Dear PERA Members and Benefit Recipients,
I am writing to you as the Chairman of the Colorado PERA Board of Trustees to inform you that the Board is recommending changes to your retirement system. We intend to propose changes for the Colorado General Assembly’s consideration in 2018. These recommendations are designed to ensure the long-term financial health of our retirement system and are being made after extensive analysis and deliberation.
This process began last year when the Board conducted a thorough review and subsequently determined the necessity of making changes to core assumptions that are used to estimate future costs of providing retirement benefits. While necessary, these changes resulted in a lowering of PERA’s funded status for two reasons. First, a more conservative view of future investment returns means PERA is projecting earning less on its portfolio, and second, an adjustment to the life expectancies of our current and future members means PERA is predicting it will pay benefits longer. After taking into account these assumption changes, each of PERA’s five divisions reached a point where reporting standards required that PERA develop a plan to improve its funded status and reduce the amount of time it would take PERA to become fully funded (commonly called the amortization period).
Given the financial standing of PERA, the Board began its efforts to develop a corrective action plan. The Board consulted with a range of actuarial and financial experts, as well as the PERA membership in a statewide outreach in 2017, known as the PERAtour. The PERAtour included a series of programs offered through community meetings, our dedicated website, and via telephone town halls. Thousands of PERA members, retirees, and other stakeholders have participated.
During the PERAtour, discussions centered around core principles that should guide any future changes to the plan. Our stakeholders told us that PERA should be a retirement plan that calculates retirement benefits in line with career paths and contributions, allows retirees to maintain their standard of living throughout their lifetime, is fair and attractive to future public employees, serves as a tool for employers to recruit and retain top quality talent, and requires shared responsibility among members, retirees, and employers.
In addition, the Board retained the principles from 2010, including intergenerational equity; long-term sustainability; preservation of the defined benefit plan; and maintaining system-wide portability. We believe our recommendation is consistent with these principles.
There are three types of changes supported by the Board:
- Increasing contribution rates from employees and employers
- Modifying benefits, including raising the minimum age for full service retirement eligibility to 65 and reducing the Annual Increase as well as suspending the Annual Increase for several years
- Aligning contributions, service credit and benefits by changing key definitions for “service credit accrual” and “PERA-includable salary”
The Trustees and I are painfully aware that every contribution increase and benefit reduction involves real people who have dedicated their time and talents to public employment in Colorado. We do not make this recommendation lightly, but do so in full recognition of our fiduciary responsibility to the membership, which includes ensuring that the trust funds are sustainable into the future, and that the fund is on a path to reach full funding in a reasonable time frame. PERA remains the key component in a Colorado public employees’ retirement security and the Board remains committed to protecting that security.
On behalf of the PERA Board,
Timothy M. O’Brien, Chairman
Colorado PERA Board of Trustees