Colorado PERA, the state's pension plan, rode the stock market to a double-digit return in 2006.

It's good news for a plan that remains underfunded by billions of dollars and faced a legislative battle in 2006 to make changes to its benefits. Critics questioned whether PERA should assume a long-term rate of return of 8.5 percent.

Preliminary portfolio results presented to the board Friday show a 13.76 percent return for 2006. The number will likely be adjusted because PERA's alternative investment and real estate holdings, which make up 13.8 percent of the portfolio, have yet to be valued.

Because PERA has to wait for those numbers, plus an audit, Chief Investment Officer Jennifer Paquette told the board she'd wait before commenting on the 2006 results.

But Executive Director Meredith Williams, in his report to the board, said 2006 was "a good year."

PERA took in $1.3 billion in contributions and paid out $2.5 billion in benefits. But investment returns plus interest, dividends and other cash generated nearly $4.7 billion.

As a result, PERA closed 2006 with more than $38 billion in assets, up from $34.7 billion at the beginning of the year.

While PERA's assets grew, the 2006 return, when finalized, may not meet the benchmark it uses to gauge its performance. PERA's domestic equities, which make up about 45 percent of the portfolio, returned 14.8 percent. The Wilshire 5000, a broad-based stock index, returned 15.77 percent.

Preliminary results show PERA's return of 13.76 percent is below the benchmark of 14.48 percent.

PERA closed 2005 with a funding ratio of 73 percent and an unfunded liability of $12.5 billion. With 2006 legislation, the fund believes it's on its way to paying off those liabilities in the decades to come, assuming an 8.5 percent investment return.

A long-term return of 7.5 percent, however, increases the risk that PERA will reach a funding crisis in about three decades.

PERA, with 395,488 benefit recipients, active workers, and inactive members as of Dec. 31, 2006, serves state employees, teachers outside Denver, and a host of other government employees. Members do not earn Social Security benefits while active, making PERA their primary retirement vehicle.

David Milstead is finance editor of the Rocky Mountain News. He can be reached at milstead@RockyMountainNews.com or 303-954-2648.