Colorado COLA Cuts Are Constitutional, Court Rules

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DALLAS — The Colorado Supreme Court has upheld the state's right to reduce cost of living adjustments for pensions administered by the Colorado Public Employees Retirement Association.

In Justus v. State, the court ruled Oct. 20 that the General Assembly did not violate the constitution with its 2010 legislation under Senate Bill 1 that reduced the cost of living adjustments from the 3.5% approved in 2000 with a lower 2% rate.

The legislation's stated goal was "modifications to [PERA] necessary to reach a one hundred percent funded ratio within the next thirty years."

Four retired public employees filed a joint class-action lawsuit in Colorado district court in Denver against the state and Colorado PERA after the bill's passage.

The state district court ruled in favor of the state and Colorado PERA in June 2011, but Colorado Court of Appeals reversed the ruling in October 2012. The case was appealed to the Supreme Court.

Colorado PERA officials praised the resolution of the case.

"Senate Bill 1 was a difficult but necessary action taken to ensure the long-term sustainability and value of Colorado PERA," said PERA executive director Gregory W. Smith said in a prepared statement. "Through the shared sacrifice approach recommended by the PERA board, the Colorado General Assembly responded after the Great Recession, and the Colorado Supreme Court agreed with our collaborative approach."

Colorado PERA oversees more than $47 billion in defined benefit and defined contribution assets.

Between 2010 and 2013, 17 states with a total of 30 plans enacted legislation that reduced, suspended or eliminated COLAs. Some of the states cut COLAs only for current employees and new hires, but many of the states also made changes to COLAs for current retirees, according to a report from Center for Retirement Research at Boston College earlier this year.

Colorado carries issuer credit ratings of Aa1 from Moody's Investors Service and AA from Standard & Poor's. Outlooks are stable.

 

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