Colorado state pension members can breathe a sigh of relief.
Contributions to the Public Employees’ Retirement Association and cost of living raises for public sector retirees will hold steady for a while longer, after a good investment year helped offset a dip in the pension’s long-term financial outlook.
PERA earned 10.8% on its investment portfolio in 2024, according to its latest financial report, eclipsing its 7.25% target for annual returns.
But the pension’s funding still slipped by $1.4 billion last year, thanks to the lingering effects of a market downturn in 2022 and a failure to fully account for how recent pay bumps for public workers will increase retirement benefits in the long term.
At PERA’s June board meeting, trustees learned that the pension is no longer on a path to full funding by 2048, the target set by Colorado’s landmark 2018 pension law. But PERA’s close enough to meeting its financial goals that it won’t trigger an automatic round of benefit cuts and contribution hikes, as its actuaries had feared a few months ago.
“We’re not out of the woods yet — although we’re cautiously optimistic,” PERA Executive Director Andrew Roth told The Colorado Sun in an interview. “We are getting a lot of money in from a contributions perspective, and that’s helpful.”
But ultimately, he added, the biggest factor in whether PERA’s funding improves from here is what happens in the next few years in an uncertain economy.
Here are some of the key takeaways from PERA’s annual financial update.
Investment returns remain strong
PERA had another good investment year in 2024 — but its returns still look disappointing on paper.
The pension smooths out its market performance over four-year periods to prevent market volatility from causing wild swings in its funding status. So while the 10.8% PERA made on its investments would normally improve its financial position, a 13.4% loss in 2022 is still weighing on its finances.
When you factor in the deferred losses, PERA made the equivalent of a 5.8% return — $927 million shy of its expected return of 7.25%. That accounts for most of the $1.4 billion PERA added to its long-term debt in 2024.
The 2022 losses will hurt PERA’s funding for six more months before coming off the books next year. But spreading its investment performance over time cuts both ways. PERA now has unrealized gains from 2023 and 2024 that will give it a financial cushion in the future.
So far in 2025, PERA’s investments are doing well — “however, what happens moving forward is anyone’s guess,” Roth said. “Between tariffs and the big (federal) budget bill, it’s difficult to predict what the consequences from those things would be.”
Private equity and real estate continue to be a drag on PERA’s investment portfolio. PERA earned 17% from publicly traded stocks in 2024 versus 6.4% from private equity and -0.6% from real estate.
PERA last year voted to increase its stake in private equity to as much as 10% of its portfolio, even as other large institutional investors are souring on the asset class. Yale University — a leading investor in private equity — and dozens of U.S. and Asian pensions are looking to sell off much of their holdings this year, the New York Times reported.
Missed assumptions
For at least the fifth straight year, PERA missed the mark on its demographic assumptions, which help determine how much money the pension will owe in benefits over time.
The biggest misstep: Public employees continue to get larger pay raises than PERA projects in its financial modeling. That added $700 million to the pension’s unfunded debt.
Monthly retirement benefits are determined by how long you work and how much you earn in your highest paid years of public sector employment. So when salaries increase for older workers who are closer to retirement, it costs PERA more than it gains through higher contributions.
In January, PERA updated its demographic assumptions for the first time in four years, an exercise that its actuaries said was likely to trigger a round of benefit cuts and contribution hikes. But the strong investment year helped keep the pension on financial track — or close enough to it to avoid a mandatory course correction.
Funded status treading water
PERA ended 2024 with 69.2% of the funding needed to pay all of the future benefits owed to public sector retirees, present and future. That’s down slightly from 69.6% the year before.
The average public pension in the U.S. is 76% funded, according to Public Plans Data, a research database for U.S. pensions.
Overall, though, PERA is in much better shape than in 2018, when its funded status had fallen just below 60%, and its unfunded debt was over $32 billion. PERA now owes $28.9 billion in unfunded benefits, up from $27.5 billion in 2023.
“While we still have a ways to go for sure, we’re in pretty good shape,” Roth said. “I don’t think that our retirees and our members should be concerned.
“I think the group that is feeling the pressure the most are the retirees, because they’re limited to a 1% (cost of living adjustment), and that’s not likely to change in the near future. And then the employers, because they’re paying 20% of payroll, and that, too, is unlikely to change in the near future.”
Importantly, all but one of PERA’s five divisions remains on track to hit 100% funding by 2048, a target set in state law.
The schools division, which is only 66.1% funded, is now five years off course, with a projected full funding date of 2053. The state division is expected to be fully funded by 2044, while local governments are on track for full funding by 2036.
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