Court: Colorado Pension System Can Cut COLAs

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The Colorado Supreme Court ruled Monday that Colorado’s largest pension fund could legally scale back cost-of-living adjustments.

In 2010, the Colorado Public Employee’s Retirement Association (CPERA) cut annual COLA increases from 3.5 percent to 2 percent. Retirees took the cuts to court, alleging breach of contract. But the ruling today sided with the pension system, and so the COLA cuts will remain.

From the Denver Post:

The Colorado Supreme Court on Monday ruled that the Colorado Public Employee’s Retirement Association can adjust the cost-of-living increases that current retirees under the state’s largest pension plan receive.

“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 the perpetual receipt of the specific COLA formula in place on the date each became eligible for retirement or on the date each actually retires,” the Colorado Supreme Court stated in its ruling.

Cost-of-living formulas were first implemented in 1969 and have been adjusted several times over the years, with a 3.5 percent fixed rate set back in 2000 after stock markets had several years of big gains.

Concerns that the pension plan was severely underfunded triggered 2010 legislation that capped annual cost-of-living increases at 2 percent unless the pension’s investment suffered a loss the prior year.

In that case, the increase adjust at the actual inflation rate, up to 2 percent.

Retirees sued, arguing that PERA had a contractual obligation to provide the increases in place at the time they retired for the remainder of their lives.

A district court judged ruled against the retirees in Justus v. State, but the Colorado Court of Appeals overturned that decision.

Colorado Attorney General John Suthers, who office argued the case for the state, said he was pleased with the decision.

“The law in question was an important part of ensuring that PERA remains there for state retirees long into the future. As we argued to the Court, upholding the law helps protect both current and future retirees, and the state’s taxpayers,” he said in a statement.

PERA manages over $40 billion in assets and has over 400,000 members.


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