Retirement insights from a Colorado PERA perspective

Issues & Perspectives

Conversations About Colorado’s Public Employee Retirement System Should Include PERA Input and Be Fact-Based

Decorative Scales of Justice in the Courtroom

The Colorado Pension Project (CPP) recently posted a column regarding PERA from TeacherPensions.org and Bellwether Education Partners, national organizations headquartered in Boston, MA. Prior to its posting, Colorado PERA had the opportunity to review the material and subsequently raised concerns with CPP about inconsistencies and mischaracterizations contained within the piece. Unfortunately, CPP went ahead and posted their version without revising their statements.

Colorado’s hybrid defined benefit plan and optional defined contribution plans provide Colorado’s teachers and public workforce with portability and the option to change and advance in their careers either in the public or private sector. Members who leave their retirement savings with PERA accrue benefits with interest and an employer match until they are eligible for retirement. At that time, they can receive a guaranteed monthly income for the rest of their life – without fear they will lose money due to stock market drops or that their savings will run out. Additionally, if life events intervene, these workers have the option to cash out or roll over their savings into other qualified savings plans.

The State of Colorado has commissioned an independent actuarial firm, retained by the State Auditor’s Office, to conduct studies that will compare the costs and benefits of the different retirement savings options with those provided by PERA’s hybrid defined benefit savings plan. The PERA Board supports this process which will make comparisons of alternative plan designs considering a variety of career patterns. To the extent these studies identify employees, employers or career patterns that are not well served by the existing PERA hybrid DB system, policy makers will be well positioned to have an informed discussion of alternatives and the cost of those alternatives

The goal of the General Assembly’s reforms enacted in 2010 was for PERA to achieve fully funded status – thus ensuring retirement security – with sensitivity to the equitable distribution of costs and burdens associated with the reforms. The “potential solutions for Colorado” outlined in the CPP white paper come with significant increased costs while not appearing to materially enhance retirement security nor meaningfully improve Colorado’s ability to attract and retain a talented public workforce.

Retirement savings and security is an important conversation we should be having, and Colorado PERA is proud to be a resource and voice for how our unique plan design serves the teachers and public employees of Colorado. Colorado PERA wants to ensure our members, policymakers, community leaders and stakeholders have correct information when discussing this important topic.

PortabilityThe ability to take an existing retirement plan with you when you change employers.Hybrid defined benefitPERA’s Defined Benefit (DB) Plan is “hybrid” in that it combines features of a traditional DB plan with some of the features of defined contribution (DC) plans, such as portability.AlternativesA broad category of investments that don’t fit into traditional categories like stocks and bonds.AlternativesA broad category of investments that don’t fit into traditional categories like stocks and bonds.Defined benefitAlso known as a pension, this is a type of pooled retirement plan in which the plan promises to pay a lifetime benefit to the employee at retirement. The plan manages investments on behalf of members, and the retirement benefit is based on factors such as age at retirement, years of employment and salary history.Defined contributionA type of individual retirement plan in which an employee saves a portion of each paycheck (along with a potential employer match) and invests that money. The employee’s retirement benefit is based on their account balance at retirement. A 401(k) is a type of defined contribution plan.

Comments

  1. […] Conversations About Colorado’s Public Employee Retirement System Should Include PERA Input and… “The “potential solutions for Colorado” outlined in the CPP white paper come with significant increased costs while not appearing to materially enhance retirement security nor meaningfully improve Colorado’s ability to attract and retain a talented public workforce.” […]

  2. Dan says:

    Like the fact that PERA has a $20,000,000,000+ unfunded liability and is reducing the taxpayer contribution to the Denver Public School PERA without reducing the benefits to help accelerate the unfunded liability? It would be a great thing if some “facts” would be shared rather than the rainbows and unicorns that are typically posted on this site.

    • Katie Kaufmanis says:

      Thanks for your comment, Dan.

      The PERA Board of Trustees’ position on the original DPS true-up bill (HB 15-1251) was neutral. The Board added in their formal motion that they “oppose the actuarial deterioration of the funded status of the DPS Division. The Board urges the General Assembly to adopt an employer contribution rate for the DPS Division of 12.6 percent, which is projected to bring the Division to 100 percent funding at the end of the true-up period.”

      This information was posted on the Legislation page on the PERA website the day the Board took this position. https://www.copera.org/about/legislation

      It is the Colorado General Assembly that sets PERA’s contribution rates and determines PERA’s benefit structure. This includes the Denver Public Schools Division of PERA.

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