As Colorado PERA executives begin gathering feedback from retirees and active members on proposed plan changes, it’s worth pointing out that new hires as of 2020 will experience a somewhat different package of benefits than those in the system today.
While it’s encouraging that PERA recognizes future state and school district employees should enjoy a slightly less sweet deal than current members and retirees, the proposal takes nothing more than a couple of baby steps toward the more fundamental restructuring we believe is required to make the system solvent over the long haul.
Here are the proposed changes to the benefits of those hired from January 1, 2020 forward:
- New hires wouldn’t be eligible to retire with full benefits until they reach age 65. Current employees, regardless of age, can retire with full benefits after 35 years of service, or when they reach age 65. Depending on their hire date, employees also can retire at between ages 50 and 58 after 30 years of service.
- New hires would have their retirement benefit calculated based on five years of highest average salary, instead of the current three years.
- New hires would pay 10 percent of their pre-tax salary into PERA. This would actually be 1 percentage point lower than workers hired before 2020, because of the reduced benefits described above.
- But the changeover from calculating contributions based ion gross pay rather than net pay will have an as-yet undetermined additional impact on how much everyone pays in beginning in 2020.
As we’ve said in other posts focused on the proposed changes, this represents a good first step. But PERA missed an opportunity here to undertake deeper structural reforms we believe are necessary. For example, these changes do nothing to address the serious issues of inter-generational inequities baked into PERA’s structure.
As such, they will do little or nothing to incentivize top young talent to go to work for the state or its school districts.