Just two months after the enactment of major bipartisan reform legislation designed to improve the solvency of Colorado’s Public Employees’ Retirement Association (PERA), actuarial reports are already depicting major improvements in the overall health of the state’s primary pension plan.
Senate Bill 200 passed through Colorado’s legislature in May and was signed into law the following month. The law represents a bipartisan effort to shorten the amount of time it will take to lift PERA out from a $54.6 billion hole of unfunded pension obligations. 2016 PERA reports projected amortization periods ranging from 54 to 78 years for PERA’s various divisions, which were well above the 20-year recommended limit established by page 28 of the Society of Actuaries’ Blue Ribbon Panel on Public Pension Plan Funding.
Shortly after the bill’s signing, S&P Global Ratings gave Colorado an improved credit outlook, which represented an early sign of success for the reform. Now with the release of PERA’s 2017 actuarial valuation, more positive signs are emerging. According to a presentation made by actuaries to the PERA Board of Trustees, the reform has significantly shortened the number of years it will take to reach full funding. PERA’s School Division—the largest in both members and liability—went from a projected 78-year amortization period in 2016 to a 30-year period in the wake of reform. Likewise, the changes reduced the amortization period for PERA’s State Division from 58 years to 27. The Local, Judicial, and Denver Public School Divisions also saw reductions, going from 55-year amortizations periods to around 15 years.
It is still too early for Colorado to fully realize the impact of the 2018 reform, but early signs continue to support Reason Foundation’s analysis that SB 200 marked a meaningful improvement in the financial health of the state’s most prominent post-employment program.