HB14 1201 – Changing the Highest Average Salary Calculation

Update: This bill was killed in committee

HB14 1201 is sponsored by Representative Kevin Priola (R-Henderson). He sponsored a nearly identical concept last year in HB13 1040. This bill would change the Highest Average Salary (HAS) calculation from three years to five years. Secure PERA opposes HB14 1201.

SB14 68 – Increase Retirement Age

Update: This bill was postponed indefinitely on February 5th by the Senate State Affairs Committee.

Senate Bill 68 is sponsored by Senator Kent Lambert (R-Colorado Springs) and Representative Kevin Priola (R- Henderson) Secure PERA opposes Senate Bill 68 and on January 17th the PERA board voted to oppose the bill as well. The bill changes the minimum age and service requirements for most members hired on or after December 31, 2016. Under current law, PERA members are eligible to retire with a full benefit if they have reached age 60 and the sum of their age and years of service is at least 90. Under the bill, in order to qualify for a full retirement benefit, all PERA members would need to be at least 65 years of age and have the sum of their age and years of service be at least 95. The bill does not affect service retirement requirements for state troopers.

New GASB Accounting Standards

The Governmental Accounting Standards Board (GASB) issued two new statements that will change the way a public retirement system like Colorado PERA discloses its pension information. All financial disclosures made by PERA are contained in the audited Comprehensive Annual Financial Report (CAFR) that is published every June.

Statement No. 67, Financial Reporting for Pension Plans, affects the financial statements in Colorado PERA’s CAFR. This new statement replaces the requirements of the existing Statement No.25, Financial Reporting for Defined Benefit Pension Plans and Note Disclosures for Defined Contribution Plans, and is effective for fiscal years beginning after June 15, 2013. PERA will include these new requirements in the year-end 2014 CAFR.

Statement No. 68, Accounting and Financial Reporting for Pensions, affects the financial statements of Colorado PERA-affiliated employers. PERA is a cost-sharing multiple-employer defined benefit pension plan and serves as the retirement plan for more than 500 public employers in Colorado. Statement No. 68 replaces the requirements of Statement No. 27, Accounting for Pensions by State and Local Governmental Employers. This reporting requirement applies to Colorado PERA-affiliated employers and is effective for fiscal years beginning after June 15, 2014.

PERA has put together a website that explains the new GASB accounting standards in greater detail. Visit it by clicking here

Right-wing pension-cutters get humiliated by their own survey data

Right-wing pension-cutters get humiliated by their own survey data

TUESDAY, NOV 19, 2013 09:06 AM MST

Conservative ploy to slash public employee benefits runs into trouble when its own poll shows an unexpected reality

Late last month, the Pew Center on the States began ratcheting up its now-infamous campaign to slash public employee retirement benefits. As damaging stories about its partnership with former Enron trader John Arnold swirled through the media, the organization convened a two-day conference for politicians, lobbyists and activists at the swanky Mandarin Oriental Hotel in Washington, D.C.With pension-slashing politicians like San Jose Mayor Chuck Reed (D) rallying the troops, the event’s goal seemed obvious: to reinvigorate the Plot Against Pensions and gear up for yet another push for big retirement benefit cuts in the upcoming state legislative sessions. Yet, there was one big embarrassing problem: When the organization released its new poll at the conference in support of its pension-cutting agenda, the survey data showed that the American public is powerfully rejecting the right’s anti-public-worker crusade.Salon has obtained a copy of the results of the Pew-commissioned poll, which was jointly conducted by the Democratic-aligned Mellman Group and the GOP-aligned Public Opinion Strategies. You can review the full results of the survey here. The key findings include:
  • Though the anti-pension coalition has spent millions of dollars on ads and public campaigns to portray public employees as greedy parasites, the pollsters found that “voters have generally favorable views of public employees” and that those favorable views are found among voters of both political parties. Poll respondents gave teachers, police officers and state public employees net favorability ratings of 88, 86 and 60 percent, respectively.
  • Anti-pension activists have cited places like Detroit and California as proof that retirement benefits are too generous and unsustainable, even though average public employees in those locales make an annual $19,000 and $26,000 in retirement benefit, respectively. Pew’s poll shows that Americans are seeing through the anti-pension propaganda and appreciating the reality of those numbers. In all, 55 percent of poll respondents believe public pension benefits are currently about the right amount, or too small.
  • Pew and other anti-pension activists have claimed that a 30-year $1.3 trillion pension shortfall is a huge crisis, even though according to the Center for Economic and Policy Research the shortfall only represents about 0.2 percent of projected gross state GDP. Though modest adjustments may be required, the situation is hardly a crisis, especially with the shortfall being far less than the amount states, counties and towns are currently spending on corporate subsidies. Pew’s poll shows that the majority of Americans seem to understand the reality of the situation. In all, 50 percent of poll respondents said that public pensions face minor problems or no problems, while just 33 percent believe anti-pension activists who say public pensions are facing major problems.
  • Anti-pension activists (backed by Wall Street firms that stand to financially gain) have insisted that public pensions should be changed from defined benefit systems into defined-contribution plans like individually managed 401(k)-style accounts. Yet, Pew’s poll shows that in the eyes of taxpayers, traditional defined benefit plans for public employees are far superior to defined contribution plans. That makes sense as actuarial data prove defined-benefit systems are far more cost-effective for taxpayers and stable for retirees than 401(k)-style systems.
The overarching takeaway from these numbers is pretty straightforward: The political class’s assumptions about the politics of public employees, budgets and pensions are way off the mark. Indeed, as much as operatives, ideologues and moneymen may think it is great politics to demonize teachers, firefighters and police officers, and as much as they may think it is great politics to pretend radical cuts to retirement benefits are needed, Americans clearly aren’t buying that propaganda.Of course, that doesn’t mean the Plot Against Pensions won’t move forward. Between money from billionaires, cash from Wall Streeters looking to profit from pension conversions, and support from conservative activists who ideologically oppose the idea of guaranteed retirement income, the plot has vast resources behind it.Will those massive resources be able to manufacture a sea change in public opinion? Will they make Americans hate public employees and punish those employees by stripping them of the retirement benefits they were promised? It is certainly possible — but it looks like it is going to be a lot harder (and probably more expensive) to engineer such a scam than the anti-pension activists once thought.
David Sirota is a nationally syndicated newspaper columnist, magazine journalist and the best-selling author of the books “Hostile Takeover,” “The Uprising” and “Back to Our Future.”
E-mail him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

Governor Hickenlooper Supports Treasurer Stapleton’s Lawsuit Against PERA

Governor Hickenlooper has filed an amicus brief in support of Treasurer Walker Stapleton’s lawsuit seeking access to personal information on the top 20% of PERA retirees – read more here. In 2012 the Denver District Court ruled against the Treasurer and this past August the Colorado Court of Appeals upheld that ruling stating the Treasurer does not have “unfettered access” to PERA member information.

Our coalition has always opposed Treasurer Stapleton’s request. We believe the information he requested could lead to an invasion of private personal information and because he only requested it for the top 20% of retirees we also suspect he has nefarious plans for this data. The appellate court stated that Stapleton “bears the burden of establishing that his request is consistent with a fiduciary purpose…” We agree with the Courts that Stapleton has not adequately expressed what he would do with this personal information that would help him know more about the PERA system. Aggregated data that doesn’t violate privacy has been provided to the public via the CAFR and also in a summary version.

Many of you have called me about this story asking if it is true – it is! Then you have proceeded to call the Governor’s office and let them know you do not support his decision to support Treasurer Stapleton’s lawsuit. I think it would be great if more of you called him.

Call Governor Hickenlooper at 303-866-2471 and ask him to stop supporting the Treasurer’s lawsuit against PERA and violating your privacy.

SB13 55 PERA Actuarial Soundness & Reporting Requirements

Update: on Feb 4th Senate Bill 55 was killed in committee.

Senate Bill 55 is sponsored by Sen. Kent Lambert (R – Colorado Springs) and Rep. Lori Saine (R-Dacono)

CCRS opposes Senate Bill 55 and on January 18th the PERA Board also voted to oppose the bill.

You can read the bill in its entirety here.

The  bill sets one component of the measure of the actuarial soundness of the  defined benefit pension plan trusts by “assuming a discount rate [on liabilities] equal to the  state’s long-term debt interest rate.” The bill requires the PERA Board of  Trustees to annually submit recommendations to the General Assembly on  possible methods to bring the trusts to full funding based upon a 30-year  amortization period on unfunded liabilities. The bill extends the current  authority of the General Assembly to adjust contribution rates. Finally, the  bill mandates that the Board publically publish its Comprehensive Annual  Financial Report (CAFR) by May 31 of every year for the prior calendar year.  Currently, PERA publishes the CAFR by June 30 in compliance with the  Government Finance Officers Association’s best practices.

HB12 1150 – Change How Highest Average Salary is Calculated

Update 4/12/12 – Senate Finance killed this bill. 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.

Secure PERA opposes HB12 1150. This bill changes the calculation for Highest Average Salary, which is used to determine benefits after retirement. It changes the current 3 years to 7 years for all PERA participants hired on or after January 1, 2013. The bill applies to all members, except those in the Judicial division that did not transfer from the Denver Public Schools (DPS) division.

HB12 1142- Defined Contribution Access

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).

HB12 1179 – PERA Board Composition

UPDATE: This bill had a public hearing in front of the House Finance committee on February 23rd. This bill was postponed indefinitely.

HB12 1179 is sponsored by Representative Jim Kerr (R-Littleton). Secure PERA opposes this bill. Like last year, it modifies the makeup of the 15-member voting board of trustees of the Public Employees’ Retirement Association (PERA) to be:

  • 7 trustees appointed by the Governor and confirmed by the Senate who are not PERA members or retirees and who are experts in certain fields;
  • the State Treasurer;
  • 2 elected members of the school division, including 1 member who is at least 15 years from retirement eligibility;
  • 2 elected members of the state division, including 1 member who is at least 15 years from retirement eligibility;
  • 1 elected member of the local government division;
  • 1 elected member of the judicial division; and
  • 1 elected retiree.

HB12 1250 – The End of PERA Care

House Bill 1250 was introduced by Representative Holbert. This bill changes the way the PERA health care trust fund is funded. Currently, employers pay 1.02% of employee salaries into the fund. HB 1250 would change this funding mechanism which would result in the trust fund not being adequately funded and could result in the end of PERA Care.

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.