. Illinois Municipal Kentucky ERS 8.00% Alaska Teachers New York City Teachers Aetna Inc. CenturyLink Inc. FirstEnergy Corp Target Corp. 7.00% Idaho PERS Kentucky County Alaska PERS 5.90% Philips Electronics North J.C. Penney Co. Inc Dow Chemical Co. Abbott Laboratories Illinois Teachers New York State Teachers America Crop. 8.10% General Dynamics Corp. New York City ERS Kentucky Teachers Louisiana SERS Alabama ERS Ohio PERS PPL Corp. Chevron Corp. United States Steel Corp. Texas Municipal NY State & Local Police & Fire Louisiana Teachers Alabama Teachers Oklahoma Teachers 6.00% Shell Oil Co. HSBC North America Merck & Co. Inc. The Allstate Corp. 8.20% Raytheon Co. Virginia Retirement System NY State & Local ERS Missouri DOT and Highway Arkansas PERS Texas Teachers Corning Inc. Reynolds Group Holdings Wells Fargo & Co. NextEra Energy Inc. Southern Co. Patrol Arkansas Teachers Sears Holdings Corp . The Walt Disney Co. BB&T Corp. Eastman Kodak Co . 7.13% Maine State and Teacher Oklahoma PERS Texas County & District 6.30% Prudential Financial Inc. Pennsylvania School Montana PERS Arizona SRS Texas ERS PNC Financial Services Montana Teachers Phoenix ERS MetLife Inc. 7.10% The Hartford Financial Group Inc. 7.90% MeadWestvaco Corp. 8.30% The Coca-Cola Co. 7.20% Wisconsin Retirement Employees Texas LECOS Services Group Inc. R.R. Donnelley & Sons Co Inc. System New Hampshire Retirement San Diego County Nationwide Insurance Group Northwestern Mutual Life Exelis Inc. Pennsylvania State ERS Kimberly-Clark Corp. Xcel Energy Inc. DTE Energy 7.25% Contra Costa County Rhode Island ERS System Denver Employees 8.10% Vermont State Employees Insurance Co. 8.00% IBM Corp. New Mexico PERF Connecticut SERS American International Group Illinois SERS Rhode Island Municipal 8.25% Ohio Police & Fire 6.32% Acatel-Lucent 7.20% Weyerhaeuser Co. Lockheed Martin Corp. 8.40% Du Pont Illinois Universities New Mexico Teachers Chicago Teachers Goodyear Tire & Rubber Co. Inc. Northrop Grumman Corp. Eli Lilly & Co . South Carolina Police 6.50% Bank of America Corp. Maine Local South Carolina RS Ohio School Employees Kansas PERS 8.40% Minnesota PERF Rock-Tenn Co. FedEx Corp. Missouri Local Ohio Teachers Massachusetts SERS Minnesota State Employees PG&E Corp. 7.30% Exxon Mobil Corp. Macy’s Inc. 3M Co. 8.50% Pfizer Inc. Tennessee State & Teachers American Electric Power Co. Bank of New York Mellon Johnson & Johnson North Carolina Local Tennessee Political Oregon PERS Massachusetts Teachers Minnesota Teachers Union Pacific Crop. Consolidated Edison Co. of Government City of Austin ERS Michigan SERS Duluth Teachers CBS Corp. Corp. New York Inc. Alcoa Inc. Subdivisions Ashland Inc. 7.60% Textron Inc. Dominion Resources Inc. North Carolina Teachers Utah Noncontributory Wyoming Public Employees Michigan Public Schools St. Paul Teachers 6.60% National Grid USA International Paper Co. Michigan Municipal Ameren Corp. General Mills and State Employees Fairfax County Schools 7.85% Arizona Public Safety 7.70% United Technologies Corp. American Airlines Inc. South Dakota PERS St. Louis School Employees 8.50% Connecticut Teachers 6.70% Reynolds American Inc. PPG Industries Inc. Marsh & McLennan Cos. Inc. Altria Group Inc. Kellogg Co. Washington LEOFF Personnel Houston Firefighters Entergy Corp. West Virginia Teachers Missouri State Employees BAE Systems North America 7.40% Ford Motor Co. Nestle USA Inc. Bristol-Myers Squibb Co. 7.50% LA County ERS 7.90% New Jersey Teachers Missouri Teachers Southern California Edison New York Life Insurance Co. California PERF West Virginia PERS Chrysler Group LLC 7.80% AT&T Inc. 8.80% United Parcel Service Inc. New Jersey Police & Fire Missouri PEERS Co. BP America Inc. Public Service Enterprise California Teachers 7.58% San Francisco City & New Jersey PERS Mississippi PERS Duke Energy Group Inc. 8.90% Delta Air Lines Inc. Colorado PERA County North Dakota PERS 6.80% Liberty Mutual Group 7.50% Boeing Co. Honeywell International Inc. Vermont Teachers Computer Sciences Corp. Unisys Corp. General Electric Co. Caterpillar Inc. Emerson Electric Co Hewlett-Packard Co. 6.90% Siemens Corp. Verizon Communications Inc. Cigna Corp.

National Association of State Retirement Plan Administrators–October 2014 Pensions and Investments Database–November 2013 15 16 15 16

PERA Defined Benefit Assets vs. Liabilities Market Value as of December 31 for each year America’s Retirement Crisis 2013 Funded Ratio at Market Value = 65.17 Percent

» Americans are not prepared for retirement » 85 percent are concerned that economic conditions will affect their ability to have a secure retirement » Average value of 401(k) plans is $58,351 » Median value of 401(k) plans is $17,794 » Median value of 401(k) plans for workers aged 55-64 is $61,850 » More than half report the total value of household savings and investments is less than $25,000 (excluding their home)

Sources: National Institute on Retirement Security, Employee Benefits Research Institute, and Vanguard Group

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3 Supplemental Savings Opportunities Your Future, Your Voice with PERAPlus

» Allows participants opportunity to seek investment advice at no » Get involved to help protect your retirement additional cost » PERA Ambassadors: » Received GFOA’s Award for Excellence in Government Finance • Receive training » Promotes the crucial concept of asset allocation in retirement investing • Write letters to the editor » Makes allocation decisions easier for participants • Meet and email Legislators » Provides participants access to custom, easy-to-understand, and diversified » The time commitment is small, but the message you send is powerful PERAdvantage investment options • www.copera.org/ambassador » Low fees maximize participant contributions • 303-398-7677 • [email protected]

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» Web address • www.copera.org » Social media • The Dime, www.thedimecolorado.com • Twitter, @ColoradoPERA and @thedimeCO • Facebook, www.facebook.com/thedimecolorado » Office locations • 1301 Pennsylvania Street, Denver • 1120 West 122nd Avenue, Westminster » Phone number • 1-800-759-PERA (7372)