Lawsuit Filed after PERA Cuts Passed

Denver, COA class action lawsuit has been filed against the state of Colorado on behalf of the Colorado Public Employees Retirement Association (PERA). The lawsuit seeks to overturn the Colorado PERA solvency plan that reduced the annual pension adjustment for PERA members.

Prior to the amendment, known as Senate Bill 10-001, state law guaranteed an annual pension adjustment that was based on either a cost of living adjustment or a guaranteed 3.5 percent annual increase. The bill reduces the 3.5 percent increase to two percent, starting in 2011. If certain conditions exist, the benefit increase could drop below two percent. There is to be no increase for this year.

Bill 10-001 also changes employer and employee contributions in various benefit calculations. PERA officials say there will still be cuts to retiree benefits.

The lawsuit alleges that the changes are unconstitutional and violate employees' contractual rights to pension benefits as promised when the employees retired or became eligible to retire. According to the plaintiffs' lawyers, cuts to the plan would result in losses of approximately $165,000 over 20 years for a public employee who retired in 2002 and was eligible for $2,772 a month.

The 2/26/10 issue of InDenverTimes notes that PERA's net assets available for benefits decreased from $43.1 billion at the end of 2007 to $30.8 billion at the end of 2008. The article says PERA pays approximately $3.1 billion in benefits each year and receives approximately $1.7 billion in contributions from covered employees and their employers. The PERA system has more than 190,000 active members, more than 81,000 benefit recipients and more than 143,000 in active members (members that are eligible but are no longer employed jobs covered by PERA).

The lawsuit cites a 2004 attorney general's opinion that once a PERA member retires from active service and receives a pension, "the member's pension becomes a vested contractual obligation of the pension program that is not subject to unilateral change of any type by the General Assembly."

The lawsuit was filed in District Court in Denver on behalf of approximately 100,000 PERA members who were eligible to retire or have retired since March 1, 1994. This includes Denver Public School retirees, who joined PERA on January 1, 2010.