Retirement insights from a Colorado PERA perspective

Legislation & Governance

New Report Compares Inflation to Annual Increase

Photo credit: GeorgeRudy – 664449468 – GettyImages

Key points from this story:

  • PERA prepares a SB 10-001 report every five years
  • The report must show two things: how the Annual Increase compares to inflation and what progress has been made toward eliminating the unfunded liability
  • The 2020 report shows that inflation has risen an average of 1.5% per year since 2010 while the Annual Increase has risen an average of 1.4%

Although the Annual Increase retirees receive has decreased in recent years, it is generally keeping pace with inflation over the long term — one of the key findings in a report PERA delivered to the General Assembly this month.

Background of the Report

In 2010, the General Assembly passed Senate Bill 10-001, which made structural changes to PERA. In addition to these changes, the bill required PERA to prepare and submit a report to lawmakers every five years.

The report is required to show two things: the progress made toward eliminating unfunded liabilities and an analysis of how the Annual Increase retirees receive compares to inflation.

PERA prepared the first such report for the General Assembly in 2015. On January 1, 2021, PERA submitted a report that updates the original report with data from 2015-2020.

The Annual Increase and Inflation

The Annual Increase in 2020 was 1.25%. In 2021, the Annual Increase will also be 1.25%. This amount has changed many times throughout PERA’s history. The formula used to determine the Annual Increase amount changed most recently with the passage of SB 10-001 and again with SB 18-200.

The Annual Increase helps retirees keep pace with inflation throughout retirement. That does not mean that the Annual Increase will equal inflation in any given year, however. In 2017, for example, the Annual Increase was higher than inflation (2.0% vs 1.0%) while, in 2019, inflation was higher (2.5% vs 0.0%).

As part of this report, PERA is required to compare how the Annual Increase, over time, compares to inflation. The 2020 report showed that inflation rose an average of 1.5% per year since 2010 while the PERA Annual Increase rose 1.4% per year since 2010. Between 2010 and 2019, inflation rose a total of 16.2% while the Annual Increase rose 14.9%.

Measuring Inflation

It’s also important to note that inflation is measured using a specific measure, called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) (learn more about the CPI-W here).

The CPI-W accurately captures broad changes to the cost of food, energy, housing, and more. This is useful as PERA has retirees that live throughout the United States.

However individuals don’t experience inflation at a national level — you experience the inflation of the area in which you live. For example, in any given year a person living in Grand Junction might experience inflation at a rate higher than the national average while someone living in Alamosa might experience a lower rate of inflation. Or vice versa. Additionally, the cost of health care has been rising faster than inflation for years.

Managing these changes can be difficult. However, a secure lifetime benefit with an Annual Increase that compounds annually remains a valuable tool to have in retirement over the long term.

Progress Toward Eliminating PERA’s unfunded liability

The report also included an update on PERA’s progress toward the goal of eliminating all unfunded liabilities (this information is also provided publicly every year in PERA’s Comprehensive Annual Financial Reports).

The report states that the changes in SB 10-001 led to an immediate reduction in $8.9 billion of liabilities and the SB 18-200 changes reduced liabilities by another $3.9 billion.

PERA’s liabilities aren’t a static figure, however, and are updated every year. For example, strong investment returns in 2019 led to PERA making faster-than-expected progress.

Demographic changes are another factor that can affect PERA’s liabilities. PERA undergoes an experience study every four years to ensure that the projections it uses for inflation, retiree lifespans, the ages at which members retire, and more are as accurate as possible (the experience study is covered in-depth here).

The most recent experience study showed that, among other things, the trend of retirees living longer than originally projected continues. This trend adds liabilities to PERA, as longer lifespans mean a larger lifetime benefit will be owed to retirees on average.

A likely result of these adjustments is that the automatic adjustment provision (AAP) will go into effect after the release of the next CAFR, in June 2021 (the final determination regarding the AAP is part of the CAFR process and is released with the release of the CAFR). If this happens, the changes would go into effect in July 2022.

While changes like these can be difficult, they have resulted in a more secure and resilient plan members can rely on in the future.

AapA provision of Colorado law that automatically changes PERA contributions (from employers, employees, and the state) and annual benefit increases based on PERA’s funding progress.Annual increaseAn adjustment to PERA retirees’ monthly benefit payments, paid in July each year. The Annual Increase amount is set in statute and can adjust up or down based on PERA’s funding progress. It is not tied to inflation.Unfunded liabilityThe difference between the projected amount of money needed to pay benefits earned to date and the amount of money currently available to pay those benefits.


  1. Joseph Thompson says:

    1.5 – 2.5 isn’t enough to stay in step with inflation and you know it so stop acting like you did us a favor and as a retiree we got NOTHING for 2 years !!

    • Christopher Smith says:

      My concern is the alternative. How does this compare to Social Security both monthly benefit and annual increase? My family that are on SS have to wait until 67 to collect a fraction of what I can collect when I turn 60. Would we be better off taking SS or PERA?

    • Peggy B says:

      Nail, head, contact!

    • Sandra O’Connor says:

      Thank you Joseph!

  2. Tom Moore says:

    Taken to the extreme, your final paragraph is like saying, “If we would kill off a few retirees, those remaining would be better off.” The state of Colorado should own up to its commitments in funding employee retirement plans.

  3. Ryan Christy, CFA says:

    Informative, thanks!

    Ryan Christy, CFA

  4. Susan Brown says:

    I agree with the previous two comments!! Every year we have less spending ability; never get ahead! In spite of where we find ourselves, I’m grateful for my pension!!

  5. James Lipscomb says:

    So PERA plans to further reduce our annual increase (“COLA”) because we are living longer. Really? Do you read the news? In the interest of telling the truth, PERA should publish the old assumed mortality rates, actual 2020 experience, and the newly revised mortality rate assumptions.

  6. Kim lack says:

    I agree with the previous comments. I feel like I am being screwed. I retired in June 2015. Had to wait a year or two to get my first increase, then got it 2 years , then it was frozen for 2 years and reduced to the 1.25. I got a whopping $43 in June of 2020 medical insurance went up $75. In 6 years my total amount went up $183 . Insurance went up about 100 to 150 each year. I am now bringing home about $300 less per month. This is wrong.

    • Christopher Smith says:

      I’m curious as to whether or not you got a salary increase of 3-4% every year while employed. I know I don’t. Also, while employed I’ve seen increased insurance costs too. Was your health insurance premium static while employed?

      • Mark says:

        I, for one, did. When in the same job, I averaged a 3% annual pay increase.

        I was also promoted several times during my career. Those salary increases averaged about 10% per promotion.

      • Beth says:

        Sometimes there is no cost-of-living raise, and sometimes there is no “step” raise (moving up the pay scale based on years of service). Sometimes we get both, and together they may total 4%. My health insurance goes up every year, and the benefits frequently go down (higher deductible and higher copay). I currently pay 30% of costs after I meet my deductible, up from 20% a few years ago. And none of the premium for my spouse or children is covered; I pay 100% of that.

  7. Leading Edge Boomer says:

    1. The US longevity rate has decreased by about a year because of the coronavirus. Statistically, people are not living longer.
    2. Much of the prose in this report could be replaced by a couple of well-thought-out graphs.

    • PERA On The Issues says:

      Thanks for the comment–you bring up a great point. I saw the news about how Coronavirus is affecting the longevity rate as well.

      When PERA sets assumptions for the longevity rate, it sets it for Colorado PERA members, specifically. This number does not always align with broader national trends. Longevity rates for PERA members frequently exceed national averages. Also, while COVID-19 is expected to bring down the longevity rate for 2020 and 2021, the assumptions PERA sets are forward looking and cover a long time period rather than year by year.

  8. Tina says:

    I cannot help but wonder if some of the PERA funding difficulties lie in its very high benefits for some retirees. When I think about how much my school district’s superintendent will be getting for the rest of his life, I can’t help but think about how little the custodians will be getting. Perhaps some graduated caps would help out so that more people could receive a decent benefit.

    • Harry Singleton says:

      Good thought. I agree.

    • Charl Hill says:

      Tina,I agree! There should be a limit on any increases for higher benefit earners. I’ve mentioned this before with no real response. Really I feel there should be some real COLA limitations or benefits of over $150,000. Maybe an increase every other year or a decreased COLA.

  9. John Alonzo says:

    You certainly have not done us any favors, so quit trying like you have. I retired at least 6 years ago and have only received 1 increase in that time . Just tell the truth if u can.

  10. Nan Edlund says:

    Some retirees may say, “Oh, well, the reductions don’t amount to much each year, and we can manage.” At the time the reductions were being discussed, I did the math. Over an assumed remaining lifespan of 20 years, the loss of approximately $45 a month in previously promised increases results in a cumulative loss of about $80,000 for my husband and me. Lucky for PERA, many retirees didn’t do the math. Your condescending report makes light of the impact, particularly on people of limited means. PERA should at least keep pace with inflation each year, and should not gloss over the very real loss to retirees when fair increases are not given.

  11. Paul says:

    You wrote that the SB 10-001 report is released every 5 years and must show among other things “how the annual increase compares to inflation” and that left me with two questions:

    1. Why are you reporting the cumulative rate and average rates over 10 years instead of 5 years given the report is released every 5 years?

    2. Can you provide the cumulative annual increase over the last 5 years and show a comparison to the rate of inflation over the last 5 years?


  12. Soon to be retired says:

    In my opinion — A big part of the unfunded liability is the fact that PERA, until around the year 2000, allowed the purchase of unlimited years towards retirement at absurdly low cost, together with unrealistic rate of return assumptions over the years based on their chosen investments. PERA would be better off with a total stock market index fund. 9-10% average rate of return since 1925 and minimal expense ratio.

    • Christopher Richards says:

      Wise or otherwise they did it none-the-less, and entered into a contract with that particular group of retirees. Those contracts should be enforceable and honored just like any other. Would you not object if your PERA wages were suddenly cut, and then cut again, and again, and again, with the end effect of reducing your HAS and retirement benefit? This taking of our annual increases is no different. We budgeted for retirement according to what was promised, and now many lower paid retirees are going under because of those promises repeatedly being broken.

  13. Nancy Eagle says:

    Agree with the previous comment in that if the report is due out every 5 years, why are you reporting data for the past 10? Obviously sharing data for the past 5 years must look pretty bad or one would assume that information would have been provided.

    • PERA On The Issues says:

      Hi Nancy,

      Thank you for the question. The state legislature required this report to track the impact of SB 10-001 over time, so we use 2010 as the starting year. The first report tracked the 5-year impact while the update is able to capture the 10-year impact. That said, the report does contain a year-by-year breakdown.

  14. Patty Ayala says:

    Pera made bad decisions and had Board Members going on fancy trips and vacations at our expense. Granted they have taken that away but now we are paying for it. I have not received an increase for the last two years and will not get another one for another year because you are trying to make it financially solvent. Because you wasted our money we should not get penalized and not get cost-of-living raises. We trust you to make good decisions with our money for our retirement you should not penalize us go after them and take the money back.

  15. Greg says:

    Wow, get real. PERA is better than social security and most pension plans. We are very lucky and I feel privileged to have such an amazing retirement plan and administration!

    • Dennis Mathistad says:

      I’m thankful for the retirement that I’m receiving especially if I look back on what other plans are providing if they even exist any more. Some horror stories out there. Personally I feel those at PERA are doing the best that they can. The State Legislature is very jealous and likes to mess with our program. But we all know that they do very well as all politicians do.

  16. Matt Young says:

    I hate to sound like a conspiracy theorist, but I think that the whole point of capping the Colas is to wait for the inevitable bout of significant inflation and watch the relative payouts decrease as a fraction of the assets, which will presumably grow with inflation. I cannot disagree with someone who said that some pensions are too high – probably they should be capped at 80 percent or thereabouts – but I suspect those giant pensions are not a significant fraction of the whole.

  17. Larry Williams says:

    I have wondered if upper administration officials don’t get a good “boost” in pay during their last few years in order to boost their retirement benefit. I would like to see an analysis. I suspect that the big earners are gaming the system to gain retirement benefits that the rank and file don’t get.

  18. Sherry says:

    It is disappointing to see the annual increase reduced so often but I am still thankful every day every day for PERA.

  19. Jill-Ellyn Straus says:

    Unfortunately this “increase” does not come close to covering the increase in insurance premiums under PERA CARE.

  20. Tom says:

    I planned my retirement based in part on what I was told by PERA. Then the COLA was reduced, and then reduced to zero for 2 years and now reduced again. How can people plan their retirement without truthful data? PERA, please remember you’re dealing in part, with retirees! We plan based on our meetings with your representatives. Once retired, we have a deep need for you to keep your word.

    • Christopher Richards says:

      Well said. PERA… keep your promises, honor our contracts. Find funding from other sources, that’s your job. Most retirees have no way of making up these broken promise shortfalls. Go to bat for us in regard to the WEP, cancel the sweetheart deals for judges and state police. You are letting us down.

  21. DRedman says:

    PERA’S AI was first promised at a “guaranteed” 3%, lowered to 2%, 1.5%, 0% for two years, and finally 1.25%. This is NOT enough to keep up with inflation. Please don’t blow smoke. We are retired, not stupid!

  22. Duane A Harris says:

    Dollar for dollar Colorado’s PERA program is still one of the best! If you compare it with other state pension plans it has been for 75+yrs, and still remains today, pretty unbeatable. All that aside, my biggest concern now is just how newly elected President Biden, and his big taxes, socialist “FREE” programs, and open boarders, are going to impact every ones port-folio, including PERA. Talk about inflation through the roof!! I hope PERA is still here 4yrs from now, in any form, at the end of the Biden/Harris 1st term administration.

    • Victoria says:

      I totally agree with your comment. I am very concerned about my PERA retirement plan and whether or not PERA will survive the Biden/Harris Administration 1st and last term. Open Borders, increased minimum wage, FREE programs, etc., will quickly destroy our economy!

      • Harry says:

        I have to comment on these concerns and some people’s short memories. In 2008 when the housing bubble burst, during the Bush/Cheney administration with its lax regard for banking regulations, the whole market was on the verge of collapse. Imagine what would have happened to PERA if it had. Thank god for Obama/Biden’s actions or we would really be whining.
        As it was PERA took a heavy hit, as did most defined benefit retirement programs. We’ve been recovering from it ever since. And let’s have some regard for those just starting in PERA. How would we like it if those before us had drained away the resources?

        • Renae Lyman says:

          Thank you! Thank God we had a Democratic administration to lead us through the near-collapse of the market in 2008! For those commenters “worried” about our present Democratic administration—get over it! Perhaps more balanced “news” sources would help ease your mind.
          As far as the WE scheme—I really would like to know the ugly, twisted rationale that got that infuriating plan passed. It amounts to nothing more than overt theft from public employees. Those who have done enough work under SS to earn a pension, large or small (operative word being EARNED), deserve every cent. Using the excuse that the windfall elimination prevents “double dipping” is just laughable. Let me guess who was behind that giant scam…?

    • Christopher Richards says:

      You have it backwards. It is a very, very, clear matter of easily discoverable public record, that leading Republicans have been trying to dismantle PERA for the last 3 or 4 decades. They are also very clearly responsible for the incredibly unfair WEP (a topic that PERA regularly dodges by saying it’s a federal matter over which they have no influence). Republicans have repeatedly called for the privatization of PERA jobs, and have striven to reduce and restructure our retirement benefits at every opportunity, while at the same time allowing the expensive self-serving sweetheart deals for Judges and State Police to continue. PERA has almost always done better for retirees under Democratic leadership.

  23. Donna says:

    You referred to the expectations of a 30 year and retirement promised. When I started PERA at age 37 I was promised a 3% annual increase in my retirement every year after retiring. That lasted four years after I retired. It has since gone down to 1.25% (two years 0%).
    That is a huge loss if you check compounding loss. I am now 75 and it is becoming harder to keep up with cost of living. But I won’t apologize for living too long!

  24. Mary Morris says:

    My retirement income wouldn’t be so tight if my Social Security benefit from paying into Social Security for decades before working an additional 25 years for a PERA employer was not reduced to almost nothing. This penalty is so unfair!

    • Christopher Richards says:

      100% agreed, 100% true. PERA does nothing but dodge the topic of the WEP, saying only that it is a federal matter over which they have no influence. The reason they have no influence, is that they CHOOSE to not pursue and object. They, and all other state retiree programs, should be calling every congressional office weekly about this travesty. I’ve asked why this is in these comments, over and again for maybe a decade, and have never once received a reply.

      • Christopher Richards says:

        My projected $708 monthly SS benefit (if I claim at my full retirement age) gets reduced to $265 (accurate, and not a typo). Doesn’t even cover my utilities. I paid in, same as non-PERA people, 40+ quarters worth during my youth. Why aren’t real estate investments, stocks etc not also considered “double dipping”? This is arbitrary, politically motivated theft. PERA continues to turn a blind eye.

        • Renae Lyman says:

          My monthly SS benefit would have been $560 and was reduced to $220…Theft, pure and simple. I earned the required credits through years of work in ADDITION to my teaching duties. Why am I being penalized for giving an employer my time and energy?

      • Charl Hill says:

        Yes for those of us that aren’t lifers in PERA, WEP is THE total ripoff. Unfortunately with the toxic environment in Washington, I fear there will never be any real debate or consideration for the financial well-being of us that fall under the WEP rip-off.

    • Dennis McCloskey says:

      Word! It’s not double dipping, it’s double working. Earned benefit.

  25. Sandy Bennett says:

    I am so thankful for my pension. I am blessed to be getting it. This was informative.

  26. Debbie Bangs says:

    I agree with the comment that if you, PERA need to find a way to reduce funds, you should be looking at those high level salaried positions, such as administrators who are getting a completely higher retirement than the bulk of your retirees. Put a upper cap on these retirement amounts and you will not need to reduce all of us! This huge gap between amounts from the “upper level” employee administration salary scale just continues to be unfair in retirement. Put an end to this gap!

    • Thomas Thielemier says:

      A better solution to the large benefits is to calculate each FUTURE pension based on the average salary over the years paid into PERA with a minimum ten year denominator. It would be interesting to determine how this would affect future retirees at all job levels who seek to spike income over the current three year avg income. Big surprise!

    • Charl Hill says:

      Again I agree.

  27. Christopher Richards says:

    “Additionally, the cost of health care has been rising faster than inflation for years.” Huh??? Rising health care costs somehow now aren’t an integral component of inflation? Such “word craft” (aka, BS) is at best manipulative. Our now paltry (and sometimes non-existent) COLA does not come anywhere close to keeping up, attempts to say otherwise are patently false. Lower paid retirees, dedicated employees with 20 – 30 years of service, are going under because of the outrageous, and ever-tightening, breach of contract regarding our annual increases.

    • Thomas Thielemier says:

      A better solution to the large benefits is to calculate each FUTURE pension based on the average salary over the years paid into PERA with a minimum ten year denominator. It would be interesting to determine how this would affect future retirees at all job levels who seek to spike income over the current three year avg income. Big surprise!

  28. William J. McGurn says:

    I hate to complain when there is so much pain in the world right now, but I find myself joining the ranks of those struggling to make it. It was bad enough to have my Social Security reduced thanks to PERA, but when they reduced COLA from 3% as promised, that was adding insult to injury. Our cost of living should be based on REAL inflation not national estimates.

  29. Christopher Richards says:

    At least this report has an appropriate acronym. POTI. Make it a double “T” and it becomes more clear. Manipulative half-truths on several points.

  30. Steve K says:

    I would think with a 16% stock market return for 2020 and mortality rates adjusted for the numerous Covid deaths, the AAP would allow for PERA Retirees’ to have their annual increase (COLA) bumped up to the 1.5%.
    But the tone of the article sounds like our COLA will be headed down, why?

  31. Keith D says:

    I am so grateful for PERA. So many people don’t have a defined benefit pension at all. Thank you to all the PERA staff that work to protect our retirement benefits…! No complaints here.

  32. Rob Gray says:

    Several retirees commented that the COLA used to be 3% per year. Actually, from 2001 through 2009, the COLA was 3.5% per year. During that period, the COLA exceeded inflation 7 out of 9 years. Something to remember for those of us who retired prior to 2010. During this pandemic and in other years, there are many reasons to be happy about receiving a guaranteed lifetime monthly income.

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