Two bills making their way through the Colorado Legislature would expand the number of PERA retirees who can return to work in school districts without facing a reduction in their benefits.
While the bills are intended to address an important staffing shortage in school districts across the state, there are potential financial implications to the trust funds that provide benefits for PERA members.
Why limit how much retirees can work?
Public pension plans like Colorado PERA place limits on working after retirement in order to balance two competing priorities: The staffing needs of employers and the financial health of the retirement plan.
Generally speaking, allowing retirees to return to work, either for the same employer or a different employer covered by the same retirement plan, can encourage workers to retire earlier than they otherwise would have, since they can collect a salary in addition to receiving a monthly retirement benefit. Because plans project their finances based on factors such as workers’ expected retirement age, early retirements add to the plan’s cost due to a longer-than-expected period of benefit payments. Even if those retirees continue to contribute to their plan, like PERA retirees do, the contributions aren’t always enough to make up for the member’s extended retirement.
In most cases, PERA retirees can work for a PERA-affiliated employer for up to 110 days or 720 hours per calendar year without affecting their benefit. School districts and colleges/universities can designate a limited number of workers who are allowed to work up to 140 days or 916 hours per year, and some school districts can hire retirees to fill certain positions for which there is a critical need for qualified workers, and those “critical shortage” hires are not subject to working after retirement limits.
PERA regularly reports on the impact of working after retirement exemptions for rural school districts and boards of cooperative services (BOCES) to the Legislature.
Estimating the financial impact
Calculating how much it would cost to expand working after retirement provisions is difficult because it ultimately depends on how many workers take advantage of the proposed new rules.
As it’s currently written, SB24-099 would add superintendents and principals to the list of qualified positions under “critical shortage” provisions. HB24-1044 would allow larger school districts to hire more retirees under the 140-day/916-hour rules. To estimate the bills’ cost, PERA’s actuaries modeled several scenarios in which different percentages of eligible workers retire early and return to work. The models showed that if eligible employees retired two years early, it could result in millions of dollars in added costs and potentially extend the amount of time it would take PERA to reach full funding.
The PERA Board of Trustees is committed to protecting the integrity of PERA’s trust funds for the benefit of all members. It has taken an “amend” position on the above bills, encouraging lawmakers to include provisions that would offset the potentially negative effects on PERA’s funding.
PERA On The Issues will continue to track these and other PERA-related bills throughout the session and post any updates here.
Trust fundA fund in which money and/or other assets are held and managed by trustees on behalf of plan participants. PERA maintains trust funds for each of its Defined Benefit Plan divisions (State, Local Government, School, Denver Public Schools, and Judicial).
Why wouldn’t PERA support a version of this for ‘full retirees’ – this would not encourage early retirement and provide an additional 30% of salary (20%from employer & 10% from employee, in round figures) as revenue for PERA with NO change in future benefits for those individuals working as critical shortage. Those types of restrictions are already in place for other ‘critical shortage’ job titles for rural districts. Early retirees would still only be eligible for the 110/140 day work limitations.
We are losing many high-quality individuals who would continue to work but the minimal difference in their 30-year retirement versus salary is not worth it. Allowing this for full retirees might keep many of these individuals in the workforce for several more years, contributing additional revenue, with no change in their benefits.
Interesting to see if you get a reply from PERA or a legislator (besides the typical condescending, “it’s a very complex issue which we’ve looked into, but you wouldn’t understand, etc.”).
Maybe (rural and suburban) school districts, with the greatest hiring difficulties, need returning retirees (retirees subsidize school districts by saving them from paying higher wages); likewise teacher unions have a very large and powerful lobby; so, they leech off PERA instead of support passing the costs onto local municipalities and counties (via property taxes) where the costs should rightfully be borne by the parents of students?
Is it a tad too honest to suggest this bank rolls white-flight from urban schools? Regardless, looking forward to seeing how your original comment is addressed (otherwise we might infer PERA’s post-retirement work policies are also ageist).
Why wouldn’t PERA support a version of this for ‘full retirees’ – this would not encourage early retirement and provide an additional 30% of salary (20%from employer & 10% from employee, in round figures) as revenue for PERA with NO change in future benefits for those individuals working as critical shortage. Those types of restrictions are already in place for other ‘critical shortage’ job titles for rural districts. Early retirees would still only be eligible for the 110/140 day work limitations.
We are losing many high-quality individuals who would continue to work but the minimal difference in their 30-year retirement versus salary is not worth it. Allowing this for full retirees might keep many of these individuals in the workforce for several more years, contributing additional revenue, with no change in their benefits.
Has anyone else, who is reduced by GPO,received a large bill (over a 3 year span) from social security? If so, it is not correct. They said they paid me too much, but actually SSA made a lot of mistakes. I sent 15 pages of documentation & 3 spreadsheets proving their mistakes. They quickly waived the entire bill. How much more can they do to us? If you get such a bill, contest it!
P.E.R.A. participants. There are 1078 divorced retires that are paying life time ex-spouse settlements under option 3 of retirement plan after ex spouse has remarried. Other plans like military and railroad pension plans when the ex spouse remarries the pension stops and goes back to the participant of the plan. Thus allowing participant to collect full benefit for what “they” paid into and freeing them of a life time penalty to a full time working ex spouse and full time working new spouse with retirement benefits. In 2023 HB23-1144 was denied asking for removal of unethical and outdated option 3. In most cases retired participants of the plan have had to go back to work fulltime to makeup for the loss and be able to sustain themselves at a low income life style because of the loss of a majority their the retirement pension. I encourage P.E.R.A. retires in this situation to contact their local and state representatives and balance the injustice of this rule. Don’t be told that it is what it is and you just need to accept it. Laws get changed and the legislature has the power to do it. Hoping this situation will resurface in 2024 with a new bill and fresh understanding of our “representatives for the people”.
What I am confused about is that the legislature expanded the critical shortage bill by stating that it was now indefinite instead of a six year limit. However, the retired individual working under the critical shortage HB can still only work for six consecutive years. After which the individual must then be designated as a 140 or not work at all in the field as critical shortage. After this year, the person can then be redesignated as critical shortage and work another six years. How does this aspect make any sense? This also creates a burden on school districts with having to hire a substitute for the days that the person designated as 140 cannot work. To me, the required year as a 140 designation should be eliminated as well.
Board of Trustees Should Oppose These Bills !
Public sector employers (mostly school districts) balk at paying salaries to attract qualified workers (who can afford to live and work in Colorado); but teacher and the state employees’ unions went along with cutting PERA retirement benefits(?!); and thus under-paid workers become impoverished retirees and forced back to work, which further harms PERA’s funding. The elimination of PERA’s COLA and lowered benefit calculations in conjunction with higher payroll deductions, adversely impacts RECRUITMENT & RETENTION* in the public sector, so lawmakers push these ad hoc laws to try to repair the disaster they set in motion with benefit cuts following the raid on PERA (using the money for other things, in order to circumvent TABOR).
The state’s assault (by politicians in both major parties) on a merit based civil service (in order to hand out jobs to friends and cronies) pales in comparison to the non-partisan and wide-spread theft of state pension funds, which results in state sanctioned robbery and elder abuse.
Since the root of the problem, giving rise to the laws mentioned in this article, are rooted in cutting PERA benefits, then I hope citizens generally, and PERA members in particular, wake up and attend their local caucuses to send the politicians of both parties a message to stop raiding PERA and stealing from retirees!
– G M SANTO (handsoffmypera@hotmail.com)
Footnote * – “Recruitment & Retention” refers to: Public servants used to accept a lower salary for some job and retirement security, but neither exist anymore, and the state even broke the promise to pay workers who had already retired a COLA…So, now the state keeps trying to figure out how to stick PERA with the bill for the problems caused by raiding PERA and breaking pension promises in the first place.
P.S. – Sorry if this “reply” appears more than once, but hopefully third time is a charm to get my comment posted (seems like this website is having problems?)
There should be an elimination of the purchase of service time.
This encourages employees to retire earlier, therfore collecting their pension longer and results in the same bottom line that is an argument for changing “working after retirement. “
**against**
Service Credit Purchases & Social Security WEP & GPO
I agree, there “shouldn’t” be a provision for purchasing service credit, but the state should match other (higher income) states in also contributing to Social Security; and the Congress should pass H.R. 82 to repeal the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO), which reduce Social Security for many PERA members.
An ability to re-purchase service credit (with interest), based on a prior cash-out, should exist when one is rehired; but the 5 year purchase limit for “non-covered” employment seems insignificant; and the real damage has already been done by the service-credit-purchase fire sale under Owens (up to ten years, offered to rid him of civil servants hired under prior administrations and show a temporary reduction in labor costs for state budgets).
Legislation passed last year (with no objection by PERA) to allow many Wildlife Officers to be classified as State Troopers for (early) retirement purposes WITHOUT AN ADDITIONAL APPROPRIATION FROM THEIR EMPLOYERS TO PERA TO OFFSET INCREASED PENSION COSTS. Although Wildlife Officers may well deserve the designation for retirement purposes, lawmakers needs to recognize that they can’t keep raiding PERA to make political points with various constituencies, without adversely impacting all PERA retirees!
I hope PERA members attend next month’s political caucuses and send a clear message to the politicians to stop raiding PERA and honor their promise to pay a COLA (up to 3.5%) to retirees that vested prior to 2010.
Hi Guy,
To address your point about Senate Bill 23-163 reclassifying Colorado Parks and Wildlife officers as State Troopers for the purpose of PERA benefits, the affected employees and their employer both pay higher contributions under the State Trooper classification. The bill’s fiscal note has more information on its financial impact: https://leg.colorado.gov/sites/default/files/documents/2023A/bills/fn/2023a_sb163_f1.pdf
Dear Whatever Your Name May Be,
Thanks for trying to validate PERA’s (non)position on the bill last year; but employer or worker contributions (only going forward?) would seem to have less impact than prior contributions, (earlier) retirement dates, and life spans of those involved; but if PERA maintains they know when every re-classified Wildlife Officer will retire, die, and has (or will obtain) purchased service credit, then who am I to argue. Perhaps PERA can forecast liabilities; but I suspect it’s more of a case of going along with legislators in these obscure deals to curry favor to prevent something adverse to the membership being proposed (like eliminating a COLA), or drastic (like restricting investments or scrutinizing the secrecy surrounding private equity). I can only hope “fiduciary duty” demonstrated by the Board is not indicative of the ability of PERA’s staff to count beans. Please accept my apology for doubting either the competence of PERA Board & Staff or the veracity of a legislative fiscal note.