FoP logo

Your Opinions

Issues

Note: The blue type below is the response by Friends of PERA to some of the questions/statements in these emails.

Friends of PERA would, of course, prefer that changes not be made to the program, but we have seen the information PERA has presented and have come to the conclusion that, for the most part, the proposal by PERA is justifiable and appropriate. That doesn’t mean we are happy about it. Friends of PERA was formed with the goal of making sure the defined benefit plan continues for public employees. At the present, it isn’t pressure to go to a defined contribution plan that we are fighting, rather it is to make sure the fund is sustainable.

01/15/10 A response by FOP to the email found below.

Thanks for your email regarding the COLA. I am going to give you some of my thoughts and then respond to some of the things you stated.  I agree that it is not a pleasant thought to only have a 2 % COLA; if there was any other way around this, we would endorse it but we have to be practical. We have stretched the employer contributions and the employee contributions as far as they can go. In many pension plans, there is no COLA. The 3.5% flat rate was instituted when PERA was 105% funded and there was excess money, so the legislature agree to "share the wealth" PERA had achieved by increasing the annual increase to a flat amount as well as to reduce the employer contribution, add a matchmaker program for matches to voluntary deferred compensation investments by active members, and reduce the cost to purchase service credit. All of these enhancements have succumbed to the difficult market situation except for the 3.5% increase in benefits. 

Not always have we had high inflation...from 1991 to 2000, the average CPI-W rate of inflation was 2.7%; Since 2000, the average CPI-W increase has averaged 3%. Retirees have received increases averaging 3.5%, consequently, we are 7% ahead of inflation. A retiree receiving $1,000 monthly in 2000 would be receiving $1,363 today. Had the inflation rate been used for those increases, the benefit would be $1,270, about $93 per month less ($1116 per year). 

Cost of living increases are one of the most expensive parts of a defined benefit plan. That is why nearly all private industry DB plans do not have a cost of living increase built into it, and why the 3.5% PERA increase is at the outer edge for public pension plans.  

FOP encouraged PERA to put a provision in the bill that requires PERA to provide the Legislature with a report in five years that will complete a review of whether PERA’s funding improvement is on the projected track, as well as a comparison of CPI-W increases versus the annual benefit increase received by PERA beneficiaries. Should there be a wide variance between CPI and the ABI, the PERA Board and the Legislature could seek a remedy for retirees. There is a provision in the bill that once PERA gets to 103%, then the COLA will increase by .25% each year. Certainly, this will be some time out, but at least there is a light at the end of the tunnel.  FOP

01/11/10 An email from Susan which prompted the above response:

The biggest problem with the current draft of the bill is that it cuts PERA’s annual pension increase from 3.5% to 2%.  This cut ensures that retirees will lose a substantial amount of the value of their pensions to inflation by the time they reach their later retirement years.  It affects current retirees and has an even greater effect on future retirees who will see inflation eat away at their pensions during their entire retirement.

For example, if inflation averages 3.75% per year as PERA's actuaries predict, pensions would lose 20% of their real value within 15 years, and would continue to decline in value every year until the retiree dies.  The average monthly retirement benefit for PERA members who retired in 2008 was $2878.  Assuming 3.75% average inflation and a 2% annual COLA, that benefit would be worth $1461 in real (i.e. inflation adjusted) dollars after 40 years. (This is an overly dramatic example; the average retiree who is age 55 has a life expectancy of 28 years.)

One way to reduce the potential impact to retirees (and future retirees) would be to limit the decrease in real (i.e. inflation adjusted) value of a retiree's pension under the new (2%) rate to a maximum of 20% (a different percentage may be negotiated).  Once a retiree's pension has lost the full 20%, his or her future annual increases would revert to the 3.5% fixed annual rate which is currently in effect.  (While this is a good idea, PERA can't afford it. PERA is cutting the increase because it does not have the money to pay for it and not go broke. So the 2% is the maximum it can pay if we only get an 8% return on average.)

Since this provision would probably not be triggered for about 15 years, PERA’s fund balance would have a substantial period to recover before the fund had to resume paying the 3.5% annual increase rate. Yes, PERA will be better funded in 15 years, but it does not expect to reach 100% funded for 30 years. We have argued that we don't need to be 100% funded, but this is the national standard and consequently, we are been forced to follow the standard. We are on your side but also understand the need to decrease the COLA...

01/06/10

As far as I am concerned the bill needs to be changed.  Those of us who are already retired cannot live on a 2% annual increase.  Has anybody checked the price of groceries lately?  The annual increase needs to be left at 3.5% for those already retired and unable to increase their pension any other way. Fred

01/06/10

For PERA to unilaterally reduce my COLA from 3.5% to a floating amount not to exceed 2 percent, which will probably result in a 1% increase average for many years to come is to take away my 2.5% COLA compounded every year.  This is important, for 2.5% would help me help to keep up with inflation.  As a retiree, there is no provision to allow me to regain this loss, while those who have not retired yet have other options.

I believe PERA needs to reconsider the impact of reducing the COLA on its retirees. I am against it. Rick C.

12/24/09 (Referring to the Coalition Statement)

The fallacy of all of this is that all of us are still very vulnerable to market risk!

It seems particularly mean spirited to ram this SB ONE through immediately to deprive us retirees of the 2010 COLA. My share of the PERACARE premium increased 23% for 2010. Couldn't we at least have a one year reprieve before we are forced to bail out the state? Charles B. (Social Security beneficiaries and military retirees get no increase this year; we should be able to swallow the same pill.)

12/31/09

It is a difficult situation, no one will deny that. (They) should NOT LOCK us into the proposed agreement until the 100% plus funding status is achieved.  That could mean NEVER seeing another COLA increase while PERA members still working would continue to get raises and our healthcare premiums escalate and inflation eats away at our buying power.  

I suggested that PERA add two more columns to their COLA calculator.  One for 1% increase and a second for O% as those two columns make the loudest statement of what no cola increases will do to our standards of living. Even an email from a PERA board member was written as if we would all receive consistent 2% increases…TRUST me, I wrote a heated response that misinforming retirees was wrong.

I hope any lobbying opportunities and/or open meetings with legislators will be advertised.  I would like to attend and participate. I could have left my savings in a tax shelter STILL making more than anything I will now realize from having bought my first 4 years of service credit in Michigan !   So I’m not happy. Ruth

1/4/2010: UNCOLA: PERA’S Pernicious Proposal

The recent issue of PERA Retiree Report listed a summary of the PERA legislative recommendations for 2010, denoted as “2/2/2Plus.” While there is much to like in the package of proposals, one specific proposal in the package represents a real danger to retirees. I do support the passage of the package, with ONE MAJOR EXCEPTION.

The most pernicious provision in 2/2/2 Plus is the proposal to cap the COLA at 2%. A COLA with a cap is not a COLA: it is an UNCOLA. The effect will be very damaging to seniors. Every sane financial observer knows that an extended period of high inflation is virtually guaranteed by recent government policy. Many economists talk openly of the prospect of hyper-inflation. But even if inflation is merely high, not hyper, the impact is devastating.

Allow me to use real figures, rather than speculation. The period from 1973 to 1982 had a CPI exceeding 6%, and ranging up to 11%, for each of those years. The cumulative effect of those years was to slash the effective purchasing power of retirees by over 60%. If you are a retiree, or know someone who is, try to imagine them living with 60% of their income taken away permanently. For most retirees, there is no way for them to recoup that loss of income.

A cap on the COLA is a broken promise. Retirees often lose ground even with a COLA, because retirees often experience inflation exceeding even the CPI. Even when CPI-based inflation is very low, the expenses that form the backbone of senior citizens’ budgets – medical insurance, prescription drugs, fuel – continue to rise alarmingly. The federal government itself recognizes the inequity of a CPI-based COLA by calculating a senior-specific CPI formula, which it never uses, that shows our cost of living rises faster than that of most young people.

A simple observation: PERA could instantly become fully funded if future obligations were slashed explicitly. That would not be legal and no one is proposing such a drastic action because that is clearly breaking the promise we have made to our seniors. Worse, it would all but guarantee a legal challenge and extended litigation, wasting the resources of PERA. But the effect of the COLA cap is almost assuredly the same as a slash in promised benefits. Passage of the COLA cap invites litigation. There is no question that a COLA cap would help the PERA move to fully funded status, but only on the backs of our seniors.

If our economy does experience a period of high inflation, PERA will regain market position rapidly. But a cap on the COLA would punish seniors even as PERA prospers and would deny PERA retirees the right to share in that growth.

PERA does need some reform. Currently, for all divisions, the employee contribution is below the employer contribution. I suggest that PERA, and the Legislature, consider this simple proposal: Require the employee contribution to be no less than the employer contribution. That still represents a 1:1 match, which far exceeds most retirement plans in the private sector. (Employees are impacted in this proposal by a 3% increase in contributions which will not be refundable and will be taken out of the money used to provide increases in salaries and benefits by employers. It is better for PERA that these contributions come in as the Supplemental Amortization Equalization Disbursement than as the employee contribution.)

I urge the Legislature to strip the UNCOLA from the “2/2/2 Plus” package and pass the rest.

I urge all PERA retirees to contact your state legislators and ask them to strip the UNCOLA.

Drew C, Former State Representative

1/14/2010: Response to an email which is in “blue” below.

Thanks for your email regarding the COLA. Before I answer your email specifically, here are some thoughts on the COLA. I agree that it is not a pleasant thought to only have a 2 % COLA; if there was any other way around this, we would endorse it but we have to be practical. We have stretched the employer contributions and the employee contributions as far as they can go.

In many pension plans, there is no COLA. The 3.5% flat rate was instituted when PERA was 105% funded and there was excess money, so the legislature agree to "share the wealth" PERA had achieved by increasing the annual increase to a flat amount as well as to reduce the employer contribution, add a matchmaker program for matches to voluntary deferred compensation investments by active members, and reduce the cost to purchase service credit. All of these enhancements have succumbed to the difficult market situation except for the 3.5% increase in benefits.

Not always have we had high inflation...from 1991 to 2000, the average CPI-W rate of inflation was 2.7%; Since 2000, the average CPI-W increase has averaged 3%. Retirees have received increases averaging 3.5%, consequently, we are 7% ahead of inflation. A retiree receiving $1,000 monthly in 2000 would be receiving $1,363 today. Had the inflation rate been used for those increases, the benefit would be $1,270, about $93 per month less ($1116 per year).

Cost of living increases are one of the most expensive parts of a defined benefit plan. That is why nearly all private industry DB plans do not have a cost of living increase built into it, and why the 3.5% PERA increase is at the outer edge for public pension plans.

FOP encouraged PERA to put a provision in the bill that requires PERA to provide the Legislature with a report in five years that will complete a review of whether PERA’s funding improvement is on the projected track, as well as a comparison of CPI-W increases versus the annual benefit increase received by PERA beneficiaries. Should there be a wide variance between CPI and the ABI, the PERA Board and the Legislature could seek a remedy for retirees. There is a provision in the bill that once PERA gets to 103%, then the COLA will increase by .25% each year. Certainly, this will be some time out, but at least there is a light at the end of the tunnel. 

The biggest problem with the current draft of the bill is that it cuts PERA’s annual pension increase from 3.5% to 2%.  This cut ensures that retirees will lose a substantial amount of the value of their pensions to inflation by the time they reach their later retirement years.  It affects current retirees and has an even greater effect on future retirees who will see inflation eat away at their pensions during their entire retirement.

For example, if inflation averages 3.75% per year as PERA's actuaries predict, pensions would lose 20% of their real value within 15 years, and would continue to decline in value every year until the retiree dies.  The average monthly retirement benefit for PERA members who retired in 2008 was $2878.  Assuming 3.75% average inflation and a 2% annual COLA, that benefit would be worth $1461 in real (i.e. inflation adjusted) dollars after 40 years. (This is a dramatic example; the average retiree who is age 55 has a life expectancy of 28 years.)

One way to reduce the potential impact to retirees (and future retirees) would be to limit the decrease in real (i.e. inflation adjusted) value of a retiree's pension under the new (2%) rate to a maximum of 20% (a different percentage may be negotiated).  Once a retiree's pension has lost the full 20%, his or her future annual increases would revert to the 3.5% fixed annual rate which is currently in effect.  (While this is a good idea, PERA can't afford it. PERA is cutting the increase because it does not have the money to pay for it and not go broke. So the 2% is the maximum it can pay if we only get an 8% return on average.)

Since this provision would probably not be triggered for about 15 years, PERA’s fund balance would have a substantial period to recover before the fund had to resume paying the 3.5% annual increase rate. Yes, PERA will be better funded in 15 years, but it does not expect to reach 100% funded for 30 years. We have argued that we don't need to be 100% funded, but this is the national standard and consequently, we are been forced to follow the standard.  

I'm on your side but also understand the need to decrease the COLA.

3/25/09: I am so sorry I won’t be able to be at the capitol but we need to be there. These are the same people I testified against and the independence institute is dangerous. I hope the retirees come out in full force against them. They are very scary and they must have their Wall Street cronies lined up and ready to get their hands on our money. They tried to privatize once and they’re trying it again.

Because of the dissolution of one of the strongest unions we had, Colorado Federation of Public Employees, and without Jo Romero’s guidance, we may be sunk. Please keep us informed on this list as to what happens at the capitol. MU

3/26/09: I was in the main room (during the hearing). It seemed that everyone (legislators as well as presenters) was surprised/impressed at the number of people attending the meeting; a good thing I believe. The legislators who were present seemed to respond to the presentation down party lines with several Republicans leaving during Meridith Williams comments. BB

3/25/09 - Statement on the K-12 Pension "Reform" by Georg Ek What now is the game play of the insufferable Independence Institute with its scurrilous stink tank? Why should the PERA Pension Fund be removed from our present trustees and placed in the hand of the unknown with whom we suspiciously trust as much as AIG?

By "reforming" PERA as Messrs.Poulson and Mannino have advocated in publications of the Independence Institute, are we not surrendering our futures to entities whose value system is quite different in character than shared by teachers and civil servants?

PERA folk - teachers and civil servants alike - share common values: values not based on greed, money and power but service to our public, husband of our Earth with its natural resources, protecting, conserving and enhancing our flora and fauna, and use the people's water not for private profit but wisely, cleaning our spoiled air, and cautiously develop judiciously inorganic resources for the public common good - All for future generations?

Buckling-in to the alleged "reform" is to double back to where "We the People" have just been. Again we are slickly asked to extend our trust to those who may - if we give to them our pension funds - again be laughing up their sleeves and snickering amongst themselves at all of us who have given our trust to them. We may loose everything, but will they? They have had their day - a decade or more. May the current changes blowing in the wind be an inspiration that reunites our folk to rebuild our barns and our people.

Just as this Great Nation, and and indeed our World, struggles to emerge from that narrow bottom-line thinking that knows the cost of everything and the value of nothing, may we who have devoted our lives to service and stewardship - and those able PERA staff who share our dedication to our people and our Colorful Colorado unite to sincerely oppose this ill-conceived "reform'. Those whose training and vision narrowly focuses on money manipulation, what have they in common with our ideals and philosophy as teachers and servant of the public? We know well that there are many more points to the compass than profit and loss.

Don't let Poulson and Mannino of the IP Institute with its swave stink tank be our PM!!!

3/23/09: Sorry I missed the (FOP meeting with PERA's presentation), but did anyone inquire if PERA might offer some legislative proposals this year at that presentation; and if so, what about continuous improvement type changes, e.g., offer voluntary postponement of COLAs (for a number of years certain, possibly w/some small monetary incentive later for sacrificing now) &/or offer to exchange the set 3 - 3.5% COLAs for a true Denver-Boulder (or actual location related) based C.P.I., not to go below zero, to those willing to accept such an exchange?

As for the push to shove PERA out in exchange for DC plans, why not ask if the "buy-out" assures the continuance of PERA for those already vested...if the proponents of DC plans will address retaining present DB plans for vested members and the orderly transfer towards a voluntary option to become a DC plan participant, eventually only offering a DC plan to future workers (and the involvement and role of PERA's board & staff in overseeing, administering, and offering same), then perhaps a dialog could ensue; but lacking that, then the proponents of DC plans are obviously bogus and/or naive on their face and all their proposals must be rejected out of hand until they seriously wish to confer in a way even remotely resembling good faith!

As for your recent update, I had to laugh when I read: 'The Colorado Republicans blasted PERA’s idea to wait until 2010. “With the magnitude of the current economic crisis, PERA’s plan of doing nothing for another year is tantamount to Nero fiddling while Rome burned,” they said in the letter.' MY COMMENTS ON THAT ARE: - - - Of Course They Should Know, They're The Arsonists Behind The Flames! (Translation: PERA staff needs to get off their collective asses and get ahead of the curve on this crime).

In closing, I shall endeavor to make the March 25th legislative hearing (Independent Institutes' media farce. GS

2/21/09: Any way to rescind the divestments currently costing PERA so much money? Engagement makes a lot more sense, and is cost effective. Since no entities but public pension funds are divesting, the purpose of divestment has not, and will not be achieved. There is absolutely no comparison to the South African divestment since no one has signed onto the Sullivan Principles. CF

2/19/09: I am within 5 years of retirement. Please stand tough for our benefits. BP

3/26/09: Maybe Obama can bail out PERA or at the very least get the country rolling as he promised to so many DIS-GRUNTLED AMERICANS.  If all was rosey the state would not be in financial need, add automobile taxes, freezing property taxes etc.  If new arrangements need to be made for future hires that is one thing, but to change the rules for anyone that was hired or retired before January 1 2010 should not be allowed. FG

3/26/09: Thanks for your comments regarding the hearing...Excellent coverage of everything!  By some lucky chance, we both were able to listen to the session using our computers.  We just wish we could have been there. I could tell at the very beginning that Mannino was very surprised that so many people were in attendance in support of PERA and I really think that threw him off his game. He seemed nervous, or should I say, sounded nervous and seemed unable to focus. I agree that most of the time he didn't present coherently, descending into terminology that really didn't make much sense (at least to me). 

We were impressed with Meredith's response to Mannino's assertions. I think he was very reasoned in his comments and did make many good points. (I laughed when he gave his "extra value meal" interpretation.) Mannino should have come away from the session pretty humbled, but may not since he'll have Poulson and the Independence Institute to prop him up again. I didn't catch the name of the legislator who made the comment about PERA not making recommendations based on what Mike Rosen says on his talk show, but thought it was a great ending to the session...very appropriate, with humor. 

Question:  Does this mean that there won't be legislation introduced this session. CF

(Our response: not necessarily. Someone could introduce legislation or it could be the forerunner of a ballot initiative as occurred about two years ago – the reason FOP was formed.)

Sample letter sent by an FOP member, October 31, 2007 »letter

From Cheryl Flagg...Oct. 17, 2007:

Don't see anything here about divestment being a shared responsibility...only California public pension funds must make the sacrifice. Also, looks as though a lot of people stand to gain monetarily from California divestment, while its pension funds lost money. Actually, it's those teachers, public school employees, firemen, policemen, and civil servants that lose money! What will it cost Colorado PERA? By the way...that's us, you and me! More...

Friday, September 28 at 2:00 PM
Cynthia Rutledge of Oak Creek writes to Rocky Mountain News:

I’m responding to the Sunday, September 16, 2007 article in SPEAKOUT
by Senators Fitz-Gerald, Gordon, McElhany and Penry.

Our state legislators are abusing their authority with repeated
attempts at manipulating the investment of Colorado PERA’s defined
benefit pension funds for an increasing list of divestment
“imperatives.” It is the PERA members and retirees who OWN these
funds, not the taxpayers at large and not the General Assembly. Our
mandated contributions and those of our employers are made subject to
contractual agreements and are in lieu of contributions to social
security. Nowhere is it stated that legislators may usurp the purpose
for which our retirement funds are invested to promote their own or
other’s version of our nation’s foreign policy, their own ideology or
to repay their own benefactors.

Two years ago PERA’s defined benefit plan was considered so fragile
the then State Treasurer felt it imperative to propose benefit
changes. Four months ago the State’s General Assembly forced
divestment from companies doing business with Sudan at an estimated
cost to the same defined benefit fund of up to $3,000,000. Rep.Victor
Mitchell considered it imperative that PERA’s defined benefit members
pay all costs of divestment out of their funds, thus bearing the total
financial burden for a social statement supposedly made for all
Coloradoans.

Now we have yet another “imperative” proposal known to be vigorously
promoted by foreign nationals and powerful lobbies to divest from
Iran. And yes, it’ll cost us.

Legislative oversight is not a mandate to pillage and plunder pension
funds for ANY purpose. Remember, while members of PERA’s defined
benefit plans are paying for a proliferation of divestment proposals
now, ALL Colorado taxpayers will end up paying for the legislated
decimation of PERA’s trust fund in the future.

This letter has not been edited.

Oct. 9, 2007: This is the comment I posted in response to "Darfur: Solution or
Diversion?" at Foreign Policy In Focus. My concern is no one ever
addresses the impact on public pension funds and its members. ( From CF)

Kevin and Steve, I found your article well balanced, presenting quandaries of divestment many of us are concerned about but rarely see in print. And I applaud you for that. However, as a member of a public pension fund, I and many others continue to be struck by the lack of coverage given to the impact Sudan and Iran divestment will have on public pension funds and its members. We are concerned that such divestment only targets the hard-earned savings, held in trust, of teachers, public school employees, policemen, firemen, and civil servants. No other individuals, entities, or institutions in the United States will be mandated to divest; therefore, divestment is not a shared responsibility as it should be in our democratic society. When South Africa divestment was accomplished, legislation mandates also included banking, financial institutions, purchasing policies, licensing, franchising, and distribution agreements. Why doesn't current Sudan and Iran divestment legislation include these same areas? Many see this is a form of discrimination.

Sudan and Iran divestment is, and will continue to take its financial toll on public pension funds. Additional staff must be hired to manage the divestment process which is very complicated and lengthy. Since the SEC no longer offers a free list of companies to divest, lists of companies doing business with Sudan and Iran must be purchased from private list making companies for thousands of dollars...and not just once, but quarterly and for how long no one seems to know. (As an aside, how would any private individual know what companies to divest since this information is not made public?) When the offending companies are divested, they continue to be listed on the stock exchange to be purchased by any one person or institution...except public pension funds. Companies who may have as little as 2% holdings in Sudan and Iran are on these divestment lists. The only persons who will bear the costs and losses from Sudan and Iran divestment are public pension fund members: teachers, public school employees, policemen, firemen, and civil servants. One final point...if any of these companies targeted for divestment leave Sudan and Iran, who will take their place in those countries? Food for thought.

Sept. 27, 2007: E-mail with infor about Iran divestments by Florida (From CF, Steamboat Springs)

Hello All, You may have seen this but if you haven't, here it is...the first financial figures on Iran divestment from Florida, the first state to pass such legislation. I keep running into folks who say they've been told that divestment won't cost PERA any losses. We need to make sure those people see this. Also I keep reminding people that banks, investment and brokerage firms, business and labor pension funds, mutual funds, defined contribution plans, private individuals and legislators are not mandated to divest...only PERA's defined benefit plan is targeted for divestment in legislation. Cheryl

Sept. 26, 2007: Email to Sen. Fitz-Gerald & Sen. Gordon (From CR, Denver)

I thought you would like to see a letter I wrote to Senator Fitz-Gerald and the response I got back in the form of an attachment. I was a little confused and maybe so is she or the intern that responded. CR,Denver

Sept. 26, 2007: Email with info about Texas divestment action (From CF, Steamboat Springs)

Interesting situation down in Texas... Gut-check time for pension trustees

Sept. 26, 2007: E-mail about divestment editorial for Burma in WSJ (From CF, Steamboat Springs)

Hello All, As you will read here, WSJ initiates Divest Burma (Myanmar) campaign. While certainly tragic, as are so many places in the world, PERA and other public pension funds cannot carry the costs of constant divestment of their defined benefit plans. CF

Sept 23, 2007: Email on Ohio Divestment Compromise (From CF, Steamboat Springs)

Update on Ohio's massive Sudan-Iran SHB 151 possible compromise.

print Print | Close x