Colorado Coalition for Retirement Security Supports Senate Bill 1 As Amended

Update: On January 26th the Senate Finance committee amended Senate Bill 1 as discussed below regarding the COLA and age and service changes. These amendments allowed Secure PERA to support SB1. 

In 2008, Wall Street recklessly gambled with the future of retirees and working families across our nation. As a result, PERA, like most defined benefit plans lost money and is facing critical questions about its long-term solvency. Colorado also faces a more immediate dilemma: how do we make sure that PERA is secure for generations to come without placing unreasonable hardship or risk on either taxpayers or PERA members. The Colorado Coalition for Retirement Security, representing more than 200,000 taxpaying PERA members, including both active employees and retirees, believes we should re-invest in PERA and stabilize it through shared responsibility that is equitable to all participants.

More than 400 governmental and public agencies here in Colorado rely on PERA to provide retirement benefits to their workers. These workers do not receive social security benefits and in many cases rely solely on PERA for their retirement, a retirement that averaged only $2,772 per month in 2008. So while the Coalition believes everyone should share in the burden, reducing benefits more than is necessary is unacceptable.

The legislature will consider Senate Bill 1 on Tuesday, a PERA fix introduced by Senators Brandon Shaffer and Josh Penry. Our Coalition opposes Senate Bill 1 in its current form. The bill, a slightly improved version of PERA’s 2/2/2 PLUS proposal developed last September, goes too far in placing an unnecessary burden on retirees, employers, and employees.

You can view the bill here. You can also find a synopsis done by PERA on SB1 here.

We believe this bill goes too far in fixing the problem. The Coalition will require several changes to the bill before we can support it. While the various sides are not that far apart, the changes we require for our support of this bill help to protect the workers, retirees and employers all while making PERA more stable.

Senate Bill 1 is being heard in the Senate Finance committee this Tuesday, January 26^th at 1:30 pm at the Capitol. The Coalition will be testifying with regards to what changes it needs to see to be supportive of the bill.

We also ask you to send an email to the Senate Leadership and Finance Committee about the need to fix SB1 by clicking here. We suggest you use the following language in your email:

“I do not support Senate Bill 1 in its current form. I do believe we must re-invest in PERA and stabilize it, but not at the expense of retirement security. Senate Bill 1 requires too much sacrifice by retirees and too many benefits changes that are not necessary for current and future employees.

Please work with the Colorado Coalition for Retirement Security to make this bill more equitable while still securing PERA for generations to come.”

The 2/2/2 PLUS plan was designed to share the responsibility for fixing PERA among the employees, employer and the retirees. The truth is, according to PERA, 90% of the fix is paid for by the employees and the retirees. Meredith Williams, Executive Director of PERA, capsulated it perfectly: “You are going to have to work longer, pay more, and receive less under the 2/2/2 PLUS plan.” 

More than 400 governmental and public agencies here in Colorado rely on PERA to provide retirement benefits to their workers. These workers do not receive social security benefits for their public service and in many cases rely solely on PERA during their retirement, the average 2008 PERA monthly benefit was $2,772. We are willing to do our share to secure PERA; we just want to make sure every change that reduces benefits is absolutely necessary.

Our Coalition is united in needing several changes to Senate Bill 1 before we can support it. First, Senate Bill 1 would require a two year suspension of cost of living increases for retirees and then reduce the increases in the future from  a current 3.5% to a 2% max. The Coalition believes this burden is more cumbersome than is necessary. The Coalition also believes that those with the smallest pensions should have the additional benefit of inflation protection. Inflation will hit those with the smallest pensions the hardest. When you make the decision to retire you make it based on knowing how much you will receive from your retirement plan each month and then decide if you need to work longer or not. In many cases they cannot return to the workforce.

Our requested changes regarding retirees are as follows:

1)      Reduce the number of zero COLA years from two years to one year

2)      Fully index the first $1,200 of the COLA without a cap to provide for inflation protection. The additional amount of the COLA would be subject to the 2% cap scenario laid out in SB1.

3)      We suggest when working post-retirement the additional 30 days that SB1 allows for the school division and DPS division that the PERA contribution should be worked out at the local level and not codified in State law.

Like many others throughout the country, current employees have seen pay raises suspended, endured furlough days, dealt with rising health care costs, and are now looking at 2.5% pay cuts in the coming year. These things all affect their take home pay in a negative way which is the reason the Coalition believes the solution to the PERA funding shortage should not go further than is necessary to fix the problem.

Senate Bill 1 escalates the minimum age for future public employees.  While politically attractive, such a shift will do almost nothing for the fiscal stability of PERA over the next 30 years. What it will do is excessively shift costs to public employers by requiring them to keep their most senior and most expensive employees on the job longer. This will put an additional financial strain on schools and government employers who are already trying to reduce their personnel costs by offering early retirement incentives to senior employees. 

We have already seen one major improvement in SB1 over the PERA proposal that the Coalition was fighting for. The PERA proposal required five years in the HAS calculation and Senate Bill 1 only requires three. This was a victory for us but we still need some additional changes in order for us to support SB1.

Our requested changes regarding current and future employees are as follows:

1)      For the school division and the DPS division:

a.       Decrease the AED (employer contribution) by .5%

b.      Increase the SAED (employee contribution) by .5%

c.       Because the employee is paying more into PERA, exempt them from the rule of 90 (minimum retirement age of 60) that would go into effect 1/1/2017 and instead allow them to stay at the rule of 88 (minimum retirement age of 58). These “rule of” changes would only affect new hires. If you are an active employee today your retirement age would not change.

We are asking the State Legislature to continue working with the Coalition on an amenable solution that secures PERA into the future but not at too high a cost to taxpayers, employers, retirees, and employees.