Recent PERA Contribution Changes, Explained

July 7, 2020

 

If you’re in the PERA Defined Benefit Plan, a percentage of your paycheck is deposited to your PERA account every month. The percentage is set by state law. When you compare a paycheck you receive in July to a paycheck you received in June, you’ll notice the amount sent to PERA has changed. You might ask, “Why did the amount change, and where does that extra money go?” Let’s break it down…

Contribution Changes

Changes to contribution rates in 2020 occurred for a few reasons. While every PERA member saw at least one change, not every change affected everybody. Here are the reasons behind each kind of change, and who is affected.

Planned increases from SB 18-200

In 2018, the Colorado General Assembly increased contributions in a bill commonly referred to by its bill number, SB 18-200. This bill put PERA on the track to full funding. Employees, employers, retirees, and the state each contribute a portion of what’s needed to get there.

Instead of these changes being implemented immediately, however, lawmakers decided to roll out the changes over a number of years. For active employees, that means a 2% overall contribution increase is phased in over three years. Contribution rates were scheduled to increase by 0.75% in 2019, 0.75% in 2020, and 0.5% in 2021. This change applies to all PERA members except those who work for a local government.

Automatic Adjustment Provision

PERA is tasked with pursuing long-term goals, including reaching full funding by 2047—that’s still 27 years away! It’s good to have a goal and a plan to get there, but a lot can happen in 27 years.

Imagine you’re the captain of a ship, and you’re sailing from New York to London. You have a destination in mind and you’ve plotted your course. But you also must be prepared to adapt to unforeseen circumstances, from maneuvering around other boats while leaving port to avoiding storms while at sea.

Creating that kind of flexibility is what the automatic adjustment provision (AAP), which was created in SB 18-200, is all about. The AAP automatically alters contribution amounts by a fraction of a percent depending on PERA’s financial circumstances. If the AAP is triggered, the changes go into effect the following year.

The AAP was triggered after 2018’s financial report was released in 2019. The change—a 0.5% increase in contributions for all active members—goes into effect this July. This increase stays in effect until the AAP calculation is triggered in the other direction.

In June, PERA released its financial report for 2019: There will not be an additional AAP adjustment in 2020.

Judges—a two-year swap

As part of the response to budget shortfalls, the General Assembly passed a law temporarily increasing contributions that judges make to their PERA account to offset a reduction in their employer’s contribution. The increase of 5% will take place for the next two years.

Where These Extra Dollars Go

As of July 1, total member contribution rates are:

 

State, School, and DPS Divisions 10%
Judicial Division – (Judges) 15%
Local Government Division 8.5%
Safety Officers 12%

Raises in contributions result in less take-home pay. This can be difficult. However, remember that every dollar sent to PERA remains your money. Member contributions go directly to your member account. You can track every cent you’ve contributed, and the interest it has earned, on your online member account or in the annual statement you receive.

Keeping PERA on track ensures that the benefits provided to hundreds of thousands of PERA members remains secure today and into the future.