Colorado’s state employee pension fund didn’t fair well in 2018 despite recent reforms and a strong economy.
The Public Employees’ Retirement Association (PERA) saw a net loss on its investments, a 3.5 percent decline, according to the latest report.
It’s the first year in a decade that the fund’s investment returns were in the negative.
“Looking back, 2018 was a difficult year for many investors and resulted in generally low investment returns,” PERA Executive Director Ron Baker said in a video. “2018 in particular was challenging, with most global equity indexes down around 10 percent for the year, with the bond markets generally flat.”
“This had a big impact on PERA because nearly three quarters of our portfolio is invested in the public markets,” he added.
The state’s unfunded liability increased last year despite recent reforms to how the state funds pensions. The funding ratio is at 59.8 percent in 2018, down from 61.3 percent the previous year.
The pension fund’s unfunded liability stands at $31 billion in 2018, up from $28.8 billion the previous year.
PERA’s decline in investment returns means workers will have to pay 0.5 percent more into the fund starting July 2020, and annual benefit increases will be reduced by 1.25 percent.
In 2018 the legislature passed Senate Bill 200 to address the state’s growing unfunded liability.
SB 200 increased the required contributions from employees and employers, and required $225 million a year go towards reducing the unfunded liability.
The legislation also included a mechanism to automatically adjust contributions to meet funding needs within 30 years, acting as a “guard rail.” That mechanism took effect, raising contributions by .5 percent.
The pension provides retirement and benefits to 587,000 former and current government workers, including teachers and law enforcement. The fund has over $49 billion in assets.