Now that Governor Hickenlooper has formally signed Senate Bill 200 (SB 200), the work begins on implementing it. (Read more about the passage of SB 200 here.) This complex piece of legislation naturally raises numerous questions for Colorado PERA members, retirees and employers. PERA on the Issues will continue to provide details on all aspects of the bill, and we encourage you to contact us if you’re unclear about any of the new provisions.
Why did the Board advocate for any changes to the PERA plan?
During the General Assembly’s deliberations about the bill questions arose about why this was necessary given that the legislature had passed another PERA-related bill in 2010. The primary reasons are that PERA members are living longer, which increases the cost to provide their retirement benefits; and that more conservative projections of future investment returns have emerged, which requires PERA to adjust its prior assumptions about our investment portfolio. The result of these two factors is that PERA’s risk profile had become too high.
Did SB 200 include all of the PERA Board recommendations?
The PERA Board and staff recognized these trends in 2016 and subsequently spent all of 2017 formulating recommendations for the structural changes that became the basis of SB 200. The final bill contains many of the PERA Board’s proposals, all of which are designed to reduce PERA’s risk profile moving forward and decrease the amount of time it will take to reach full funding for each of its divisions to within 30 years. A comparison of the Board’s recommendations with the final version of SB 200 can be found here.
What assurances are there that these changes will continue to keep PERA sustainable?
Of course, economic and demographic trends will continue to evolve. But SB 200 accounts for that by including an innovative automatic adjustment provision that—should PERA stray from its 30-year funding timeline—modifies employer and employee contributions, the direct distribution and the annual increase as needed. (Read more about the automatic adjustment provision of SB 200 here.)
What else does the bill include besides changes to the PERA benefit structure?
SB 200 mandates that the state pay a $225 million direct distribution every year until the unfunded liability is paid off. It also establishes an oversight committee comprised of four legislators and 10 appointed, non-governmental experts from relevant fields. Neither of these provisions were included as part of the PERA Board’s recommendations.
Because of SB 200, PERA members, retirees and employers, as well as Colorado taxpayers, will benefit from a stronger, more stable retirement fund. PERA’s funded status will improve over time, the state’s credit rating will remain strong and PERA retirees will continue to receive retirement benefits, contributing to Colorado’s economy and the state’s well-being. For more comprehensive details about how SB 200 will affect you, see our fact sheet.