Both Governor Hickenlooper’s plan and the PERA Board’s recommendation to return PERA to long-term sustainability have received attention in the news recently, even though legislation has not been introduced yet this year at the Colorado General Assembly.
While there are differences between the Governor’s proposal and that of the Board, the two plans share the goal of achieving full funding within a 30-year period. However, each proposal achieves that goal using different funding and savings mechanisms.
- Both proposals would increase contributions. The Board’s proposal includes contribution increases from current members and working retirees, new and future members, and employers. The Governor’s proposal does not increase contributions from employers.
- Both proposals would limit annual increases. The Board’s proposal would lower annual increases to a cap of 1.5 percent, while the Governor’s proposal would lower the cap to 1.25 percent. Both proposals would also increase future hires’ age and service requirements for retirement benefits.
- Both proposals would also improve the alignment of contributions with benefits and include automatic adjustment provisions to keep PERA on a path to full funding within 30 years.
Review a comparison chart of the two proposals.
Since the Board’s legislative recommendation was released in September 2017, PERA has received a number of questions about the necessity of a proposal, given the strength of the U.S. stock market. During the Board’s most recent assessment of the economic and demographic conditions that influence the plan’s funded status (performed in November 2016), the Board heard from investment and actuarial experts and subsequently lowered the rate of return assumption due to a less optimistic view of the future. This change to an important economic assumption, alongside the adoption of new mortality tables, extended the timeframe in which the trusts were projected to reach full funding beyond the 30-year goal set forth in the Board’s funding policy adopted in March 2015 and revised January 19, 2018.
We will continue to monitor the legislative landscape at the State Capitol and inform PERA on the Issues readers of any PERA-related legislation that is introduced.