The Colorado Senate on Monday passed a bill that sponsors say would shore up the Public Employees' Retirement Association over the next 30 years.
SB10-001, with a 25-10 vote, now moves to the House. The measure is scheduled to be heard by the House Appropriations Committee next week.
The legislation would increase contributions by employers and employees, provide no cost-of-living adjustment for this year and place a cap on future adjustments for retirees, and change the age of retirement eligibility to 60 from 55 for most members.
One amendment was modified before passage. It says PERA will provide written notice to all members that an actuarial necessity, a legal term that means the future fund is in peril, could occur and the General Assembly could modify the benefits allowed by the plan.
In earlier debate, several witnesses had testified that changing cost-of-living adjustment benefits amounted to a breach of contract. Currently, retired members receive a 3.5 percent increase in benefits each year. SB1 would put a cap of 2 percent on the benefits, unless the plan is not fully funded; in that case, the amount of benefits would depend upon an inflation calculation.
During Senate debate last week, Sen. Keith King, R-Colorado Springs, said he was skeptical of the rescue plan, calling it "too rich," and offered several amendments that ultimately were defeated by the Senate Finance Committee.
Many of those amendments have now become part of House Bill 1207, which is co-sponsored by King.
As drafted, HB1207 would:
- Modify highest average salary, which is a method used to calculate benefits, to a five-year base with a cap on the amount of salary increase from year to year at 5 percent.
- Require the state treasurer to submit a report to the General Assembly regarding the overall financial standing of PERA on an annual basis.
- Define actuarial necessity, a legal term that is not defined by current statutes.
- Require PERA to assume an annual rate of return on investments based on average of actual rate of return for the three previous calendar years.
- Eliminate amortization equalization disbursement (AED) and supplemental amortization equalization disbursement (SAED) beginning in 2011.
- Allow contribution rates to be set by the General Assembly, depending on plan funding percentage.
- Prohibit purchases of service credits after Jan. 1, 2011.
- Raise retirement age to 65.
- Cap cost of living adjustment for all members to the lesser of 2 percent or inflation.
- Eliminate existing defined contribution plan administered by PERA and specifies that member employees will become members of a newly established defined contribution plan. All employees hired on or after Jan. 1, 2011, would become members of the new DC plan and would not have the option to become a member of the current defined benefit plan. Current members of the defined benefit plan could opt in to the new DC plan.
Another measure, HB1153, would change the makeup of the 15-member board of trustees of PERA to create a majority of trustees who are non-PERA members with experience in certain fields. That bill has been assigned to the Houses State, Veterans and Military Affairs Committee.