May 10th at 6:30 pm – 8:00 pm

Longmont Senior Center
910 Longs Peak Avenue
Longmont, CO 80501

RSVP Here

April 10th
2pm
3rd Floor of the Capitol – room 354

HB 12-1179 is  sponsored by Representative Jim Kerr (R-Littleton). The bill would replace four of the elected positions on the PERA Board of Trustees with four Governor-appointed Trustees approved by the Senate. The new appointees would join the Board as the terms of elected  Trustees expire. When fully implemented, seven Trustees would be elected by PERA members/benefit recipients and seven Trustees would be Governor appointees. The State  Treasurer would remain on the Board as a voting member and a non-voting member  or retiree from the Denver Public Schools (DPS) Division would remain on the Board.

The bill also provides that in  both the State and the School Divisions, at least one of the two Trustees elected  from each Division after January 1, 2013, be 15 or more years from  retirement eligibility on the date the Trustee begins serving his or her first  term on the Board.

CCRS opposes this bill as there are numerous studies about how member elected board do a better job managing the resources than appointed boards.

This bill would make elected member representatives a minority of the members on the Board of Trustees.

You can view this bill in this entirety here.

•  Colorado PERA was the first public pension fund in the United States to respond to the economic downturn and has been called a model for other states to follow by the Center for State and Local Government Excellence and The New York Times.

• Board composition was modified in 2006 when three Governor-appointed and Senate approved Trustees were added to the Board. These appointed Trustees are required by law to have relevant pension administration expertise and cannot be a member of the plan.. All benefit and contribution provisions of PERA are determined by the General Assembly. The preamble of HB 12-1179 falsely asserts that the Board has this capacity and is therefore inherently conflicted.

•  The provisions of the bill are discriminatory due to the mandate that two seats be held by members who are more than 15 years away from retirement. No one older than 50 could be elected for his or her first term for a seat with the 15 years from retirement eligibility criteria. This is true since members can retire at age 65 with any amount of service. Also, this may exclude some members older than 35 from being on the Board when first elected since some members can retire at age 50 with 30 years of service.

•  The PERA Board administrative model represents the best practices in governmental pension plan governance.

• Research by Boston University Asst. Professor of Law David H. Webber shows that when there are elected or “beneficiary” members of boards, the investment returns are better.

• Current Trustees have skills, knowledge, and the experience to effectively manage the fund. All Trustees are required to attend educational workshops on investments, actuarial practices, benefits administration, and other topics related to serving as a fiduciary. Additionally, the Board employs a professional staff and many consultants who are experts in all areas of the Board’s responsibility. The 11 Trustees who are members or retirees hold many advanced degrees including 11 master’s degrees. Two hold law degrees, one has a Ph.D. in public policy, two Trustees are C.P.A.s. and one is a Chartered Financial Analyst.

Update 3/23/12 – This bill has been assigned to the Senate Finance committee – visit this page to email the committee.

Update 3/15: HB 1150 Passed the House on 3rd reading. Next it will be assigned to a Senate committee.

Update: This bill was amended on March 9th to only affect new hires.

HB 12-1150 is sponsored by Representative Kevin Priola (R-Henderson) and Senator Kent Lambert (R-Colorado Springs). The bill would change the Highest Average Salary (HAS) calculation from three years to seven years for members who are NOT eligible for a full or reduced service retirement on or after January 1, 2013.

CCRS opposes this bill as it violates the shared sacrifice compromise we came to under Senate Bill 2010-001.

You can read the bill in its entirety here.

•  This bill is not needed. SB 10-01 addressed the long-term sustainability of the PERA funds by changing the benefit and contribution structure such that all of the liabilities of PERA will be funded in a reasonable 30-year time period as currently recommend by the Governmental Accounting Standards Board.
• SB 10-01 addressed “salary spiking” and significantly limits the ability of a few members to turn a small salary into a large benefit. SB 10-01 limited the year-to-year increase in salaries used in the Highest Average Salary calculation to 8 percent. The “salary spiking” provisions currently contained in state law are some of the most restrictive in the country.
• For the typical PERA member, the opportunity to “spike” one’s salary is just not possible. Therefore, the typical member is pre-funding their benefit at the appropriate level during their working career.
• SB 10-01 addressed the non-typical member’s ability to increase their retirement benefit by placing a low year-to-year collar on salary that is included in the benefit calculation.
• The bill raises constitutional contractual issues because the Trusts are currently sustainable. The court has ruled that benefit reductions could be made in SB 10-01 because the Trusts were going to be depleted in less than 30 years. Since PERA is now sustainable, further benefit reductions for existing members would not be constitutional and may invite a costly lawsuit.
• During the SB 10-01 discussions, the issue of raising the number of years in the HAS calculation was considered and subsequently determined to be unnecessary. A retirement plan like PERA deals with liabilities that can be over a century long in nature. The ramifications of tinkering with benefit provisions could take decades before they are realized. Therefore, let’s give the comprehensive and equitable changes to benefits provisions in SB 10-01 some time to work.
• The bill will lower the base benefit for the average future retiree between 6-11 percent.
• The PERA Board, the entity created and entrusted by the Colorado General Assembly to safeguard the membership Trusts, opposes this bill due to contract impairment issues and the comprehensive nature of SB 10-01.
• The bill will reduce future benefit payments making the lives of retirees more difficult and lowering the future economic impact of benefit payments made to retirees in Colorado, as well as decreasing tax revenue for the State and local governments.
• SB 10-01 increased the retirement ages for 140,000 non-vested current PERA members to the Rule of 85 (minimum age of 55) and new State hires will eventually be under the Rule of 90 (minimum age of 60). Therefore, a member will have to have at least 30 full years of service and be at least 60 years old to retire.
• SB 10-01 has significantly reduced the costs of the benefit structure for members hired since January 1, 2011. New hires have no guaranteed Cost of Living Adjustment (COLA) provisions. There is now a separate COLA fund to pay COLAs for new hires and these COLAs will be paid only when there is funding available. Reducing the base benefit (as this bill does) would also reduce the value of this new COLA even further.
• The bill could have the opposite impact of its intent by providing members the incentive to purchase service and retire sooner than they had planned.
• The bill does not reduce the contribution rates for employers and members and, therefore, provides no immediate fiscal relief to employers.
• The minimal positive impacts identified in this bill on PERA’s funded status would not be realized for a very long period of time.

This bill was amended on March 1st to only affect new hires. The bill will now be heard in the House Appropriations Committee. You can see the unofficial amended version here. The bill now will cost the State of Colorado $580 million.

HB 12-1142 is sponsored by Representative Brian DelGrosso (R-Loveland). The bill would expand to all members the option to participate in the PERA defined contribution (DC) plan in lieu of the PERA defined benefit plan. The option is currently available to certain State Division employees.

CCRS opposes this bill as it undermines the principles of providing a secure retirement for all employees.

You can read the bill in its entirety here.

Learn how the bill will cost the State of Colorado $580 million in the non-partisan fiscal note here.

• The bill is not needed. SB 10-01 addressed the long-term sustainability of the PERA Trusts by changing the benefit and contribution structure such that all of the liabilities of PERA will be funded in a reasonable 30-year time period as currently recommend by the Governmental Accounting Standards Board.
• The expansion of the Defined Contribution (DC) option would jeopardize the sustainability of the PERA Trust funds. Because existing and new members could opt out of the PERA Defined Benefit (DB) Plan and select the DC option, the existing liabilities of the PERA DB Plan would have to be paid by a smaller number of participants, which in turn would result in the escalation of the employer contribution rate.
• It is unwise public policy to allow public employees to invest their entire retirement savings in a DC plan especially when Colorado’s public employees and their employers do not participate in Social Security.
• A DC plan only retirement, without the Social Security safety net, could potentially increase future public assistance costs as employees retire with inadequate account balances or become unable to work.
• DC plans were designed to supplement typical pension plans in addition to Social Security. DC plans were not intended to be the only investment vehicle available to save for retirement.
• The Employee Benefits Research Institute (EBRI) has found that the median value of 401(k) plans for American workers aged 55-64 is $56,212, with 27 percent saying they have less than $1,000 in savings. More than half of Americans surveyed by EBRI report the total value of household savings and investments is less than $25,000 (excluding their home).
• Using the baseline assumption of 15 percent DC participation, the unfunded liability in the School Division of PERA will almost double from $5.8 billion to $9.2 billion and the Health Care Trust Fund will become insolvent in 2027.
• There is no demand from members for this bill. PERA is not aware of members requesting the expansion of the DC option.
• All PERA members and retirees are encouraged to participate in the voluntary PERA 401(k) and 457 plans offered to supplement their PERA DB retirement. PERA runs one of the largest public sector 401(k) plans in the country and offers state-of-the-art investment options for a very low cost.
• The retirement system exists to fund a reasonable retirement benefit for Colorado’s public employees. Research has shown that a DB plan is an efficient provider of a retirement dollar because assets are pooled and invested by professionals at a low cost.
• During the SB 10-01 debate in the General Assembly, several attempts were made to expand the DC option and these efforts were resoundingly defeated along bi-partisan lines.
• A DC plan costs more. Not only are investment and administration fees more (on average above 1.4 percent of assets compared to PERA’s 0.4 percent), but the there is also the cost of educating participants so that they wisely invest their assets in a DC plan.
• The DC option expansion will hurt Colorado. Currently, about 90 percent of PERA benefits are paid to Colorado residents. These benefit payments result in $230 million tax revenue to the State and local governments and generate income for local businesses when retirees spend in their local communities.
• PERA’s professional investment managers have produced annual average investment returns over past 25 years of 9.0 percent. Statistics have shown over this same period that individually managed 401(k) accounts average far less because of higher fees and poor investment decisions made by individuals. The bill does not reduce the contribution rates for employers and members and, therefore, provides no immediate fiscal relief and only increases long-term fiscal burdens.
• The Defined Benefit plan maximizes returns for Colorado taxpayers, governmental entities, and members by spreading longevity risk (the risk that you will outlive your retirement savings) over nearly a half million members and the pooling of $40 billion in retirement savings of public employees over many decades reducing investment risk (the need to move into guaranteed income products when you near retirement).
• DC plans unnecessarily place both longevity and investment risk on the individual.
• The basis of the capitalist system is the power of the specialization of labor. Individuals have different skills that they are inherently better at than other people. The pension system is a shining example of this by specialization of labor through superior investment management so a typical individual doesn’t have to be an investment expert. After plowing roads during a blizzard or teaching 6th graders, do these individuals really have the time, the discipline and the drive to invest funds for their retirement over many decades on a daily basis?

Many of Colorado’s public employees are not prepared to invest for their retirements.

• DC option participants will not have access to group rates for retiree health care which could expose them and their families to one of the fastest growing costs in the economy.
• Employers wishing to provide survivor and disability coverage to their employees will have to pay an additional cost to independently contract for these features that are included in the cost of the PERA DB Plan.
• All Americans should have access to a professionally managed DB plan – that these plans have disappeared from the private sector will only threaten the retirement security of millions, and will also strain public programs to keep elderly Americans out of poverty.
• Research from the National Institute on Retirement Security (NIRS) shows that poverty rates among older households lacking pension income are about six times greater than those with such income.
• Seventy-five percent of Americans believe the disappearance of pensions has made it harder to achieve the “American dream” (NIRS).
• Over 80 percent say government should make it easier for employers to offer pensions and believe that policy makers should ensure that more Americans can have a secure retirement (NIRS).

We need as many people to come to the Capitol as can. If you want to testify on House Bill 1142 let us know and we can help you with talking points. If you don’t want to testify we need you to come and put a face on who PERA is.

The Coalition is opposed to all three bills.

The bills that will be heard that day are:

House Bill 1142 which would allow all PERA members to opt into a defined contribution plan instead of a defined benefit plan. Read more here.

TWO BILLS FOR ACTION ONLY – Testimony was heard on February 23rd.

House Bill 1150 which would change the highest average salary calculation from three years to seven for those not eligible to retire by January 1, 2013. Read more here.

House Bill 1179 which would change the composition of the PERA board to include more executive appointees. Read more here.

The coalition opposes this bill.

Read the bill in its entirety here.

In 1985, the Colorado General Assembly determined that retiree health care coverage should be overseen by PERA and the PERA Health Care Trust Fund (HCTF) was created. The HCTF is a pre-funded system that is used to offset the costs of retiree health care for participants in PERACare. Prior to the creation of the HCTF, retiree health care was provided on a pay-as-you-go basis by appropriation in the State budget. The HCTF receives 1.02 percent of the employer statutory contribution. The contributions to the fund are invested over the working careers of public employees and are used to offset the costs of retiree health care for retirees who participate in the PERACare program. The current monthly amounts are up to $230 for those under the age of 65, and up to $115 for those who are age 65 and over.

The PERA Health Care Program is a retiree health care program that was thoughtfully created. Unlike other retiree health care plans in the public and private sectors, the HCTF pays a flat dollar subsidy based on years of service and age of the retiree. This amount does not fluctuate with health care premium costs. The subsidy amount has not been changed for over 12 years and since then, health care costs have doubled. That means that as health care costs have increased, retirees have had to pay more for health insurance which erodes the value of their overall PERA retirement benefit.

This bill will deny health care coverage to 42,000 retired public employees and their dependents who currently participate in the PERACare Health Care Program.

• Those prevented from participation in PERACare will have to try to find health care insurance on their own at substantially increased costs since PERA has the ability to secure attractive group rates for a large retiree population.
• This bill affects nearly 3,200 retirees age 65 and older who did not qualify for Medicare Part A during their working careers. Additionally, those retirees would be forced to pay a penalty for not enrolling in Medicare Part A when they first became eligible.
• The current monthly premium for Medicare Part A is $451. The penalty for not enrolling in Medicare Part A upon becoming eligible increases this monthly premium by 10 percent. The higher premium has to be paid for twice the number of years that the person could have had Part A, but did not enroll.
• This bill cuts benefits that have been promised for over 30 years and on which people rely. This bill impacts the most vulnerable of the PERA retiree population. For example:
• One retiree over the age of 100 would receive a 20 percent cut to their total benefit. The average retiree who is over 100 would see 6.5 percent reduction to their total benefit.
• The average 90-100 year old without Medicare Part A coverage would see an average total benefit cut of 16.8 percent. The average 90-100 year old with Medicare coverage would see a 5.2 percent total benefit cut.
• The genesis behind the 1985 creation of the PERACare Retiree Health Care Program was to take a pay-as-you-go retiree health care program off the State’s budget. The program was funded by a cut in the contribution to the PERA retirement plan and the State saved money. The State never pre-funded the plan and just transferred the unfunded liabilities to PERA.
• This bill will increase the Medicaid costs for the State by throwing people off the PERACare insurance rolls and by cutting many retirees’ total benefit below the monthly income threshold for eligibility for the Medicaid program.
• This bill will cut the pre-funded health care insurance subsidy for over 37,000 former public employees over the age of 65. For retirees with Medicare coverage, their total benefit will be cut by an average of 3.5 percent. For retirees without Medicare coverage, their total benefit will be cut by an average of 12 percent.
• The loss of subsidy for no Medicare Part A retirees costs an average of $482 per month.
• The loss of subsidy for Medicare eligible retirees costs an average of $107 per month.
• Many retirees would face increasing premiums since individual coverage premium costs are higher for those who are older and buying coverage outside of a group plan.
• For retirees who are still able to qualify for PERACare coverage, it is likely the premiums would increase because fewer retirees would be allowed to participate in the PERACare program.

The Coalition is opposed to all four bill.

The bills that will be heard that day are:

House Bill 1142 which would turn PERA into a defined contribution plan instead of a defined benefit plan. Read more here. 

House Bill 1150 which would change the highest average salary calculation from three years to seven for those not eligible to retire by January 1, 2013. Read more here.

House Bill 1179 which would change the composition of the PERA board to include more executive appointees. Read more here. 

House Bill 1250 which would effectively get rid of the health care trust fund and PERA Care. Read more here.

Send the House Finance Committee an email here to oppose these bills.

You can learn more about Senate Bill 84 here.

You can learn more about Senate Bill 136 here.

SB -1 was passed by the Colorado Legislature signed into law by then Governor Bill Ritter in late February 2010. One of the provisions of the law eliminated the annual benefit increase for 2010 and effectively limited future annual increases to 2%.

Within days of the Governor’s signing, a group of retirees filed a lawsuit in the Denver District Court challenging this law and naming Colorado PERA and the State of Colorado as defendants. The lawsuit charged that SB-1 is unconstitutional because it impairs a retiree’s contractual right to receive a pension benefit at a promised level.

Many months of legal maneuvering by both sides ensued and in early 2011, both sides filed a request for summary judgment with the court. A summary judgment order by the court would mean the court feels that no factual issues remain to be tried and the complaint can be decided upon the facts presented by the two parties making a trial unnecessary.

On June 20, 2011 the Denver District Court Judge denied the plaintiff’s motion for summary judgment ruling that a retiree has a contractual right to the base PERA benefit but that there is no contract right to a specific COLA formula.

In a ruling nine days later, Judge Robert S. Hyatt granted the summary judgment motion sought by Colorado PERA and the State of Colorado. In his ruling, Judge Hyatt cited statutory provisions over the last 40 years, legislative history and retirement plan language.

On July 25, 2011, the plaintiffs appealed Judge Hyatt’s ruling to the Colorado Court of Appeals. The plaintiffs based their appeal on their original assertion that the COLA is part of a retiree’s contractual right and cannot be reduced. The case remains with the Colorado Court of Appeals as of this date. It is expected that this case will ultimately be decided by the Colorado Supreme Court or, possibly, the United States Supreme Court.

Stapleton Member Records Lawsuit

Update April 4, 2012 – A Denver Federal Judge ruled against Stapleton. For more info click here.

Another currently active lawsuit affecting PERA is one involving a June 2011 request by the State Treasurer, Walker Stapleton, for individual records of the top 20% of PERA recipients based on annual pension benefits. In making this request, Mr. Stapleton postured that he needed this information to carry out his role as a fudiciary and that, as a member of the PERA Board of Trustees, he is entitled to complete access to all PERA records.

Acting on the advice of outside counsel, the PERA Board of Trustees voted to deny Stapleton’s request stating that Colorado law requires PERA to maintain the confidentiality of “all information” in PERA’s member records. Stapleton’s response was to file a lawsuit in the Denver District Court to obtain these records. Subsequently,

PERA filed its own claim in the Stapleton lawsuit asking the Court to provide guidance on the circumstances under which PERA can lawfully disclose confidential member information to its Trustees.

Additionally, with this claim, PERA is asking the Court to determine that the Board of Trustees acted properly in concluding that the Treasurer is not entitled to information he requested regarding the top 20 percent of PERA benefit recipients.  Despite numerous opportunities to state a valid reason for requesting this information, The Treasurer has never done so. In addition, Stapleton could not describe any reasonable connection between the information he was requesting and any valid fiduciary purpose.

Every member and retiree record is analyzed each year by the PERA actuarial consultants. This analysis is reported to the PERA Board of Trustees and to the General Assembly’s Legislative Audit Committee. This information is publicly available on the State Auditor’s Web site and in the PERA Comprehensive Annual Financial Report.