May 13, 2012 07:10 PM UTC

State Sponsored Theft: The Evidence Mounts.

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• by: PolDancer

A 2001 REPORT TO THE COLORADO LEGISLATIVE AUDIT COMMITTEE CLEARLY IDENTIFIES PERA’S COLA AS “FIXED,” “AUTOMATIC,” AND “COMPOUNDED ANNUALLY FOR EACH YEAR OF RETIREMENT.”

On November 20, 2001, Buck Consultants, a global human resources benefits firm (consulting in the area of defined benefit administration) presented a report to the Legislative Audit Committee of the Colorado General Assembly.  Buck Consultants was hired by the State Auditor, a legislative services agency.  The report provided the results of a retirement plan study for Colorado, conducted pursuant to SB 01-149.

Six of the seven members of the Audit Committee sitting at the table had been sponsors of HB 00-1458 the prior year.  (HB 00-1458 was the bill that placed in Colorado law the 3.5 percent fixed, automatic PERA COLA.)  The six members were Scott, Taylor, T. Williams, Coleman, Tupa, and Vigil.

The report is available here:

https://www.nctr.org/pdf/colora…

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This report by Buck Consultants is interesting in that it clearly identifies the Colorado PERA 3.5 percent COLA as “automatic,” refers to “guaranteed benefits at retirement,” and the “fixed” COLA, that is “compounded annually for each year of retirement.”

Significantly, the report identifies the 3.5% PERA COLA as “automatic” and contrasts it with an “ad hoc” COLA “as approved by Legislature.”

Specifically, the report makes reference to:

“PERA’s automatic 3.5% per year COLA feature”;

“the guaranteed lifetime income provided by PERA”;

“COLA – Automatic 3.5%” as opposed to an “ad hoc” COLA;

“PERA guaranteed benefits at retirement”;

“Colorado PERA vesting requirement – five years.”

Further, the report notes that:

“Effective March of 2001, the cost of living adjustment was set at an annual fixed rate of 3.5%”;

“PERA provides inflation protection to retirees with a 3.5% annual COLA,” and

“Post-Retirement Benefit Increases:  Each year on March 1, benefits which have been paid for at least three months are increased. The increase is 3.5% compounded annually for each year of retirement.”

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As a major player in the defined benefits industry employees of Buck Consultants understand the difference between an “automatic” COLA and an “ad hoc” COLA.

Why would Buck Consultants bother identifying Colorado’s COLA as “automatic” if it was actually “ad hoc”?  

Why would this distinction between “automatic” and “ad hoc” COLAs exist in the defined benefit pension industry if it is meaningless?

Why is this distinction between “automatic” and “ad hoc” COLAs made in state statutes and among defined benefit pension professionals if the two terms are synonymous?

If internationally prominent consultants in the defined benefits industry identify Colorado PERA’s 3.5% COLA as “automatic,” “fixed,” and “compounded annually for each year of retirement,” is it any surprise that PERA retirees (at a minimum) have a “reasonable expectation” that their fully-vested  PERA COLA is “unchangeable for the rest of their lives”?

If the experts in the industry contrast the “automatic” PERA COLA with a COLA that is “ad hoc,” that is, with one that may legally be diminished by a legislative body, it is perfectly natural that a PERA retiree with fully-vested pension rights will also make this distinction.

The game is up.  It’s time to end the charade that a Colorado PERA retiree’s 3.5% automatic COLA can be legally diminished by the Colorado General Assembly.