Retirement insights from a Colorado PERA perspective

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<h4 class="wp-block-heading"><a href="https://coloradosun.com/2023/11/20/colorado-special-session-bills-passed-2023/" target="_blank" rel="noreferrer noopener">What the Colorado Legislature Passed During the Special Session and How It Will Affect Your Wallet | The Colorado Sun</a></h4>



After voters rejected Proposition HH, state lawmakers convened for a special session focused on property tax relief. In all, lawmakers passed seven bills aimed at providing financial relief and assistance, including property tax relief and increased TABOR refunds for lower earners.



<h4 class="wp-block-heading"><a href="https://news.bloomberglaw.com/daily-labor-report/federal-lawmakers-seek-401k-plans-for-teen-savers-in-new-bill" target="_blank" rel="noreferrer noopener">Federal Lawmakers Seek 401(k) Plans for Teen Savers in New Bill | Bloomberg Law</a></h4>



Lawmakers introduced a bill that would change federal law to make it easier for 18-to-20-year-olds to save for retirement in employer-sponsored plans. The bill, known as the Helping Young Americans Save for Retirement Act, would lower the minimum participation age in plans like 401(k)s from 21 to 18.



<h4 class="wp-block-heading"><a href="https://www.cbsnews.com/news/unnecessary-medical-care-treatments-costs/" target="_blank" rel="noreferrer noopener">Why It&#8217;s So Tough to Reduce Unnecessary Medical Care | CBS News</a></h4>



A recent report shows that despite efforts to reduce unnecessary health care spending in Colorado, spending on so-called “low-value” care — such as unneeded testing — has barely changed. Despite financial incentives and patient demands to provide more care than is necessary, one Colorado hospital has found some innovative ways to cut waste.



<h4 class="wp-block-heading"><a href="https://finance.yahoo.com/news/the-irs-makes-tax-filing-simpler-for-next-year-with-long-awaited-improvements-180235101.html" target="_blank" rel="noreferrer noopener">The IRS Makes Tax Filing Simpler for Next Year With Long-Awaited Improvements | Yahoo! Finance</a></h4>



Thanks to a boost in funding, the IRS is rolling out a number of changes that should make tax filing season a little easier. Updates include better customer service staffing, expanded electronic communication options and a more user-friendly tax refund tracker, with more changes on the way.



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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: How Colorado’s Special Session Will Affect Your Finances

The PERA Board of Trustees met for its last meeting of 2021 on Nov. 19. The Board heard updates from PERA staff and also discussed a number of important issues, several of which are summarized below.



<h4 class="wp-block-heading">2022 Board election</h4>



The Board approved the calendar for the 2022 Board election, when four Board seats will be up for election. They are:



<ul><li>Ramon Alvarado (State Division)</li><li>Ashley M. Smith (State Division)</li><li>Guillermo Barriga (School Division)</li><li>Cheryl Pattelli (Local Government Division)</li></ul>



Candidacy packets will be available for interested parties beginning in January, and the election will be held in May.



<h4 class="wp-block-heading">Member contribution interest rate</h4>



Every year, the PERA Board sets the <a href="https://www.copera.org/members/tax-deferred-interest" target="_blank" rel="noreferrer noopener">interest rate</a> paid on Defined Benefit (DB) Plan accounts. That interest rate is set at 3 percent for 2021 and is compounded annually.



If a PERA member leaves PERA-covered employment and requests a refund of their DB account, they receive their contributions and any applicable employer match plus the interest earned on that balance. If that member keeps their account with PERA, however, their balance will continue to accrue interest and the member will be eligible for a lifetime monthly benefit when they reach retirement eligibility.



After discussing the competitiveness of the interest rate and its effectiveness in encouraging members to keep their accounts with PERA, the Board voted to keep the interest rate at 3 percent for 2022.



<h4 class="wp-block-heading">Board Governance Manual update</h4>



As part of the regular review of its governance framework, the Board voted to approve a number of changes to its Governance Manual, which outlines policies and other guidelines for how the Board oversees PERA’s operations. Some of the updates were minor and involved updating wording to align with current Board practice. Others involved updating PERA’s <a href="https://www.copera.org/recap-of-the-pera-boards-november-2021-meeting" target="_blank" rel="noreferrer noopener" class="broken_link">mission and vision statements</a>, which underwent review in 2020, and updating the Board’s standards of professional and ethical conduct.



The Governance Manual is <a href="https://www.copera.org/recap-of-the-pera-boards-november-2021-meeting" target="_blank" rel="noreferrer noopener" class="broken_link">available online here</a>.



<h4 class="wp-block-heading">Legislative update</h4>



The Board also received an update on a draft bill calling for the legislature to make up its missed $225 million payment to PERA from 2020. That bill, <a href="https://peraontheissues.com/legislative-committee-seeks-to-make-up-missed-225m-payment-to-pera/" target="_blank" rel="noreferrer noopener">which we covered previously here</a>, passed Legislative Council review on Nov. 15, clearing the way for it to be introduced in the legislative session. Lawmakers are set to begin the regular session on Jan. 12, 2022. The Board’s next meeting is scheduled for Jan. 21, 2022.

Recap of the PERA Board’s November 2021 meeting

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

After a historic pause, the state legislature returned to work in May. Four bills containing language related to PERA have been approved by both the House and Senate since the legislative session resumed. They now move to Governor Polis’s desk, where he can sign them into law or veto them. If he does not take action, the bills automatically become law after 10 days. 



A brief description of each bill, as well as the position taken by PERA’s Board, is included below.



<a href="https://leg.colorado.gov/bills/hb20-1379" target="_blank" rel="noreferrer noopener">HB 20-1379</a>: Suspension of the state’s direct distribution for one fiscal year



PERA Board position: PERA’s Board opposed the bill. As fiduciaries and pursuant to its funding policy, the Board opposes any reductions in contributions to PERA while PERA has unfunded liabilities.



What the bill does: This bill was introduced after the shuttered economy required billions to be cut from the state budget. The bill suspends the state’s $225 million direct distribution to PERA for the 2020-21 fiscal year. The <a rel="noreferrer noopener" href="https://peraontheissues.com/wp-content/uploads/2018/05/DirectDistribution-final.pdf" target="_blank">direct distribution</a> is an amount of money set aside annually in the state budget to bring PERA to full funding. It was first put into law in 2018 as part of SB 18-200. The bill does not adjust retiree benefit payments and is not related to direct deposit. The direct distribution is used solely to pay off PERA’s unfunded actuarial accrued liability.



The direct distribution is not the only source of contributions PERA receives. PERA also receives member contributions and employer contributions. In 2018, member contributions totaled $938 million and employer contributions totaled $1.745 billion. As an employer, the state contributed $567 million in employer contributions in 2018. The state will continue making normal employer contributions during the suspension of the direct distribution in the next fiscal year.



<a href="https://leg.colorado.gov/bills/hb20-1394" target="_blank" rel="noreferrer noopener">HB 20-1394</a>: Changes contribution rates for judges for two fiscal years



PERA Board position: PERA’s Board opposed the bill. The PERA Board, as fiduciaries and pursuant to its funding policy, opposes reductions in contributions to PERA while PERA has unfunded liabilities.



What the bill does: Like HB 20-1379, this bill is the result of an array of budget cuts the state made in May. The bill makes a temporary change to the contribution rates for state judges and their employer. Judges will contribute an additional five percent to PERA for fiscal years 2020-21 and 2021-22 while employer contributions are reduced by five percent.



These additional member contributions will go directly to each member’s account and are treated as normal contributions. While this change will affect a judge’s take-home pay, it will not affect his or her <a href="https://www.copera.org/pera-on-the-issues/pera-related-legislation-sent-to-governor" target="_blank" rel="noreferrer noopener">highest average salary</a> calculation.



While the total contributions coming to PERA will remain equal, the dollars received from employer contributions have a stronger effect in reducing PERA’s unfunded actuarial accrued liability than employee contributions. As a result, the bill has a slight negative effect on PERA’s goal of becoming fully funded.



This bill only applies to state court judges. The bill does not affect PERA contributions for those who work for the judicial branch in other roles, nor does it adjust contributions made by Denver County Court Judges.



<a href="https://leg.colorado.gov/bills/sb20-057" target="_blank" rel="noreferrer noopener">SB 20-057</a>: Adds firefighters employed by the Department of Public Safety to the Safety Officer benefit structure in PERA



PERA Board position:&nbsp;The PERA Board of Trustees considered this bill at its January 17 meeting and decided to not take a position.



What the bill does: The Division of Fire Prevention and Control is part of the Department of Public Safety. This bill alters the benefits firefighters in this Division receive, including PERA benefits, to reflect the nature of the job description.



Certain PERA employers hire people who fall under the category of “Safety Officers.” The state legislature, not PERA, determines which positions fall under this category. Safety Officers have a higher PERA contribution rate than other PERA members. They also use different tables to calculate their benefit. These tables were formerly referred to as “Trooper tables,” as State Trooper was once the primary job to fall under this category. However, in 2018, the state legislature added county sheriffs, corrections officers, and similar positions to the category, a change that went into effect in 2019.



SB 20-057 adds all current and future employees classified as a firefighter I through firefighter VII to the category of Safety Officer, beginning on July 1, 2020.



Current employees who had been building a benefit with PERA under the standard PERA tables will begin building a dual-service benefit under this new structure that takes into account the benefit earned under each structure. &nbsp;



<a href="http://leg.colorado.gov/bills/HB20-1127" target="_blank" rel="noreferrer noopener">HB 20-1127</a>: Modifies the rules for retirees hired by a BOCES



PERA Board position:&nbsp;The PERA Board of Trustees considered this bill at its January 17 meeting and decided to not take a position.



What the bill does: PERA retirees who wish to work at a PERA employer in retirement must follow <a href="https://www.copera.org/retirees/working-after-retirement" target="_blank" rel="noreferrer noopener">requirements</a> established by the state legislature. The bill modifies the rules for certain retirees hired by a Boards of cooperative services (BOCES).



BOCES provide special education services to the school districts they serve. Almost all of these school districts are in rural parts of the state. BOCES often face difficulty hiring qualified people to serve as special service providers in these areas.



The bill allows a PERA retiree who is a special service provider (which includes school psychologists, early childhood education teachers, speech language pathologists, and more) to work beyond the limits set by these requirements. They can do this for up to five consecutive years without a reduction in their benefits.



The bill requires a BOCES that hires a PERA retiree to provide full payment of all PERA employer contributions, disbursements, and working retiree contributions. In addition, the BOCES is required to pay an additional amount equal to two percent of the retiree’s salary to PERA.



Under the bill’s provisions, all BOCES combined may hire no more than 40 people over five years.







Editor&#8217;s note: This story was updated on 6/9 to reflect the passage of SB 20-057

Tag Archives:

News You Should Know: How Colorado’s Special Session Will Affect Your Finances

Recap of the PERA Board’s November 2021 meeting

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

PERA-related Legislation Sent to Governor

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