Retirement insights from a Colorado PERA perspective

Legislation & Governance

PERA reform legislation passes Colorado Senate

PERA reform

After two committee hearings, a spirited preliminary debate, and remarks from legislators prior to the final vote, major PERA reform legislation gained final approval by the full Senate last week. If passed, SB 18-200 would impact every current and future PERA member and beneficiary.

Below is a breakdown of the bill’s path through the legislative process.

Senate Finance Committee
After over four hours of testimony on the bill on Tuesday, March 13, the Committee delayed the amendment phase and final vote. When the hearing continued on Thursday, March 15, they considered four amendments. Two of the amendments, which both passed by votes of 3-2, removed language that would have increased employer contributions beginning in 2018, as well as the employer contribution increases that were part of the automatic adjustment provision. Another amendment, which passed without objection, clarified that the four members of the proposed public pension oversight committee who are “experts in the area of pensions or retirement plan design” would not be legislators, and therefore would not have the power to vote on matters before the committee. The only amendment that did not pass out of Senate Finance would have removed the provision in SB 18-200 expanding the option of choosing the defined contribution plan to all new hires. The committee members voted 4-1 to refer the amended bill to Senate Appropriations.

Senate Appropriations Committee
With no public testimony, the Appropriations Committee hearing was quick. One amendment appropriated $200,000 of general fund money which may be used by the legislative council for an “independent review of PERA assumptions.” The committee voted 4-3 to advance the amended SB 18-200 to the floor of the Senate.

Senate floor
The full Senate debated SB 18-200 over the course of two days; Friday, March 23 and Monday, March 26. During the debate, several amendments were considered, but only two passed: (1) removing the provision to adjust retirement eligibility for current members (PERA Interim Executive Director Ron Baker expressed concerns about this provision during the Senate Finance Committee hearing) and (2) moving up the implementation date from 2020 to 2019 for allowing eligible new members to opt-in to the defined contribution plan. On Tuesday, March 27, the full Senate voted 19-16 to send the bill, as amended, to the House of Representatives.

What’s next
SB 18-200 has been introduced and assigned to the House Finance and House Appropriations Committees. A hearing has been set for Monday, April 16 at 1:30 p.m. Once the hearing starts, everything will begin anew: public testimony, consideration of amendments by committees and the full house, and, if the bill continues to pass through the process, eventually final approval from the House. If the House version of the bill differs from the Senate version—and all indications are that it will—then the Senate will be asked to concur with House amendments and send the bill to Governor Hickenlooper, or a conference committee of members of the House and Senate will be formed to try to forge a compromise that can win the support of both chambers. All of this must happen prior to Wednesday, May 9, which is the final day of the legislative session.

As always, for up-to-date information on SB 18-200 and any other PERA bills that might still be introduced, check back with PERA on the Issues.

See this fact sheet for a comparison of the PERA Board’s recommendation and SB 18-200.

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. Jerry E. says:

    Will PERA provide testimony at the House Finance Committee meeting on 4/16 that strongly advocates an employer contribution of 2% or more, elimination of expanded DC plan as not helping to improve PERA trusts funding and increasing retiree COLA to 1.5% or more?

  2. Dave Lovell says:

    That’s my question too Jerry, thanks.

  3. Colorado PERA says:

    Jerry and Dave,

    Colorado PERA Interim Executive Director Ron Baker will be providing testimony in support of the Board’s recommendation: https://www.copera.org/sites/default/files/documents/proposalcomparison3-18.pdf

  4. mark says:

    During the public comment period on Monday 4/16 is it required to sign up in advance or just be there at 1:30 to speak?

  5. Deon says:

    How will the increased choice in defined contribution help strengthen PERA ‘s outlook or will it?
    Not sure I understand the benefit of choice or the differences in contribution.

  6. David Sautte says:

    Sadly, we older retirees 72-82 years old may never receive the small COLA annual increase (1 1/4%) before we die. Too bad there was ‘t some consideration for retirees 70+ years old. Also, unfortunate/convenient that we are now only a few months before our next 2% annual increase. A bit insensitive to older retires.

    • G Craun says:

      Might it be prudent to look at the big picture? As a 72-year old retiree, I would rather go without the COLA for a couple of years to give PERA some latitude to correct the serious issues before us. Yes, we worked hard and deserve our annual increase, but it is also important to think of the current employees who would also like to retire at some point. How about we stop thinking about ourselves and center our concerns with future state employees. Unfortunate and insensitive timing? Perhaps, but for the greater good. We must stop thinking about ourselves. I am sure many of us (myself included) were on the low end of state employee salaries by today’s standards, and now, my PERA retirement is more than I ever made working 60+ hours a week. Those of you who were on the higher salary range are doing better than that. I am thankful and grateful. Just call me a proud, bleeding heart, happily retired liberal.

  7. Roxana M. says:

    It seems like the Republican Senators are fine with members and retirees carrying the entire load on this so called reform package. What happened to shared sacrifice? There is no effort to live up to the promises made to PERA members. Retirees will suffer and PERA employers will not be able to attract and retain qualified workers. This is a very short sighted proposal.

  8. Kevin T. says:

    Has PERA conducted an analysis to determine the financial implications of SB 18-200 as amended without the 2% additional employer contribution PERA recommended and the decrease in the retiree COLA from the PERA recommended 1.5% to 1.25%? It would seem that without the employer contribution now, the bill would fall far short of ensuring that PERA stay on track to reach full funding in the 30 year time frame. If my assumption is correct, the bill would almost instantaneously trigger further reductions to the COLA and increases in the employee contribution if passed in its current form.

    Additionally, I have seen opinion columns from people stating that retirees are not making much of a sacrifice by having the COLA reduced. Due to the power of compounding, the costs to retirees is significant. Reducing the COLA from 2% to 1.5% as recommended by PERA reduces the retirees TOTAL benefit 5% over the first 20 years compared to what they would receive without the reduction. Reducing it another .25% as currently written in SB 18-200 reduces the TOTAL benefit 7.44% over the first 20 years compared to what they would receive under the current benefit structure. Due to the compounding provision, the percentage is small at first and gets bigger and bigger as time goes on.

  9. Deborah says:

    Please tell me why the Colorado employees have to pay more to refund PERA when legislators & the actual state of Colorado is NOT paying more to their so-called “valued employees”? A 1% to 2% increase “raise” every few years does NOT even cover the increased rate of living here in the first place! We are so far behind the cost of living increases & property tax increases over just the last 9 years it’s ridiculous!! So employees end up paying more–again–& earning less! Especially now that the pay structure is changing for state employees with CDLE & we’re losing a half month of pay that we won’t ever see unless we quit, get fired, retire (there’s a joke right there) or die???

  10. Dawn Paluch says:

    It seems to me that taking current teachers and or future teachers out of the pera system by providing a defined contribution plan will upset the foundation of pera as we know it. The system needs new monies to grow the persion and provide stability.

  11. David Lovell says:

    Kevin,
    The legislatively required 5 year report on the SB10-001 bill showed that of the $15 billion in savings the COLA reduction from 3.5% to 2% resulted in a savings of $14.6 billion or over 90% of the bill’s savings. Quite a substantial amount! Those opinion writers are speaking in ignorance of the facts.

  12. Don Deane says:

    The March 16 discussion indicated, and Ron Baker confirmed in a side conversation, that under SB18-200 the employer contribution for an active member would be higher if s/he chose the DC plan than if s/he chose the DB plan. The difference for employees choosing DC would go toward amortizing PERA’s unfunded liability, to ensure that an employee’s DC vs. DB choice doesn’t undermine liability amortization. Yet I couldn’t find a clear provision to this effect in the legislative language, and don’t know the size of this employer contribution difference (as % of employee pay) for the PERA divisions. Please clarify: (a) whether I understand the bill provision correctly as passed by the Senate (and if not how so?); (b) if I do understand it correctly, the size of this additional employer contribution for employees choosing DC in each division.

  13. Robert Skipworth says:

    I attended a meeting, I believe in 2008 when we were told about the proposed COLA reduction. I asked the question “If we allow this to happen now, what would keep it from occurring in the future?” We were told, whoever would have expected this to happen, the current recession at the time, and that it would be very hard to reduce our PERA again. However, here we are a few years later, in an economy that is doing very well and again we are losing more of our cost of living. I retired based on the commitments made by the state legislature and I fulfilled my side of the contract. I also continued to work after retiring from the state and have more than enough Social Security quarters to draw full social security benefits. However, I am being told that I can only draw greatly reduced Social Security benefits due to my PERA pension, even though they are also being greatly reduced. Is there anything that can be done by PERA, if a person is qualified to be eligible to draw full Social Security benefits they can receive those benefits.

  14. Pam Brauer says:

    REPEAL: WEP & GOVERNMENT PENSION OFFSET! SUPPORT: HR 1205, S 915, HR 1902 (Larson) and POWR HR 1583 (Sanchez). AMERICAN WIDOWED WOMEN…NEED THEIR SS….SURVIVOR BENEFITS….TO STAY OUT OF POVERTY !!!

  15. Rudy Drautz says:

    How do the PERA policies currently in place (where a retiree can receive a 50 or 100 match on member contributions and interest if they have five years of service credit) affect the financial status of PERA and unfunded Liability?

  16. Dennis Anderson says:

    Will any retiree ever receive a COLA increase if this latest legislative move passes? With the 2 year moratorium and the changes to how they calculate future adjustments to COLA, retirees of any age may never see a COLA increase EVER.
    It’s beyond belief that retirees will be taking the brunt of the cuts when we are the least able to bear the burden. The legislators should be ashamed to be proposing these deep retiree cuts. These cuts are deeper than what PERA has originally proposed.
    Why not phase COLA cuts in? We were waiting for our July 2018 COLA increase. It’s beyond cruel that the legislators should implement these changes two months before our planned increase.
    After several years of no COLA increases, the state will be paying for my welfare and Medicaid bills.

    • Colorado PERA says:

      Dear Mr. Anderson,

      The Annual Increase (COLA) in the current version of SB 200 will be capped at 1.25% and paid in July 2020 if PERA’s investment portfolio returns more than 0% in 2019.

      In SB 200 as it exists today, retirees are responsible for 28 percent of the reforms, with current and new members paying 33 percent, employers at 7 percent, and the State through the direct distribution will be paying 32 percent.

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