PERA gives solvency plan to panel

State employees' contributions would be higher, benefits lower

by Joe Hanel
Herald Denver Bureau

Article Last Updated; Tuesday, November 03, 2009 12:02AM

DENVER - Legislators got their first chance Monday to hear the Public Employees Retirement Association present its multibillion-dollar rescue plan.

The plan calls for lower benefits for employees and increased payments into the system from both workers and the governments and school districts that employ them.

PERA Executive Director Meredith Williams presented the plan Monday to the Legislative Audit Committee, which includes some of PERA's most persistent critics. The PERA board voted unanimously to back the plan, which Williams said is fair to future employees and retirees.

"We don't want children and grandchildren paying for parents and grandparents," Williams said.

The board wants a 2 percent increase in contributions from employers and employees, plus a 2 percent cap on annual cost-of-living increases. Current law gives retirees up to 3.5 percent annual cost-of-living increases. The minimum retirement age to receive full benefits would be raised to 60, up from 50 or 55 now.

The changes should put PERA on the path to long-term solvency within 30 years, according to its projections.

That prediction is based on expected 8 percent annual return on its investments. Previously, PERA used an 8.5 percent expected rate, but the board dropped it half a point to be conservative, Williams said.

But critics say PERA leaders still are way too optimistic about future returns.

Minor adjustments in assumptions could make a big difference over 30 years, said Sen. Shawn Mitchell, R-Broomfield.

The Legislature will have to approve the plan next year. Lawmakers say they have to do something, because ultimately, the state treasury is on the hook for PERA's obligations.

Most state, local government and school district employees belong to PERA. The system has 439,000 members across the state, including 8,135 in the five counties of Southwest Colorado. During the last year, 1,491 Southwest Colorado retirees drew $46.2 million in benefits, according to PERA.

PERA has owed more in benefits than it has in assets since about 2000, and it lost $10.5 billion last year in the stock market crash. It now faces a long-term $27 billion gap to cover its obligations, Williams said.

Even with improving markets, PERA can't "invest its way out" of the crisis. "PERA's investments would have to earn nearly 60 percent in 2009 to return PERA to prerecession funded levels," according to a PERA news release.

The lower benefits and increased contribution rates would phase in starting in 2013 for employers and 2014 for employees, ending in 2017.

The Legislature will take up the plan in its 2010 session, which begins in January.

jhanel@durangoherald.com