US - The US$33bn Colorado Public Employees' Retirement Association (PERA) will seek legislation that would reduce benefits and increase risk for new members.
The proposed plan would create a two-tiered system, with existing members joining the more beneficial tier 1, while those who joined after end 2006 placed in tier 2.
Tier 2 PERA members would not be guaranteed an annual increase after retirement, and contributions rates would increase in tandem if the funded ratio for tier 2 benefits declined below 90%.
Should member contributions eventually reach a maximum of 10% of salary, the PERA board would then propose legislation to reduce future benefits for these members.
The announcement arrived on the back of a difficult financial period for PERA, brought about by the earlier bear market. The fund saw its funded status drop from 105% in 2000 to just above 70% last year, and is now saddled with a $12.8bn shortfall.
But the PERA board insisted the situation was not as severe as publicly reported. Even if PERA received no investment return or contributions from employers or members, benefits could be paid for another 15 years, it said.
Meredith Williams, executive director of Colorado PERA, had earlier stressed the need to not place too much stock in short-term developments.
“Public pension plans are long-term investors, and have many decades to invest before all benefits become payable,” said Williams.
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