Retirement insights from a Colorado PERA perspective

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We’re more than halfway through the 2026 legislative session, which kicked off in mid-January and will continue until mid-May. So far, state lawmakers have introduced nearly 500 bills that could become law.



For an update on this session’s legislative activity, we checked in with Michael Steppat, PERA’s Director of Public and Government Affairs. Throughout the session, Steppat, along with PERA executives, meets with legislators, educates them on and discusses PERA-related issues and policy, and testifies at bill hearings.



Can you start by updating us on PERA-related bills that have been introduced so far?



As of mid-March, legislators <a href="https://www.copera.org/pera-on-the-issues/2026-proposed-pera-related-legislation-status">have introduced four PERA-related bills</a>, one of which is still making its way through the General Assembly.



<a href="https://leg.colorado.gov/bills/HB26-1026" target="_blank" rel="noreferrer noopener">House Bill 1026</a> would make changes to PERA provisions related to purchasing service credit and expand access to the PERAPlus 401(k) and 457 plans. Under current state law, qualified PERA members can purchase service credit based on previous periods of employment, and this bill would allow for limited purchases based on periods of unemployment, such as taking time off to raise a child or care for a loved one. It would also require all PERA-affiliated employers to offer the PERAPlus 401(k) and 457 plans, in both pre-tax and Roth options, to their employees.



Many employers already offer these plans to their employees, which have competitive advantages compared to others available in the marketplace. The bill does not mandate that employees participate in them, and it allows employers to continue offering any other existing plans if they choose. That bill has passed the House and is now under consideration in the Senate.



<a href="https://leg.colorado.gov/bills/HB26-1146" target="_blank" rel="noreferrer noopener">House Bill 1146</a> would allow approved facility schools to apply for affiliation with PERA to provide retirement benefits to their employees. These are schools serving students whose needs aren’t being met in a regular classroom. That bill has passed.



<a href="https://leg.colorado.gov/bills/HB26-1027" target="_blank" rel="noreferrer noopener">House Bill 1027</a>, which would allow executive directors of boards of cooperative services (BOCES) to return to work after retiring for unlimited amounts of time without facing a reduction in their PERA benefits, has passed. That bill was signed into law by Governor Polis on March 12.



MORE INFO: <a href="https://www.copera.org/pera-on-the-issues/2026-proposed-pera-related-legislation-status">2026 Proposed PERA-Related Legislation Status</a>



Let’s talk about the State budget. As lawmakers work to cut spending and balance the budget, they’ve been discussing the potential privatization of Pinnacol Assurance. Can you explain more about that and why PERA is part of the conversation?



Pinnacol Assurance is a quasi-public entity that provides workers’ compensation coverage, serves as the State’s “insurer of last resort,” and is an affiliated employer in the State Division of PERA. The Governor’s Office has proposed to convert it to a private company and to use the proceeds of the State’s interest in Pinnacol for other priorities to help alleviate the budget shortfall. Pinnacol also wants to privatize so it can modernize and serve the needs of its customers, which may include expanding its business outside of Colorado, something it’s currently prohibited from doing.



The privatization of Pinnacol has been a point of discussion in many recent legislative sessions, and the reason PERA comes into play is because Pinnacol’s employees are public employees and therefore PERA members. If Pinnacol were to become a private entity, its employees could no longer be PERA members, and they and Pinnacol could no longer contribute to the Defined Benefit Plan, and so there would be a requirement for Pinnacol to disaffiliate from PERA.



That kind of conversion has financial implications for PERA, since those employees would still be entitled to the retirement benefits they’d earned prior to disaffiliation and given the current unfunded liability of PERA, there is a cost to disaffiliate. Under state law, any employer who disaffiliates from PERA must pay for its share of that unfunded liability. PERA’s actuaries calculate the cost of disaffiliation based on current law, which means using a 5.25% discount rate—PERA’s actuarial investment assumption rate (currently at 7.25%) minus 200 basis points, or 2%—to account for the inherent risks and ensure PERA has the assets to pay the earned benefits over time without that liability shifting to the rest of the State Division fund.



The potential conversion of Pinnacol to a private entity has also been the topic of ballot measures filed recently for the upcoming November election. We’ll continue to monitor this issue and ensure that if privatization moves forward, it won’t have any negative financial effect on PERA.



Are there other aspects of the budget process that might affect PERA?



The Joint Budget Committee is nearing the finish line when it comes to producing the State budget for the next fiscal year. The budget bill, known as the long bill, will be introduced later this month, and there will be a handful of companion bills that relate to the State budget.



The JBC is tasked with cutting hundreds of millions of dollars to produce a balanced budget, which is required by law, as the costs of providing certain governmental services has been increasing faster than what the State is allowed to keep and spend each year. That’s no easy task, and they’ve had to juggle many competing priorities throughout the process.



PERA doesn’t rely on the State budget for the administration or operating costs of the plan, but we always monitor the budget-writing process to watch for any potential impacts. Any changes to PERA contributions—either the State’s annual $225 million direct distribution to PERA or the State’s contributions as a PERA employer—would require separate legislation to go through the regular legislative process and be signed into law by the Governor.



The Governor had included in his budget proposal a temporary 1% reduction in the State’s contributions to PERA as an employer, but the Joint Budget Committee denied that request earlier in the session. We’re grateful that the Legislature remains committed to making consistent contributions to fund public employees’ retirement benefits.



READ MORE: <a href="https://copera.org/pera-on-the-issues/joint-budget-committee-rejects-proposal-to-reduce-pera-contributions">Joint Budget Committee Rejects Proposal to Reduce PERA Contributions</a>



What other legislative issues can we expect to come up between now and the end of the session?



We’re currently working with legislators on a companion bill to the long bill that we think will put PERA on even stronger footing as we make progress toward our funding goal.



PERA’s actuaries conducted a study into some potential changes that could reduce the likelihood of triggering the&nbsp;<a href="https://www.copera.org/automatic-adjustment-provision" target="_blank" rel="noreferrer noopener">Automatic Adjustment Provision</a>&nbsp;(AAP) that took effect with Senate Bill 200 in 2018. The AAP automatically adjusts member and employer contributions, the State’s direct distribution, and retiree annual increases based on our funding progress.&nbsp;



We know those adjustments can be really challenging for our members and retirees, so the bill will include two proposals that are meant to make adjustments less likely in the near future—without jeopardizing our progress toward reaching full funding by 2048.



Those proposals include providing PERA flexibility to&nbsp;allocate&nbsp;the&nbsp;State’s annual $225 million direct distribution&nbsp;to whichever division trust funds&nbsp;would help minimize the likelihood of&nbsp;triggering automatic&nbsp;adjustments and&nbsp;redirecting a&nbsp;portion&nbsp;of employers’ health care trust fund contributions to instead help pay off&nbsp;pension&nbsp;liabilities.&nbsp;The health care trust fund is closer to full funding than the pension trust funds, so we want to make sure those contributions are going where they’re needed most and benefit the largest number of retirees.



It’s also likely that the Legislature will consider a bill suspending certain interim committee activities like they did last session, in order to save money in between sessions. 



For the latest updates throughout the session, be sure to <a href="https://www.copera.org/pera-on-the-issues/subscribe">subscribe to the biweekly PERA On The Issues newsletter</a>.

Checking in on the 2026 Legislative Session So Far

The State Legislature’s Joint Budget Committee reaffirmed its commitment to retirement security for public employees by denying a request to reduce contributions to PERA.



In an effort to reduce State spending and balance the budget, Governor Jared Polis had included in his budget proposal a plan to temporarily reduce contributions from employers in PERA’s State Division by 1%.



The Joint Budget Committee (JBC) met on February 4 to consider that and other proposals. After hearing hours of testimony on many competing interests, JBC members voted to deny the Governor’s request. With the vote, the Committee shows the Legislature remains committed to ensuring stable, reliable funding for PERA and a secure retirement for the hundreds of thousands of PERA members who have served our State.



There’s still a lot of legislative work that has to happen before the JBC finalizes its budget in the spring, and PERA On The Issues will continue to monitor the process throughout the session.



<h2 style="color:#000000;" class="wp-block-heading has-black-color has-text-color has-medium-font-size">JBC moves to draft other PERA proposals</h2>



The JBC also voted to draft two legislative proposals that PERA developed to strengthen the Defined Benefit Plan’s financial position and reduce the likelihood of triggering automatic adjustments under the <a href="https://www.copera.org/automatic-adjustment-provision">Automatic Adjustment Provision</a> of 2018’s Senate Bill 200.



Those proposals are:



<ul>
<li>Give PERA flexibility to&nbsp;allocate&nbsp;the&nbsp;State’s annual $225 million direct distribution&nbsp;to whichever division trust funds&nbsp;would most help minimize the likelihood of&nbsp;triggering automatic&nbsp;adjustments.</li>



<li>Redirect a&nbsp;portion&nbsp;of employers’ health care trust fund contributions to help pay off&nbsp;pension&nbsp;liabilities.</li>
</ul>







Lawmakers have not yet formally introduced a bill to include either proposal.



<h2 style="color:#000000;" class="wp-block-heading has-black-color has-text-color has-medium-font-size">Additional legislative activity</h2>



Work continues on other PERA-related bills that are making their way through the General Assembly.



On February 9, the House Finance Committee voted to postpone indefinitely <a href="https://leg.colorado.gov/bills/HB26-1062" target="_blank" rel="noreferrer noopener">House Bill 1062</a>, which would have removed the state income tax deduction cap on income from pensions and other annuities. That means the bill will not move forward this session.



Three other PERA-related bills remain under consideration, including <a href="https://leg.colorado.gov/bills/HB26-1026" target="_blank" rel="noreferrer noopener">House Bill 1026</a>, which passed the House Finance Committee and is now with the House Appropriations Committee. That bill would make two changes: Allow for limited purchases of service credit for periods of unemployment, and require all PERA employers to offer the PERAPlus 401(k) and 457 Plans to their employees.



MORE INFO: <a href="https://www.copera.org/pera-on-the-issues/2026-proposed-pera-related-legislation-status">2026 Proposed PERA-Related Legislation Status</a>

Joint Budget Committee Rejects Proposal to Reduce PERA Contributions

The Colorado General Assembly wrapped up the 2021 legislative session in June, but legislative work has continued in the ensuing months at the Capitol. Some of that work over the summer and fall involved committees that conduct routine oversight into Colorado PERA and its operations.



PERA and its Board of Trustees appreciate the value of rigorous review and transparency, so staff regularly engage with these legislative panels to provide updates on PERA’s finances, answer questions and listen to feedback from lawmakers and others. Summaries of those activities are included below.



<h2 class="wp-block-heading">Legislative Audit Committee</h2>



The <a href="http://leg.colorado.gov/committees/legislative-audit-committee/2021-regular-session" target="_blank" rel="noreferrer noopener" class="broken_link">Legislative Audit Committee</a> met in August to hear an update on PERA’s financial status and receive the results of an independent audit of PERA’s <a href="https://content.copera.org/wp-content/uploads/2024/07/pera-annual-comprehensive-financial-report-2020.pdf" target="_blank" rel="noreferrer noopener">Comprehensive Annual Financial Report</a>. The Committee heard from PERA Executive Director Ron Baker, Chief Investment Officer Amy C. McGarrity, external auditors, and actuarial consultants.



The auditors gave PERA’s annual report a clean audit with no significant issues or outstanding recommendations.



<h2 class="wp-block-heading">Pension Review Commission and Pension Review Subcommittee</h2>



The legislature’s <a href="http://leg.colorado.gov/committees/pension-review-subcommittee/2021-regular-session" target="_blank" rel="noreferrer noopener" class="broken_link">Pension Review Subcommittee</a>, which was established as part of the PERA reforms of Senate Bill 200 in 2018, consists of legislators and members of the public with expertise in topics such as accounting, economics and investment management.



At its Sept. 10 meeting, the Subcommittee voted to draft 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. The Subcommittee forwarded that bill to the <a href="http://leg.colorado.gov/committees/pension-review-commission/2021-regular-session" target="_blank" rel="noreferrer noopener" class="broken_link">Pension Review Commission</a>, which then forwarded the draft to <a href="http://leg.colorado.gov/committees/pension-review-commission/2021-regular-session" target="_blank" rel="noreferrer noopener" class="broken_link">Legislative Council</a> for review. In November, the Legislative Council voted to approve the bill, clearing the way for it to be introduced in the upcoming legislative session, which begins in January.



The Pension Review Subcommittee also conducted an independent review of the actuarial assumptions PERA uses in its financial calculations and reporting. Based on that review, the Subcommittee made three recommendations to the PERA Board regarding PERA’s funding policy and Signal Light methodology and reporting.



At its November meeting, the Board discussed the recommendations in detail and heard from PERA staff as well as PERA’s actuarial consultants. Following the discussion, the Board decided to draft a letter to the Pension Review Subcommittee responding to the recommendations. In the letter, the Board stated it agrees with the Subcommittee that there’s a need for clearer communication in the Signal Light report and the Board will consider implementing changes in future versions of the report. The Board also said it will consider making changes to PERA’s funding policy when it undertakes its planned review of the policy in 2023.



<h2 class="wp-block-heading">Joint Budget Committee</h2>



On Dec. 9, PERA Executive Director Ron Baker and Chief Investment Officer Amy C. McGarrity appeared before the <a href="http://leg.colorado.gov/committees/joint-budget-committee/2021-regular-session" target="_blank" rel="noreferrer noopener" class="broken_link">Joint Budget Committee</a> for that panel’s annual hearing on PERA. Baker and McGarrity provided the Committee with updates on a number of topics — including PERA’s finances and membership, results of <a href="https://peraontheissues.com/2020-experience-study-preparing-for-a-secure-future/" target="_blank" rel="noreferrer noopener">2020’s actuarial experience study</a>, and market performance in 2021 — and answered questions from committee members.



<h2 class="wp-block-heading">What’s ahead in 2022</h2>



The Colorado General Assembly will convene to kick off the 2022 legislative session on Jan. 12. PERA On The Issues will keep track of any proposed legislation that pertains to Colorado PERA, including the draft bill to make up the state’s missed 2020 payment of $225 million, and provide updates throughout the session. If you haven’t already, <a href="https://www.copera.org/pera-on-the-issues/subscribe" target="_blank" rel="noreferrer noopener">subscribe to our newsletter</a>.

PERA Oversight Continues Between Legislative Sessions

Gov. Jared Polis included PERA&#8217;s direct distribution in his 2021 state budget proposal.



The state legislature passed a bill in 2020 suspending the $225 million payment for one year due to historic revenue shortfalls and consequential budget cuts. PERA On The Issues has covered the 2020 suspension in depth in <a href="https://peraontheissues.com/legislative-update-an-uncertain-path-ahead/" target="_blank" rel="noreferrer noopener">previous</a> <a href="https://content.copera.org/polis-budget-plan-includes-pera-direct-distribution/" target="_blank" rel="noreferrer noopener">articles</a>.



It&#8217;s up to the state legislature to ultimately create and pass a budget, but the governor&#8217;s budget proposal helps get the budget conversation underway.



Direct Distribution – a Summary



The landmark SB 18-200 included a number of changes that work in concert to bring PERA to full funding. The <a href="https://peraontheissues.com/direct-distribution-of-225-million-helps-return-pera-to-full-funding/" target="_blank" rel="noreferrer noopener">direct distribution</a> was one of these changes. In short, it is a $225 million annual payment from the state. Every dollar goes toward paying off PERA’s unfunded liability.



This payment was more than a commitment of budget writers in 2018. The direct distribution was written into statute, to occur every year until all unfunded actuarial accrued liabilities from all divisions of PERA are eliminated.



2020 Crisis



The global pandemic led to a precipitous drop in state revenue. Billions of dollars of expected income vanished. The Joint Budget Committee (JBC), the bipartisan group of senators and representatives who write the state budget, faced an unenviable task: reducing or eliminating a <a href="https://peraontheissues.com/legislative-update-an-uncertain-path-ahead/" target="_blank" rel="noreferrer noopener">large number</a> of previously budgeted items in order to balance the budget. The direct distribution was one of many emergency cuts.



2021 Budget Process



We won’t know what next year’s budget will look like for a while. Typically, the JBC releases their budget in late March or early April. However the process of creating the budget takes months.



The governor’s budget plan is one of the first waypoints of this process. While the governor does not write the budget, he can signal priorities via this plan. Restoring the direct distribution is a key part of <a href="https://www.colorado.gov/governor/news/3376-governor-polis-releases-state-budget-proposal" target="_blank" rel="noreferrer noopener" class="broken_link">his proposal</a>, which he released on November 2. Next Steps



The status of the direct distribution won’t be official until the state legislature passes a budget next year. However, learning about the priorities of everyone involved in the budget process, like the governor, can bring some focus to an otherwise hazy picture.



Another opportunity to gain clarity is when the state releases its revenue forecasts periodically. Revenue forecasts supply JBC members with crucial information about how much money they can expect to work with. 



Remember, these forecasts are estimates and can change over time. But they are important in setting expectations as the JBC does their work.



“The September revenue forecast painted a slightly less grim picture of the state’s revenue situation as the economy continues to rebound,” said Michael Steppat, PERA’s Public and Government Relations Manager. “But all eyes will be on the upcoming December forecast as state and local leaders ponder the best response to currently surging COVID cases across the state.”



PERA On The Issues will continue following the budgeting process and post updates as they occur.







Editor&#8217;s note: this story was updated on 11/11 for clarity.

Tag Archives:

Checking in on the 2026 Legislative Session So Far

Joint Budget Committee Rejects Proposal to Reduce PERA Contributions

PERA Oversight Continues Between Legislative Sessions

Polis Budget Plan Includes PERA Direct Distribution

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