HB11 1248 – Modify the Composition of the PERA Board of Trustees

Secure PERA Opposes HB11 1248 and all efforts to change the PERA Board of Trustees. The bill was “postponed indefinitely” (PIed) on May 6, 2011 in the House State, Veterans, & Military Affairs Committee.

House Bill 1248 is sponsored by Rep. Jim Kerr (R-Littleton) and Sen. Ellen Roberts (R-Durango). The bill modifies the composition of the PERA Board of Trustees so that it is comprised of:

6 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 from the state division;
  • 3 elected members from the school division;
  • One elected member from each of the local government and judicial divisions;
  • One elected retiree; and
  • The ex officio trustee from the Denver public school division.

The bill also requires that one elected member from each of the state and school divisions be at least 15 years from retirement eligibility when the member begins serving his or her first term on the board. The bill allows current trustees to finish serving their terms and eliminates trustees who represent each of the divisions and retirees as their terms expire.

SB11 76 – Continuation of A Temporary Modification to The Contribution Rates For Certain Divisions Of The Public Employees’ Retirement Association

UPDATE: The amendment was removed that included the school, DPS and local government divisions. Only state and judicial divisions remain in the swap. It passed and was signed by Governor Hickenlooper.

Secure PERA Opposes Senate Bill 76. We all learned what shared sacrifice was during the 2010 session by accepting the changes in Senate Bill 1, and this bill seeks to shift that balance. The bill in its final form shifts 2.5% of the total contribution from employers to employees for FY 2011-12 only for the State and Judicial divisions.

SB10 1 – Comprehensive Changes to PERA

WHAT WAS SENATE BILL 1?

In 2009, Secure PERA began meeting with PERA and state legislators to talk about this groundbreaking legislation that would help correct the downward trajectory of PERA’s fiscal stability. Our approach was to make sure that no sacrifices were taken unnecessarily and that the sacrifices were shared between the employer, employees, and retirees.

Senate Bill 1 (SB1) reforms had a significant impact on PERA’s sustainability; it went from projected to run out of money within 30-35 years to on track to reach 100% funded.

In a nutshell, SB1 did the following:

  • Increased employee contributions by 2% via SAED* increases
  • Increased employer contributions 2% via AED** increases
  • Retiree COLA***  annual increase was reduced to 2%, and there was a 1-year holiday
  • And some additional benefit reductions

*SAED = Supplemental Amortization Equalization Disbursement. The SAED is an amount contributed by employers and is, to the extent permitted by law, to be funded by moneys otherwise available for employee wage increases. The SAED also has gradual increases.
**AED = Amortization Equalization Disbursement. The AED is an additional amount contributed by PERA employers that has gradual increases.
***COLA = Cost of Living Adjustment. This is the amount a retiree’s payment is increased each year to account for things like inflation.

WHAT DID THESE CHANGES MEAN FOR PERA MEMBERS?

Employees and retirees contributed $14.9 billion in reductions. When all was complete, 90% of the “cost” of making PERA secure came on the backs of retirees and employees.

Retirees who already retired by 2010 took a one year COLA holiday, and all current and future retirees sustained an annual reduction in COLA from 3.5% to 2% (unless PERA’s market returns are negative, in which case the COLA will be indexed to CPI-W).

Employees added an additional 2% in contributions through SAED.  These additional contributions were paid for using funds that would have otherwise been used for raises. Many employees also extended the length of their careers with the increased Rules of 85 & 88, thereby decreasing their overall benefit.  An employee that starts work today will have a benefit worth 1/3 less over the life of their benefit.

Employers committed to contributing an additional 2% through AED contributions. This amounted to $125 million.

HOW DID SB1 IMPACT THE FUND?

Senate Bill 1 worked. It was designed to get PERA back on a path towards 100% funding  in the wake of the disastrous 2008 stock market crash – and it was successful. Today, PERA is paying out benefits and is not predicted to run out of money.

SB1 was designed with a 30-year expected rate of return of 8%.  Contrary to common belief, we are hitting that mark.  Since the passage of SB1, the average rate of return has been 8.62%.