Retaining Effective Teachers Policy
The state should ensure that excessive resources are not committed to funding teachers' pension systems.
As of December 31, 2010, the most recent date for which an actuarial valuation is available, Colorado's pension system for teachers is 64.8 percent funded and has a 50-year amortization period. This means that if the plan earns its assumed rate of return and maintains current contribution rates, it would take the state 50 years to pay off its unfunded liabilities. Colorado's amortization period significantly exceeds the regulatory requirement of a 30-year period, and its funding level is too low. The state's system is not financially sustainable according to actuarial benchmarks.
Colorado does not commit excessive resources toward its teachers' retirement system. The mandatory employee contribution rate to the defined benefit plan is 8 percent and the employer contribution rate is 14.75. Statutory requirements set the employer contribution rate at an established rate of 10.15 percent, rather than an actuarially determined amount. However, recent legislation mandated increases in the rate until a minimum funding level and a 30-year amortization period are reached; 1.5 percent of the increase came from funds that would have otherwise been available for wage increases. Even at the increased level, these rates are reasonable, considering that teachers and local districts are not also contributing to Social Security.
Colorado Public Employees' Retirement System Contribution Rates http://www.copera.org/pdf/5/5-123.pdf Colorado Public Employees' Retirement System Comprehensive Annual Financial Report For the Fiscal Year Ended December 31, 2010 https://www.copera.org/pdf/5/5-20-10.pdf
Ensure that the pension system is financially sustainable.
The state would be better off if its system was over 95 percent funded and had an amortization period of 30 years or less to allow more protection during financial downturns.
The Public Employees' Retirement Association of Colorado did not respond to repeated requests to review NCTQ's analyses related to teacher pensions.