Colorado Overhauls Pension System

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Colorado Overhauls Pension System



Colorado’s pension system has a big problem – it doesn’t have enough money to pay its promised benefits. Reforms enacted during this year’s legislative session may be enough to fix these problems, but they will bring changes to the way state employees plan for retirement.


At the beginning of this year, the gap between what the state government promised its retirees and what its pension system had available to pay those promises was between $32 billion and $50 billion. If lawmakers did not find a way to close this gap, retirees would face large benefit cuts in the future.


Governor John Hickenlooper and legislators crafted a bipartisan bill that changed the state retirement system in a number of ways:

  • The percentage of pay that state employees must contribute as their share of paying for the pension plan will go up from 8% to 10%.
  • The retirement age for both teachers and state government workers will go up to 64. Currently, teachers can retire at 58 and state employees at 60.
  • More workers can opt out of the pension plan and instead choose to use something like a 401(k) for their retirement.
  • Current retirees will not have a cost-of-living raise for the next two years.
  • Once that two-year freeze is over, the cost-of-living increase will be 1.5%, down from 2% currently.
  • The state will pay $225 million a year to the pension system to meet its unfunded liabilities.
  • There will also be a .25% payroll tax that the state government and school districts will pay that will go towards meeting pension obligations.


These reforms come on top of 2010 legislation that also attempted to shore up the pension system.


Some unions representing state employees did not like all of the changes, such as raising the retirement age to 64. The proposal also came under attack from some conservative commentators, who say that it does not go far enough to fix the state pension system’s problems.


Do you think that it is fair to ask state employees to retire at 64 instead of 58 or 60? Should retirees’ cost-of-living increase for their pensions be lowered to 1.5% to help shore up the pension fund?


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