Over the past year, we’ve taken a look at the history of public pension systems in Iowa, Kansas, Kentucky, Oklahoma, and Wyoming. Today, we’re examining Colorado’s public pension systems, which play a critical role for the Centennial State’s public employees since Colorado is one of seven states where all public employees do not participate in Social Security.
The Colorado Public Employees’ Retirement Association (PERA) and the Colorado Fire & Police Pension Association (FPPA) are the two major pension systems in the state. PERA, which was created by state law in 1931, covers most of Colorado’s public employees. In 1980, the Colorado General Assembly established a separate system (FPPA) to provide retirement benefits for law enforcement officers and firefighters. According to the National Association of State Retirement Administrators (NASRA), these plans combined have $58,455,358 in assets with 252,947 active members and 146,157 annuitants.
A third system, the Denver Public Schools Retirement System, previously provided benefits for Denver School District employees but was absorbed into PERA in 2010, according to NASRA.
2010 Legislative Changes
PERA originally faced significant obstacles following the Great Recession of 2008, after the system’s annual projections showed that the fund was in poor fiscal shape due to underfunding by lawmakers leading up to the financial crisis.
In response, the legislature passed Senate Bill 1, which included a number of measures intended to shore up the system’s funding. Some of the reforms, according to PERA, included tying cost-of-living adjustments (COLAs) to the system’s funded status, increasing employer and employee contribution rates, and changing rules for service retirement eligibility.
PERA was put on a path towards a stronger financial position following the passage of Senate Bill 1, with $15 billion shaved off of the system’s unfunded liability as a result of these reforms.
2018 Legislative Changes
In 2018, state lawmakers passed Senate Bill 200, a compromise bill intended to further improve PERA’s finances and bring the system to 100 percent funded status within 30 years.
As part of the measure, both employer and employee contributions were further increased, COLAs were capped at 1.5 percent for retirees, and eligibility requirements were increased again. In exchange for these sacrifices from public employees, the state legislature would appropriate a yearly $225 million payment to the pension system.
The Colorado General Assembly abided by Senate Bill 200 and made its annual payments to PERA in the fiscal years 2019 and 2020. However, the state legislature recently decided to excise it from the state budget for the fiscal year 2021 in light of the coronavirus-driven recession, which created a $3 billion budget shortfall for the state.
Going forward, we will continue to follow developments in Colorado to ensure that active and retired public employees receive the pensions they have earned throughout their careers serving the public.