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).

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.

Under the bill, the Board and the General Assembly are prohibited from increasing member and employer contributions, AED, or SAED amounts above the rates allowed by law as of December 31, 2011.

CCRS opposes this bill. This bill alters the structure created under Senate Bill 1 – we must let SB1 work!

You can read the bill in its entirety here.

• The Colorado Coalition for Retirement Security opposes this bill.
• The annual compensation report has not been fully funded in the last 11 years – we must fix this survey in whole not in part.
• The PERA Board of trustees is the appropriate body to evaluate the State’s retirement plan and make recommendations to the General Assembly like they have been doing for decades, not the state personnel director.
• This bill puts an onerous burden on the state personnel director and the Department of State Personnel.
• DPA believe this bill will cost them nearly $200,000 every other year to complete the report.
• SB 136 requires DPA to use a published 3rd party survey to compile all of its recommendations – we do not believe such a survey currently exists and thus would have to be created costing the State unnecessary money.
• This bill does not include what elements of retiree benefits should be included or how they should be compared.

On 1/30/2012 Senate Bill 16 was killed on a 2-3 vote of the State Affairs committee.

Senator Lambert introduced on opening day a bill that would allow PERA employers in the Local Government division to swap up to 2.5% of their payment to PERA to the employees.

The Colorado Coalition for Retirement Security OPPOSES this bill. We oppose any swapping structure where the payment is moved from the employer to the employee. Swaps jeopardize the fiscal stability of PERA over time as employee dollars are only worth about $.80 on the dollar compared to employer dollars. The reason for this discrepancy is because the employee dollars can be taken out of PERA by the member whereas an employer dollar cannot.

We supported Senate Bill 1 in 2010 because of its principle of shared sacrifice. Swapping that sacrifice from the employer to the employee destroys the principle of shared sacrifice.

The Facts About Senate Bill 16

* This bill eliminates the employer’s portion of the shared  sacrifice of the SB 10-01 and places the total burden for maintaining  PERA solvency on employees and retirees. SB01 as structured had 90% of the burden placed on employees  and retirees through employee contribution rate increases and benefit  cuts.

* This bill increases litigation risks astronomically. As testified to on SB11-74 and  SB11-76, the constitutionality of this swap is in question,  heightening the likelihood of an additional lawsuit.

* This bill creates inequity among employers. To the extent that an  employer didn’t opt to swap contributions, the effect would  be to subsidize other employers within the Division inequitably by  paying more towards the unfunded accrued liability.

You can view Senate Bill 16 in its entirety here.

CCRS opposed this and all bills that would affect the shared sacrifice we achieved in Senate Bill 2010-001.

You can read the bill in its entirety here.

SB 12-084 is sponsored by Senator  Kent Lambert (R-Colorado Springs) and Representative Spencer Swalm  (R-Centennial). Currently, law provides that all  information contained in records of members, former members, inactive members,  and benefit recipients, as well as records of participants in PERA defined  contribution plans, be kept confidential by PERA. The bill would create an exception to current law and require PERA publicly disclose certain PERA information on individual elected officials and cabinet-level  appointees of elected officials on a yearly  basis.

Information to be reported would include the member’s name, each  position held during employment with a PERA employer, the annual salary  paid for each position, the employer and employee contributions paid on  that salary, age of retirement, Highest Average Salary, and amount of any  benefits paid.

CCRS opposes this bill, as releasing this information would not give an accurate picture of PERA’s finances or serve any purpose to help secure PERA.

• The PERA Board of Trustees voted to oppose SB 84, as under current law it owes the duty of confidentiality to all members.
• As fiduciaries, the Board of Trustees must act in their best interests of its members. It is highly questionable as to how releasing members’ records to the public serve the members’ best interests. In addition, to break out a specific class of members violates the principle of equity.
• One of the major flaws of the bill is that there is no precise definition of what is an “elected official” or “cabinet member of elected official.”
• Even if PERA did know the definitions of these “officials,” PERA has no records for current or former active members that contain their title or position. To acquire this information would mean surveying all of our members and employers. Therefore, the provisions of the bill that require the release of such information prior to the end of 2012 would place a high administrative burden upon PERA that would likely be in the millions of dollars and require additional staff.
• There are probably many PERA members or retirees who hold or have held positions as elected officials such as special district board members, city council members, county commissioners, legislators, as well as statewide elected officials such as the Governor, State Treasurer, Secretary of State, and Attorney General. PERA would have to rely on all of our 485,000 members to accurately report to us if this applies to them. This would be a process that would be very difficult to verify as being thoroughly correct.
• SB 84 may have a chilling effect on public employees considering running for public office, and conversely, a potential employee for a PERA employer may be discouraged from taking a PERA-covered job if they have ever received compensation as a result of being an elected official for a PERA employer since their member record would be made public.
• The term “Member Plan Solvency Information” contained in the bill has no relation to how a pension plan really functions. Information required to be disclosed by this bill does not represent the entire funded status picture of the retirement plan.
• PERA already provides far more detailed information related to plan sustainability in the annual actuarial valuation which is contained within the Comprehensive Annual Financial Report (CAFR). The CAFR and the annual actuarial valuation are formally presented to the Joint Legislative Audit Committee of the General Assembly each year. The CAFR contains information based on an analysis of all of PERA’s 485,000 members, rather than a specific subset.
• Legislation enacted in 2010 (Senate Bill 1) returned PERA to long-term sustainability.
• PERA takes membership record confidentiality very seriously and SB 84 is a step toward having all member and retiree financial information publicly available.

You can read the bill in its entirety here.