Retirement insights from a Colorado PERA perspective

Legislation & Governance

Direct distribution of $225 million helps return PERA to full funding

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A key component of SB 200, the legislation passed at the end of the 2018 legislative session that will put PERA on a path to full funding within 30 years, is a direct infusion of funding from the state budget.

If this legislation is signed into law by Governor Hickenlooper, beginning on July 1, 2018, PERA will receive $225 million as a direct distribution from the state. By statute, payments will continue each year until PERA is fully funded, meaning that there are no unfunded actuarial accrued liabilities in any division of PERA that receives the distribution.

PERA will allocate the direct distribution as proportionate to the trust of each division (Denver Public Schools, Judicial, School, and State). The Local Government Division Trust Fund, which has a higher funded ratio, will not receive an allocation. Unlike the other divisions, SB 200 does not increase the employer contribution from the Local Government Division.

The $225 million allocation can be impacted by the auto adjustment provision in SB 200, but by no more than $20 million per year. Additionally, the disbursement is capped at $225 million.

All funds from the direct distribution will go toward paying off PERA’s unfunded liability.

For additional information on this provision of SB 200, please see this fact sheet.

Comments

  1. Patricia Kenney says:

    This state funding increase is obviously a very good thing for PERA but I wish the legislators, PERA, and the governor had been able to protect retirees’ pensions from decreasing in value due to no annual increases for 2 years and very low increases in the following years, with no connection to any price index. With healthcare costs and property taxes (among other things) going up at double-digit rates, there will be significant financial impact on many if not most PERA retirees. The final compromises in SB18-200 were in contradiction to the oft-mentioned “shared responsibility” and commitment to preserve the value of the pensions retirees rely on for financial security. I believe PERA and state government have broken the trust with public servants and I would caution current employees to remember that they, too, will be retirees some day.

    • bo black says:

      You are correct

    • Shari says:

      I agree with Patricia Kenny and I have 12 yrs before I retire!

    • Charles B. Reinhardt says:

      I agree with Patricia Kenney. Retirees do not just face double digit increases in property taxes and healthcare, but we face increased costs for everything necessary to sustain our lives. Food, clothing, gasoline, heating and utilities all increase on an annual basis, but PERA, state legislators, and the governor pulled the financial rug out from under retires. Many retires worked for 25, 30 or more years with the prospect of a retirement into which we contributed our share during our working years. Not to many years ago, retires received annual pay increases at 3%, then it was cut to 2%, now we see our income frozen for 2 years (which is actually from July 2017 – July 2020) and again annual increases are being cut, this time to 1.5 %. At this rate of degradation of retirement benefits, it won’t be long before we will have to pay a premium back to PERA just to receive a small percentage of what we were promised during our working years. It is hard to see any integrity in the major contributors to state government employment and retirement when the benefits employees worked for are cut so severely after our working years. Current retirees gave the better part of our working years to a system that constantly degrades the promises made to us when we were employees instead of keeping the promises made to us regarding our retirement benefits.

      • Donna Robertson says:

        I. Agree completely! It is becoming harder and harder to make ends meet, especially due to health care costs, the cost of homes and pretty taxes.

    • COL says:

      I’ve lost respect and confidence.

    • Danny Ackerman says:

      How about some really plain English and give us a better understanding of the actual effect on our monthly retirement check!

  2. Ruthie says:

    I don’t understand the nature of the $225 million/year from the state’s budget. Is that a bailout, similar the the US govt’s bailout of Chrysler Corp?

    • Colorado PERA says:

      Ruthie,

      The direct distribution will be used to offset unfunded liabilities and will enable PERA to reach full funding in approximately 30 years.

  3. Dave Lovell says:

    I couldn’t agree more Patricia. At the very least with what retirees are giving up with the COLA we should at least been exempted from the automatic adjustment provision which could further lower our COLA if incoming money (investments & contributions) don’t keep us on a path to full funding in 30 years.

  4. Barry Northrop says:

    The article states that, “All funds from the direct distribution will go toward paying off PERA’s unfunded liability.” How exactly will that work? Does it mean the direct distribution will be invested (the best use IMO) or redistributed as pension payments to retirees, or some other method? A little more color here would help.

    • Colorado PERA says:

      Mr. Northrop,

      All contributions are invested and are used to pay future benefits.The direct distribution, once received, will be invested as well.

  5. Edrie Womack says:

    Once again, we as retirees are being cheated after being iied to about our retirement income; All the great promises made while we remained loyal employees are basically null and void–we may have done better to have left PERA employment and taken our chances in the stock/bond market or 401K’s. Our expenses go up and up and our income ultimately goes down and down. Gee, thanks PERA! Hiss and boo on the State Legislature!

  6. W. Steve Eslary, M.A. says:

    Let’s hope that this outcome really materializes over the next 30 years or the next generation of state retirees will be asked to forego a COLA permanently during their retirement. The PEW Research Center shows what is going on in all 50 states and it looks like a real deterioration in state pensions is on the way. I would suggest that all government employees stay informed and make adjustments to their retirement plans for the future. There will be more sacrifices on the horizon and probably another downgrade to the COLA formula as is indicated in the ongoing PEW Research. Please remember that our loved ones will have to live on what we leave them in pension income. The future needs to be scrutinized carefully.

  7. J. Williams says:

    This may be a “genuine compromise” for the legislators, Governor Hickenlooper and the PERA board, but it is not for retirees who were expecting much more when retiring from PERA. Only three weeks before we retirees were counting on a COLA increase effective July 1, this bill pulled the rug out from under us.

    Back in 2000, PERA was actually overfunded. Then, state lawmakers and former Gov. Bill Owens boosted benefits and cut contributions. The legislators screwed with us then and are doing the same thing now. PERA retirees will need to hope that we receive another COLA increase after the two year moratorium. Thanks for nothing in 2018 and 2019.

    Hopefully the WEP will be eliminated by Congress to help us poorer retirees.

  8. G says:

    PERA was fully funded I’m pretty sure until a certain Governor allowed high dollar directors and state employees to purchase years of service. Great for hard working state workers to buy a few years maybe, most still couldn’t afford to purchase time and worked the full years time needed to retire. Some already WEALTHY individuals, some appointed by the Gov. worked for 5 years and purchased enough time to buy into the system and receive high dollar monthly retirement benefits. Always appears as take from the poor and give to the rich. Please be wise, honest, and prayerful and carefully consider the votes this year!

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