Public employee pension plan lowers expected rate of return

The panel that oversees the state’s largest public employee pension system has decided to lower its expected rate of return.

That decision to lower the rate to 7.25 percent from 7.5 percent comes as welcome news to Colorado Treasurer Walker Stapleton, who said it was a good move even if it will increase the system’s unfunded liability.

Still, the man who oversees the state’s investment portfolio said the reduction wasn’t enough.

Stapleton, a member of the board that oversees the Colorado Public Employees Retirement Association and a longtime critic of how it is managed, said the move will increase the system’s unfunded liability by about $3 billion.

“This is a small step in the right direction, but it does not go nearly far enough to a realistic rate of return,” Stapleton said.

“We pushed hard to lower the rate to a maximum of 6.5 percent. PERA’s own experts from Byron Wein to Goldman Sachs advised the board that 5 percent is a more realistic rate of return. It is unfortunate PERA’s board thinks 7.25 percent is a responsible assumption.”

The association also lowered its inflation expectations to 2.4 percent from the current 2.8 percent.

Gregory Smith, the association’s executive director, said the change will impact the fund’s long-term viability, and called on the pension plan’s members and state policymakers to start a discussion about ways to address it.

Still, he said the fund is in no immediate trouble.

“While the PERA trusts continue to be sustainable, we are receptive to all ideas and are in the best position to provide accurate information to PERA’s stakeholders,” he said.

The association provides retirement and other benefits to more than 547,000 current and former teachers, state troopers, corrections officers and other public employees in state and local governments.

Its retiree benefits also help the state of Colorado’s economy, pumping about $3.7 billion a year into it.


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