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.

How well do you remember 2002?



<ul>
<li>The <a rel="noreferrer noopener" href="https://www.youtube.com/watch?v=PEjwubqDTfc" target="_blank">Winter Olympics</a> took place in Salt Lake City. Mitt Romney, who would go on to become a Massachusetts governor, presidential candidate, and Utah senator, led the organizing committee.</li>



<li>President George W. Bush <a rel="noreferrer noopener" href="https://www.youtube.com/watch?v=3KlFc2-4Yyk" target="_blank">signed a bill</a> creating the Department of Homeland Security</li>



<li>The word &#8220;Googled&#8221; <a rel="noreferrer noopener" href="https://www.theatlantic.com/technology/archive/2014/06/the-first-use-of-the-verb-to-google-on-television-buffy-the-vampire-slayer/373599/" target="_blank">appears</a> for the first time in pop culture, on an episode of Buffy the Vampire Slayer</li>



<li>For the first time, US consumers could buy a cell phone with a built-in camera (thanks, <a rel="noreferrer noopener" href="https://www.phonearena.com/news/Sprint-and-Sanyo-Introduce-Americas-First-Built-in-Camera-Phone_id145" target="_blank">Sanyo</a>!)</li>
</ul>



2002 was also the year in which PERA last adopted mission and vision statements it used until the Board adopted updated versions at its November meeting.



Mission, Vision, and the Board’s Strategic Plan



Colorado PERA’s Board of Trustees adopts strategic plans that guide the organization’s work. The most recent plan, adopted by the Board in 2019, will guide PERA through 2023. One objective in the current strategic plan is refreshing the organization’s mission and vision statements.



“A mission and vision statement helps an organization articulate who they are, and who they want to be,” said Laura Morsch-Babu, PERA’s director of communications. “PERA has evolved significantly since our mission and vision were created, and so has our industry. It was the right time to reflect on our mission, who we are today, and how we will serve our membership in the future.”



Creating a New Mission and Vision Statement



Despite the brevity of the statements, a lot of work goes into ensuring they represent PERA’s wide array of stakeholders. PERA staff conducted dozens of interviews and distilled the feedback into key themes that were then woven into the new statements.



Earlier this year, PERA staff presented the Board with a number of different approaches. The Board whittled down the options to just a few choices and asked staff to incorporate additional feedback. At the November Board meeting, the Board approved a new set of statements.



“The Board’s final mission and vision reflects PERA’s commitment to providing retirement security in a sustainable way for our members, but it also closely aligns with the board’s strategic plan to evolve and modernize the way we do business,” said Morsch-Babu. “These new statements will guide every aspect of our work and become part of the PERA culture.”


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Board Refreshes PERA’s Mission, Vision

The implications of the spread of COVID-19 now reach deep into
every corner of our lives, and these are difficult times for all of us. We are
all concerned about the health of our family and friends, and we also know that
many are also burdened by worries about jobs, bills, childcare, and so much
more. 



I wanted to take a moment to let you know how Colorado PERA
is adapting to this temporary new reality and what you can expect in the days and
weeks ahead.



<ul><li>PERA will continue to operate and benefit recipients will receive their benefit payments. Every month, we send out more than $400 million in retirement benefits to thousands of benefit recipients, most of whom live in Colorado, and we will continue to pay retirement benefits even though 90% of our staff will be working remotely. </li><li>We will continue to serve you. You can still call Customer Service, send in forms, update your information, and log in to your account. We thank you for your patience if you encounter a slightly increased wait time—we are working to improve our capabilities every day. Additionally, if you are currently retired and still receive your benefit check in the mail, we ask that you consider using <a href="https://content.copera.org/peras-response-to-covid-19/" target="_blank" rel="noreferrer noopener" label=" (opens in a new tab)">direct deposit </a>instead. It’s free and simple to set up. Making this switch will alleviate the need for staff to be in the office, and you don’t need to make a trip to the bank. </li><li>All in-person services have been moved to webinar and phone platforms. This includes group meetings with our Field Education staff and individual meetings with a benefit counselor. Use our online <a href="https://content.copera.org/are-public-sector-workers-satisfied/" target="_blank" rel="noreferrer noopener" label=" (opens in a new tab)">meetings and appointment scheduler</a> to sign up for these free services. </li><li>Our PERACare plans offer COVID-19 testing at no cost. If you use one of our PERACare plans, know that any test you receive for COVID-19 will be covered at no cost. </li><li>We continue to be a long-term investor. Some members have asked about PERA’s investments and financial health amid the recent global market. As PERA’s Chief Investment Officer, Amy C. McGarrity,&nbsp;<a href="https://peraontheissues.com/peras-chief-investment-officer-addresses-market-drop/">noted</a>&nbsp;a few weeks ago, we can’t predict what markets do, but we can—and do—incorporate risk into our investment decisions. In any given short-term period, the portfolio may perform better or worse than long-term expectations. However, we are confident that PERA is well positioned to continue to invest through the ups and downs of the market cycle, providing the opportunity to achieve our long-term goals. </li><li>We will continue to keep you updated. We will continue to share updates with our members via our <a href="https://www.copera.org/update-on-operations-from-peras-executive-director" target="_blank" rel="noreferrer noopener" label=" (opens in a new tab)">website</a>.</li></ul>



We don’t know when this unwelcome chapter will end. But I
know that we already live among those who will help us get through it. In the
coming weeks, Coloradans will look to PERA members as we find our way through
to the other side. We will draw inspiration from the teachers who find
innovative ways to continue inspiring their students, from the CDOT employees who
work hard to keep our roads safe for the emergency workers and movement of goods
we all rely on, and from the public health professionals working tirelessly to
stop the spread of the virus. All of us at PERA thank these and countless others
who are at the forefront of this crisis. 



Sincerely,



Ron Baker 
Executive Director, Colorado PERA

PERA’s Response to COVID-19

Editor&#8217;s note: The dates mentioned in this story were updated on April 21 to reflect the most current information.



The emergence of COVID-19 has disrupted daily life around the world, including here in Colorado. There is much we still don’t know about this still-emerging pandemic. In a matter of days, we have all experienced sudden, extensive changes, the likes of which most of us have never experienced. These changes can be difficult to process. Most importantly, the concern about our health and the health of our friends and family weighs heavily for so many people. 



The safety of our employees and our members is of upmost
importance to us here at PERA. To that end, I would like to share steps
Colorado PERA is taking to keep our employees and members safe and what you can
expect in the days ahead.



PERA Service Changes



Members will see some temporary changes in how we interact
with members. We plan to continue delivering a high level of service, answering
your questions and responding to your needs quickly. However, we are eliminating
in-person contact for a time as we do our part to stop the spread of this virus.
These PERA services will be available online and over the phone. Specifically:



<ul>
<li>In-person individual counseling session at our three office locations will be suspended until May 16. If you had an in-person counseling session already scheduled, a PERA Benefits Counselor will be reaching out to convert your appointment to either a telephone or online appointment. </li>



<li>PERA is suspending walk-in customer service. Members are still able to turn in forms at our office locations in Denver and Westminster. </li>



<li>PERA-hosted meetings occurring around the state have been canceled through May 16. <a rel="noreferrer noopener" aria-label=" (opens in a new tab)" href="https://www.copera.org/members/webinars" target="_blank">Webinars</a> that cover the same topics will continue to take place as scheduled. </li>



<li>Customer Service Representatives are available by calling 1-800-759-7372 Monday–Thursday, 7:00 a.m. to 5:30 p.m. and Friday, 7:00 a.m. to 4:30 p.m. (Mountain time). </li>



<li>Please note that benefit payments will not be disrupted.</li>
</ul>



Investment Operations



As PERA’s Chief Investment Officer, Amy C. McGarrity, <a rel="noreferrer noopener" aria-label=" (opens in a new tab)" href="https://peraontheissues.com/peras-chief-investment-officer-addresses-market-drop/" target="_blank">noted</a> a few weeks ago, we can’t predict what markets do, but we can—and do—incorporate risk into our investment decisions. In any given short-term period, the portfolio may perform better or worse than long-term expectations. However, we are confident that PERA is well positioned to continue to invest through the ups and downs of the market cycle, providing the opportunity to achieve our long-term goals.



Finally, we know that many PERA members are at the forefront of the fight against COVID-19. Instead of being asked to stay at home, thousands of public safety officers, health officials, and others will be asked to go into the storm. We’ve seen this before. Time and time again, we&#8217;ve seen those in public service rise to whatever challenge is placed before them. They go from being the unsung heroes of daily life to being a source of inspiration and strength that we all need right now. We are thankful for these, our fellow PERA members, and for all who are involved in responding to the challenges we now face. It will not be easy, but they will undoubtedly carry the day.



We appreciate your cooperation and patience during this emerging and evolving situation. We will continue to keep you <a rel="noreferrer noopener" label="informed (opens in a new tab)" href="https://www.copera.org/update-on-operations-from-peras-executive-director" target="_blank">informed </a>about any additional PERA developments. I hope you and your family remain safe during these uncertain times.



-Ron Baker

Update on Operations from PERA’s Executive Director

PERA In 2020: Important Dates and Changes

As the Legislature <a href="https://www.copera.org/retirement-age-requirements-how-colorado-pera-stacks-up-today-and-under-proposed-legislation">debates</a> the details of <a href="https://www.copera.org/retirement-age-requirements-how-colorado-pera-stacks-up-today-and-under-proposed-legislation">Senate Bill 18-200</a>, intended to improve PERA’s funded status and lower its overall risk, it is helpful to keep in mind how PERA compares to similar public employee retirement plans across the country – both today and if legislation is approved.



The proposed legislation incorporates many of the <a href="https://www.copera.org/2018-pera-on-the-issues-legislative-preview" target="_blank" rel="noreferrer noopener">recommendations</a> that the PERA Board approved last September, including changes to the age and service requirements necessary for a full service retirement benefit. The Board had recommended increasing those requirements to age 65 for most divisions with a minimum of five years of service. (The recommendation for State Troopers was a lower, but still increased, age.). These increases reflected the data gathered from the experience study that showed the PERA retiree population was living longer than previously projected. Read more about the Board’s changes to actuarial assumptions <a href="https://content.copera.org/actuarial-impact-analysis/" target="_blank" rel="noreferrer noopener">here</a> and <a href="https://www.copera.org/impact-assumption-changes" target="_blank" rel="noreferrer noopener">here</a>.



As currently written, the bill would increase age and service requirements for all members who begin employment on or after January 1, 2020, inline with the Board’s recommendations. The bill would also change retirement eligibility for all current members who are age 46 or younger as of that date by adding one year to retirement eligibility for every four years less than age 46, not exceeding 65 years of age.



The minimum age at which an employee can retire and receive a full retirement benefit (often shortened to “retirement age”) is an important component of any retirement plan. Even for Social Security (which is not really a retirement plan but rather a social safety net to reduce old-age poverty), the retirement age for a full, or normal, retirement benefit, is now 66. For many years, it was 65 but <a href="https://www.ssa.gov/planners/retire/ageincrease.html" target="_blank" rel="noreferrer noopener">has been gradually increasing</a> for people born in 1938 or later. It will continue increasing until it reaches 67 for people born after 1959.



Different pension plans determine retirement eligibility using a variety of factors that typically include some combination of age at retirement combined with years of service (or purchased service, in some cases).



Looking at various features of similar public pension plans across the United States – that is, large public plans with members who, for the most part, do not participate in Social Security – Colorado PERA currently falls in the middle of the pack for retirement age requirements.



The minimum age for a normal PERA retirement is 58 for the most recent hires in the School Division and 60 for the most recent hires in other divisions not including Troopers, giving Colorado one of the lower – but not the lowest – retirement ages in this comparative group. Under the proposed legislation, Colorado’s retirement age of 65 would be one of the higher – but not the highest – retirement ages. And the retirement age would still fall lower than that of Social Security.



Many of the plans with a lower retirement age are making trade-offs elsewhere. For example, Ohio Teachers has a retirement age of 60 but just reduced its cost of living adjustment or <a href="https://www.copera.org/retirement-age-requirements-how-colorado-pera-stacks-up-today-and-under-proposed-legislation" target="_blank" rel="noreferrer noopener">COLA to zero</a>. In Kentucky, a number of changes are currently pending in the legislature that would <a href="https://kypolicy.org/whats-senate-pension-bill/" target="_blank" rel="noreferrer noopener">reduce the COLA to 0.75%.</a>



The chart below shows how Colorado’s retirement age requirements compare to this group, reflecting normal or full retirement eligibility requirements for the most recent hires or newest retirement tiers, where applicable.



(It should be noted that the data presented here are simplified for purposes of this discussion and caution must be used in interpreting the information. For example, in Colorado, State Troopers pay a higher employee contribution and have a lower minimum retirement age. While a few of those exceptions are noted, in most cases the most common or average for a given plan is used. Our sources include data compiled by PERA staff in February 2017 and comparison data from the <a href="https://www.copera.org/colorado-pera-plan-design-compared-to-other-non-social-security-public-employee-retirement-plans" target="_blank" rel="noreferrer noopener">Wisconsin Legislative Council</a> from December 2016.)


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Retirement age requirements: How Colorado PERA stacks up today and under proposed legislation

<blockquote class="wp-block-quote">
New Pennsylvania study considers increased public assistance, decreased economic activity resulting from insufficient retirement savings.
</blockquote>



Insufficient retirement savings will cost the Commonwealth of Pennsylvania $14.3 billion in state assistance by 2030, according to a new <a href="https://www.patreasury.gov/pdf/Impact-Insufficient-Retirement-Savings.pdf" target="_blank" rel="noreferrer noopener">study</a> from <a href="https://www.copera.org/lack-of-retirement-savings-will-cost-pennsylvania-14-3-billion-by-2030" target="_blank" rel="noreferrer noopener">Pennsylvania State Treasurer Joe Torsella</a>. The study quantified the fiscal and economic impacts of insufficient retirement savings, considering both increased state public assistance costs and loss of economic activity due to reduced tax revenue, household spending, and jobs.



The study notes that the ability of elderly households to maintain their living standards during retirement has significant implications not just on seniors’ quality of life but also for the state’s economic conditions and fiscal situation. <a href="http://www.post-gazette.com/business/money/2018/01/26/Study-finds-14-3-billion-hit-coming-as-Pa-residents-lack-retirement-savings-Joe-Torsella/stories/201801260124" target="_blank" rel="noreferrer noopener">The study determined</a> that Pennsylvania spent about $702 million in public assistance due to insufficient retirement savings and lost about $70 million in tax revenue in 2015 alone.



As <a href="https://www.nirsonline.org/reports/win-win-pensions-efficiently-serve-american-schools-and-teachers/" target="_blank" rel="noreferrer noopener">recent</a> <a href="http://leg.colorado.gov/sites/default/files/documents/audits/1409s_colorado_public_employees_retirement_association_pera_hybrid_defined_benefit_plan_study.pdf" target="_blank" rel="noreferrer noopener">studies</a> have shown, public sector retirement models <a href="https://content.copera.org/lack-of-retirement-savings-will-cost-pennsylvania-14-3-billion-by-2030/" target="_blank" rel="noreferrer noopener">including the Colorado PERA Hybrid Defined-Benefit Plan</a> provide the most efficient retirement savings, where each dollar saved “<a href="https://www.nirsonline.org/2017/10/pensions-are-critical-tool-for-recruiting-retaining-teachers-offer-best-path-to-retirement/" target="_blank" rel="noreferrer noopener">provides nearly twice the amount of retirement income than money invested in an individual savings plan because of lower costs and sharing key risks</a>.”



An <a href="http://www.philly.com/philly/opinion/editorials/pennsylvania-retirement-savings-plan-joseph-torsella-editorial-20180212.html" target="_blank" rel="noreferrer noopener">editorial</a> from the <a href="http://www.philly.com/inquirer" target="_blank" rel="noreferrer noopener">Philadelphia Inquirer</a> cited Treasurer Torsella’s study, noting that the costs of state support for elderly poor Pennsylvanians are crowding out other beneficial spending: “money that could support schools, parks, and infrastructure. And if senior citizens had more secure retirements, they’d be putting more money into the economy.”



Torsella further explained when releasing the study, “insufficient retirement savings will have far-reaching consequences that go well beyond individual implications. We can find a commonsense solution for Pennsylvanians to save now, or we can pay a steep price in increased budget deficits and lost economic activity later.”

Lack of retirement savings will cost Pennsylvania $14.3 billion by 2030

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.

2018 proposed legislation status

This is shaping up to be a big year with the Legislature. Elected officials at the state and federal levels are pledging to address everything from <a href="https://www.denverpost.com/2018/01/07/2018-legislative-session-colorado/" target="_blank" rel="noreferrer noopener">pensions</a> to <a href="https://www.washingtonpost.com/news/wonk/wp/2017/12/01/gop-eyes-post-tax-cut-changes-to-welfare-medicare-and-social-security/?utm_term=.1700ac9b3498" target="_blank" rel="noreferrer noopener" class="broken_link">Medicare</a> to <a href="https://www.cnbc.com/2017/12/26/political-reality-stands-in-way-of-medicare-social-security-cuts.html" target="_blank" rel="noreferrer noopener">Social Security</a>. It’s never been more important to pay close attention to what’s going on in the State Legislature and Congress. Here are just a few things that will be discussed.



Colorado General Assembly The second session of the 71st Colorado General Assembly began on January 10. Because of the <a href="https://www.copera.org/2018-pera-on-the-issues-legislative-preview" target="_blank" rel="noreferrer noopener">PERA Board’s recommendation</a> to lower the fund’s risk profile and ensure its long-term sustainability, PERA will be a major issue at the Capitol. Many Coloradans have just heard about the Board’s proposal from recent news coverage. But regular readers of PERA on the Issues know that <a href="https://www.copera.org/icymi-colorado-pera-board-chairman-outlines-path-to-lowering-peras-risk-profile" target="_blank" rel="noreferrer noopener">PERA has been working for more than a year</a> to address the impact on PERA’s funded status of a less optimistic global economic outlook and the longer lives of PERA retirees. In addition to the Board’s recommended package, <a href="https://www.denverpost.com/2017/11/01/colorado-budget-pera-fix/" target="_blank" rel="noreferrer noopener">Gov. John Hickenlooper has also included PERA reform as part of his budget</a>.



While there are differences between the Governor’s proposal and that of the Board, the two plans share the goal of achieving 100 percent full funding within a 30-year period. The differences lie in how that goal is achieved. Comparing the two proposals, there are a few key differences, including employer contributions and the annual increase. The Board’s proposal calls for a shared sacrifice approach similar to the <a href="https://www.copera.org/2018-pera-on-the-issues-legislative-preview" target="_blank" rel="noreferrer noopener">Senate Bill 10-001</a> reforms. The Governor has opted for a path that asks retirees and active members to shoulder most of the burden. A bipartisan group of legislators has been working to address the issue of PERA reform, and at least one bill is expected to be introduced in the first half of the session. Of course, this proposal and all other PERA-related legislation will be here on PERA on the Issues.



Another retirement issue state legislators are expected to tackle is a proposal to create a state retirement savings plan for private-sector workers who do not currently have access to a plan. <a href="https://leg.colorado.gov/bills/hb17-1290" target="_blank" rel="noreferrer noopener">Previous attempts</a> at creating this type of “auto-IRA” system, or even studying the creation of one, have died on party lines.



Beyond retirement, <a href="https://coloradopolitics.com/ten-things-watchcolorado-legislature/" target="_blank" rel="noreferrer noopener">issues legislators expect to address</a> in 2018 include transportation, health care, education spending, and broadband.



Federal legislation Despite initial concerns that the sweeping overhaul of the federal tax code might dramatically alter public retirement systems, the law signed by President Trump on December 22, 2017, has little impact on those plans. The few changes generally impacting retirement plans include the following:



<ul>
<li>Roth IRA Re-Characterizations. IRA participants are permitted to move amounts previously contributed to a Traditional IRA to a Roth IRA, and participants would be taxed at the time of that conversion. Previously, these conversions could be undone, or “re-characterized,” back to a Traditional IRA to avoid tax. Under the new law, a conversion to a Roth fund is permanent—it cannot be re-characterized after it is completed.</li>



<li>Retirement Plan Loans. Plan participants with outstanding loan balances are given more time to repay them at termination of employment. Previously, the participant had 60 days to repay the loan or roll over the loan to a different plan after termination, or a taxable distribution of the outstanding loan amount was deemed to occur. Now, participants have until the deadline for filing their federal income tax returns (including extensions) to roll over such loans.</li>



<li>Disaster Distribution Relief. Generally, if a plan participant takes money from a qualified retirement plan, a 403(b) plan, or an IRA, and the participant is under age 59½, the distribution is subject to a 10 percent additional early withdrawal tax. The new tax law provides an exemption from this additional tax for amounts taken due to a disaster that occurred in 2016, as long as the individual’s loss was caused by the disaster and the individual’s principal residence is in the disaster area. &nbsp;</li>



<li>Length of Service Awards for Public Safety Volunteers. Plans may solely provide for length of service awards for public safety volunteers. Such amounts are not considered deferred compensation as long as the amount is paid on behalf of a volunteer performing qualified service and is under the limit. The tax bill increases that limit from $3,000 to $6,000 in 2018, with cost-of-living adjustments thereafter.</li>
</ul>



On the other hand, many of the provisions affecting retirement plans that initially appeared in the House or Senate versions of the tax bill are not included in the final law. These include:



<ul>
<li>Unrelated Business Income Tax. This was a primary concern for governmental plans. Unrelated Business Income Tax (UBIT) is a tax on investment income that governmental plans have been exempt from since the UBIT first went into effect.</li>



<li>Hardship Withdrawals from 401(k) Plans. 401(k) plans may allow a participant to take a distribution of elective deferrals while still employed if the participant is affected by one of the defined hardship events. The proposed bill would have permitted employers to allow hardship distributions from amounts other than elective deferrals – in other words, a participant would have been able to take hardship distributions from account earnings and employer contributions.</li>



<li>Aggregation of Retirement Plan Limits. Currently, 457(b) plans have an elective deferral limit ($18,500) separate from the 401(k)/403(b) limit ($18,500 aggregated), plus special catch-up contribution limits. The proposal would have repealed special rules allowing additional elective deferral limits under 457(b) plans, and catch-up contributions under section 403(b) plans and governmental section 457(b) plans.</li>
</ul>



One of the biggest reverberations policymakers will be feeling from the tax reform bill will be the large increase in the budget deficit. While some proponents say the bill will end up paying for itself through higher tax revenues from economic growth in the coming years, the <a href="https://www.cbo.gov/publication/53437" target="_blank" rel="noreferrer noopener">Congressional Budget Office</a> found the reform bill will increase the deficit by $1.5-1.8 trillion over the next decade.



In order to address the looming increase in budget deficits, some lawmakers like House Speaker Paul Ryan have suggested addressing the long-ignored issue of reforming Social Security and health care programs like Medicare and Medicaid. According to the non-partisan <a href="https://www.cbpp.org/research/federal-budget/policy-basics-where-do-our-federal-tax-dollars-go" target="_blank" rel="noreferrer noopener" class="broken_link">Center on Budget and Policy Priorities</a>, Social Security and health care programs currently account for about 50 percent of federal spending. Policy proposals to address lowering these costs include increasing retirement eligibility ages for both Social Security and Medicare and cutting benefits. Increases in the current 12.4 percent Social Security tax and 2.9 percent Medicare tax (both <a href="https://www.irs.gov/taxtopics/tc751" target="_blank" rel="noreferrer noopener">split evenly</a> between employees and employers) are also possible. Currently, if lawmakers do not address the funding shortfall faced by Social Security, it is projected that future retirees would receive 75 percent of promised benefits <a href="https://www.ssa.gov/policy/docs/ssb/v75n1/v75n1p1.html" target="_blank" rel="noreferrer noopener">beginning in 2033</a>.



If lawmakers do decide to take up Social Security reform, it’s possible they will choose to address reforming the Windfall Elimination Provision (WEP), which the powerful House Ways and Means Committee Chairman <a href="https://www.copera.org/retirement-roundup-a-new-plan-for-repealing-the-windfall-elimination-provision" target="_blank" rel="noreferrer noopener">Kevin Brady (R-TX) recently described</a> as “…something we must do for our teachers, firefighters, police, and other public servants.” <a href="https://content.copera.org/2018-pera-on-the-issues-legislative-preview/" target="_blank" rel="noreferrer noopener">Bills that would have repealed WEP and the Government Pension Offset (GPO) were introduced last year</a>, but did not receive hearings.



With 2018 just starting, it’s clear there is a potential for big changes to retirement policy. Make PERA on the Issues your go-to source for up-to-date information on all things legislative.

2018 PERA on the Issues legislative preview

PERA members want their retirement system to be fair and equitable. So it was no surprise to PERA staff and the Board of Trustees when, in the first phase of <a href="https://www.copera.org/board-proposal-calls-for-clarity-in-salary-parity-in-benefits" target="_blank" rel="noreferrer noopener">PERAtour</a>, 87 percent of participants agreed that retirement benefits should be aligned with career paths and contributions.



To enhance fairness and equity, the Board is looking to bring clarity to the issue of retirement salary and parity to how members earn retirement benefits. As part of its <a href="https://content.copera.org/board-proposal-calls-for-clarity-in-salary-parity-in-benefits/" target="_blank" rel="noreferrer noopener">comprehensive package of recommendations</a> to the State Legislature, the Board addresses two calculations that are inequitable in their current form and place unneeded risk on the fund.



PERA-includable salary



The Board proposes redefining PERA salary to include employee contributions to tax-advantaged <a href="https://www.copera.org/board-proposal-calls-for-clarity-in-salary-parity-in-benefits" target="_blank" rel="noreferrer noopener">Section 125</a> and 132 plans. These are contributions employees make to flexible spending accounts or so-called cafeteria plans to pay for expenses such as dependent care, health care premiums, health care expenses, or transportation.



Members who participate in these plans have lower salary reported to PERA and therefore make lower PERA contributions. However, as members near retirement, they often seek to maximize their highest average salary and stop participating in these plans in order to report a higher salary to PERA.



This practice creates a disparity between how much some members are paying into the PERA system while working, and how much of a benefit they receive in retirement. This has a negative impact on the funding of PERA. It also creates a disincentive for members to participate in tax-advantaged plans near the end of their working careers.



The Board’s proposal would redefine PERA salary to include all members’ full salary, inclusive of any contributions to 125 and 132 plans, beginning on January 1, 2020. The change would increase fairness, but it would also align PERA with its peers. A recent survey of 28 statewide pension systems found that PERA is the only plan that excludes these tax-advantaged contributions from the salary amounts reported for retirement benefits.



More information on the Board’s proposal to make Section 125 and 132 contributions includable in PERA salary is available from PERAtour <a href="https://www.copera.org/board-proposal-calls-for-clarity-in-salary-parity-in-benefits" target="_blank" rel="noreferrer noopener">here</a>.



Accrual of PERA service credit



The Board also proposes redefining how service credit in PERA is earned by moving from a salary basis to a percentage of full-time employment worked.



Currently, PERA members earn one month of service credit for each month that they earn a minimum salary of 80 times the federal minimum hourly wage (80 x $7.25=$580). As a result, part-time employees who earn this minimum salary each month receive the same amount of service credit as a full-time employee. A part-time employee who becomes full time later in a career could then receive a retirement benefit equivalent to an employee who had worked full time for an entire career. This again creates a disparity between how much some members and their employers pay into the PERA system and the benefit the member will receive in retirement.



The Board’s proposal would redefine the accrual of service credit from the current salary threshold of $580 a month to a percentage of full-time employment. Under this change, a half-time employee would receive half a month of service credit, regardless of the amount of salary earned. This proposal would require employers to define the hourly requirement for full-time employment and PERA would base service accrual on a percentage of the employer’s definition. The Board’s recommendation does not modify how service credit is allocated for educators who work a contract period that is less than 12 months.



Together, these changes would mean that dollars paid in to PERA would be equitable with dollars paid out, ensuring that members’ benefits are directly correlated to the contributions they and their employers make.



More information about which parts of compensation are currently eligible to be included in PERA contributions is <a href="https://www.copera.org/board-proposal-calls-for-clarity-in-salary-parity-in-benefits" target="_blank" rel="noreferrer noopener">available here</a>.



More information about the Board’s proposal to change both calculations is <a href="https://www.copera.org/board-proposal-calls-for-clarity-in-salary-parity-in-benefits" target="_blank" rel="noreferrer noopener">available here.</a>



More information about the Board’s full package of recommendations is <a href="https://content.copera.org/board-proposal-calls-for-clarity-in-salary-parity-in-benefits/" target="_blank" rel="noreferrer noopener">available here</a>.

Board proposal calls for clarity in salary, parity in benefits

The PERA Board of Trustees has recommended <a href="https://content.copera.org/board-proposal-calls-for-clarity-in-salary-parity-in-benefits/" target="_blank" rel="noreferrer noopener">reforms to PERA</a> designed to reduce the overall risk profile of the plan and improve PERA’s funded status. In light of these recommendations, it can be helpful to see how PERA as it exists today compares to similar plans across the country and how the Board’s proposal for future changes might compare as well. Comparing the PERA benefit to that of public employees in others states can also help ensure that Colorado’s public employers can attract and retain talented employees.



In a time of shifting economic and fiscal realities, PERA is not alone in considering reforms that will impact funding levels and benefit structures over time. <a href="http://www.governing.com/news/headlines/tns-kentucky-pension-reforms-worse.html" target="_blank" rel="noreferrer noopener">Significant changes</a> have been proposed to Kentucky’s public pension systems, and in Ohio, the board of the retirement plan for teachers <a href="https://www.copera.org/colorado-pera-plan-design-compared-to-other-non-social-security-public-employee-retirement-plans" target="_blank" rel="noreferrer noopener">recently reduced</a> the cost-of-living adjustment to zero.



(More information on the Board’s recommendation is available at a dedicated website, <a href="https://www.copera.org/colorado-pera-board-endorses-package-reforms" target="_blank" rel="noreferrer noopener">PERAtour</a>.)



Looking at various features of similar public pension plans across the United States – that is, large public plans with members who, for the most part, do not participate in Social Security – shows that PERA is somewhat typical. Features such as member and employer contribution rates, cost of living adjustments (COLAs) or automatic increases, and benefit multipliers vary across plans, but Colorado’s plan tends to fall in the middle of a range of these features.



The charts below indicate how these public retirement plans compare, and where PERA fits in – both today and if the Board’s proposal were to be implemented in the future.



One area where PERA is an outlier is in excluding Section 125 and 132, or so-called “Cafeteria Plan” and flexible spending account deductions from PERA-includable salary. In a survey conducted by the <a href="http://www.nasra.org/" target="_blank" rel="noreferrer noopener">National Association of State Retirement Administrators</a>, Colorado is the only one of 28 plans surveyed that excludes these deductions.



(It should be noted that the data presented here are simplified for purposes of this discussion and caution must be used in interpreting the information. For example, in Colorado, State Troopers pay a higher employee contribution because they can retire sooner than other members. While a few of those exceptions are noted, in most cases the most common or average data point for a given plan is used. Our sources include data compiled by PERA staff in February of 2017 and comparison data from the <a href="https://www.copera.org/colorado-pera-plan-design-compared-to-other-non-social-security-public-employee-retirement-plans" target="_blank" rel="noreferrer noopener">Wisconsin Legislative Council</a> from December, 2016.)



<figure class="wp-block-table"><table><tbody><tr><td colspan="2">Member contribution rate by state</td></tr><tr><td>State</td><td>Rate as percent of payroll</td></tr><tr><td>Connecticut Teachers</td><td>6</td></tr><tr><td>Alaska Public Employees</td><td>6.75</td></tr><tr><td>Maine</td><td>7.65</td></tr><tr><td>Colorado (current)*</td><td>8</td></tr><tr><td>Louisiana State Employees</td><td>8</td></tr><tr><td>Louisiana Teachers</td><td>8</td></tr><tr><td>Illinois State Universities</td><td>8</td></tr><tr><td>Alaska Teachers</td><td>8.65</td></tr><tr><td>Illinois Teachers</td><td>9</td></tr><tr><td>Kentucky non-University</td><td>9.105</td></tr><tr><td>California</td><td>9.205</td></tr><tr><td>Colorado proposal*</td><td>10-11</td></tr><tr><td>AVERAGE of current plans</td><td>10.34</td></tr><tr><td>Massachusetts State Employees</td><td>11</td></tr><tr><td>Massachusetts Teachers</td><td>11</td></tr><tr><td>Ohio Public Employees</td><td>14</td></tr><tr><td>Ohio School Employees</td><td>14</td></tr><tr><td>Ohio Teachers</td><td>14</td></tr><tr><td>Nevada</td><td>14.5</td></tr><tr><td>Missouri</td><td>14.5</td></tr><tr><td>Texas</td><td>15.1</td></tr></tbody></table></figure>



*Note that Colorado State Troopers currently contribute 10 percent of payroll. The Board proposal would increase contributions for members hired before January 1, 2020, by an additional 3 percent above current contribution rates and for those hired on or after January 1, 2020, by an additional 2 percent. This is because for new hires starting in 2020, and for members with less than five years of service credit as of January 1, 2020, more years of salary will be considered to calculate an average salary used to determine the total retirement benefit and the retirement age will be higher.



<figure class="wp-block-table"><table><tbody><tr><td colspan="2">Employer contribution rate by state</td></tr><tr><td>State</td><td>Rate as percent of payroll</td></tr><tr><td>Massachusetts State Employees</td><td>12.41</td></tr><tr><td>Ohio Public Employees</td><td>14</td></tr><tr><td>Ohio School Employees</td><td>14</td></tr><tr><td>Ohio Teachers</td><td>14</td></tr><tr><td>Missouri</td><td>14.5</td></tr><tr><td>Nevada</td><td>14.5</td></tr><tr><td>Texas</td><td>15.1</td></tr><tr><td>Colorado (current)*</td><td>19.13</td></tr><tr><td>Maine</td><td>19.29</td></tr><tr><td>Massachusetts Teachers</td><td>19.61</td></tr><tr><td>Colorado (proposed)*</td><td>21.13</td></tr><tr><td>Alaska Public Employees</td><td>24.84</td></tr><tr><td>Louisiana Teachers</td><td>26.3</td></tr><tr><td>California</td><td>26.58</td></tr><tr><td>Alaska Teachers</td><td>29.27</td></tr><tr><td>Connecticut Teachers</td><td>30.35</td></tr><tr><td>Kentucky non-University</td><td>30.755</td></tr><tr><td>Illinois Teachers</td><td>36.64</td></tr><tr><td>Louisiana State Employees</td><td>37.8</td></tr><tr><td>Illinois State Universities</td><td>45</td></tr></tbody></table></figure>



*More detailed information on PERA contribution rates may be found in this <a href="https://www.copera.org/real-return-investments-for-inflation-protection" target="_blank" rel="noreferrer noopener">fact sheet</a>. Note that while the SAED is paid by employers, it is to be funded by foregone wage increases. The figure here is for the State Division, the AED and SAED, minus 1.02 percent which is dedicated to the Health Care Trust Fund. Contribution rates shown in this table generally reflect teachers, higher education faculty, school employees, and regular state employees.



The multiplier in a defined benefit plan is a factor used to determine the monthly benefit. An example of PERA’s multiplier is 2.5 percent times years of service times the Highest Average Salary (HAS). For a member with 30 years of service credit, the monthly benefit would be 75 percent (30 times 2.5 percent) multiplied by the HAS. (The PERA Board reviewed changes to the multiplier, but decided to maintain the current 2.5 percent factor.)



<figure class="wp-block-table"><table><tbody><tr><td colspan="2">Benefit multiplier by state</td></tr><tr><td>State</td><td>Benefit multiplier*</td></tr><tr><td>Maine</td><td>2</td></tr><tr><td>Connecticut Teachers</td><td>2</td></tr><tr><td>Ohio Teachers</td><td>2.2</td></tr><tr><td>Illinois State Universities</td><td>2.2</td></tr><tr><td>Illinois Teachers</td><td>2.2</td></tr><tr><td>Nevada</td><td>2.25</td></tr><tr><td>Texas</td><td>2.3</td></tr><tr><td>California</td><td>2.4 (varies by age)</td></tr><tr><td>Alaska Public Employees</td><td>2.5 (varies by service)</td></tr><tr><td>Alaska Teachers</td><td>2.5 (varies by service)</td></tr><tr><td>Colorado (current and proposed)</td><td>2.5</td></tr><tr><td>Louisiana State Employees</td><td>2.5</td></tr><tr><td>Louisiana Teachers</td><td>2.5</td></tr><tr><td>Massachusetts State Employees</td><td>2.5</td></tr><tr><td>Massachusetts Teachers</td><td>2.5</td></tr><tr><td>Ohio Public Employees</td><td>2.5 (varies by service)</td></tr><tr><td>Ohio School Employees</td><td>2.5 (varies by service)</td></tr><tr><td>Missouri</td><td>2.5</td></tr><tr><td>Kentucky non-University</td><td>3 (varies by service)</td></tr></tbody></table></figure>



*Where noted, plans have variable multipliers based on age or years of service at retirement. Those listed are the highest possible multipliers earned.



<figure class="wp-block-table"><table><tbody><tr><td colspan="3">Annual increase provisions by state</td></tr><tr><td>State</td><td>Rate as percent of payroll</td><td>Notes*</td></tr><tr><td>Ohio Teachers</td><td>0</td><td>Fixed/Simple</td></tr><tr><td>Texas</td><td>0</td><td>Ad hoc</td></tr><tr><td>Illinois Teachers</td><td>1.25</td><td>Indexed/Simple</td></tr><tr><td>Illinois State Universities</td><td>1.375</td><td>Indexed/Simple</td></tr><tr><td>Colorado (proposed)</td><td>1.5</td><td>Fixed/Compound</td></tr><tr><td>Kentucky non-University</td><td>1.5</td><td>Fixed/Compound</td></tr><tr><td>Louisiana State Employees</td><td>1.5</td><td>Ad hoc/Typically simple</td></tr><tr><td>Louisiana Teachers</td><td>1.5</td><td>Ad hoc/Typically simple</td></tr><tr><td>Missouri</td><td>1.5</td><td>Indexed/Compound</td></tr><tr><td>Connecticut Teachers</td><td>1.75</td><td>Indexed/Compound</td></tr><tr><td>Alaska Public Employees</td><td>1.95</td><td>Indexed/Compound</td></tr><tr><td>Alaska Teachers</td><td>1.95</td><td>Indexed/Compound</td></tr><tr><td>California</td><td>2</td><td>Fixed/Simple</td></tr><tr><td>Colorado (current)</td><td>2</td><td>Fixed/Compound</td></tr><tr><td>Maine</td><td>2.2</td><td>Indexed/Compound</td></tr><tr><td>Massachusetts State Employees</td><td>3</td><td>Ad hoc, Indexed/Simple</td></tr><tr><td>Massachusetts Teachers</td><td>3</td><td>Ad hoc, Indexed/Simple</td></tr><tr><td>Nevada</td><td>3</td><td>Indexed/Compound</td></tr><tr><td>Ohio Public Employees</td><td>3**</td><td>Fixed/Simple</td></tr><tr><td>Ohio School Employees</td><td>3</td><td>Fixed/Simple</td></tr></tbody></table></figure>



*Annual increase provisions vary by state. Those that are indexed are tied to various measures, including <a href="https://www.copera.org/real-return-investments-for-inflation-protection" target="_blank" rel="noreferrer noopener">Consumer Price Index</a> (CPI), or <a href="https://www.ssa.gov/oact/cola/colaseries.html" target="_blank" rel="noreferrer noopener">Social Security benefit increases</a>. Ad hoc increases may be recommended by a board or set by the state legislature. The COLA PERA pays is compounding, increasing the base benefit each year. However, some systems pay COLAs that are not compounded (simple interest) and do not increase the base benefit for the next year’s COLA payment.



**This figure does not reflect the recent decision of the Ohio Public Employees Retirement System to recommend a reduction in its cost of living adjustment to a 2.25 percent cap.

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