By admin 
In 2014, Colorado’s police and firefighters voted to increase their payroll contributions to improve their retirement benefits.
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The Fire and Police Pension Association of Colorado was fully funded at the time, but members were told that if they didn’t increase contributions, the pension would be unable to afford annual cost-of-living raises. Such increases — a key fixture of Social Security and most public pension plans — protect retiree pensions from losing spending power over time.
Without regular raises to combat inflation, members were warned, their retirement dollar would be worth only 41 cents after 30 years.
Today, police and firefighters contribute 12% of their salaries to the retirement plan, up from 8% before the vote. But over a decade later, the promised cost-of-living adjustment, or COLA, still hasn’t materialized.
In response to growing complaints from retirees, FPPA at an August board meeting announced a new task force to study options for increasing the COLA without threatening the pension’s financial stability. The initial roster includes 27 members, including retirees, current workers and stakeholder groups such as unions, the Colorado Municipal League and the Special District Association of Colorado.
The task force has its first meeting Thursday. The board also plans to hire an independent actuary to review the plan’s financial assumptions.
Solutions won’t be easy to come by. COLAs are expensive, because they compound every year until a retiree dies.
And FPPA officials say the financial realities faced by public pensions have changed since the 2014 vote. Retirees are living and drawing benefits longer than ever. Public worker pay has risen more than anticipated in recent years, boosting their future retirement earnings. And FPPA expects to earn less on its investments than it used to.
Add it all up, and it simply costs more to fund the plan today than it did a decade ago. That means less money leftover for COLAs than officials had expected.
Over the past 10 years, the highest COLA paid out in any given year was 0.5% — well below the 2% to 3% needed in most years to match inflation. In some years, police and fire retirees received one-time payments to help with rising costs. In others, they received nothing at all.
While retiree groups insist that FPPA can afford to spend more on benefits, the board’s consultants stress that any increases today would come with financial trade-offs that future generations would have to shoulder.
And, board members fear repeating the mistakes of Colorado’s largest public pension, the Public Employees’ Retirement Association, which has been digging itself out of a financial hole for decades.
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“I understand the angst. This is not a cheap place to live. The cost of everything’s going up,” Bill Clayton, the board’s vice chair, said at the August meeting. “We just want to make sure that everybody has a sustainable pension going forward.”
Fully funded, but no COLA
Colorado’s fire and police pension is 100% funded, with a growing reserve.
That financial stability puts FPPA in an unusual position — and not just in Colorado. The average public pension nationwide has 79% of the money needed to pay future benefits, according to Public Plans Data, a repository of public pension finances maintained by the Center for Retirement Research at Boston College.
PERA — Colorado’s pension for state agencies, school districts and other local governments — is 69% funded. But even after repeated benefit cuts, PERA still provides a 1% cost-of-living raise annually. And it is on track to be fully funded within the next two decades.
Police officers and firefighters actually contribute more than most of their counterparts at PERA, while their employers contribute far less. In part, that’s because the agencies served by PERA have been forced to make up for decades of mismanagement. Until Colorado’s 2018 pension reforms, government agencies spent over a decade promising benefits that they weren’t properly funding.
PERA also guarantees an annual COLA as part of its base benefits; FPPA doesn’t.
At the August meeting, some FPPA board members said they don’t want to be in PERA’s position decades from now by providing consistent COLAs before they can afford it. The board’s current policy is to give a cost-of-living raise only if it can do so for every plan member in perpetuity, without causing the pension to dip below 100% funded.
To retirees, that argument falls flat. The average public pension gave retirees a 2.9% raise last year, according to the National Conference on Public Employee Retirement Systems. That’s more than FPPA has given in the past decade combined.
“What’s missing isn’t the money,” Jennifer Steck, a retired Denver police officer, said at the meeting. “It’s the will.”
While members in 2014 were told that their contributions would help fund future COLAs, it’s not clear that a COLA has been the pension’s top financial priority in recent years.
In 2020, the legislature passed House Bill 1044 to phase in higher local government contributions to the pension, increasing them from 8% to 12% by 2028. But the new money wasn’t to pay for cost-of-living raises.
Instead, the bill allowed employees to retire sooner, earning full benefits at age 50 with 30 years of service. Previously, police and firefighters had to work until age 55, or their benefits would be reduced.