Retirement insights from a Colorado PERA perspective

Inside Colorado PERA

Colorado PERA Board Endorses Package of Reforms

Board study

The Colorado PERA Board of Trustees has endorsed a comprehensive reform package to reduce the overall risk profile of the plan and improve PERA’s funded status. This endorsement follows extensive analysis by the PERA Board and a statewide outreach effort with a range of stakeholders conducted earlier this year. Learn more about the next phase of outreach at PERAtour.org.

After taking into account assumption changes made in 2016, each of PERA’s five divisions are in the “orange” category, where reporting standards applicable to PERA called for the Board to develop a plan to reduce the amount of time it will take PERA to be fully funded.

The Board’s package, which must be approved by the General Assembly, includes recommendations that will significantly change the benefit provisions and contribution structure of the plan. If passed by the Legislature, the Board’s proposal would fortify the fund by making major changes:

Modify the benefits of current retirees, members, and future members.

  • Increase the number of years used to calculate Highest Average Salary from three years to five for most divisions. The exception is the Judicial Division, which currently uses a one-year HAS and will now use a three-year calculation. For new hires starting in 2020 and for members with less than five years of service credit as of January 1, 2020, more years of salary will be considered to calculate an average salary used to determine the total retirement benefit.
  • Change the age of eligibility for full service retirement benefits to 65 for new hires starting in 2020. For State Troopers, the minimum age for full service retirement eligibility will be raised to age 55. This change aligns PERA with national trends, including Social Security and peer defined benefit plans across the country.
  • Reduce the Annual Increase (commonly called the Cost of Living Adjustment or COLA) provided to current and future retirees. Most current retirees receive a 2 percent Annual Increase and that will be lowered to 1.5 percent. Those who became members after 2006 currently do or will receive an Annual Increase based on the CPI with a limit up to 2 percent. This Annual Increase would also be capped at 1.5 percent. This change will go into effect on the date legislation is passed.
  • Suspend the Annual Increase for two years for current benefit recipients. Under existing law, current benefit recipients have experienced a one-year waiting period upon retirement to receive an increase. Future retirees would have a three-year waiting period before their Annual Increase begins. This change will go into effect on the date legislation is passed.

Increase contributions into the fund.

  • Increase employee contributions for current members hired before 1/1/2020 by an additional 3 percent above current contribution rates. This increase would impact all active PERA members and retirees working after retirement.
  • Increase employee contributions for future members hired on or after 1/1/2020 by an additional 2 percent.
  • Increase employer contributions by an additional 2 percent.

Ensure the equitable alignment of “input” or contributions and service credit, with “output” of benefits paid out.

  • Change the definition of PERA-includable salary to require PERA to collect contributions on salary that includes Internal Revenue Code Section 125 and 132 deductions. In other words, PERA contributions would be made on gross pay rather than net pay. These changes would impact current and future members.
  • Change the definition of full-time service accrual. Under the Board’s proposal, PERA future members will earn service credit for part-time work based on the percentage of full-time employment they are actually working.

The Board also came forward with an innovative solution that will respond to future economic and demographic changes by instituting an automatic mechanism by which employer and employee contributions as well as Annual Increase amounts will adjust based on the financial condition of the fund. More details on the Board’s proposal may be found on the PERA website.

By State law, the Colorado General Assembly sets contribution rates and benefit levels and the PERA Board of Trustees has oversight of investments and benefit administration. More information on the Board of Trustees may be found on the PERA website.

Comments

  1. Roy says:

    The stock market has been on fire, what the heck is PERA doing with our money. Some folks need to be canned.

  2. David Sautte says:

    Yep, we retirees saw this one coming! Why even waste time with “input” meetings, when it was obvious this was the desired oucome from the beginning ? PERA continues to resolve financial issues on the backs of retirees. Now two next years of zero COLA, and then less than half of the amount (3 1/2%) that was was originally promised.

  3. Lynn Gabenski says:

    An additional reduction of retiree benefits? From 2% to 1.5% COLA. Ad a retiree, I am not in favor of this.

  4. Lynn Gabenski says:

    “As a retiree”

  5. Randall Cote says:

    Really sad, we were promised 3.5% down to 2% now you want to cut us to 1.5%
    Really hard to keep up with col, we have no SS, new employees should really consider going to work for the State of Co

  6. Michael Derou says:

    The treatment of retirees under this plan is unacceptable. The state, over the last 35 years, has always managed to weasel out of it’s legal contrbution agreements to PERA. It is amazing to me that this is never discussed. Thanks for planning to give all PERA retirees the shaft. If this part of your plan passes, I will vote against anyone that supported it.

    • GM SANTO says:

      – Back in 2010, when Senate Bill 001 permitted robbing pensioners, only 5 Democratic Representatives (B. McFadden, M. Merrifield, S. Pace, D. Primavera, & P. Weissman) plus 1 Republican Senator (N. Spence), voted against robbing PERA… general assemblies and governors have been raiding PERA ever since!

      – There were only six decent and honest legislators in all of Colorado for the last decade, so feel free to vote against all incumbents. Currently there is only one Democratic candidate (for State Treasurer) who cares about PERA members. So voting against either the Democrat or Republican is meaningless. PERA members who are registered voters in Colorado need to go to their respective party’s county re-organization meetings after the first of the year to raise holy-heck over the raids on retirees and workers state pensions, challenge incumbents with primaries, and keep after the politicians!

  7. John Schneider says:

    Note clear on if current retired employees will be reduced to 1.5 percent ?? Also, not clear the freeze of 2.0 percent or 1.5 percent applies too current retired employees for the two years. Looking at another law suit??

  8. Shelley Howard says:

    I retired in 2005 with the understanding that my COLA would be 3%. Then the crash happened and retirees settled on 2%. Now Pera wants to reduce that to 1.5 % which is less than SS. I am extremely disappointed in this part of the package as I am sure many others are as well. Please stop trying to fund PERA on the backs of current retirees. It feels like a breech of contract! I need all my income to live in Denver where I have been for 40 years. The cost of living here is higher than it used to be. Not only that but i hardly get any of my SS benefit because of the windfall provision. It is disheartening to work hard as a public servant and then be denied all my benefits after I retire! I do not support this package!

  9. Barry Northrop says:

    Quoting from the article, “The Board also came forward with an innovative solution that will respond to future economic and demographic changes by instituting an automatic mechanism by which employer and employee contributions as well as Annual Increase amounts will adjust based on the financial condition of the fund. More details on the Board’s proposal may be found on the PERA website.”

    I clicked the link but did not find more details on the “innovative solution.” Where is that spelled out?

    Will the now-reduced Annual Increase still hinge on whether PERA had a net market gain on its investments for the year?

    • Jerry E. says:

      How about an innovative solution when the trust fund is underfunded to automatically increase funding by the State or employers to decrease the need for periodic large adjustments when a fix fails?

  10. P. Williams says:

    et tu, Brute?

  11. David Reitz says:

    I understand why this has to be done, but I’m afraid for future employees this will make working for a PERA employer a unattractive career choice. Too bad members of the PERA Board and its administrators in past years allowed people to buy huge amounts of years of service for work outside of PERA at bargain rates. My gut level reaction is that these types of practices are what has led to the current financial crisis PERA now experiences.

  12. Vince Emmer says:

    The above are long overdue starts to making PERA equitable and sustainable.

    Next step is to stop siphoning off money from the young workers and “less-than-lifers” to give to higher paid and more favored beneficiaries.

  13. Patricia Kenney says:

    I am a PERA retiree and I strongly oppose two of the proposed benefits changes that are part of the “comprehensive reform package” put forth by PERA this week. The public engagement process that PERA engaged in resulted in a finding that “PERA members have shown support for the idea that PERA should…allow retirees to maintain their standard of living throughout their lifetime.” The benefits modifications that would reduce the Annual Increase from 2% to 1.5%, combined with the proposal to suspend the Annual Increase for two years for current benefit recipients, would severely affect current retirees’ ability to keep up with inflation. In addition to losing more than 4% of anticipated income during the first two years, the subsequent reduced increase of 1.5% might be well below inflation at the time annual increases are resumed. The annual increase was designed to be a Cost of Living Adjustment (COLA) and has already been reduced significantly and permanently since I retired (from 3.5% annually to the current 2%). When a prospective retiree engages in retirement planning, the COLAs that a benefit plan provides are part of the calculation process, and, I would argue, the contract with the employee/retiree. A retiree—especially those of us who have been out of the workforce for many years—usually does not have the option to go back to work or adjust their standard of living without major issues arising, e.g., losing one’s home due to increased property taxes or other increasing homeowner costs or reducing health insurance coverage due to constantly increasing premiums. Further the “innovative solution” that the PERA Board came up with to have “Annual Increase amounts …[which are] based on the financial condition of the fund” undercuts the entire concept that an annual increase is a COLA designed to “allow retirees to maintain their standard of living throughout their lifetime.”

    If any change to the Annual Increase/COLA formula is contemplated, it should at least be based on relevant consumer price indexes and not just be an arbitrary number designed to come up with a package of modifications that ostensibly meets the goal of “shared responsibility among members, retirees, and employers.” That goal presumes that current employee members, current retirees, and employers have equal resources and choices to accommodate to changes in the benefit calculation model. That is an erroneous presumption as retirees have few means to adjust to a benefit that is increasingly worth less than it was in previous years.

    Of course, we all want a solvent retirement fund, and I think it is unfortunate that PERA took actions in previous years that were detrimental to that objective, e.g., allowing employees to purchase service credit at reduced rates and calculating years of service differently for some classes of employees, to name two such mistakes. But, any package of reforms that further penalizes current retirees, when we have already seen a significant decrease in annual increases AND been required to contribute 8 to 10% to PERA if we work up to 110 days/year after retirement for a PERA employer, with NO increase in our own benefit, is targeting a group with little means to cope with what is effectively an income decrease.

    • tom says:

      This appears to be PERA’s way to avoid there fiscal responsibility to competent financial management. Rather than improve the competency and skill level necessary to perform their fiduciary duty to their members this action relieves them of that responsibility. They can continue with their function with mitigated effort on their part with little or no effort or consequences.
      Kaiser Perm uses this technique making the patient completely liable and responsible in their agreement in the use of effective email communication to their Doctor; releasing Kaiser, third party users and computer errors of all medical responsibility.

    • Donna Bunting says:

      Very well put, we have no way to earn additional income due to losses. We too were once promised a retirement which would mantain our currebt life styles. So future retirees beeare?

  14. Betty Glover says:

    I think you should reconsider the raises for benefit recipients. I know several retirees who live on less than $1500 a month, some of them less than $1000 per month. We are now living on less every year but health care, groceries, utilities, continue to rise. We have gone from a 4% increase to a 2% increase and now to a 1.5% increase. I, for one, have to pay for Medicare part B and since I don’t draw social security, it continues to increase every year as well as the supplement through PERA. I am sure none of you can relate to this but I think it needs to be taken in to consideration. I am confident that you can find an alternative measure.

    Thank you.

  15. William Robbins Sr. says:

    I am retired but still work as a substitute teacher. In Jeffco, we get $100 per day and you take out 8%, leaving me $92 minus taxes. Now you want an additional 3% leaving me even less to take home. For an 8 hour day, I will take home about $80 to $82 per day. That is very little over $10 per hour. I can work at McDonalds and start at $11 per hour. You may have just ended my 46 years in education, because I can not see working and giving more money to PERA. I do not even get credit for the 8% you take from me now. Since I am required to give you 8% and not get credit, it would be only fair to call it a forced donation which I could deduct from my taxes. PERA has been good to me over the years, but now you are trying to bleed me to death.

  16. Barbara Johnson says:

    If this legislation is passed as a retiree I will have received 4 years of a freeze on my COLA. We did not receive a COLA in 2010

  17. GARY cRUMB says:

    When I inter into a contract both parties agree to follow it. If one party wants to change the agreement they both have to agree. I entered into a contract with PERA that if I worked 30 years I would get a set amount of retirement pay. The contract was amended that I would get a 3% COLA increase ever year. PERA changed tat to a 2% COLA a couple of years ago, I was unhappy about it but I accepted it and budgeted my life around it. Now you want to change it to 1.5% but you give your ex’s a 3% raise. Now that I am to old & unable to work to make up the difference in COLA when the cost of living is going up 3-4% a year plus who knows about medical costs. Thanks for breaking the contract that was in place for 30+ years I guess I will slowly die off and you guys will not have to pay me anymore .

  18. Jerry E. says:

    The “shared” sacrifice of Senate Bill 10-001 resulted in the “fix” that 90% of the solution came from the reduction of existing and future benefits of employees (retirees, active and future). Only 10% of the “solution” came from increases from contributions from employers. While employees have contributed their agreed upon share of funding, even more for a short period of time without their consent or agreement, employers have been remiss in paying their full amount of annual actuarial required contributions. Any proposed solution by PERA should completely and unequivocally support employees by advocating a proposed “sharing” where employers first catch up on their unpaid contributions as well as obtain a secure source of long term funding, independent of employee benefits, to reach a fully funded status. Employee benefits should be lower and less weighted on the list of solutions this time around.
    The recent PERA Board proposal is not a fair or reasonable sharing. Please let members know now what share of the new proposal will be borne by member sacrifice and what share is to be paid by employers. With that information we will be able to start the conversation as to what is just. Thank you.

  19. Rex Harper says:

    It is shameful that a retirement contract can be changed at the expense of the retiree. Apparently pera is setting a trend to reduce retires benefits every few years. For long we will be in the negative. Why don’t you help instead reduce benefits?

  20. Herbert Clevenger says:

    Here we go again. What a shame! Remember retirees this isn’t a cola. It is an annual benefit increase. Remember in the Retirement Process book under the Annual Benefit Increases section that each March, PERA will increase you retirement benefit by 3.5 percent. Just because the Colorado State Supreme Court ruled in PERA’S favor didn’t make it right for PERA to reduce our annual benefit increases. One reason is that meeting after meeting when questions were asked about any reductions or if changes could be made that would impact our retirement a PERA representative would always quote Ken Salazar “Once a PERA member fulfills all the statutory requirements for a pension benefit, retires and begins receiving a pension, the member’s fully vested pension right cannot be reduced by the General Assembly “. Does anyone remember runaway inflation? Look at this. Social Security cost-of-living adjustments for 1975 8.0%, 1976 6.4%, 1980 14.3%, 1981 11.2% and one in 2008 at 5.8%. With COLAs, Social Security and Supplemental Security Income (SSI) benefits keep pace with inflation. So now PERA wants to do what they said they wouldn’t do and cut our annual benefit increase again. Recently I sent you an article written by John Tozzi “Americans Are Dying Younger, Saving Corporations Billions”. In 2015, the American death rate—the age-adjusted share of Americans dying—rose slightly for the first time since 1999. And over the last two years, at least 12 large companies, from Verizon to General Motors, have said recent slips in mortality improvement have led them to reduce their estimates for how much they could owe retirees by upward of a combined $9.7 billion, according to a Bloomberg analysis of company filings. “Revised assumptions indicating a shortened longevity,” for instance, led Lockheed Martin to adjust its estimated retirement obligations downward by a total of about $1.6 billion for 2015 and 2016, it said in its most recent annual report. Of course PERA you responded to remind me that PERA retirees are living longer, but haven’t you considered that we will follow the national trend? I would say that PERA is reacting to the mortality information too soon. Doctors at hospitals all over the country are seeing more and more cases where people have bacteria and there are no longer antibiotics that will help. I wish I could believe that PERA would do what is right by retirees. I’m disappointed in PERA’s condescending attitude toward retirees. This wasn’t always the case. It’s time that PERA takes the high road and does what is right for those that are already retired. Scrap your idea of suspending annual increases for two years and reducing annual increases capped at 1.5%.

  21. Herbert Clevenger says:

    Maybe PERA needs to consider a true cost of living adjustment in case inflation spirals out of control again.

    • GM SANTO says:

      In 2010, many legislators and PERA were broached with the suggestion to allow individuals to trade COLA reductions with an equal and corresponding increase if (when) inflation returns; but they were not interested in re-negotiating on an individual contractual basis (the state already allocated their budgets and PERA staff had spent members’ funds on attorney retainer fees for a court battle); and, yes you paid for the privilege to sue yourself!

  22. Brad Buckner says:

    Many of the concerns and problems with the proposed changes for retirees and have already been stated. For retirees who have seen only freezes and reductions on their COLA since retiring it is very hard to accept continued freezes and reductions. As has been pointed out, retirees have few options to deal with these changes. It is too late to increase savings to IRAs, 401(K)s or HSAs. In many cases it isn’t possible to even take a minimum wage job. Although inflation has been low for a number of years, making the reduced COLA of 2% manageable, that has begun to change with the improving economy. A more equitable solution would be to tie the COLA to the CPI. There is no mention of addressing or adjusting to future probable changes in the economy such as a rising cost of living. This would be an incredible over site. As these costs go up (or down) there should be automatic adjustments that would not require legislation.

    As noted in other comments, your link to “More details” does not talk about “innovative solution(s) that will respond to future economic and demographic changes” . That is critical information to have.

    I recognize the need for changes and supported SB 1, but this proposal for retirees has me considering what parts of the country I might move to to find a lower cost of living. This proposal in untenable.

  23. Peggy Marolt says:

    Again! More of the same. Why is Colorado PERA doing so badly when the stock market is going crazy. Quit taking money from retirees. Your solutions do not seem innovative, but draconian. What about the increased health costs? Will COLA pay for these? We did “shared sacrifice” when you reduced our COLA during the last recession. I already went back to work to increase my benefits. I crossed the Colorado line to work in New Mexico and drove 160 miles a day to get a small retirement from New Mexico. At least my my social security increased, but because of the Windfall in this state money was again taken away from me. So the moral of this story, the faster one works the more will be taken away from you. I am 74 years old. My budget is running out of money. Do you care? It does not feel like it.

  24. To the entire Board of Trustees for Colorado PERA;
    This new Reform Package
    Question: Has the board ever considered the path The State of Michigan used during the early 1990’s to address their problem – similar to Colorado’s ?
    In the early 1990’s (1991, 1992 ?) Michigan established an option to the state retirement plan. They gave current Michigan employees the choice to continue with the state’s plan or opt out to a new 401K Plan administered by the State.
    Subsequent to this option Plan (2000, 2001 ?), The State of Michigan made it mandatory that all NEW employees hired on or after a specified date be placed under the 401K Retirement Plan.
    The two plans have operated independently and parallel without any further changes to their plans.
    This prevents all the additional work and effort to continually and periodically reworking the our current retirement plan.
    It may be worth looking into as an alternative our existing retirement plan.
    I hope this may help in some way.
    Respectfully,
    R. J. Victorson, retiree

  25. Herbert Clevenger says:

    Does PERA Board support the concept that allows retirees to maintain their standard of living throughout their lifetime? Maybe they think that cutting our annual increase for two years and a cap at 1.5% manages to do that. Obviously their proposal will hurt seniors that have high medical cost and many others things that are going up in cost. I found this information to be of an interest. Social Security beneficiaries have lost nearly a third of their buying power since 2000 as the costs of items typically purchased by the elderly have significantly outstripped the annual inflation increases in their retirement benefits, according to a new report by The Senior Citizens League (TSCL) obtained by Investment News.

  26. Mike Morris says:

    Reducing retirees COLA to 1.5% and then freezing the COLA for two years does not meet any criteria for ” helping retirees maintain their standard of living”. Everyone knows everything keeps costing more and the freeze puts us even further behind. Thumbs down on the freeze of the COLA from me!

  27. Dm says:

    Those who listened to the telephone town hall earlier this week that was held for retirees might tell you that the highly-scripted event made it clear that this is a done deal as far as PERA is concerned. Also, get this: If I heard them correctly, and I hope I didn’t, they said that even if the legislature refuses to raise employer contributions, PERA intends to go ahead with the annual adjustment freeze and reduction for current retirees. This would, of course, once again put an unfair portion of the burden on the backs of current retirees who, as has been stated above, have few options to react to the now-continuing reductions. Shared burden, indeed…

  28. Ron Ratkovich says:

    PERA members who retired in the 80’s and 90’s did so using an HAS which was considerably lower,
    in actual dollar amounts, than those who have retired more recently. Highest salaries have increased remarkably in this century when compared to those who retired in the last century and
    are now in their late 70’s. 80’s and 90’s. To impose a two year freeze on these retirees would be extremely devastating.

  29. Barry Northrop says:

    The PERA Board bears huge responsibility, takes none of the blame, and sticks it to retirees, employees, and employers. The pathetic Colorado legislature will vote in favor of these recommendations. Nothing will change and in another few years, a new round of benefit reductions will surface. The financial reality is that the pension funding status stinks despite the rosy picture that PERA persistently paints. The political reality is that Coloradans will not vote for higher taxes destined for mismanagement so state employees are sacrificed. Sad but true.

  30. Clint Locks says:

    “If passed by the Legislature, the Board’s proposal would fortify the fund by making major changes”
    Perhaps one of the “major changes” could be a reduction in Board benefits and salaries. Maybe not too innovative, but maybe it would wake some people up. This is disgusting and I’m all for legal reaction to this. Jumping ship is looking pretty good…that or gathering around the plank.

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