FormerStateTreasurer Mike Coffman appointed the commission in December of 2004 (See Colorado Treasurer Appoints State Pension Plan Committee ). In July of this year PERA reported a $12.8 billion shortfall to the state’s Legislative Audit Committee (See Another State Pension System Reports Trouble ). PERA’s funding ratio dropped from a high of 105.2% in 2000 to 70% now, the Denver Business Journal reports.
The commission made seven reform recommendations beginning with changing PERA’s governance model. According to the Journal, the Commission’s report stated, “PERA employs an outmoded and ineffective governance regime — particularly as it relates to the 16-member Board of Trustees. This structure results in an organizational inability to coherently manage a pension system with more than $30 billion in assets.”
In addition to the large deficit, state auditors reported on disclosure violations for gifts received by PERA staff members and extraordinary benefits granted to staff members contributing to problems with the Association (See Disclosure Violations Added to Colorado’s Pension Problems ).
The commission suggested replacing every member of the current board, all beneficiaries of the plan, with a smaller board that would balance the interests of plan participants, employers and state taxpayers, according to the Denver Business Journal. The report also recommended trustees have prior educational or professional experience in finance, pension management, or another related field.
Other recommendations of the Commission, according to the Denver Herald, included:
- Increase employee contributions to the plan from 8% to 10.15%,
- Raise the minimum retirement age from 50 to 55, and possible 65 for younger workers, and
- Lower the cost-of-living adjustment to the inflation rate or 3% a year, whichever is lower, for employees hired after July 1, 2005.
In the 2000, the Legislature allowed for public employees who had worked for 30 years to retire with full benefits at age 50, and also set the cost-of-living adjustment at a fixed 3.5%. The commission believes these changes contributed to the system’s shortfall, according to the Herald.