Retirement insights from a Colorado PERA perspective

A distant view shows a mountainous landscape with sloping peaks, green trees in the foreground, and a cloudy sky above.

<h4 class="wp-block-heading"><a href="https://www.npr.org/sections/shots-health-news/2024/08/15/nx-s1-5075659/medicare-negotiated-drug-prices-for-the-first-time-heres-what-it-got" target="_blank" rel="noreferrer noopener">Medicare Negotiated Drug Prices for the First Time. Here’s What It Got. | NPR</a></h4>



Medicare has revealed the results of its first-ever negotiated drug prices. Officials have been negotiating with pharmaceutical companies for months, and that process just wrapped up, resulting in discounts on popular drugs for diabetes, cancer, arthritis, and other ailments. The new lower prices for the first batch of 10 prescription medications will take effect in 2026.



<h4 class="wp-block-heading"><a href="https://coloradosun.com/2024/08/15/colorado-special-session-property-taxes-election-2024/" target="_blank" rel="noreferrer noopener">Colorado Governor Calls Special Session on Property Taxes to Avoid Ballot Measure Fight in November</a></h4>



Gov. Jared Polis called for a special legislative session to tackle the issue of property taxes in Colorado. Various advocacy groups had been calling on the legislature to take action and pass a bill to lower taxes rather than allow two tax-related initiatives to appear on the November ballot.



<h4 class="wp-block-heading"><a href="https://www.reuters.com/markets/rates-bonds/size-looming-fed-rate-cuts-may-hinge-job-market-2024-08-02/" target="_blank" rel="noreferrer noopener">Fed Rate Cuts Loom Large as US Job Market Slows Sharply | Reuters</a></h4>



Prior to early August’s monthly jobs report, many analysts said the Federal Reserve would be likely to start lowering interest rates in September. That jobs report showed a noticeable increase in unemployment, signaling a weakening job market and all but guaranteeing a rate cut in the very near future.



<h4 class="wp-block-heading"><a href="https://www.plansponsor.com/milliman-reveals-health-care-costs-for-65-year-olds-retiring-in-2024/" target="_blank" rel="noreferrer noopener">Milliman Reveals Health Care Costs for 65-Year-Olds Retiring in 2024 | PLANSPONSOR</a></h4>



A new report highlights the rising cost of retiree health care. According to the Milliman Retiree Health Cost Index, the amount of savings needed to cover health care costs for a couple retiring in 2024 has increased by $7,000 in the past year if that couple is enrolled in original Medicare with supplemental coverage. On the other hand, retirees with Medicare Advantage plans need less money saved up in order to pay for care.



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News You Should Know is a digest of news from publications around the nation about finance, investing, and retirement.

News You Should Know: Medicare Wraps Up Drug Price Negotiations

The 2023 Colorado General Assembly commenced January 9 and will continue for 120 days.



Below you’ll find summaries of proposed legislation affecting Colorado PERA. The status of each bill will be updated regularly.



Last updated: June 7, 2023



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<h2 class="wp-block-heading"><a href="https://leg.colorado.gov/bills/sb23-056" target="_blank" rel="noreferrer noopener">SB23-056</a></h2>



<h3 class="wp-block-heading">Compensatory Direct Distribution To PERA</h3>



Summary: Requires the state to make an additional payment to PERA in an amount equal to $35,050,000 that, along with the payment required under <a href="https://peraontheissues.com/colorado-lawmakers-pass-bill-making-up-225m-payment-to-pera/" target="_blank" rel="noreferrer noopener">HB22-1029</a>, is meant to fully recompense PERA for the cancellation of a previously scheduled July 1, 2020, direct distribution of $225 million. The source of funds identified for this payment is the balance of the <a href="https://peraontheissues.com/2021-proposed-legislation-status/" target="_blank" rel="noreferrer noopener">PERA payment cash fund</a>, with any remaining amount coming from the state&#8217;s general fund.



Sponsors: <a href="https://leg.colorado.gov/legislators/chris-kolker" target="_blank" rel="noreferrer noopener">Sen. Chris Kolker</a>, <a href="https://leg.colorado.gov/legislators/shannon-bird" target="_blank" rel="noreferrer noopener">Rep. Shannon Bird</a>



Status: Passed; Gov. Jared Polis signed into law on June 2.



<h2 class="wp-block-heading"><a href="https://leg.colorado.gov/bills/sb23-016" target="_blank" rel="noreferrer noopener">SB23-016</a></h2>



<h3 class="wp-block-heading">Greenhouse Gas Emission Reduction Measures</h3>



Summary: Would require the PERA Board to adopt a proxy voting policy that ensures any voting decisions align with the state’s greenhouse gas emission reduction goals, as well as require PERA to include in its annual <a href="https://www.copera.org/investment-stewardship">Investment Stewardship Report</a> a description of climate-related investment risks, impacts and strategies. 



Sponsors: <a href="https://leg.colorado.gov/legislators/chris-hansen" target="_blank" rel="noreferrer noopener">Sen. Chris Hansen</a>, <a href="https://leg.colorado.gov/legislators/karen-mccormick" target="_blank" rel="noreferrer noopener">Rep. Karen McCormick</a>, <a href="https://leg.colorado.gov/legislators/emily-sirota" target="_blank" rel="noreferrer noopener">Rep. Emily Sirota</a>



Status: The Senate Finance Committee amended the bill Feb. 21 to remove the section pertaining to PERA&#8217;s proxy voting policy. Gov. Jared Polis signed the bill into law on May 11.



<h2 class="wp-block-heading"><a href="https://leg.colorado.gov/bills/hb23-1092" target="_blank" rel="noreferrer noopener">HB23-1092</a></h2>



<h3 class="wp-block-heading">Limitating Use of State Money</h3>



Summary: Would require PERA staff to make investment decisions solely on financial factors and would prohibit consideration of social, political, or ideological interests. The PERA Board opposes efforts to restrict PERA’s investment options or compel PERA to invest in a way that prioritizes a policy outcome over fiduciary duties.



Sponsor: <a href="https://leg.colorado.gov/legislators/rod-bockenfeld" target="_blank" rel="noreferrer noopener">Rep. Rod Bockenfeld</a>



Status: Postponed indefinitely



<h2 class="wp-block-heading"><a href="https://leg.colorado.gov/bills/sb23-104" target="_blank" rel="noreferrer noopener">SB23-104</a></h2>



<h3 class="wp-block-heading">Denver Public Schools Division Employer Contribution Reduction</h3>



Summary: Would reduce the employer contribution rate of the Denver Public Schools Division of PERA from 10.4% to 7.15% of salary. The PERA Board opposes reductions in contributions while PERA has unfunded liabilities.



Sponsors: <a href="https://leg.colorado.gov/legislators/james-coleman" target="_blank" rel="noreferrer noopener">Sen. James Coleman</a>, <a href="https://leg.colorado.gov/legislators/chris-hansen" target="_blank" rel="noreferrer noopener">Sen. Chris Hansen</a>, <a href="https://leg.colorado.gov/legislators/jennifer-bacon" target="_blank" rel="noreferrer noopener">Rep. Jennifer Bacon</a>



Status: Postponed indefinitely



<h2 class="wp-block-heading"><a href="https://leg.colorado.gov/bills/hb23-1144" target="_blank" rel="noreferrer noopener">HB23-1144</a></h2>



<h3 class="wp-block-heading">Public Employees&#8217; Retirement Association Defined Benefit Plan Payments To Ex-Spouse</h3>



Summary: This bill seeks to make changes in state law regarding the division of PERA Defined Benefit Plan benefits in legal separation or dissolution of marriage or civil union actions. Parties to these actions in Colorado may enter into an agreement allocating a portion of the PERA Defined Benefit Plan benefits to the retiree’s former spouse.&nbsp; The bill would terminate benefits to the former spouse of a PERA retiree if the former spouse remarries.



Sponsor: <a href="https://leg.colorado.gov/legislators/regina-english" target="_blank" rel="noreferrer noopener">Rep. Regina English</a>



Status: Postponed indefinitely



<h2 class="wp-block-heading"><a href="https://leg.colorado.gov/bills/hb23-1176" target="_blank" rel="noreferrer noopener">HB23-1176</a></h2>



<h3 class="wp-block-heading">PERA Defined Contribution Plan School Personnel</h3>



Summary: Would create a new &#8220;flexible defined contribution plan&#8221; for new members of PERA&#8217;s School and Denver Public Schools divisions. The plan would be separate from the existing PERA Defined Contribution (DC) Plan, which is available to State and Local Government division employees, and would offer members the ability to elect their contribution rates. The PERA Board opposes the bill as introduced because of the costs associated with the proposal and the inability for PERA to administer such a plan as written due to its failure to meet federal rules for governmental plans.



Sponsor: <a href="https://leg.colorado.gov/legislators/don-wilson" target="_blank" rel="noreferrer noopener">Rep. Don Wilson</a>



Status: Postponed indefinitely



<h2 class="wp-block-heading"><a href="https://leg.colorado.gov/bills/sb23-163" target="_blank" rel="noreferrer noopener">SB23-163</a></h2>



<h3 class="wp-block-heading">Colorado Parks and Wildlife Officers Classified As State Troopers</h3>



Summary: Would reclassify wildlife officers and parks and recreation officers employed by Colorado Parks and Wildlife as safety officers for the purpose of determining their PERA benefits.



Sponsors: <a href="https://leg.colorado.gov/legislators/perry-will" target="_blank" rel="noreferrer noopener">Sen. Perry Will</a>, <a href="https://leg.colorado.gov/legislators/iman-jodeh" target="_blank" rel="noreferrer noopener">Rep. Iman Jodeh</a>, <a href="https://leg.colorado.gov/legislators/mike-lynch" target="_blank" rel="noreferrer noopener">Rep. Mike Lynch</a>



Status: Passed; Gov. Jared Polis signed into law on June 6.

2023 Proposed Legislation Status

<h4 class="wp-block-heading" id="medicare-to-consider-lowering-part-b-premiums-kiplinger"><a href="https://www.kiplinger.com/retirement/medicare/604056/medicare-to-consider-lowering-part-b-premiums" target="_blank" rel="noreferrer noopener">Medicare to Consider Lowering Part B Premiums</a> | Kiplinger</h4>



Late last year, Medicare announced monthly premiums for Part B (medical coverage) would increase due to FDA approval of a controversial and expensive Alzheimer’s drug. The drug’s manufacturer has since cut the price in half, leading Medicare to reconsider its premium hike.



<h4 class="wp-block-heading" id="colorado-lawmakers-know-where-they-want-to-direct-federal-covid-funding-they-just-have-to-figure-out-how-the-colorado-sun"><a href="https://coloradosun.com/2022/01/31/colorado-arpa-committee-reports/" target="_blank" rel="noreferrer noopener">Colorado Lawmakers Know Where They Want to Direct Federal COVID Funding. They Just Have to Figure Out How.</a> | The Colorado Sun</h4>



For months, three task forces of Colorado lawmakers have been discussing how best to spend $2.6 billion in COVID funds from the federal government. The legislature has until the end of 2024 to allocate the money, and the task forces recommend focusing on priorities like affordable housing, behavioral health and economic relief.



<h4 class="wp-block-heading" id="interest-rates-are-expected-to-rise-in-2022-here-are-4-ways-to-prepare-cnbc"><a href="https://www.cnbc.com/2022/01/24/interest-rates-are-expected-to-rise-in-2022here-are-4-ways-to-prepare.html" target="_blank" rel="noreferrer noopener">Interest Rates Are Expected to Rise in 2022 — Here are 4 Ways to Prepare</a> | CNBC</h4>



The Federal Reserve is expected to raise a key interest rate — the federal funds rate — this year. Changes in that rate can lead to changes in other interest rates, like those you pay on credit cards, mortgages and other loans. Here are some smart money moves to consider while the federal rate is still low.



<h4 class="wp-block-heading" id="don-t-let-the-volatile-stock-market-rattle-your-retirement-savings-plan-yahoo-finance"><a href="https://finance.yahoo.com/m/c54a1e38-ba4b-4af9-b7d2-e252ffd6b8a1/don%27t-let-the-volatile-stock.html" target="_blank" rel="noreferrer noopener">Don’t Let the Volatile Stock Market Rattle Your Retirement Savings Plan</a> | Yahoo! Finance</h4>



The stock market has seen some wild ups and downs lately, which may cause some anxiety for people who have money invested in stocks. Nobody likes to see their account balance drop when the market dips, but good investment strategy and an eye on the long-term can help provide peace of mind during times of volatility.



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News You Should Know is a digest of news from publications around the nation about finance, investing, and retirement.

News You Should Know: Medicare May Lower Part B Premiums

When Colorado’s lawmakers convene at the State Capitol on Jan. 12, they’ll begin the 120-day process of proposing, debating, and deciding on bills that could change state law. With only about four months to decide on hundreds of bills, it’s a busy, fast-paced time at the Capitol.



It’s also a busy time for Michael Steppat, Colorado PERA’s Public &amp; Government Affairs Manager. He tracks legislation affecting PERA, maintains relationships with legislators, oversees lobbying, and more.



PERA On The Issues sat down with Steppat to get his perspective on the upcoming legislative session and the issues lawmakers might decide to tackle this year.



<h5 class="wp-block-heading">Can you explain your role and the work you do on behalf of PERA and its stakeholders?</h5>



<div class="wp-block-image"><figure class="alignright size-full is-resized"><img decoding="async" loading="lazy" src="https://content.copera.org/what-to-expect-in-colorados-2022-legislative-session/"PERA Public &amp; Government Affairs Manager Michael Steppat" class="wp-image-2734" width="225" height="281"/><figcaption>PERA Public &amp; Government Affairs Manager Michael Steppat</figcaption></figure></div>



The Colorado General Assembly is responsible for many aspects of PERA, including contribution rates and benefit levels, while the Board is responsible for overseeing PERA’s investments and the administration of benefits. PERA staff provide regular updates to the legislature so lawmakers can make informed decisions on issues that affect our members.



I represent PERA at the Capitol. I monitor and report on legislative activity, build and maintain relationships with legislators and other stakeholders, and oversee lobbying efforts. I also serve as the liaison for legislative committee staff.



It’s important that PERA is represented and can provide education to legislators — especially given legislator turnover at the State Capitol because of term limits — on the impact of proposed legislation to PERA’s active members and retirees.



<h5 class="wp-block-heading">Last year’s legislative session was an unusual one due to the COVID-19 pandemic. Will lawmakers be returning to a more “normal” session this year?</h5>



Last year, the General Assembly gaveled in to begin the session in January and then immediately hit “pause” on the session for several months due to COVID-19. We don’t expect the same thing to happen this year — all indications are that lawmakers will convene and begin the session as usual.



<h5 class="wp-block-heading">We know lawmakers plan to introduce a bill to make up the state’s <a href="https://peraontheissues.com/legislative-committee-seeks-to-make-up-missed-225m-payment-to-pera/" target="_blank" rel="noreferrer noopener">missed $225M payment to PERA</a> from 2020. What other issues do you anticipate seeing?</h5>



It’s possible we’ll see legislation pertaining to <a href="https://www.copera.org/retirees/working-after-retirement" target="_blank" rel="noreferrer noopener">working after retirement</a> laws, especially given the pandemic-related shortages of qualified teachers and other staff in rural school districts. There will likely be a fossil fuel <a href="https://www.copera.org/investments/divestment" target="_blank" rel="noreferrer noopener">divestment</a>-related bill, which was introduced last session as well. &nbsp;



There are more than five hundred bills introduced every session on a variety of issues, but the bills we can expect to be at the top of most legislators’ to-do lists next year include many of the usual hot topics like the state budget, health care and education.



<h5 class="wp-block-heading">Our members and retirees often ask if anything is being done about the Windfall Elimination Provision (WEP) and Government Pension Offset (GPO). Is there anything the state legislature can do about those provisions?</h5>



The WEP and GPO are two separate provisions in federal law that are specific to Social Security. It would require Congress to pass legislation for there to be any changes to those provisions. Last year, two bills were introduced that would repeal or change the WEP and GPO, but there has been no further action on either from lawmakers in DC. The efforts to drive this change over the past few years have, unfortunately, proved fruitless and the cost of such proposals is often mentioned as the reason. It is important for members and retirees to contact their representative or senator to have their voice heard on federal issues like this one.



<h5 class="wp-block-heading">Does PERA take a position on proposed legislation?</h5>



Yes, the Board of Trustees determines PERA’s legislative agenda and positions on bills in accordance with Board policies.



<h5 class="wp-block-heading">How can PERA members and retirees stay up-to-date and get involved in the process?</h5>



PERA On The Issues&nbsp;is a good place to start — our biweekly <a href="https://www.copera.org/what-to-expect-in-colorados-2022-legislative-session" target="_blank" rel="noreferrer noopener">newsletter</a> will be up-to-date on any legislation that affects PERA. We also encourage people to follow the <a href="https://facebook.com/coloradoretirementactioncenter" target="_blank" rel="noreferrer noopener" class="broken_link">Colorado Retirement Action Center on Facebook</a> and sign up for the PERA Ambassadors newsletter <a href="https://www.copera.org/what-to-expect-in-colorados-2022-legislative-session" target="_blank" rel="noreferrer noopener">here</a>.



In addition, the General Assembly&nbsp;<a href="https://leg.colorado.gov/" target="_blank" rel="noreferrer noopener">website</a>&nbsp;has lots of great information. You can listen to&nbsp;<a href="https://leg.colorado.gov/content/committees" target="_blank" rel="noreferrer noopener">committee meetings</a>, view&nbsp;calendars, review the&nbsp;<a href="https://leg.colorado.gov/bills" target="_blank" rel="noreferrer noopener">status of a bill</a>, and sign up to testify at committee meetings.



Most importantly, we encourage PERA members and retirees to contact their&nbsp;<a href="https://leg.colorado.gov/legislators" target="_blank" rel="noreferrer noopener">legislators</a>&nbsp;about issues that are important to them.

What to Expect in Colorado’s 2022 Legislative Session

Editor’s note: On Monday, Nov. 15, the Legislative Council voted to approve the bill, clearing the way for it to be introduced during the regular legislative session, which is set to begin on Jan. 12. PERA On The Issues will continue to monitor the bill and will provide updates regarding its status during the session.



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The Colorado General Assembly’s Pension Review Commission on Tuesday voted to recommend a bill for the 2022 legislative session that would make up the legislature’s missed $225 million direct distribution payment to PERA from July 2020.



Lawmakers <a href="https://peraontheissues.com/pera-related-legislation-sent-to-governor/" target="_blank" rel="noreferrer noopener">enacted legislation</a> to forego the annual $225 million payment to PERA during the height of the COVID-19 pandemic, when the General Assembly cut billions of dollars from the state budget. The state resumed payments in July 2021 but did not make up 2020’s payment.



The Pension Review Commission’s draft calls for the state to make a payment totaling $303.57 million — $225 million plus estimated investment gains, had the money been invested — on July 1, 2022.



Lawmakers recommended using money from the state’s general fund to make the payment, though committee members also suggested using money from a new cash fund the legislature established during the <a href="https://peraontheissues.com/2021-proposed-legislation-status/" target="_blank" rel="noreferrer noopener">2021 legislative session</a>. That fund, which currently has a balance of $380 million, is meant specifically for future payments to PERA.



The draft bill will head next to the Legislative Council before it could be introduced in the 2022 legislative session.



The $225 million direct distribution to PERA is part of a package of reforms enacted under Senate Bill 200 in 2018 and is meant to help PERA pay down its unfunded liability. Also included in Senate Bill 200 was the Automatic Adjustment Provision, which will trigger increases in employee and employer contributions to PERA and reductions to annual increases for benefit recipients in July 2022.

Legislative Committee Seeks to Make Up Missed $225M Payment to PERA

In January, <a href="https://content.copera.org/legislative-qa-with-peras-public-and-government-affairs-manager/" target="_blank" rel="noreferrer noopener">we spoke with</a> Michael Steppat, PERA’s Public and Government Affairs Manager. As the Colorado legislative session winds to a close, we checked back in to get his thoughts on a number of different topics.



<h4 class="wp-block-heading">The legislative session usually ends in early May. However, this year’s legislative session started with a multi-week recess due to COVID-19. So where does that put us now?</h4>



The state legislature can meet for no more than 120 days. The delay essentially just extended the deadline for the general assembly to adjourn sine die—the formal term used when the legislative session ends for the year. The number of days they were on recess can just be tacked on to the end of the original end date. That means the legislature must adjourn on or before June 12.



<h4 class="wp-block-heading"><a href="https://peraontheissues.com/2021-proposed-legislation-status/" target="_blank" rel="noreferrer noopener">Two bills related to PERA</a> have passed. What can you tell us about them? What effect will they have for PERA members?</h4>



PERA retirees who go back to work at a PERA employer in retirement must follow certain rules set by law. House Bill 21-1136 modified the provisions created for judges who work in retirement. These changes were made in order to address the massive caseload backlog caused by the pandemic and only affect retired judges.



Another bill, Senate Bill 21-228, set aside funds in the current fiscal year to be used by the state for future employer contributions or disbursements to PERA. This bill does not change anything about how PERA works. This bill was created primarily to give lawmakers additional flexibility to operate within Colorado’s state budget rules.



<h4 class="wp-block-heading">What is the status of last year’s direct distribution, which was part of across-the-board cuts the legislature made to the budget? Will this year’s $225 million direct distribution be made to PERA?</h4>



PERA did not receive the $225 million direct distribution in 2020, however the full direct distribution to PERA was restored going forward, including this year’s payment.



<h4 class="wp-block-heading">Do you expect any other PERA-related bills to come up this session?</h4>



I don’t expect any more bills that are directly related to PERA.



<h4 class="wp-block-heading">Many pieces of major federal legislation have been passed in the past few months. Do any of these impact state finances in a way that will affect PERA?</h4>



Anything that impacts state finances can potentially have an indirect effect on PERA, as we saw last year with the budget cuts that had to be made. However, there isn’t anything we’ve seen in any of the pandemic-relief-related federal legislation that would affect PERA directly. It’s also important to keep in mind that federal law prohibits state lawmakers from using the funds sent to them in recent COVID-related legislation for pension-related purposes.



<h4 class="wp-block-heading">As is the case most years, there is a bill to repeal the Government Pension Offset and Windfall Elimination Provision in Social Security. What is the state of that bill?</h4>



House Resolution 82, <a href="https://peraontheissues.com/wep-gpo-bill-introduced-in-d-c/" target="_blank" rel="noreferrer noopener">which would repeal the GPO and WEP</a>, was introduced earlier this year. While it has gained cosponsors since it was introduced in January, we haven’t seen it move through legislative process.



A second bill has also been introduced recently. While this second bill would not repeal these Social Security-related measures, it would make some changes to the WEP. See more about House Resolution 2337 <a href="https://content.copera.org/legislative-qa-with-peras-public-and-government-affairs-manager/" target="_blank" rel="noreferrer noopener">here</a>.

Legislative Q&A with PERA’s Public and Government Affairs Manager

<a href="https://results.enr.clarityelections.com/CO/91808/Web02-state.220747/#/" target="_blank" rel="noreferrer noopener">Election day in Colorado</a> changed the balance of power at the State Capitol, but voters rejected a majority of statewide ballot issues, leaving many of the state’s fiscal challenges without a clear resolution.



Democrats will hold all five statewide elected positions, as voters elected new faces for Governor, Lieutenant Governor, Secretary of State, Treasurer and Attorney General. <a href="https://content.copera.org/colorados-mid-term-elections-provide-some-answers-leave-some-questions/" target="_blank" rel="noreferrer noopener">Democrats also took over leadership in both chambers</a> of the State Legislature by electing a new majority of Senators and maintaining a majority in the House.



Voters rejected several statewide ballot questions, including tax increases that would have gone to schools and transportation projects. But while some of those who were elected have spoken of support for additional funding for roads and improving teacher pay, <a href="https://www.denverpost.com/2018/11/07/colorado-political-newsletter-10/" target="_blank" rel="noreferrer noopener">there are no clear paths</a> for where that funding might come from.



Nationally, health care and employee benefit experts are thinking about how a divided Congress – with Republicans keeping a Senate majority and Democrats taking the majority in the House – will impact health care policy and the workplace for both employees and employers. One possible result? Gridlock with split chambers may <a href="https://www.benefitspro.com/2018/11/09/industry-experts-react-to-midterm-elections/" target="_blank" rel="noreferrer noopener">force the states</a> to become more active on these issues.



The Colorado General Assembly will get to work on these and other issues on Friday, January 4, 2019, nearly a week before the legislative session typically starts. Why so soon? The Constitution requires that the governor is sworn in on the second Tuesday of January. The General Assembly can start its session no later than the second Wednesday of January. In 2019, the second Tuesday will be January 8 and the second Wednesday is January 9, when the session would typically start.



However, an additional constitutional requirement makes this schedule unworkable. According to the Office of Legislative Legal Sources, which recently posted an explanation on its <a href="https://legisource.net/2018/09/20/surprise-the-2019-legislative-session-convening-a-week-earlier/" target="_blank" rel="noreferrer noopener">Legisource blog</a>, the Constitution further requires the General Assembly to declare the winners of the top statewide offices. The Legislature has to be in session to do that and therefore, will satisfy these requirements by convening on January 4.



As always, PERA staff will be monitoring developments at the Capitol for impacts that could affect PERA or its members and retirees. Make <a href="https://www.copera.org/colorados-mid-term-elections-provide-some-answers-leave-some-questions" target="_blank" rel="noreferrer noopener">PERA on the Issues</a> your go-to source for up-to-date information on all things legislative.

Colorado’s mid-term elections provide some answers, leave some questions

Late Wednesday evening, May 9, the Colorado General Assembly voted to approve <a href="http://leg.colorado.gov/sites/default/files/documents/2018A/bills/2018a_200_enr.pdf" target="_blank" rel="noreferrer noopener">Senate Bill 18-200</a>, sending legislation that will return PERA to full funding over 30 years to the Governor for his signature.



All stakeholders—PERA members, retirees and employers—will be impacted by the legislation. It will reset PERA’s path to financial resilience, making the retirement fund stronger and more stable.



Having already been approved by both the Senate and the House, the legislation passed out of conference committee Wednesday evening and, later on the 9th, was again approved by both chambers. Some of the key provisions of the bill in its final form include:



•&nbsp; PERA receiving an annual <a href="https://peraontheissues.com/wp-content/uploads/2018/05/DirectDistribution-final.pdf" target="_blank" rel="noreferrer noopener">direct distribution</a> from the state budget of $225 million. •&nbsp; Increasing employer contributions by 0.25 percent beginning July 1, 2019 (except Local Government employers). •&nbsp; A phased-in increase of employee contributions for most members by an additional 2 percent, reaching a total of 10 percent of pay by 2021. •&nbsp; Suspending the Annual Increase (AI, or Cost of Living Adjustment) for 2018 and 2019. •&nbsp; Capping the Annual Increase at 1.5 percent and increasing the waiting period from one to three years. •&nbsp; Increasing the age and service requirements for new hires as of January 1, 2020 to:



°&nbsp; Any age with 35 years of service °&nbsp; Age 64 with 30 years of service °&nbsp; Age 65 with five years of service °&nbsp; Age 55 with 25 years of service for state troopers °&nbsp; Age 65 with five years of service for state troopers



•&nbsp; Increasing from three to five the number of years used to calculate Highest Average Salary (HAS) for non-vested members as of January 1, 2020. •&nbsp; Implementing an <a href="https://peraontheissues.com/wp-content/uploads/2018/05/AutoAdjustment-WORK_REV_5.17.18.pdf" target="_blank" rel="noreferrer noopener">Automatic Adjustment Provision</a> for contributions, Annual Increases and the state’s direct distribution that will keep PERA on a path to full funding in 30 years. •&nbsp; For new members hired on or after January 1, 2019, expanded access to the PERA Defined Contribution (DC) Plan for the Local Government Division, and for classified college and university employees.



PERA on the Issues will continue to publish additional information about the legislation and its impacts on current retirees, members and employers. More details about Senate Bill 200 in its final form are available <a href="https://www.copera.org/contributions-to-colorado-pensions-lower-than-average" target="_blank" rel="noreferrer noopener">here</a>.

General Assembly approves Senate Bill 18-200 to return PERA to full funding

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Senate Bill 18-200 ensures PERA is on the path to full funding in 30 years
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On March 7, 2018, SB 18-200 was introduced in the Colorado State Senate. The intent of the legislation is to improve PERA’s funded status and lower its overall risk. Sponsors include Sen. Jack Tate (R-Centennial), Sen. Kevin Priola (R-Henderson), Sen. Cheri Jahn (U-Wheat Ridge), House Majority Leader KC Becker (D-Boulder), and Rep. Dan Pabon (D-Denver). SB 18-200 has been assigned to the Senate Finance Committee, and a hearing is expected to be scheduled soon.



The PERA Board held a special meeting on Wednesday, March 7, and directed staff to continue engagement on reform legislation. Bill sponsor Senator Tate had <a href="https://peraontheissues.com/wp-content/uploads/2018/03/PERA-Board-Letter-1.pdf" target="_blank" rel="noreferrer noopener">a letter</a> read at the Board meeting thanking the PERA Board for their significant contributions to the development of this legislation. In September 2017, the PERA Board approved a&nbsp;<a href="https://www.copera.org/2018-pera-on-the-issues-legislative-preview" target="_blank" rel="noreferrer noopener">package of recommendations</a> to the General Assembly that would restore the fund’s resilience.



If passed by the Legislature and signed into law by Gov. Hickenlooper, the bill upholds the PERA Board’s goal of bringing all five of PERA’s Trust Funds to 100 percent funding within 30 years. The bill incorporates many of the PERA Board’s recommendations that would impact retirement benefits and contribution levels of all current and future PERA members and retirees. In addition, the legislation includes the Board’s recommended increase in contributions for PERA-affiliated employers. Certain provisions of the legislation would go into effect as soon as this year, while others would be phased-in over the next few years.



The bill includes a set of automatic adjustment provisions that would go into effect to ensure that PERA remains on the path to full funding in 30 years. These provisions would modify employee and employer contributions and the annual increase paid to retirees to offset any deviation from the 30-year timeframe. The bill would also require PERA to report to an interim legislative committee to ensure progress is being made toward full funding. This committee would also have the power to consider and recommend legislation regarding PERA to the full General Assembly.



The legislation would also allow new hires from all divisions the option to choose between the PERA Defined Contribution (DC) plan and PERA’s Hybrid Defined Benefit Plan. Currently, only employees in the State Division have this option.



Below are additional details on how the bill would affect retirees, current members, future members, and employers.



Retirees The only provisions affecting retirees (who are not working after retirement) are related to the annual increase. For current retirees, there would be a two-year suspension of the annual increase in 2018 and 2019, followed by a reduction in the cap of the annual increase paid each year thereafter to 1.25 percent from the current 2.0 percent.



Current members The immediate impact for current members would be a phased-in 3 percent contribution increase from the current 8 percent to 11 percent of pay, starting in July 2018.



Like retirees, current members would have a lower cap on the potential annual increase paid. In addition to a reduction in the annual increase, the waiting period would increase to three years from the current one year.



Current members would also see a change to the definition of PERA-includable salary that would include certain pre-tax benefit programs under Sections 125 and 132 of the Internal Revenue Code.



Finally, as currently written, the bill would change the retirement eligibility age for all members who are age 46 or younger as of January 1, 2020, by adding one year to full service retirement eligibility for every four years less than age 46, not to exceed 65 years of age. A similar requirement would apply for reduced service retirement, not to exceed 60 years of age.



In addition to the changes listed above, nonvested members (those with fewer than five years of service credit) would see a change in the length of time used to determine Highest Average Salary (HAS). Currently, HAS is determined by using the three highest years of salary while this proposed legislation would increase the number of years to seven.



New members on or after January 1, 2020 All of the above changes would apply to new members, except for the retirement age eligibility modifications for current members described above. For new hires, eligibility requirements (age and service) for full service retirement benefits would increase to age 65 for most members with a minimum of five years of service and age 55 with 25 years of service for a reduced service retirement (for certain employees, mainly State Troopers, full service retirement benefits will require recipients be age 55).



New hires would earn service credit based on the full-time equivalency of their position.



New hires in all divisions would also be able to choose between the PERA Hybrid Defined Benefit Plan and the PERA DC Plan.



PERA-affiliated employers For all PERA employers, there would be a phased-in contribution increase of 2 percent of pay beginning July 1, 2018.



Additionally, employers would be required to calculate contributions on PERA-includable salary to include employee participation in certain benefit programs outlined above starting in January 2020.



Finally, for certain Local Government Division employers who choose to disaffiliate from PERA, the discount rate used to determine liabilities will be modified.



To learn more about how the introduced bill compares to the <a href="https://www.copera.org/2018-pera-on-the-issues-legislative-preview" target="_blank" rel="noreferrer noopener">PERA Board’s recommended package</a> from September 2017, please refer to <a href="https://peraontheissues.com/wp-content/uploads/2018/03/Comparison-Board-and-SB18-200-1.pdf" target="_blank" rel="noreferrer noopener">this fact sheet</a>. To stay up-to-date on all PERA-related legislation, please subscribe to the PERA on the Issues newsletter by <a href="https://content.copera.org/legislation-to-reduce-peras-risk-profile-introduced/" target="_blank" rel="noreferrer noopener">signing up here</a>.

Legislation to reduce PERA’s risk profile introduced

A summary of proposed legislation affecting Colorado PERA. Check back often for new bills and updated status reports. Last updated: May 21, 2018.



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Active Bills



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<h3 class="wp-block-heading"><a href="http://leg.colorado.gov/sites/default/files/documents/2018A/bills/2018a_200_enr.pdf" target="_blank" rel="noreferrer noopener">Senate Bill 18-200</a></h3>



(Note: the summary below reflects the bill as it was passed out of the House on May 2, 2018, and does not reflect the changes made to the bill by the conference committee and approved by the House and Senate on May 9, 2018. An updated summary and a comparison between the final version and previous versions, along with the Board&#8217;s proposal, will be available soon.)



Modifications To PERA To Eliminate Unfunded Liability



Summary (applies to the reengrossed version of this bill as introduced in the second house): The public employees&#8217; retirement association (PERA) provides retirement and other benefits to employees of the school districts, state, local governments, and other public entities across the state. The bill makes changes to the hybrid defined benefit plan administered by PERA with the goal of eliminating, with a high probability, the unfunded actuarial accrued liability of each of PERA&#8217;s divisions and thereby reach a 100% funded ratio for each division within the next 30 years. The bill modifies benefits, ensures alignment of contributions and benefits, and makes other modifications as follows:



Highest Average Salary (HAS): Currently, for a PERA member who is not in the judicial division of PERA, the member&#8217;s HAS is based on an average of the highest annual salaries associated with 3 periods of 12 consecutive months of service with a base year. For a PERA member who is in the judicial division of PERA, the member&#8217;s HAS is based on an average of the highest annual salaries associated with 12 consecutive months of service. For all new PERA members hired on or after January 1, 2020, who are not in the judicial division, and for all existing PERA members who do not have 5 years of service credit as of January 1, 2020, who are not in the judicial division, the bill modifies the HAS calculation to be based on an average of the highest annual salaries associated with 5 periods of 12 consecutive months of service with a base year. For all new PERA members hired on or after January 1, 2020, who are in the judicial division, and for all existing PERA members in the judicial division who do not have 5 years of service credit as of January 1, 2020, the bill modifies the HAS calculation to be based on an average of the highest annual salaries associated with 3 periods of 12 consecutive months of service with a base year.



Definition of salary: The bill modifies the definition of salary for new hires as of July 1, 2019, by including amounts deducted from pay pursuant to a cafeteria plan or a qualified transportation plan in the definition of salary. In addition, the bill includes unused sick leave converted to cash payments in the definition of salary for all members.



Contribution increases: The bill increases the employee contribution rate by 2.0%, phased-in over three years. Beginning July 1, 2019, the bill will increase employee contributions by 0.75%, followed by another 0.75% increase on July 1, 2020, and finally a 0.50% increase on July 1, 2021. The bill also increases the employer contribution rate by 0.25% beginning on July 1, 2019, except for the Local Government employers.



Termination of affiliation: Employers assigned to the PERA local government division may terminate affiliation with PERA upon application to the PERA board. The bill clarifies that any employer that ceases operations or ceases to participate in PERA for any reason is deemed to have terminated its affiliation with PERA and is required to fully fund its share of the unfunded liability. The bill further clarifies that the PERA board will determine the amount of such payments and that such determinations are appealable through PERA’s administrative review process. Additionally, employees with less than five years of service credit will now be able to keep an account at PERA, rather than having their accounts automatically moved to a replacement plan.



Direct distribution: The bill modifies current statute to allow for a direct distribution from the state treasury to PERA of $225 million annually.



Expands state trooper definition to include certain other public safety officers: This bill adds certain public safety officers (such as sheriffs, detention officers, and corrections officers) who become members of PERA on or after January 1, 2020 to the definition of “state trooper,” applying the higher state trooper contribution rate, lower age and service credit retirement eligibility, and immediate disability eligibility for on-the-job injuries to these other public safety officers.



Automatic contribution and annual increase amount changes: The bill specifies the circumstances under which the member and employer contribution rates, the direct distribution &nbsp;and the annual increase percentage for retirement benefits can be adjusted so the fund remains within the target of paying off the unfunded liability within 30 years. The bill specifies that the yearly adjustments can be up to one-quarter of one percent on the annual increase percentage, one-half of one percent on the employee and employer contribution percentages and the direct distribution may increase by $25 million or decrease by $20 million. The bill places limits on how much the annual increase,contribution rates and the direct distribution can be adjusted. Automatic adjustments could begin as early as July 1, 2020.



Service retirement eligibility for new members: For non-state trooper members who begin employment on or after January 1, 2020, the bill increases the age and service requirements for full-service retirement benefits to age 64 with a minimum of 30 years of service, age 65 with a minimum of 5 years of service, and any age with a minimum of 35 years of service. For non-state trooper members who begin employment on or after January 1, 2020, the bill increases the age and service requirements for reduced service retirement to age 55 with a minimum of 25 years of service and age 60 with a minimum of 5 years. For new state trooper members who begin employment on or after January 1, 2020, the bill increases the age and service requirements for full-service retirement benefits to age 55 with 25 years of service, age 65 with 5 years of service, or any age with 35 years of service. For new state trooper members who begin employment on or after January 1, 2020, the bill increases the age and service requirements for reduced service retirement to age 50 with 20 years of service.



Cost of living adjustment (COLA) for all retirees, members, and inactive members: Currently, the annual COLA for benefit recipients who began membership prior to January 1, 2007, is 2%. For the years 2018 and 2019, the bill reduces the COLA to 0%. For each year thereafter, the bill changes the COLA to 1.50%, unless it is adjusted pursuant to the automatic adjustment provisions explained above. In addition, the bill requires benefit recipients to wait 36 months or three years (depending on when they became members) after benefits commence before receiving their first COLA if they had not received a COLA on or before May 1, 2018.



Defined Contribution (DC) choice expansion: New members in the Local Government Division and certain classified employees of state colleges and universities in the State Division on or after January 1, 2019 will have a choice between joining the PERA Hybrid Defined Benefit plan or the PERAChoice DC plan.



Defined Contribution (DC) supplement: Employers whose employees choose to participate in the DC plan will pay the DC supplement in order to offset any increases in PERA liabilities created by members who would otherwise have participated in the Hybrid Defined Benefit plan.



Public pension legislative oversight committee: Expands the existing Police Officers’ and Firefighters’ Pension Reform Commission to include oversight of PERA and creates a subcommittee exclusively focused on PERA. The 14-member subcommittee will include four legislators appointed from the Commission and 10 appointed external experts from relevant industries.



Investment program oversight: PERA may share private equity and real estate investment details in an executive session of the legislative members of the Subcommittee unless confidentiality provisions of contracts prohibits such disclosure.



Sponsors: <a href="http://leg.colorado.gov/legislators/jack-tate">Sen. Jack Tate</a>, <a href="http://leg.colorado.gov/legislators/kevin-priola">Sen. Kevin Priola</a>, and <a href="http://leg.colorado.gov/legislators/cheri-jahn">Sen. Cheri Jahn</a> | <a href="http://leg.colorado.gov/legislators/kc-becker">Majority Leader KC Becker</a> and <a href="http://leg.colorado.gov/legislators/dan-pabon">Rep. Dan Pabon</a>



Status:&nbsp;Awaiting action from the Governor.&nbsp;(Passed conference committee and re-passed by the House and Senate on May 9, 2018.)



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<h3 class="wp-block-heading">Inactive Bills</h3>



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<h3 class="wp-block-heading"><a href="https://leg.colorado.gov/bills/hb18-1111" target="_blank" rel="noreferrer noopener">House Bill 18-1111</a></h3>



Modifications To PERA Board Of Trustees



Summary: Reconfigure the PERA Board of Trustees and allow Trustees access to member and retiree information.



This bill would change the existing 16-member <a href="https://content.copera.org/2018-proposed-legislation-status/" target="_blank" rel="noreferrer noopener">Board of Trustees</a> as follows:



<ul>
<li>Eliminate four member-elected positions;
<ul>
<li>Eliminate one elected Trustee from the State Division (lowering from three to two Trustees in this Division, one of whom is from Higher Ed);</li>



<li>Eliminate three elected Trustees from the School Division (lowering from four to one Trustee in this Division);</li>
</ul>
</li>



<li>Require the member-elected positions to be at least 20 years from retirement eligibility (the DPS seat would not be modified to have this requirement);</li>



<li>Replace the eliminated positions with four Trustees appointed by the Governor, with Senate confirmation, bringing the total of Governor-appointed Trustees to seven. These appointees may not be PERA members or retirees. Of the seven appointees, no more than four shall be from the same political party.</li>



<li>Eventually, the seven appointed Trustees must be comprised of professionals with ten years of experience in the following fields:
<ul>
<li>One professional in investment fund management,</li>



<li>One professional in accounting and a CPA,</li>



<li>One professional in securities law and a licensed attorney in Colorado,</li>



<li>One professional in tax law and a licensed attorney in Colorado,</li>



<li>One professional in pension management,</li>



<li>One professional in actuarial analysis and a certified actuary, and</li>



<li>One professional who is a certified financial planner accredited by a nationally recognized accreditation agency.</li>
</ul>
</li>
</ul>



In addition to composition changes, the bill would also authorize a Trustee to review all records or information within the custody and control of PERA.



The bill defines information requests to include: “salary and benefit information that is contained in records of members, former members, inactive members, DPS members, DPS retirees, benefit recipients, and their dependents; except that, in fulfilling a request for records or information by a trustee pursuant to this section, the executive director of the association and the board shall not provide any other information that is designated as confidential pursuant to Section 24-51-213.”



Sponsors: <a href="https://leg.colorado.gov/legislators/justin-everett" target="_blank" rel="noreferrer noopener">Rep. Justin Everett</a> | <a href="https://leg.colorado.gov/legislators/tim-neville" target="_blank" rel="noreferrer noopener">Sen. Tim Neville</a>



Status:&nbsp;Postponed indefinitely&nbsp;(House State, Veterans, and Military Affairs 2/14/18)



PERA Board Position: Opposed.

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