Before taking a proposed package of pension plan reforms on a roadshow, Colorado PERA executives held two “telephone town hall” meetings last week to field questions from members and retirees.
Transcripts of the two phone meetings posted online show that members and retirees, while not thrilled with higher contribution rates and lower (or frozen) cost-of-living increases recognize that something has to be done to keep the plans solvent.
Before getting to a few member and retiree thoughts, it’s worth quoting PERA CEO Greg Smith at length on key elements of the proposed changes, because Smith provides a bit of detail (highlighted in bold) we hadn’t seen in earlier communications.
Now, let’s talk about the structural change the PERA board has also recommended. The structural change is made in an effort to set the course for the long term shared responsibility that’s responsive to good times or bad and is included in the package as an automatic adjustment provision that responds to those cycles in the future. This prevents the need for future legislative action and allows today’s legislature and today’s governor to set a course for the long term sustained health of the system. It would be automatically responsive to cycles and I’ll give a little further explanation, although it’s a fairly complicated structure.
The provision would adjust contributions and the cola to keep the plan on a path to pay off the unfunded liabilities over a 30 year schedule. In other words, if PERA has investment or demographic experience that pushes it off of the 30 year amortization period or pay off schedule, member and employer contributions, as well as the cola, would change in a predefined way to return to the funding schedule. If the future experience is more positive than expected, the cola could return to the 2% level that it currently exist at and contributions could return to lower levels.
Conversely, a negative experience could lead to contribution increases of up to 2% additional for employees and employers and the cola reduction could go as low as one half of 1%. This automatic adjustment provision sets a long term path that responds to the changing conditions while eliminating the unfunded liabilities and maintaining the value of the system for PERA’s members and for the state of Colorado.
Now to a few questions and responses. Sandy, the spouse of a PERA member eligible for retirement complained that “it apparently seems to always fall back on retirees or the employees themselves to recover where PERA may have made some poor decisions along the way.” She suggested putting the burden of changes on new hires, because cutting a retirees COLA by even half a percentage point hurts.
“It seems like PERA is always changing things on us, like we never know now what will be our retirement benefits because it’s not the same as what we signed up for originally,” Sandy said.
Smith said the PERA board came up with a package that “spreads that responsibility or shared sacrifice among all the different categories.” Anything else would be unfair, he said:
“When the benefits that have been accrued and the short fall, or the unfunded liability that’s been accrued relates to the service that’s been provided by our existing members to put the cost of fixing that issue all on the shoulders of future hires is something that’s not consistent with the board’s view of inter-generational equity.”
Marcus, a retiree from Buena Vista, echoed the concern about reducing the COLA from 2 percent to 1.5 percent after a two-year freeze. He asked whether one of those two hits could be reconsidered.
Keeping the COLA at 2 percent would require a five-year freeze, Smith told him, adding:
The cost of the package is largely falling in our active and future employees and our employers, our retirees certainly have skin in that and we recognized the pain.
Live town halls begin a week from today — Oct. 16 — in Grand Junction, and continue through Nov. 2, with the final session in Denver. Any changes to PERA will have to be crafted into legislation, passed by the State House and State Senate, and signed by the governor.