The Colorado Supreme Court on Monday unanimously upheld part of a 2010 law that made significant changes to the Public Employees’ Retirement Association, including a reduction in the annual cost-of-living increase awarded to retirees. Reduction in the COLA drew a lawsuit from retirees shortly after Senate Bill 10-001 was signed into law, and lower courts issued conflicting rulings on the issue. The PERA system covers all Colorado teachers and a wide variety of other state and local civil servants.
The law eliminated payments associated with cost of living in 2010 and cut retirees’ annual benefit increases from 3.5 percent to 2 percent starting in 2011. Future increases could drop below 2 percent under certain conditions. (While the increases are commonly referred to as cost of living raises, they aren’t pegged to inflation or consumer prices.) Plaintiffs argued they had a constitutional, contractual right to the 3.5 percent annual increase.
The supreme court’s ruling said, “We hold that the PERA legislation providing for cost of living adjustments does not establish any contract between PERA and its members entitling them to perpetual receipt of the specific COLA formula in place on the date each became eligible for retirement or on the date each actually retires.”
PERA doesn’t have an estimate for how much is saved every year by the COLA reduction. The law as a whole was projected to reduce PERA’s unfunded liability by $9 billion. Observers of the case believed that overturning of the COLA reduction would significantly weaken the law’s ability to improve PERA’s financial health. When the lawsuit was filed, plaintiffs estimated the COLA reduction could cost the typical retiree more than $165,000 over 20 years.
The Coalition for Retirement Security, which represents several employee groups and which backed SB 10-001, said, “We are very thankful to the Colorado Supreme Court in upholding the changes we advocated for in Senate Bill 1. Senate Bill 1 represents shared sacrifice by retirees, employees and employers. This shared sacrifice put PERA on the track to being fully funded and today the Supreme Court upheld that sacrifice as legal.”
Read the full article at Chalkbeat Colorado.