Retirement insights from a Colorado PERA perspective

Legislation & Governance

Senate Bill 200: What you need to know

healthcare legislation

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.

Comments

  1. Kevin says:

    When the last Changes were made to PERA back in 2000, we were told that everyone had to share the sacrifice, so retirees HAD to go from 3.5% yearly increase to zero to 2% increase. With this last legislation, it seemed to be less imperative to share the sacrifice, and the employer contribution increase was negligible. Of course that is to be expected. Once they start taking away our benefits, they will continue doing so until they are gone. And with GPO/WEP also taking away 66% of our earned Social Security benefits, it’s obvious retired public employees are expected to do all the giving until there’s nothing left to give.

    • Bill says:

      I agree the the social security loss that those of us w suffecient SS time have to take is egregious. I question the fairness of mipy Ss being decreased when the military whom receive a similar pension as PERA are not affected.

  2. Terri Tarbutton says:

    This bill again hurts current retirees unable to increase incomes. My husband is disabled and we have depended on my Pera to take care of us. We do not ask for government hand outside but will have to in the foreseeable future. I invested in Pera during my tenure and was not aware of a 401 or 403 during my working years. I spoke with Pera and my congressman. I will remember the quality of your response as a long time Colorado citizen! When will you consider what damage you have done to previous
    Pera employees?

  3. P. Williams says:

    No use leaving a comment, really. That reservation to adjust simply means that any time, any year, regardless of individual impact on retirees, they can jerk the pathetic “maximum 1.5% raise.” We’ve done without raises a couple of times, they cut the “guaranteed cost-of-living-increase,” and now, they can jerk it every single year if they select the right “numbers.” In the meantime: our health care premiums go up, as well as prescriptions, co-pays for medical tests and services, massive increases in cost, hearing aids and glasses cost astronomical amounts, gas is nearly $3 a gallon, bread is up to anywhere from $3.00 to $7.00 a loaf, and meat, well, forget grilling a steak to celebrate an anniversary or birthday. Maybe we will live longer, but the butchery done all those years ago when they changed retirement to 50 with 30 years service doesn’t make those people fit “living longer.” They are the same age now they would have been had they not been given the bum’s rush to retire early. It only means they are RETIRED longer than they could have been under PERA’s long-established plan. PERA warned, and the governor and legislature pooh-poohed and shoved it through anyway. Now, we see those disgusting editorials and commentaries and hear the pious speeches saying PERA has not “performed” to expectations. Wrong again. When they shoved the 50/30 through, PERA was OVER-FUNDED.

    • Marty Meinberg says:

      I really don’t think it matters what retirees say or do in the future. Whatever the paraboard and the politicians want is going to happen. These fact finding and feedback tours are a farce. Retirees are helpless now and in the future.

  4. Chas R. says:

    The “restructuring” won’t stop until there’s nothing left. The ultimate goal is to reduce the state’s liability to zero. Starting in 20xx, employees won’t have a retirement option. Only a 401k. It will probably have a healthy match, but no more guaranteed income. The State of Colorado wants out from under the liability of a defined benefit plan. If only we were banksters, then this wouldn’t be a problem. The govt would just force taxpayers to fund us.

  5. Cherie says:

    The legislature, governor, and PERA do not care about the impact on current retirees, and as far as spending to help growth in the economy what a joke. How can you hope to help the economy when in reality you may not be able to feed, clothe, or pay housing/medical costs without assistance from the same entities that have decreased your income to the poverty level. It’s for certain they will tweek the figures so we never see the paltry 1.5% pay increase. I hope everyone who supported these changes can sleep at night! I’m sure their lives will be virtually unchanged.

  6. Bill Saladin says:

    Thank you for stating it so well, and especially the 50/30 farse, and how PERA tried to stop it and how the very politicians who are now crying about PERA being underfunded, were the very ones who were crying about how bad it was for PERA to be overfunded in the past and that they needed to spend that money on the 50/30 deal etc. instead of knowing that it would settle out over time. They seem to make financial decisions on emotions and political popularity instead of financial knowledge like the professional financial people at PERA. Now they want to tell PERA how to fix it again.

  7. David Lovell says:

    I’m sick to death of hearing about “shared sacrifice” from PERA about both SB10-001 and SB18-200. The retiree COLA is zeroed out for two years and then dropped to 1.5% in 2020 if the automatic adjustment provision doesn’t kick in and reduce it further. Meanwhile, everyone else gets to phase in their contributions or has a cap as with the Direct Distribution regardless of performance. In the meantime, PERA spent over $1 billion dollars since 2009 on external investment managers and alternative investments that have underperformed. In 2016 PERA earned a paltry 7.4% while the benchmark was over 13%. The one visit I have each year with my financial adviser earned me 13% on my mix of mutual funds and I think my fees were less than $100. Now that they’ve sucked their members dry PERA better get its investment house in order.

    • Rob Gray says:

      As I look at the Popular Annual Financial Report on the PERA website, it shows the benchmark return was 7.3% for 2016, matching the return that PERA earned. The benchmark incorporates PERA’s asset allocation among stocks, bonds, real estate, and other categories and represents index returns for each asset class. Over the most recent 3, 5 and 10 year periods, PERA returns have exceeded the benchmark and the median pension fund. If you were 100% invested in the S&P 500 in 2008, you lost 39%. PERA had a 26% negative return in 2008 because it invested in bonds, etc, not just stocks. Also, under SB 200, the retiree COLA can rise above 1.5% if eliminating the unfunded liability moves along faster than expected.

      • David Lovell says:

        I would question PERA’s benchmark then. In that same year, the DOW earned 13.4%, the S&P 500 earned 9.5%, and the NASDAQ earned 7.5%. PERA’s earnings hit none of those benchmarks. Additionally, is that 7.3% PERA earned calculated as a net earning after they paid somewhere north of $100 million to their investment managers? Are those investment managers truly earning what PERA is paying them? We don’t know because PERA isn’t being fully transparent with that information. I am also invested in bonds, real estate, stocks, etc. in my mutual fund mix. I am anxiously awaiting this years report on 2017 earnings since it was such a banner year for all investments. Here we are in the middle of June and we still haven’t heard. So sad! Hopefully we won’t be disappointed.

  8. Jann Todd says:

    These years of no raises and the piddly amounts we will get in 3 years means we will be making at least $150 a month less than now. We are already behind several hundred because of the raises not coming as they were guaranteed. Everything goes up except our PERA. Somehow we need to get the state to give us our 100% on Social Security. I should get $900 and get $171. The other money could help us get better health insurance. Right now if something happens to me I’m out $3500 before the insurance pays a dime. If I’d know how lousy PERA would become I would have not worked under it.

  9. Mike Harris says:

    If Governor Hickenlooper ever runs for national office he has lost my vote I am extremely disappointed with Senate Bill 200 again Pera retirees take the hit extremely disappointed but all the politicians are patting each other on the back

  10. Ray says:

    Will PERA employees receive no salary increase of any kind for the next two years as a show of solidarity with the retirees? Or will they receive the increases to stay at least even with the cost of living while retirees fall further and further behind.

    • Colorado PERA says:

      Dear Ray,

      PERA employees are PERA members and will be participating in all changes as specified in the law by contributing more, working longer, waiting three years before becoming eligible for an annual increase and having a lower cap on the increase as well.

  11. Louise Salcido says:

    Since this bill has passed, give us back our penalized funds from social security!!

  12. Delores Duarte says:

    This issue has very little to do with the PERA funding structure. In numerous ways and in numerous places the State has reduced the wages of employees by cutting back on services to taxpayers in this state (eg. the atrocious service at motor vehicle and driver licensing offices). The core cause is less work hours for employees and employees that do not get replaced. Fewer wages equals less withholding from those wages to fund PERA.

  13. Gerhard Schultz says:

    There has been no discussion on the maximum Pera Payments. if I am not mistaken the amount is around $170,00 per year. I don’t know how many are drawing this amount, however this should have been capped. There are many retirees who only get a fraction of that and will be hurt by the new policy

  14. Bill Hibbard says:

    I like how PERA so discriminatly dismissed printing my Replies to this topic of SB 200.
    They apparently didn’t want a stand up hard reality check being brought to the Retirees and showing our State in a less than favorable light.
    Apparently we shouldn’t mention political offices or Legislative ineptitude. Maybe it was the mention of misguidance, lies, broken contracts and the previous plundering of the coffers that touched the nerve. We “Retirees” should just sit back and swallow whatever they can shove at us and do nothing, until there is nothing.

  15. Barry K. Thorpe, MA says:

    The article is titled ” What you need to know”…. I think I still have some pre-retirement (2005) literature similarly titled. Those important “things to know” have proven to be meaningless, even though retirement decisions and financial planning were based on them.
    Quoted from the article:

    “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”

    1. Life expectancy has not changed in any significant way fora person of retirement age in 200, when 3.5% was contracted with that group of retirees , and considering all factors has dropped by 1% since 2015.
    https://www.theverge.com/2017/12/21/16805384/life-expectancy-us-opioid-epidemic

    2. Life expectancy AT BIRTH has gone up for quite some time, however that does not affect the retirees who were contracted for a 3.5% ABI. There is no evidence of any uptick in life expectancy in the retiree group that is not offset by the fact that the group gets smaller by attrition every year.

    3. The “more conservative projections” mentioned above are merely SOMEONE’s guess. The picture looked pretty bleak in 2010, but the recovery has reversed and shown us that these kind of projections are really just a political tool . The Economy in Colorado is booming with new sources of tax revenue from sky-high housing markets, to tourism, to recreational marijuana revenues. The stock market has gained approx. 68% since 2001. How did PERA miss that opportunity ?

    Colorado is doing quite well, and managed properly could easily re-instate the benefit offered to that dwindling group of retirees who were contracted at 3.5% ABI. A “fiduciary” responsibility that ignores previous contracts is really fiduciary malpractice.

  16. Mike Scheer says:

    Where have the actuarial folks been over the past several years? Asleep?

  17. Diane says:

    Thrown under the bus. I’ve read all the articles and emails, participated in the town hall phone meetings by PERA and CEA, as well as several in-person information meetings. I just read this post from PERA and the replies. It all leaves me with the same feeling: PERA, the legislature, our governor, and most sadly CEA have all participated in throwing PERA retirees under the bus with barely a backwards glance. In fact, the speaker at a DU informational event cautioned us that we could be losing much more than our COLA. I don’t feel grateful. Our written agreements, are no promise to count on, and I feel more than a little scared about how to plan my future finances in case I’m one of the people who doesn’t cooperate by ” living longer”.

  18. Mike Harris says:

    Just like all the other retirement plans including Social Security they go belly-up because someone spending the money besides the retirees I hope all the politicians in Colorado that voted for this and the board of Pera get replaced

  19. Jason Jones says:

    SB1 in 2000 reduced the AI to 2% with language mandating increases when PERA’s funding status reached 103%. Will there be a restoration of the AI with SB200 or is 1.5% all retirees can ever expect regardless of the funding status?

  20. Mike Harris says:

    Let’s propose as retirees that PERA cut its budget 2% so they can share in the “shared sacrifice”.

  21. Christine Linden says:

    I’m just now reading the latest mailing, Changes Ahead for PERA. One bullet point says “Setting the annual increase to 1.5 percent for current and future retirees. (IN SOME CASES, THE 2020 ANNUAL INCREASE WILL BE THE LESSER OF 1.5 PERCENT OR THE CPI-W.)
    Please specify who the lucky recipients of the LESSER are.

  22. Colorado PERA says:

    Dear Ms. Linden,

    PERA members hired on or after January 1, 2007, have a different annual increase structure than do those who began membership before that date. These are the members affected by “the lesser of” clause you asked about.

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