SB 200 – Modifications to PERA

Update: Senate Finance amended the bill to remove employer contributions and to modify the membership of the Legislative Oversight Committee. The moved the bill to Senate Appropriations on a 4-1 vote.

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Senate Bill 200 is sponsored by Senators Tate (Centennial – R), Priola (Adams County – R) & Jahn (Jefferson County – U) along with Representatives KC Becker (Boulder – D) and Pabon (Denver-D).

You can read the bill in its entirety here.

Secure PERA has voted to oppose this legislation as introduced and we are working to get it amended.

The PERA Board met on March 7th and did not take a position on the bill. They asked the PERA staff to continue working with the Legislators on the bill.

Senate Bill 200 does the following:

Contribution Increases:

  • Increases member contributions by 3%, phased in
  • Increases employer contributions by 2%, phased in

COLA Reductions:

  • Suspends the COLA (Cost of Living Adjustment) for 2018 & 2019
  • Lowers the COLA to 1.25%

Benefit Reductions:

  • Increases the Highest Average Salary (HAS) from 3 years to 7 years
  • Increases retirement age for existing employees younger than 46 as of 1/1/2020, increases 1 year for each 4 years employee is under 46 years of age
  • Increases retirement age of new employees to 65 and 5 years of service or 40 years of service
  • Changes the definition of PERA includable salary from net pay to gross pay
  • Changes the definition of full time FTEs (full time equivalent)

Expands the Defined Contribution (DC) plan to all divisions.

Click here to view a chart comparing the PERA Board Proposal and Senate Bill 200

Below are some of the major problems Secure PERA sees with Senate Bill 200:

DC Option Expansion and DC Supplemental:

  • Currently, some State Division employees have the option to choose a DC or defined contribution option. This plan works like a 401k. We oppose expanding this option to the other divisions for the following reasons:
    • A DC plan does not provide retirement security, look at what 2008 did to 401k plans across the country.
    • The DC plan option created in SB 200 will cost employers an ADDITIONAL 6%-9% in contributions, school districts and the state have better ways to spend those dollars.
    • Creating a bad option, isn’t giving an employee a choice and we can’t afford to invest in options that don’t provide retirement security.

Legislative Oversight Committee:

  • We do not support having un-elected members vote on a legislative committee. No other legislative committee functions this way.
  • The duties given to this committee are extensive and yet too prescriptive.
  • The cost for an independent actuarial audit of PERA every three years is expensive and we don’t know how it would be funded.

Contribution Increases:

  • 3% member increases are too high and equal more than the normal cost, meaning the employee is paying more than the cost of their retirement.

COLA Decreases:

  • Reducing the COLA lower than the PERA Board recommendation of 1.5% to 1.25% is too low and increases the risk of our retired public employees not being secure in their retirement.
  • In 10 years a 1.25% COLA does the following:
    • Results in a loss of on average $22,688 in PERA benefits
    • Decreases the PERA benefit by 8.7%
    • Retirees will lose 11.9% of their purchasing power
  • In the last 30 years, inflation has averaged 2.59% – a 1.25% COLA will not help our retirees keep up with inflation, especially with rising medical costs.

Benefit Reductions:

An employee that starts work today has a benefit worth 1/3 less than someone who is about to retire. We don’t need to continue to diminish the PERA benefits and make retirees less secure.

  • Increasing the retirement age for active employees violates their employment contract, is illegal and puts PERA in jeopardy with the IRS.
  • Increasing the retirement age on new employees to 65 years creates security and safety concerns as well as recruitment concerns. We are having a tough enough time getting people to become public employees and addressing the teacher shortage without having to tell them they now must work until an additional 7 years until they are 65.
  • Increasing the highest average salary to 7 years reduces a new employees’ benefit by 6% – 11%