The Colorado Public Employees’ Retirement Association (PERA), which has been grappling with a $12.8-billion funding deficit, announced the legislative proposal Monday, creating a new tier of benefits and contribution levels for employees hired in 2007 and beyond, according to news media reports.
The $34-billion PERA has 360,000 members among the state’s teachers, judges, and local government workers. PERA’s proposed legislation needs a legislative sponsor in order to be passed by the General Assembly and signed into law before becoming effective.
PERA traditionally was a Colorado success story, funding above-average retirement benefits at a cost below what most employers pay. A rapid expansion of benefits just before the stock market crash turned that story around, however. PERA’s liabilities exceed its assets by $11.3 billion.
Under PERA’s proposed reforms, according to the media reports:
- Future hires will receive 2.1% of their highest average salary for each year of service instead of the 2.5% that current members earn. Highest average salaries will be based on the highest five years of pay rather than three years.
- Employees hired in 2007 won’t get guaranteed cost-of-living increases; compared with the required current 3.5% bump in benefits each year to which current members are entitled.
- Contributions from the state, school districts and other public employers would accelerate at 0.5% a year between 2008 and 2011 rather than the current 0.4% advance. Employer contributions would hit a cap at 13.65% of workers’ pay in 2012 rather than the 13.15% cap proposed last year.
- If the new plan falls below 90% of the funds it needs, contributions from employees and employers will bump up by 1%.
- Once employees contribute 10% of their pay, benefit cuts will follow until the plan is stabilized. If the plan reaches 110% of funding, contribution levels will be reduced and benefits restored.
- To reflect the lower benefits they will receive, future public employees would contribute 7% of pay, compared with the current 8%.
A full description of the plan is here .