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

Two bills <a href="https://peraontheissues.com/2024-proposed-legislation-status/" target="_blank" rel="noreferrer noopener">making their way through the Colorado Legislature</a> would expand the number of PERA retirees who can return to work in school districts without facing a reduction in their benefits.



While the bills are intended to address an important staffing shortage in school districts across the state, there are potential financial implications to the trust funds that provide benefits for PERA members.



<h2 class="wp-block-heading">Why limit how much retirees can work?</h2>



Public pension plans like Colorado PERA place limits on working after retirement in order to balance two competing priorities: The staffing needs of employers and the financial health of the retirement plan.



Generally speaking, allowing retirees to return to work, either for the same employer or a different employer covered by the same retirement plan, can encourage workers to retire earlier than they otherwise would have, since they can collect a salary in addition to receiving a monthly retirement benefit. Because plans project their finances based on factors such as workers’ expected retirement age, early retirements add to the plan’s cost due to a longer-than-expected period of benefit payments. Even if those retirees continue to contribute to their plan, like PERA retirees do, the contributions aren’t always enough to make up for the member’s extended retirement.



In most cases, PERA retirees can work for a PERA-affiliated employer for up to 110 days or 720 hours per calendar year without affecting their benefit. School districts and colleges/universities can designate a limited number of workers who are allowed to work up to 140 days or 916 hours per year, and some school districts can hire retirees to fill certain positions for which there is a critical need for qualified workers, and those “critical shortage” hires are not subject to <a href="https://www.copera.org/working-after-retirement" target="_blank" rel="noreferrer noopener">working after retirement limits</a>.



PERA regularly reports on the impact of working after retirement exemptions for <a href="https://content.copera.org/understanding-the-financial-impact-of-working-after-retirement/" target="_blank" rel="noreferrer noopener">rural school districts</a> and <a href="https://content.copera.org/understanding-the-financial-impact-of-working-after-retirement/" target="_blank" rel="noreferrer noopener">boards of cooperative services (BOCES</a>) to the Legislature.



<h2 class="wp-block-heading">Estimating the financial impact</h2>



Calculating how much it would cost to expand working after retirement provisions is difficult because it ultimately depends on how many workers take advantage of the proposed new rules.



As it’s currently written, <a href="https://leg.colorado.gov/bills/sb24-099" target="_blank" rel="noreferrer noopener">SB24-099</a> would add superintendents and principals to the list of qualified positions under “critical shortage” provisions. <a href="https://leg.colorado.gov/bills/hb24-1044" target="_blank" rel="noreferrer noopener">HB24-1044</a> would allow larger school districts to hire more retirees under the 140-day/916-hour rules. To estimate the bills’ cost, PERA’s actuaries modeled several scenarios in which different percentages of eligible workers retire early and return to work. The models showed that if eligible employees retired two years early, it could result in millions of dollars in added costs and potentially extend the amount of time it would take PERA to reach full funding.



The PERA Board of Trustees is committed to protecting the integrity of PERA’s trust funds for the benefit of all members. It has taken an “amend” position on the above bills, encouraging lawmakers to include provisions that would offset the potentially negative effects on PERA’s funding.



PERA On The Issues will continue to track these and other PERA-related bills throughout the session and <a href="https://peraontheissues.com/2024-proposed-legislation-status/" target="_blank" rel="noreferrer noopener">post any updates here</a>.

An older woman sits at a desk in a classroom, smiling and talking with two young boys while other children work in the background, showing the positive financial impact of working after retirement.

Understanding the Financial Impact of Working After Retirement