The bill sent to the governor also reduces COLAs and opens DC plan to more employees
The Colorado General Assembly reached a compromise to pass a pension reform bill on the last day of the legislative session on Wednesday, confirmed Katie Kaufmanis, spokeswoman for Colorado Public Employees' Retirement Association, in an email.
Senate Bill 18-200, which was introduced on March 7 to improve the $49 billion Denver-based PERA's funded status, passed the Senate on March 29. On May 1, the bill passed in the House after modifications to the bill were made.
However, the Senate did not concur with the House amendments and members of both chambers were named to a conference committee.
On Wednesday, the General Assembly passed the bill by a vote of 34-29 in the House and 24-11 in the Senate. The bill moved to Gov. John W. Hickenlooper, who is expected to sign it.
The bill includes automatic adjustment provisions to ensure that PERA remains on the path to full funding in 30 years, in part by modifying the annual cost-of-living adjustment for retirees to offset any deviation from the 30-year funding time frame. PERA was 58.1% funded as of Dec. 31, 2016, according to the most recent information on the pension fund's website.
The current annual COLA for participants that started receiving benefits prior to Jan. 1, 2007, is 2%. For 2018 and 2019, the bill reduces the COLA to zero. For each year thereafter, the bill changes the COLA to 1.5%.
Other major provisions in the bill include increasing employee contributions by a total of 2 percentage points by July 1, 2021, and creating an automatic adjustment provision for employer and member contributions to remain on a path to full funding. The bill also raises the retirement age for new employees hired on or after Jan. 1, 2020.
The bill would also require PERA to report to an interim legislative committee to ensure progress is being made toward full funding. This committee would also have the power to consider and recommend legislation regarding PERA to the full General Assembly.
In addition, new school district and local government employees will be able to choose between the PERA defined contribution plan and the hybrid defined benefit plan beginning Jan. 1, 2019. State employees have been able to choose since 2006.
And although not in the final version of the bill, provisions in the state's budget include an extra state contribution of $225 million to PERA and an increase of employer contributions by 0.25 percentage points for all employers excluding those in the local government division on July 1, 2019.
"We are pleased that the differences in the bill could be ironed out, and that this significant piece of legislation to ensure the retirement security of Colorado's current, future and retired public employees has been sent to the governor," said Ron Baker, PERA interim executive director, in a news release issued by the state pension plan.