CEA's 2018 PERA Reform Guiding Principles (adopted by the CEA Board of Directors, Dec. 7, 2017)
- CEA is committed to maintaining the financial stability of members’ retirement funds through a defined benefit program. Any efforts to destabilize or dismantle it, including through a new or hybrid defined-contribution program, would be opposed.
- CEA will work towards PERA reforms to close the amortization period to within 39 years if possible. (half of current 78 year amortization period for School Division)
- All PERA stakeholders – The state, current and future employees, retirees and employers – must all contribute to the stabilization of PERA either through or via PERA Reforms.
- Employees should not be asked to contribute more to PERA during their time as current/active employees than the costs of their retirement benefits. (technically known as normal costs)
- Any solution should help districts meet GASB (Governmental Accounting Standards Board) standards and maintain or improve bond ratings.
- Any discussion around increasing the retirement age must account for the increased workload on educators that extends well beyond school hours and respective classroom environments for students.
- CEA supports the concept of an “auto-adjustment” provision as long as all PERA stakeholders are involved in each adjustment or “click” and that each “click” is gradual to prevent wild swings from year to year.
The latest updates from Secure PERA, the Colorado Coalition for Retirement Security supporting retirement security for all Coloradans. CEA is a proud member of Secure PERA. CLICK HERE to sign up for future Secure PERA updates.
#LoveMyPension HB1111 Is Dead - Feb. 14, 2018
Happy Valentines Day, it comes with two great pieces of news!
1) Over 100 of you told us why you #LoveMyPension and we have created valentines that we have been sending out over facebook and twitter today.
2) This afternoon, the House State Affairs committee voted 5-3 on a partisan vote to postpone indefinitely or "kill" House Bill 1111. Thanks to all of you, nearly 700 emails went into the committee asking them protect your personal data and maintain the PERA Board's independently elected seats. Thank you!!
Lastly, don't forget to register for Secure PERA Lobby Day on February 28th. It is coming up quickly and we need to know how many breakfasts and lunches to order. Click here for more details and to RSVP for Lobby Day.
It is beginning to look like we may see the new omnibus PERA bill in time for lobby day. So, if you want to learn more about what is going on, be sure to register for lobby day and come join us on the 28th.
The Legislature Is Off To A Quick Start On PERA - Jan. 29, 2018
The legislature is off and running. Below we have news of yet another attempt to change PERA. This new bad PERA bill would allow anyone on the PERA Board to view your personal information for any reason at all. The bill also changes the composition of the PERA Board. Both Secure PERA and PERA are opposed to House Bill 1111.
We also know at least two legislators are having town halls about PERA this weekend. The details are below. Be sure to let us know if you hear of any events with legislators discussing PERA that we should let folks know about. We need as many of you as possible to show up at these events and make sure the legislators know we support maintaining PERA as a defined benefit plan and that they shouldn't mess around with the retirement security of hard working public employees. The calendar on our website: www.SecurePERA.org is being updated regularly with these types of events.
Lastly, please join us the morning and early afternoon of February 28th for our annual Secure PERA Lobby Day. We will send out more details soon, but we hope you can join us at the Capitol to lobby our legislators about the importance of PERA.
Colorado Leg Session Has Started - PERA a Hot Topic - Jan. 12, 2018
The 2018 Legislative Session has started. Yesterday, the Governor delivered his State of the State address and declared, "We need to find the right solution to PERA’s unfunded liability."
Click here to email your own State Senator and Representative to let them know how important PERA is to you.
On Wednesday, Speaker of the House Crisanta Duran (D) opened the session with, “Steps must be taken to strengthen PERA, the state pension fund, to ensure that we honor the commitment we’ve made to our state and public-sector employees. But it would be unfair to balance PERA solely on the backs of hard-working public servants. Likewise, slashing cost-of-living adjustments for retired state employees could put many of them deeper in the hole every time the cost of living rises. Our goals must include a PERA solution that ensures its long-term solvency while being fair to current employees and retirees.”
Senate President Grantham (R) took a different approach stating, “Today, let us commit to PERA reform that provides our state employees with the benefits they were promised, and deserve, while ensuring that future generations don’t have to foot the bill. This is not a new issue, nor should it be a surprise to any member of this chamber that it’s a top priority. Current and future workers in the public sector have their own hopes and dreams for their careers and their retirement. Retirement security is a big part of those plans.
"Protecting only today’s retirees is insufficient; we must have our public pension system on sound financial footing so that today’s and future employees can also be paid when they retire. We also must come to terms with the fact that the workforce is changing, and that the solutions of the past may not be what is preferred by some of today’s workers. All public sector employees should have the same opportunities and choice in retirement planning that the State of Colorado employees enjoy; denying that choice is fundamentally not fair.
"The magnitude of the problem is larger than many believe – very possibly PERA is underfunded in excess of $55 Billion. This is large enough to affect the credit rating of the State and public institutions – and raise bonding costs for all important public construction projects. This unfunded liability is a debt in excess of $10,000 per man, woman, and child in Colorado. The fact that we don’t exactly know how much trouble we’re in also shows the need for more transparency in PERA’s finances. It will only serve to bolster confidence and give better understanding of the challenges we now face.
"Some say that we can put off reform for another year. Doing so will merely increase the debt we are facing by millions of more dollars – and put more financial strain on the pension system. Several proposals call for additional involvement by taxpayers – beyond the significant payments being made today for debt service. It is only fair then to ask for in return structural changes to PERA that start to deal with long term risk. We have to stop digging the hole at the same time that we are trying to fill it. If Option A is to do nothing, Option B is to apply a Band-Aid, and Option C is to do the hard work, I say we pick Option C.
"I won’t be here ten, twenty, or thirty years from now, and neither will any of you. I surely don’t want to hear the senators that fill our seats saying what a shame it is that the 71st General Assembly couldn’t solve this issue back in 2018. I don’t want future generations trying to tackle a $100 billion dollar unfunded liability when we could have solved it now. The choice rests with each of us. If we all, together, commit to solving the PERA question this year, then it isn’t a matter of what we’re going to get done this session, it’s simply a matter of how we’re going to get it done. And through the leadership of Sen. Tate and others we have an opportunity to accomplish this! An opportunity that we cannot simply let pass by.”
No PERA bills have been introduced yet and we don't expect any for awhile. Right now legislators are working behind the scenes deciding what approach they want to take. While they are working on their ideas we need to remind them how important PERA is to their constituents. Please click here to send your own State Senator and Representative and email about how important PERA is to you.
We also encourage you to attend any town hall meetings your legislators are having and ask about their support for PERA. The best way to know about these are to sign up for their newsletters, you can google your legislator to find their campaign website and then sign up for their emails.
We will be keeping you up to date on legislation as we see it. Here's to a good 2018 legislative session!
“UBIT” Federal Tax Issue Could Affect Public Pensions - Dec. 8, 2017
As part of our efforts to protect PERA, there’s a federal issue looming that could have a negative impact on public pensions including PERA. A relatively unknown provision, the Unrelated Business Income Tax (UBIT), would be applied to governmental pension plan investment earnings in the House-passed tax bill but was*not* included in the Senate-passed version of their tax reform bill. Final negotiations are now underway on a conference committee to reconcile differences including if a new UBIT tax on public pensions could become law.
Here are some key UBIT points shared by the National Council on Teacher Retirement (NCTR) in partnership with several other national organizations including NASRA and NCPERS:
- This is a NEW tax on state and local government retirement systems, not a clarification of existing law, and overturns a 40-year-old position by the IRS to not apply UBIT to public pension trusts.
- It sets a dangerous precedent regarding federal taxation of state agencies, eroding the Constitutional immunity states and the federal government each enjoys from taxation by the other.
- Since the Great Recession, every state has made changes to one or more of its pension plans to strengthen their financial condition. Public pension plans have NOT sought any type of assistance from Congress, but expect Congress to avoid imposing adverse tax changes, particularly without any formal consideration of the impact on the funds and the affected investments (including economic development, real estate, and infrastructure).
- If Congress wants public pension funds to exit the types of investments that would be subject to UBIT, they should, at a minimum, apply UBIT to new investments only, not ones that were entered into in good faith based on the long-standing understanding that UBIT expressly did not apply.
- Existing public plan investments will be treated far worse than private investments that use a corporate blocker, which under tax reform would give them a nearly 20 percent lower tax rate than trusts that do not have such blockers in place.
- In summary: Application of UBIT to public pension plans is a NEW tax, it sets a dangerous precedent with regard to federal taxation of state agencies, it overturns IRS’s 40-year-old position to not apply UBIT to state and local government retirement systems, and existing public plan investments will be treated far worse than private plans that choose to use blockers.
Reconciliation just started but they’re moving quickly to vote on a final bill possibly early next week.
Walker Stapleton FINALLY Shares His PERA Proposal - Dec. 6, 2017
Walker Stapleton released his PERA proposal to reporters, Dec. 6. We tried to listen into the call but he kicked us off – so much for being a transparent elected official. Here's the major points of his proposal:
- No COLA for 20+ years
- 5% contribution increase for active employees (this is approx. what would be required based off his plan below)
- No additional employers dollars into PERA
- Retirement age will be increased to match social security, 67 years old
- Increase the highest average salary from 3 years to 10 years.
- The 30 year expected rate of return should be lowered from 7.25% to 5%.
Walker doesn’t value the over half a million employees or retirees who count on PERA and don't have social security. He has also forgotten that these benefits help the entire state of Colorado's economy. CLICK HERE to let Walker know you don't agree with his priorities.
SecurePERA statement, Nov. 17, at the PERA Board meeting and during public comment...
Thank you for allowing me to address you this morning. I want to start out by clarifying that Secure PERA has not taken a position on either of the proposals that have been presented by PERA or the Governor. Instead, we initiated an intensive outreach effort.
This included a telephone townhall for Secure PERA members, 5 webinars to discuss the specifics, many presentations with opportunities for comment and a online survey that yielded nearly 4,500 responses, 80% of which were active employees.
What we have learned is that the change to the COLA is very concerning for our retirees and for future retirees. Operating on a fixed-income, they are worried about the changes they'll need to make. That impact will be felt by the entire state. As retirees adjust downward their expenses and purchasing habits, the effects will reverberate throughout the economy. I don't need to remind you that PERA puts over $3.5 billion into Colorado's economy.
Additionally, there are many who are concerned about whether employees can absorb the large increases in contribution rates, as well as the increased retirement age.
All of our members agree that the principle of shared sacrifice must be a part of any solution; we do not envision supporting a solution without an employer contribution.
One change we would like to see in your PERA Board proposal is how full time employment is calculated. We have seen tremendous amounts of push back regarding how this would be implemented and what it would mean for people.
Thank you Board members and staff for all of the time you have dedicated to helping find a solution. We know this isn't easy, but your commitment to keeping the defined benefit plan is very much appreciated by all of us.
During the meeting, the PERA staff and Board members discussed all of the feedback they have received to date. At this time, they did not make any changes to their proposal, but they did discuss the possibility of a December special meeting, if needed, to make changes.
Additionally, the PERA staff released new numbers on what the costs are to each group under the PERA proposal and the Governor’s proposal:
If you want to know more of the details about either of those proposals you can click here.
Governor Presents Another PERA Proposal - Nov. 1, 2017
This afternoon, Governor Hickenlooper announced his vision for changes to the PERA system. Keep reading to learn more about these proposed changes, including how they differ from the PERA Board of Trustees proposed package of changes...
Under this plan, there would be no additional employer contributions. Employee contribution rates would increase by 2% (beginning January 1, 2019). The COLA for all current and future retirees would be reduced to 1.25%
The plan has some components that are the same as those in the PERA Board of Trustees package. They are:
- For new and non-vested employees, the Highest Average Salary (HAS) calculation would change from 3 years to 5 years
- For new employees, the retirement age would increase to 65 (55 for State Troopers)
- The COLA would be suspended for two years. (For future retirees, this mean they would wait three years before collecting a COLA because of the suspension year in Senate Bill 1)
The Governor also proposed increasing the salaries for state employees by 3% starting July 1, 2018, which would cover the PERA 2% employee increase slated to begin January 1, 2019. and provide a 1% pay increase.
HOW DOES THE GOVERNOR'S PLAN COMPARE TO PERA'S?
Employer Contribution Increase
Existing Employee Contribution Increase
New Employee Contribution Increase
Both plans also:
- Include an auto adjust provision
- Increase the retirement age to 65 for new employees
- Increase the Highest Average Salary calculation to 5 years
- Suspend the COLA for two additional years (total of 3 years for those not retired yet)
- Change the definition of salary to gross salary
- Change the way FTEs are calculated
PERA Board Endorses Changes - Sep. 22, 2017
Today, the PERA Board of Trustees endorsed a package of changes which would accomplish the Board's goal of having PERA 100% funding in 30 years.
Secure PERA is still analyzing the proposed changes and will be seeking your input on them in the coming weeks. We are very likely to ask the PERA Board for some changes during their November meeting and in our meetings with legislators.
In the meantime, we wanted to fill you in on the proposed changes. PERA will be presenting this package during their PERAtour 2.0 which you can learn more about at www.PERAtour.org
The proposed package, which would still have to be approved by the Colorado General Assembly, includes:
For Active Employees as of 1/1/2020:
- Additional 3% contribution starting in January 1, 2020 (currently 8% and 10% for troopers)
- Salary definition will change to gross pay (currently net pay)
For New Employees as of 1/1/2020:
- Additional 2% contribution starting in January 1, 2020 (currently 8% and 10% for troopers)
- Increase retirement age to 65 years of age and 5 years of service or 40 years of service, Troopers increased to 55
Additional Changes For New Employees & Non-Vested Employees (5 years of service) as of 1/1/2020:
- Highest Average Salary calculation number of years increased to 5 years (currently 3 years) and 3 years for Judicial Division (currently 1 year)
- Salary definition changed to gross pay (currently net pay)
- Change definition for service accrual to be a percentage of time actually worked
For Current & Future Retirees:
- COLA rate reduced to 1.5% (currently 2%)
- Two year COLA suspension (those not retired yet will have three years suspended, 1 year from SB1)
- Additional 2% contribution
- Salary definition will change to gross pay (currently net pay)
Why not a 401k plan? - Aug. 6, 2017
This week, we are talking about the hybrid plan design of Colorado PERA and how it measures up against other retirement plan options, both public and private. Spoiler alert - the hybrid defined benefit plan is "...more efficient and uses dollars more effectively than the other types of plans in use today." And for the individual retiree, it produces the most replacement income for every contribution dollar spent.
How do we know this? In July of 2015, a report commissioned by the Colorado Legislature in 2014 (SB 14-214) to independently evaluate PERA compared to alternative plans in both the public and private sector. The study, conducted by Gabriel, Roeder, Smith & Company, looked at the cost effectiveness of the plan and the quality of the benefit for PERA members.
This in-depth report considered all of the factors and looked at the question from multiple angles. The brunt of what they found though, can be summarized in three points.
- PERA provides the best retirement benefit, among all alternatives >> "Alternative plans implemented for new hires require greater contributions in order to replace the same retirement income than the current PERA Hybrid Plan."
- PERA is the most cost efficient option >> "This study could find no plan that provides a more effective level of benefits than the PERA Hybrid plan.
- PERA is, without question, a better option than a 401k >> "Individually directed defined contribution plans do not earn investment returns to the same degree as large, professionally managed defined benefit plans."
A very important aspect of this report is not just the analysis that was completed to determine that the PERA Hybrid Plan is the best option for Colorado's public employees, but also the significant cost associated with moving to an alternative plan.
Knowing that we currently have the most cost efficient and effective plan, let's explore how much it would cost to move away from that plan - just for fun.
First, let's look at the the cost to maintain the same level of benefit. The report finds that, "it costs 142% more across all members to provide the same benefit at retirement to career employees, if all assumptions are met."
Next, the report calculated the potential costs associated with closing the Hybrid plan and starting an alternative one with new hires. That number, which accounts for the unfunded liability, is north of $800 million additional dollars in the first year!
Colorado PERA created this helpful chart to compare the current Hybrid plan with alternative options. Take a look at the stark differences.
FAQs on Social Security and WEP - July 28, 2017
We wanted to make sure you saw this important article from Colorado PERA, published in PERA on the Issues, about social security. We have copied it verbatim for you below. The Windfall Elimination Provision and the interaction between PERA and social security is one of the most often asked about topics.
From PERA on the Issues, July 26, 2017 -- FAQ: Colorado PERA and Social Security
In late April, new legislation was introduced in the U.S. Senate that proposes to change how the Windfall Elimination Provision (WEP) and the Government Pension Offset (GPO) are applied to those who, like many PERA members, spend a majority of their work life in employment outside of the Social Security system. The Social Security Fairness Act of 2017, introduced by Sen. Sherrod Brown (D-OH), would repeal both the WEP and the GPO. The bill, S.915, has been assigned to the Senate Finance Committee. An identical bill, H.R.1205, has been introduced in the U.S. House of Representatives, and Colorado Reps. Ed Perlmutter (D-CO-07) and Jared Polis (D-CO-02) are cosponsors of the legislation.
Most PERA members contribute to PERA instead of Social Security. But if a PERA member also qualifies for a Social Security benefit, that benefit will most likely be reduced by either the Windfall Elimination Provision (WEP) or the Government Pension Offset (GPO). For members who have contributed to both PERA and Social Security, the Social Security benefit will be subject to the WEP. Members who are eligible for a Social Security spousal benefit – a benefit for those married to someone who has earned their own Social Security benefit – the Social Security spousal benefit will be reduced by the GPO.
Below is a list of frequently asked questions from PERA members about the WEP, GPO, Social Security, and PERA:
Question: Will my PERA benefit be reduced because I’m getting a Social Security benefit?
Answer: No. PERA does not reduce the PERA benefit for members who have also earned a Social Security benefit. However, the Social Security benefit may be subject to either the WEP or GPO.
Question: Will I get the projected retirement benefit amount that is currently listed on my Social Security earnings statement?
Answer: Probably not. Chances are very good that the actual Social Security benefit amount will be less than the amount listed on the Social Security earnings statement.
Question: By how much will my Social Security benefit be reduced because I’ve worked for an employer who contributes to PERA instead of Social Security?
Answer: It’s hard to say because every work situation is unique. In terms of earning a Social Security benefit, the reduction could be determined by a number of factors including the number of years worked under Social Security, called substantial earnings. For PERA members who also have 30 years of substantial earnings under Social Security, the reduction may be lower. However, PERA members with fewer than 20 years of substantial earnings under Social Security are subject to the maximum reduction under the WEP. There is a maximum dollar amount that can be subtracted from the Social Security benefit amount. This maximum dollar amount changes each year and is established when a beneficiary reaches age 62. For people turning 62 this year, that amount is $442.50. For people turning 62 in the future, that amount will most likely increase. Use the WEP calculator to determine how this provision in federal law might impact you.
The GPO works differently. Typically, Social Security benefits are reduced by two-thirds of the PERA (or other government pension) benefit, but there are some exceptions. A GPO calculator at Social Security’s website can help estimate a Social Security Spousal Benefit.
Question: If the PERA member dies and their spouse becomes the benefit recipient, would they be subject to a reduction in Social Security?
Answer: No. If the PERA member selected Option 2 or 3 at retirement and passes away, the cobeneficiary, whether a spouse or someone else, begins to receive a PERA benefit. The cobeneficiary’s Social Security benefit is not reduced because they are receiving this type of benefit from PERA.
Question: How do I know if I’ve even earned a Social Security benefit?
Answer: In order to receive a Social Security benefit, a worker will need to have earned 40 credits (formerly called quarters) under Social Security. Forty credits equals 10 years of work. Those who have fewer than 40 credits are not eligible to receive a Social Security benefit. Create an online Social Security account to learn more about the federal program.
Question: Why are the minimum ages for qualifying for a PERA retirement and receipt of Social Security different?
Answer: For PERA members who recently began working for a PERA-affiliated employer, the minimum age to be eligible for service retirement benefits is 60 (58 for those who work for a School Division employer). The minimum age to begin receiving unreduced Social Security benefits for those born in 1960 or later is now 67. Minimum retirement ages in both programs have increased over time, reflecting the longer life expectancies of workers in the United States.
What is PERA's Status Today? - July 14, 2017
In 2014, the Colorado State Legislature & Governor Hickenlooper hired an outside actuarial firm to review the status of PERA’s funding. They recommended a simplified signal light to allow everyone to follow how PERA is doing and track how big the risk is that if something negative happened PERA wouldn’t be sustainable. Green = good & red = bad. You can read more about the PTA Sensitivity Analysis which developed this system here.
Following the passage of Senate Bill 1 most of the divisions were in the green until last year when the state and school divisions slipped into yellow after a few less than ideal years in the market (in 2014 PERA got a 5.7% rate of return and in 2015 PERA got a 1.5% rate of return). When those divisions slipped to yellow Secure PERA started looking into why.
Then, at the end of 2016 the PERA Board of Trustees made two decisions that caused all of the funds to slip into orange status. The first decision was to lower the 30-year expected rate of return from 7.5% to 7.25%. The Board had three actuarial firms come in and give them advice on where to set the 30 years rate and the came in at 6.84%, 7.5% and 8.49% as their recommendations. After a lot of debate, they decided to set the rate at 7.25%.
The second decision they made was to adopt new mortality tables. Fortunately, we are all living longer and these table reflected that but unfortunately it increased the unfunded liability of PERA since beneficiaries would be receiving their benefit for more years.
Collectively, these two decisions along with a few other smaller decisions made by the Board increased the unfunded liability by $21 billion and increased the time it would take PERA divisions to become fully funded by anywhere from 14 – 32 years depending on the division.
This means all of the PERA divisions are now ORANGE.
But, what does orange mean? Orange means PERA isn’t going to run out of money and will be able to pay benefits into the future, but it will take longer than 50 years for the divisions to become fully funded. PERA isn’t projected to run out of money but, if stock values decline PERA won't be as financially secure as some would like. In 2009, when we started working on Senate Bill 1, PERA was in the red. We aren’t there yet, but we also don’t want to stick our heads in the sand and hope for a 90s boom in the stock market.
The chart below will show you where the divisions have been each year since the year before we passed Senate Bill 1. (You can click on it to see a larger version online)
So, What Does This All Really Mean?
It means that we need to look again at PERA’s funding and benefit structure and see if some changes need to be made. PERA did their statewide listening tour in May & June – if you missed it visit here to learn more.
We at Secure PERA will be hosting a telephone town hall and webinar in the coming months to talk through all the changes the PERA Board is considering recommending to the State Legislature in the next session and get your feedback.
The ideas range from increasing contributions to increasing retirement age to reducing the COLA. So, stay tuned for information on our upcoming telephone town hall where we will go over all of this and take your questions.
The bottom line is that NOW IS THE TIME TO START PAYING ATTENTION! Let’s all work together to be sure and protect your retirement security.
What was Senate Bill 1? - June 23, 2017
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%.
Funding Your Retirement - June 9, 2017
PERA members contribute 8% of their monthly salary (10% for Colorado Bureau of Investigation and State Troopers).
Employer contribution rates are established by state law and are determined as a percent of
member pay. Since July 1, 1985, a portion of PERA employer contributions are used to pay part of the health care premiums for benefit recipients enrolled in the PERA health care program.
These contribution amounts were increased in 2006, 2008 & 2010 using mechanisms called the AED & SAED.
AED= Amortization Equalization Disbursement. The AED is an additional amount contributed by PERA employers that has gradual increases.
SAED= Supplemental Amortization Equalization Disbursement. The SAED is also 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
While the SAED increase is attributed to the employer, the actual cost is passed onto the employee in the form of a reduced salary increase.
Here is a chart detailing employee and employer contribution rates for each division within PERA.
Over 25 years, since 1999, the average rate of return has been 8.38%. Since Senate Bill 1 (SB1), the average rate of return has been 8.62%.
These investments consist of common stocks of top-rated companies, corporate boards, U.S. Treasury and other government securities, mortgages, real estate property, and other investment vehicles.
What is PERA? - June 2, 2017
Colorado Public Employees' Retirement Association (PERA) provides retirement and other benefits to the employees of more than 500 government agencies and public entities in the state of Colorado.
PERA is a hybrid defined benefit plan. On behalf of PERA members, contributions are invested in common stocks of top-rated companies, corporate boards, U.S. Treasury and other government securities, mortgages, real estate property, and other investment vehicles. These investment earnings are used to fund the monthly retirement benefits paid out by PERA.
The pension operates on this simple formula:
Contributions from Employers & Employees
Benefits Paid Out
PERA members contribute 8% of their monthly salary (10% for Colorado Bureau of Investigation and State Troopers). Employers also contribute a percentage of their total payroll. The percentage depends on the organization. These contribution amounts were increased in 2006 & 2008 (AED & SAED). Here is the chart of contribution rates across all PERA divisions.
AED= Amortization Equalization Disbursement. The AED is an additional amount contributed by PERA employers that has gradual increases.
SAED= Supplemental Amortization Equalization Disbursement. The SAED is also 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.
Currently, the assumed rate of return is 7.25%. This was set by the PERA Board of Trustees in 2016. Even with down markets in 2001, 2002, and 2008, PERA has averaged a 9% rate of return over the last 25 years. In 2008, the investment portfolio lost 26% or $11 billion – which was still better than its peers (-26.8%) or 401(k) plans (-27%).
Retired workers receive benefits calculated by this formula: 2.5% x Highest Average Monthly Salary x Years of Service
- 2.5% is the multiplier as determined by the Legislature.
- Highest Average Salary is the average of the three highest yearly salaries earned under PERA employment. (It is only 1 year in the judicial division).
- Years of Service is the member’s years and months of work for a PERA employer.
PERA’s expenses total .4%. CEM Benchmarking awarded PERA the top honor in service compared to the other 77 national and international pension plans and praised PERA’s lower-than-average operating costs. PERA’s cost per member for operation is $57. National average per member operation costs is $73.
Who is SecurePERA? - May 26, 2017
Dear Secure PERA Supporter,
You receive regular emails from us, but have you ever asked yourself who exactly is Secure PERA?
We wanted to take a minute to answer that question and highlight the great organizations that fund the Secure PERA coalition.
First, we are not PERA. Secure PERA is a coalition of PERA members, retirees and supporters. Collectively, we are dedicated to supporting retirement security for all Coloradans. Our work is funded by the member organizations, which include:
American Federation of Teachers Colorado
Association of Colorado State Patrol Professionals
Colorado Association of School Executives
Colorado Education Association
Colorado Professional Fire Fighters
CSPERA - Colorado School & Public Employees Retirement Association
NPPC - National Public Pension Coalition
We first formed in 2006 to work with PERA and the State Legislature on changes to PERA's defined benefit plan. In 2009, after the market crash of 2008, we re-activated our coalition. We were part of the bi-partisan team that created Senate Bill 1 in 2010. Senate Bill 1 was the first major reform of its kind in the nation and put PERA on a path to financial stability.
Today, we continue to advocate for policies that protect and improve PERA's fiscal stability, and oppose legislation that negatively impacts the retirement security of hard-working Coloradans.
Interested in learning more? Check out our website at WWW.SECUREPERA.ORG