Second Regular Session Sixty-fifth General Assembly STATE OF COLORADO INTRODUCED LLS NO. 06-0821.01 Nicole Hoffman SENATE BILL 06-174 SENATE SPONSORSHIP Sandoval, HOUSE SPONSORSHIP (None), Senate Committees House Committees State, Veterans & Military Affairs A BILL FOR AN ACT Concerning the noncontractual pension benefits of public employees, and, in connection therewith, modifying, for purposes of the public employees' retirement association, the current definition of salary, the highest average salary calculation, the health care subsidy, and the member and employer contribution process. Bill Summary (Note: This summary applies to this bill as introduced and does not necessarily reflect any amendments that may be subsequently adopted.) Divides state employees who are members or who become members (members) of the public employees' retirement association (PERA) into 2 groups of benefit recipients, based on the date on which the employee commenced employment with a PERA affiliated employer as follows:  An employee who becomes a member before January 1, 2007, is a pioneer member (pioneer member) of PERA; and  An employee who becomes a member on or after January 1, 2007, is a centennial member (centennial member) of PERA. For a pioneer member who has an effective date of retirement on or after January 1, 2009, limits the permissible salary increase that may be included for each of the 3 years used in the calculation of highest average salary. Specifies that the retirement benefits for centennial members of PERA shall be as follows:  Calculates a centennial member's highest average salary based on the member's highest annual salaries that are associated with 5 periods of 12 consecutive months of service credit.  Limits the permissible salary increase that may be included for each of the 5 years used in the calculation of highest average salary.  Specifies that the centennial member contribution rate is one percent lower than the applicable member contribution rate for pioneer members.  For a service retirement with a single life benefit payable for the life of the centennial member who is retired, specifies that the monthly benefit shall be calculated by multiplying the member's highest average salary by 2.1% times each year and fraction of a year of service credit that the member earned.  Specifies that if an annual increase in retirement benefits occurs for centennial members, it shall occur on July 31 and shall be paid from the division trust fund so long as the benefits have been paid to the benefit recipient for the full preceding calendar year and the retiree is older than 60 years of age as of December 31 of the preceding calendar year.  States the maximum amount of the premium subsidy for a centennial member to participate in PERA's health care program shall be $115 per month.  Specifies that the member and employer contribution rates for a centennial member who elects to participate in PERA's defined contribution plan shall be the same member and employer contribution rates for a centennial member who participates in the defined benefit plan.  Specifies the allocations that PERA shall make to the centennial reserves.  Requires PERA to conduct an annual actuarial valuation of the financial and actuarial status of the centennial program.  If the actuarial valuation of the centennial program indicates a funded ratio of less than 90%, increases the centennial member and employer contributions by 0.5%. Continues such increases annually until the plan is at least 90% funded, but specifies that such increases shall not exceed 3% for the member contribution and 3% for the employer contribution.  If, after a 3% increase in centennial member contributions and a 3% increase in employer contributions to the plan, the plan still has a funded ratio of less than 90%, directs the PERA board of trustees to submit recommendations to the general assembly to reduce benefits for members who are not eligible to retire.  If, after a 3% increase in centennial member and employer contributions and a reduction in benefits, the funded ratio of the plan is greater than 110%, directs that the member and employer contributions shall be reduced by 0.5%.  States that a portion of the employer contribution shall be allocated to the annual increase reserve to be used only to fund annual increases in benefits. Allows an annual increase in benefits only if the amount in the annual increase reserve is sufficient to fund the net present value of the actuarial liability associated with the increase. Modifies the benefits, contributions, and calculations for every member of PERA, regardless of when the member's PERA membership began, as follows:  Includes a member's pretax contributions to a flexible spending health plan and transportation plan in the definition of salary.  Renames the existing reserves in each of the state, school, local government, and judicial divisions of PERA as follows: the pioneer member contribution reserve, the pioneer employer contribution reserve, the pioneer retirement benefits reserve, and the pioneer survivor benefits reserve.  Within each of the state, school, local government, and judicial divisions of PERA, creates the following reserves: a centennial member contribution reserve, a centennial employer contribution reserve, a centennial retirement benefits reserve, a centennial survivor benefits reserve, and a centennial annual increase reserve.  Reduces the maximum amortization period that is considered actuarially sound for each of the PERA trust funds from 40 to 30 years.  Increases the amortization equalization disbursement that each PERA employer is required to deliver to PERA for each year commencing on or after January 1, 2008, but prior to January 1, 2013, to 0.5% of total payroll.  Specifies that a member who purchases service credit shall be subject to the provisions regarding benefits, contribution rates, and related provisions that are in effect at the time the member commences membership in PERA.  Specifies that the cost to purchase forfeited service credit shall be determined by the PERA board of trustees and shall be sufficient to pay the actuarial liability associated with the purchase.  Of the amount paid by a member to purchase service credit for noncovered employment, decreases the amount that is transferred to the health care trust fund on the effective date of the member's retirement to 1.02% of the member's highest average salary at the time of the purchase of service credit.  Incorporates federal requirements on minimum required distributions pursuant to the internal revenue code.  For a benefit recipient who is a pioneer retiree enrolled in the health care program and born on or after January 1, 1962, or for a benefit recipient who is a centennial member, requires the recipient to have at least 10 years of service credit in order to receive the monthly premium subsidy from the health care trust fund.  States that an eligible employee who commences employment on or after January 1, 2007, who has an existing member account with PERA, and who initially elects to participate in the defined benefit plan or transfers into the defined benefit plan from the defined contribution plan shall continue membership in the defined benefit plan at the benefit level in which such membership account exists.  States that an eligible employee who commences employment on or after January 1, 2007, who does not have an existing member account, and who elects to transfer into the defined benefit plan from the defined contribution plan shall participate in the defined benefit plan at the benefit level established for employees hired on or after January 1, 2007.  For members who participate in the state's defined contribution plan, requires that on and after January 1, 2007, the employer shall deliver all contributions to PERA and PERA shall deliver the contributions to the state defined contribution plan. Defines terms. Makes conforming amendments. Be it enacted by the General Assembly of the State of Colorado: SECTION 1. 24-51-101 (21), (25) (a), (25) (b), and (42), Colorado Revised Statutes, are amended, and the said 24-51-101 is further amended BY THE ADDITION OF THE FOLLOWING NEW SUBSECTIONS, to read: 24-51-101. Definitions. As used in this article, unless the context otherwise requires: (9.5) "Centennial member" or "centennial program" means a member or the benefits package, contribution rates, and related provisions applicable to a member who commences membership in the association on or after January 1, 2007, who is not a member, inactive member, or retiree prior to commencing membership. (21) "Employer contribution" means the money paid by an employer to the association pursuant to the provisions of section 24-51-401 (1.7) for all member salaries paid and other required employer contributions made pursuant to the provisions of section 24-51-402 sections 24-51-402 and 24-51-1601. (25) (a) "Highest average salary" means: (I) For an employee who commences membership before January 1, 2007, one-twelfth of the average of the highest annual salaries upon which contributions were paid, whether earned from one or more employers, that are associated with three periods of twelve consecutive months of service credit; (II) For a member an employee who commences membership before January 1, 2007, and who does not have the requisite three years of service credit, one-twelfth of the average of the total annual salaries earned during membership upon which contributions were paid; (III) For benefits which become effective on or after January 1, 1982, where the individual earned less than one year of service credit after December 31, 1980, one-twelfth of the average of the highest annual salaries upon which contributions were paid which were associated with five consecutive years of service credit; or (IV) Notwithstanding any other provision of this paragraph (a) to the contrary, for members of the judicial division retiring on or after July 1, 1997, and who commenced membership before January 1, 2007, one-twelfth of the highest annual salary upon which contributions were paid for twelve consecutive months; (V) For an employee who commences membership on or after January 1, 2007, one-twelfth of the average of the highest annual salaries upon which contributions were paid, whether earned from one or more employers, that are associated with five periods of twelve consecutive months of service credit; or (VI) For an employee who commences membership on or after January 1, 2007, and who does not have the requisite five years of service credit, one-twelfth of the average of the total annual salaries earned during membership upon which contributions were paid. (b) (I) In calculating highest average salary pursuant to subparagraph (I) of paragraph (a) of this subsection (25), for members whose membership commenced before January 1, 2007, and with an effective date of retirement before January 1, 2009, if any annual salary used in said calculation was associated with service credit earned during the last three years of membership, each annual salary increase shall be limited to fifteen percent. This limitation shall not apply to salary decreases. (II) In calculating highest average salary pursuant to subparagraph (I) of paragraph (a) of this subsection (25), for members whose membership commenced before January 1, 2007, and with an effective date of retirement before January 1, 2009, if all annual salaries used in said calculation were associated with service credit earned prior to the last three years of membership, no fifteen percent limit shall be applied to the salary differences. (III) In calculating highest average salary pursuant to subparagraphs (I) and (II) of paragraph (a) of this subsection (25), for retirees with an effective date of retirement on or after January 1, 2009, the association shall determine the highest annual salaries associated with four periods of twelve consecutive months of service credit. The lowest of such annual salaries shall be the base salary. The first annual salary to be used in the highest average salary calculation shall be the actual salary reported up to one hundred fifteen percent of the base salary. The second annual salary to be used in the highest average salary calculation shall be the actual salary reported up to one hundred fifteen percent of the first annual salary used in the highest average salary calculation. The third annual salary to be used in the highest average salary calculation shall be the actual salary reported up to one hundred fifteen percent of the second annual salary used in the highest average salary calculation. (IV) In calculating highest average salary pursuant to subparagraphs (V) and (VI) of paragraph (a) of this subsection (25), the association shall determine the highest annual salaries associated with six periods of twelve consecutive months of service credit. The lowest of such annual salaries shall be the base salary. The first annual salary to be used in the highest average salary calculation shall be the actual salary reported up to one hundred fifteen percent of the base salary. The second annual salary to be used in the highest average salary calculation shall be the actual salary reported up to one hundred fifteen percent of the first annual salary used in the highest average salary calculation. The third annual salary to be used in the highest average salary calculation shall be the actual salary reported up to one hundred fifteen percent of the second annual salary used in the highest average salary calculation. The fourth annual salary to be used in the highest average salary calculation shall be the actual salary reported up to one hundred fifteen percent of the third annual salary used in the highest average salary calculation. The fifth annual salary to be used in the highest average salary calculation shall be the actual salary reported up to one hundred fifteen percent of the fourth annual salary used in the highest average salary calculation. (33.5) "Pioneer member" or "pioneer program" means a member or the benefits package, contribution rates, and related provisions applicable to a member who commences membership in the association before January 1, 2007. (42) (a) (I) "Salary" means, before January 1, 2009, compensation for services rendered to an employer and includes: Regular salary or pay; any pay for administrative, sabbatical, annual, sick, vacation, or personal leave; pay for compensatory time or holidays; payments by an employer from grants; amounts deducted from pay pursuant to tax-sheltered savings or retirement programs; amounts deducted from pay for a health savings account as defined in 26 U.S.C. sec. 223, as amended, or any other type of retirement health savings account program; performance or merit payments, if approved by the board; special pay for work-related injuries paid by the employer prior to termination of membership; and retroactive salary payments pursuant to court orders, arbitration awards, or litigation and grievance settlements. (II) "Salary" means, on and after January 1, 2009, compensation for services rendered to an employer and includes: Regular salary or pay; any pay for administrative, sabbatical, annual, sick, vacation, or personal leave; pay for compensatory time or holidays; payments by an employer from grants; amounts deducted from pay pursuant to tax-sheltered savings or retirement programs; amounts deducted from pay for a health savings account as defined in 26 U.S.C. sec. 223, as amended, or any other type of retirement health savings account program; performance or merit payments, if approved by the board; special pay for work-related injuries paid by the employer prior to termination of membership; amounts deducted from pay for cafeteria plans as defined in 26 U.S.C. sec. 125, as amended; amounts deducted from pay for fringe benefits as defined in 26 U.S.C. sec. 132 (f) (4), as amended; and retroactive salary payments pursuant to court orders, arbitration awards, or litigation and grievance settlements. (b) "Salary" does not include: Commissions; compensation for unused sick leave converted at any time to cash payments; compensation for unused sick, annual, vacation, administrative, or other accumulated paid leave contributed to a health savings account as defined in 26 U.S.C. sec. 223, as amended, or a retirement health savings program; housing allowances; uniform allowances; automobile usage; employer paid insurance premiums; employer paid dependent care assistance; reimbursement for expenses incurred; tuition or any other fringe benefits, regardless of federal taxation; bonuses for services not actually rendered, including, but not limited to, early retirement inducements, Christmas bonuses, cash awards, honorariums and severance pay, damages, except for retroactive salary payments paid pursuant to court orders or arbitration awards or litigation and grievance settlements, or payments beyond the date of a member's death. SECTION 2. 24-51-208 (2) and (3), Colorado Revised Statutes, are amended to read: 24-51-208. Allocation of moneys. (2) Within each of the state division, school division, local government division, and judicial division trust funds, the following reserves shall exist: (a) Pioneer member contribution reserve; (b) Pioneer employer contribution reserve; (c) Pioneer retirement benefits reserve; (d) Deferred retirement benefits reserve; (e) Pioneer survivor benefits reserve; and (f) Deferred survivor benefits reserve. (g) Centennial member contribution reserve; (h) Centennial employer contribution reserve; (i) Centennial retirement benefits reserve; (j) Centennial survivor benefits reserve; and (k) Centennial annual increase reserve. (3) Within the member contribution reserve reserves, there shall exist individual member contribution accounts. SECTION 3. 24-51-211, Colorado Revised Statutes, is amended to read: 24-51-211. Amortization of liabilities. An amortization period for each of the state division, school division, local government division, and judicial division trust funds shall be calculated separately. A maximum amortization period of forty thirty years shall be deemed actuarially sound. Upon recommendation of the board, and with the advice of the actuary, the employer or member contribution rates for the plan may be adjusted by the general assembly when indicated by actuarial experience. SECTION 4. 24-51-212, Colorado Revised Statutes, is amended to read: 24-51-212. Funds not subject to legal process. Except for federal tax liens on distributions payable by the association, for assignments for child support purposes as provided for in sections 14-10-118 (1) and 14-14-107, C.R.S., as they existed prior to July 1, 1996, for income assignments for child support purposes pursuant to section 14-14-111.5, C.R.S., for writs of garnishment that are the result of a judgment taken for arrearages for child support or for child support debt, for payments from the association in compliance with a properly executed court order approving a written agreement entered into pursuant to section 14-10-113 (6), C.R.S., and for restitution that is required to be paid for the theft, embezzlement, misappropriation, or wrongful conversion of public property or in the event of a judgment for a willful and intentional violation of fiduciary duties pursuant to section 24-51-207 where the offender or a related party received direct financial gain, none of the moneys, trust funds, reserves, accounts, contributions pursuant to parts 4, 5, and 15, and 16 of this article, or benefits referred to in this article shall be assignable either in law or in equity or be subject to execution, levy, attachment, garnishment, bankruptcy proceedings, or other legal process. Member contributions are subject to garnishment resulting from a judgment taken for arrearages for child support or for child support debt, for restitution that is required to be paid for the theft, embezzlement, misappropriation, or wrongful conversion of public property or in the event of a judgment for a willful and intentional violation of fiduciary duties pursuant to section 24-51-207 where the offender or a related party received direct financial gain, only if the membership has terminated and the member is not vested. SECTION 5. 24-51-401 (1.7) (a) and (1.8), Colorado Revised Statutes, are amended, and the said 24-51-401 (1.7) is further amended BY THE ADDITION OF A NEW PARAGRAPH, to read: 24-51-401. Employer and member contributions. (1.7) (a) Employers shall deliver a contribution report and the full amount of employer and member contributions to the association within five days after the date members and retirees are paid. Except as provided in subsections (1.8) and paragraph (e) of this subsection (1.7), subsection (7) of this section, and sections 22-64-220 (4) (j), C.R.S., and 24-51-408.5, such contributions shall be based upon the rates for the appropriate division as set forth in the following table multiplied by the salary, as defined in section 24-51-101 (42), paid to members and retirees for the payroll period: TABLE A CONTRIBUTION RATES Division Membership Employer Rate Member Rate State All Members 10.15% 8.0% Except State Troopers 12.85% 10.0% School All Members 1/1/2006 through 12/31/2012 10.15% 8.0% 1/1/2013 and 10.55% 8.0% thereafter Local Government All Members 10.0% 8.0% Judicial All Members 13.66% 8.0% (e) The member contribution rate for centennial members shall be one percent lower than the applicable member contribution rate specified in paragraph (a) of this subsection (1.7), unless revised pursuant to part 16 of this article. (1.8) If the actuarial value of assets exceeds one hundred ten percent of the actuarial accrued liabilities in any division, as determined by the association's actuary, the division shall be considered overfunded, and employer contribution rates shall be reduced as provided in section 24-51-408.5 (5). SECTION 6. 24-51-402 (3) (a), Colorado Revised Statutes, is amended to read: 24-51-402. Unpaid contributions for any member - legislative declaration. (3) If an employer fails to provide membership in the association to an individual so entitled pursuant to the provisions of this article or fails to provide the required level of employer contributions for an individual pursuant to the provisions of this article, the following payment shall be made to the association: (a) If the individual is not a member or inactive member at the time the association first notifies the employer of its claim for unpaid contributions, the employer shall pay the unpaid employer contributions on behalf of the individual for the period contributions should have been made at the contribution rate applicable during such period together with the amortization equalization disbursement, plus interest on such employer contributions at the applicable actuarial investment assumption rate, as such interest rate is from time to time adjusted, until such contributions are paid. If an employer pays contributions pursuant to this paragraph (a) on behalf of an individual who was not a member or inactive member when the association first notifies the employer and such individual subsequently becomes a member, the member may purchase service credit for the appropriate time period pursuant to the requirements of section 24-51-503 section 24-51-505. SECTION 7. 24-51-411 (2) and (3), Colorado Revised Statutes, are amended to read: 24-51-411. Amortization equalization disbursement - repeal. (2) For the calendar year beginning January 1, 2006, the amortization equalization disbursement shall be one-half of one percent of the employer's total payroll. The amortization equalization payment disbursement shall increase by one-half of one percent of total payroll on January 1, 2007, and shall increase by four-tenths of one percent of total payroll at the start of each of the calendar years following 2007 each year thereafter through 2012, except as provided by subsection (3) of this section. For purposes of this section, the employer's total payroll shall be calculated by applying the definition of salary, pursuant to section 24-51-101 (42), to the payroll for all employees working for the employer who are members of the association, or who were eligible to elect to become members of the association on or after January 1, 2006, including any amounts paid in connection with the employment of a retiree by an employer pursuant to part 11 of this article. (3) The total of the amortization equalization disbursement shall not exceed three and one-half percent of the employer's total payroll for any calendar year. In the event that the association's actuary determines that the amortization period of the liabilities in the division is in compliance with section 24-51-211, then the amount of the amortization equalization disbursement for that division shall be reduced for the following calendar year to the percentage of total payroll needed to meet the standard in section 24-51-211. SECTION 8. 24-51-502, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SUBSECTION to read: 24-51-502. Purchased service credit. (3) Service credit purchased pursuant to this part 5 shall be subject to the provisions in effect regarding benefits, contribution rates, and related provisions at the commencement of membership. SECTION 9. 24-51-503 (2), Colorado Revised Statutes, is amended to read: 24-51-503. Purchase of service credit relating to a refunded member contribution account. (2) The cost to purchase the forfeited service credit shall be the amount refunded plus interest accrued from the date of refund to completion of determined by the board and shall be sufficient to pay the actuarial liability associated with the purchase. SECTION 10. 24-51-505 (7), Colorado Revised Statutes, is amended to read: 24-51-505. Purchase of service credit relating to noncovered employment. (7) A portion of the amount paid by a member to purchase service credit related to noncovered employment shall be transferred to the health care trust fund on the effective date of the member's retirement or, in case of death prior to retirement, on the effective date of the survivor benefit. The amount transferred shall be one and one-tenth two one-hundredths percent of the member's highest average salary at the time of the purchase, with interest at the rate specified in section 24-51-101 (28) (a). SECTION 11. 24-51-603 (1) (a), Colorado Revised Statutes, is amended, and the said 24-51-603 (1) is further amended BY THE ADDITION OF A NEW PARAGRAPH, to read: 24-51-603. Benefit formula for service retirement. (1) (a) Except as otherwise provided in subsection (2) of this section, effective July 1, 1997, the option 1 benefit for service retirement for pioneer members shall be calculated by multiplying the highest average salary by two and one-half percent times each year and fraction of a year of service credit. The following formula shall be used for this calculation: Highest Average Salary x (.025 x Years and Fraction of a Year). (c) The option 1 benefit for service retirement for all centennial members shall be calculated by multiplying the highest average salary by two and one-tenth percent times each year and fraction of a year of service credit. The following formula shall be used for this calculation: Highest Average Salary x (.021 x Years and Fraction of a Year). SECTION 12. 24-51-606 (1), Colorado Revised Statutes, is amended, and the said 24-51-606 is further amended BY THE ADDITION OF A NEW SUBSECTION, to read: 24-51-606. Vested inactive member rights. (1) Any pioneer member who has earned at least five years of service credit and who terminates membership and does not elect to receive a refund pursuant to the provisions of section 24-51-405 shall be eligible for a benefit to become effective upon reaching the age specified in table B in section 24-51-602 for a service retirement or in table C in section 24-51-604 for a reduced service retirement. (1.5) Any centennial member who has earned at least five years of service credit and who terminates membership and does not elect to receive a refund pursuant to the provisions of section 24-51-405 shall be eligible for a benefit to become effective upon written application and approval by the board and upon reaching the age specified in table B.05 or B.1 as applicable, in section 24-51-602 for a service retirement or in table C in section 24-51-604 for a reduced service retirement. Notwithstanding the provisions of this subsection (1.5), for a centennial member who applies for retirement within ninety days after the member attains age and service eligibility, the effective date of retirement shall be the date the member attains such age and service eligibility. SECTION 13. 24-51-606.5, Colorado Revised Statutes, is amended to read: 24-51-606.5. Indexation of benefits for vested inactive members. A vested inactive pioneer member who has at least twenty-five years of service credit prior to terminating membership shall be eligible, upon retirement, for a benefit, as calculated pursuant to the provisions of section 24-51-603 or 24-51-605, which has been increased by the annual increase specified in sections 24-51-1001 to 24-51-1003, from the date of termination of membership or July 1, 1993, whichever is later, to the effective date of retirement. SECTION 14. Part 6 of article 51 of title 24, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read: 24-51-615. Distribution of benefits. Distribution of benefits from each division trust fund shall be made in accordance with section 401(a) (9) of the federal "Internal Revenue Code of 1986", as amended, including the incidental death benefit requirement in section 401 (a) (9) (G), and the applicable treasury regulations and internal revenue service rulings and other interpretations issued thereunder, including treasury regulations sections 1.401 (a) (9)-2 to 1.401 (a) (9)-9. The provisions of this section shall override any distribution options that are inconsistent with section 401 (a) (9) of the federal "Internal Revenue Code of 1986", as amended, to the extent that those distribution options are not grandfathered under treasury regulations section 1.401 (a) (9)-6. SECTION 15. 24-51-803 (1), Colorado Revised Statutes, is amended to read: 24-51-803. Determination of option 2 or 3 benefits. (1) For service retirement, the calculation of benefits payable pursuant to option 2 or 3, as set forth in section 24-51-801, shall be actuarially determined as of the date the retiree first became eligible attained the age and service credit requirements for service retirement regardless of the effective date of such retirement. SECTION 16. 24-51-1001 (1), Colorado Revised Statutes, is amended, and the said 24-51-1001 is further amended BY THE ADDITION OF A NEW SUBSECTION, to read: 24-51-1001. Types of benefit increases. (1) For pioneer retirees and benefit recipients, annual increases in retirement benefits and survivor benefits shall occur on March 1 if said benefits have been paid for at least three months preceding March 1. Such increases in benefits shall be calculated in accordance with the provisions of sections 24-51-1002 and 24-51-1003 and shall be paid from the division trust funds. (3) For centennial retirees and benefit recipients, annual increases in retirement benefits and survivor benefits shall occur on July 31 in accordance with the provisions of section 24-51-1603 and shall be paid from the centennial retirement benefits reserve or the centennial survivor benefits reserve, as appropriate, so long as the following requirements are satisfied: (a) The benefits have been paid to the benefit recipient for the full preceding calendar year; and (b) For retirees other than disability retirees, the retiree is older than sixty years of age as of December 31 of the preceding calendar year. No minimum age shall be required for disability retirees and survivor benefit recipients. SECTION 17. 24-51-1002 (1), (1) (a.5) (I), and (1) (a.5) (II), Colorado Revised Statutes, are amended to read: 24-51-1002. Annual percentages to be used. (1) For pioneer members, the cumulative increase applied to benefits paid shall be recalculated annually as of March 1 and shall be the total percent derived by multiplying three and one-half percent, compounded annually, times the number of years such benefit has been effective after March 1, 2000. Benefits for vested inactive members with at least twenty-five years of service credit and benefits for survivors of deceased vested inactive members who had at least twenty-five years of service credit shall be increased by the annual increase specified in sections 24-51-1001 to 24-51-1003 under prior law from the date of termination of membership or July 1, 1993, whichever is later, to March 1, 2000, or the date benefits commence, whichever is earlier. (a.5) (I) Notwithstanding subsection (1) of this section, the increase applied to benefits of persons who become pioneer members on or after July 1, 2005, and were not members, inactive members, or retirees on July 1, 2005, shall be the lesser of three percent or the actual increase, as calculated by the United States department of labor, in the national consumer price index for urban wage earners and clerical workers during the calendar year preceding the increase in the benefit. The increase applied to such benefits shall be recalculated annually as of March 1, and shall be the compounded annual percentage of the annual increases applied to such benefits. If the benefit has not been paid during all twelve months of the calendar year preceding March 1, then the annual increase shall be prorated. (II) Benefits for vested inactive pioneer members with at least twenty-five years of service credit who become members on or after July 1, 2005, and were not members, inactive members, or retirees on July 1, 2005, as well as benefits for survivors of such deceased vested inactive members who had at least twenty-five years of service credit shall be increased by the annual increase specified in sections 24-51-1001 and 24-51-1003 and subparagraph (I) of this paragraph (a.5), from the date of termination of membership to the date benefits commence. SECTION 18. 24-51-1101 (2), Colorado Revised Statutes, is amended to read: 24-51-1101. Employment after service retirement. (2) Salary from the employment described in subsection (1) of this section shall be subject to employer contributions specified in section 24-51-401, but shall not be subject to member contributions except as provided in section 24-51-1103. Salary from employment by a retiree who is serving in a state elected official's position shall not be subject to employer contributions. SECTION 19. 24-51-1103 (1), Colorado Revised Statutes, is amended, and the said 24-51-1103 is further amended BY THE ADDITION OF A NEW SUBSECTION, to read: 24-51-1103. Contributions for a retiree who returns to membership - benefit calculation upon subsequent retirement - survivor benefit rights - disability retirement benefits. (1) For pioneer retirees, except as otherwise provided in section 22-64-220 (4) (h), C.R.S., a retiree who returns to work in a position that is subject to membership may voluntarily suspend the service retirement benefits or the reduced service retirement benefits and resume membership. Upon such suspension, employer and member contributions are required to be made pursuant to the provisions of part 4 of this article. Any additional service credit accumulated and any increase in the highest average salary of such person shall be reflected in the benefit calculation upon subsequent termination of membership only after one year of service credit has been earned. (1.5) For centennial retirees, except as otherwise provided in section 22-64-220 (4) (h), C.R.S., a retiree who returns to work in a position that is subject to membership may voluntarily suspend the service retirement benefits or the reduced service retirement benefits and resume membership. Upon such suspension, employer and member contributions are required to be made pursuant to the provisions of parts 4 and 16 of this article. Upon termination of membership after at least one year of service credit has been earned, such person shall recommence the benefit amount in effect at the time of suspension, without any adjustments for annual increases provided during suspension of benefits, and will receive a supplemental benefit based on the service credit accumulated during suspension. The option 1 supplemental benefit shall be calculated based on the benefit formula in effect during the period of suspension. SECTION 20. 24-51-1206 (2), Colorado Revised Statutes, is amended to read: 24-51-1206. Premium subsidy. (2) Except as otherwise provided in this section, on and after July 1, 2000 July 1, 2006, the premium subsidy shall be: (a) Two hundred thirty dollars per month for pioneer benefit recipients who are under sixty-five years of age and who are born before January 1, 1962, or who became a benefit recipient before January 1, 2007, and who are not entitled to medicare hospital insurance benefits provided by the federal "Health Insurance for the Aged Act", 42 U.S.C. sec. 1395, as amended. (b) One hundred fifteen dollars per month for pioneer benefit recipients who are born before January 1, 1962, who are sixty-five years of age or older, or who are under sixty-five years of age and entitled to medicare hospital insurance benefits provided by the federal "Health Insurance for the Aged Act", 42 U.S.C. sec. 1395, as amended. (c) One hundred fifteen dollars per month for benefit recipients who have at least ten years of service credit and who are either pioneer benefit recipients born on or after January 1, 1962, or who are centennial members. SECTION 21. 24-51-1503, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SUBSECTION to read: 24-51-1503. Defined contribution plan option. (3) (a) An eligible employee who commences employment on or after January 1, 2007, who elects to participate in or is automatically enrolled in the association's defined benefit plan, or who makes an election pursuant to section 24-51-1506 (1) to become a member of the association's defined benefit plan and who has an existing member contribution account in the association's defined benefit plan shall continue membership in the benefits program in which the member contribution account exists. (b) An eligible employee who commences employment on or after January 1, 2007, and who elects to participate in the association's defined contribution plan or who makes an election pursuant to section 24-51-1506 (4) to become a member of the association's defined contribution plan shall make member contributions in the member's defined contribution account as specified in sections 24-51-401 (1.7) (e) and 24-51-1601. (c) An eligible employee who commences employment on or after January 1, 2007, and who elects to participate in the defined contribution plan pursuant to part 2 of article 52 of this title shall make member contributions in the member's defined contribution account as specified in sections 24-51-401 (1.7) (e) and 24-51-1601. SECTION 22. 24-51-1505 (1) and (2), Colorado Revised Statutes, are amended, and the said 24-51-1505 is further amended BY THE ADDITION OF THE FOLLOWING NEW SUBSECTIONS, to read: 24-51-1505. Contributions - vesting. (1) For eligible employees who commence employment before January 1, 2007, contribution rates to the association's defined contribution plan by the state and by members of the defined contribution plan established pursuant to this part 15 shall be the same as the rates that would be payable by the state and the member pursuant to section 24-51-401 section 24-51-401 (1.7) (a). (1.5) For eligible employees who commence employment on or after January 1, 2007, the member contribution rates to the association's defined contribution plan shall be the rates payable by the members pursuant to sections 24-51-401 (1.7) (e) and 24-51-1601. Such member contribution and an amount equal to such member contribution from the employer contributions shall be placed in the member's account in the defined contribution plan. (2) Until January 1, 2007, the state employer shall deliver all contributions to the service provider designated by the association within five days after the date members are paid and consistent with the provisions of section 24-51-401 (1.7) (b) to (1.7) (d). (2.5) On and after January 1, 2007, the state employer shall deliver all contributions to the association within five days after the date members are paid and consistent with the provisions of section 24-51-401 (1.7) (b) to (1.7) (d). After the association receives the contributions, the association shall deliver contributions in the amounts specified in this article to the designated service provider or the bundled provider for the defined contribution plan established pursuant to part 2 of article 52 of this title. SECTION 23. Part 15 of article 51 of title 24, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read: 24-51-1511. Limitation on actions by eligible employees. Administrative actions or civil actions brought by employees to dispute the election for participation or failure to elect participation in the association's defined benefit plan, the association's defined contribution plan, or the defined contribution plan established pursuant to part 2 of article 52 of this title shall commence within one hundred eighty days after the election or within one hundred eighty days of the last day on which the employee may make an election to participate in such plan pursuant to this article and article 52 of this title, whichever is earlier. SECTION 24. Article 51 of title 24, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW PART to read: PART 16 CENTENNIAL ADJUSTMENTS AND STABILIZATION 24-51-1601. Centennial accounting reserve - creation - definitions. (1) The association shall cause to be conducted an actuarial valuation as specified in this part 16 regarding the financial and actuarial status of the centennial program. For purposes of the actuarial valuation of the centennial program, the assets to be considered shall be those assets allocated to the centennial reserves as specified in section 24-51-208 (2). (2) The following allocations shall be made to the centennial reserves: (a) The centennial member contribution specified in section 24-51-401 (1.7) (e), except as may be modified pursuant to the provisions of this part 16; (b) A fixed portion of the employer contribution that shall be determined by an initial actuarial valuation to be conducted prior to January 1, 2007. The amount of the fixed portion of employer contribution allocated to the centennial reserve shall be the amount that when added to the member contribution is sufficient to pay the normal cost, rounded up to the nearest one-half of one percentage point, of the centennial program as determined in the initial actuarial valuation plus one-half of one percent of salary to fund the annual increase reserve specified in section 24-51-1603. The normal cost determination in the initial actuarial valuation shall be based upon generally accepted actuarial principles. (c) Any increases in employer and member contribution allocations resulting from the provisions of section 24-51-1602; (d) Any contributions received by the association in connection with employment by an association-affiliated employer of a centennial retiree; (e) All interest paid by employers and members on the amounts specified in paragraphs (a) to (d) of this subsection (2); (f) All amounts received by the association in connection with purchases of service credit in the centennial program; and (g) A proportional share of investment income earned on the amounts specified in paragraphs (a) to (f) of this subsection (2). (3) No amounts other than the amounts specified in subsection (2) of this section shall be allocated to the centennial reserves. (4) The association shall cause to be conducted an annual actuarial valuation of each division's centennial program reserves, excluding the amounts allocated to the centennial annual increase reserve for such division, for the purpose of determining the actuarial funded ratio of the plan, the actuarial liabilities associated with the accrued benefits in the centennial program of each division, and the amortization period of any unfunded liabilities of the centennial program of each division. (5) As used in this part 16, unless the context otherwise requires, "actuarial funded ratio" means market assets divided by actuarial accrued liability of the centennial program of each division trust fund. 24-51-1602. Actuarial valuation - increase in contributions - decrease in benefits. (1) If an annual actuarial valuation indicates an actuarial funded ratio of less than ninety percent, the contribution allocations specified in section 24-51-1601 (2) (a) and (2) (b) shall each increase by one-half of one percent of the amount of the salary and continue to increase at said level unless revised by the provisions of this section. The allocation increase specified in this subsection (1) shall not exceed three percent for the member contribution allocation and three percent for the employer contribution allocation above the contribution allocations specified in section 24-51-1601. (2) If the actuarial valuation indicates an actuarial funded ratio of less than ninety percent and the contribution allocations specified in section 24-51-1601 (2) (a) and (2) (b) have increased pursuant to subsection (1) of this section to the maximum allocation, then the board shall submit recommendations to the general assembly for a reduction in the benefits, and the general assembly shall have the authority to reduce the benefit provisions for the centennial members who have not yet retired and are not yet eligible to retire as necessary to achieve a current actuarial funded ratio of ninety percent with a maximum amortization period for the unfunded liability of thirty years from the effective date of the revisions. In no event shall any benefit reduction be applied to reduce the accrued benefits associated with service credit earned or purchased prior to the effective date of the reduction. (3) If the actuarial valuation indicates an actuarial funded ratio greater than one hundred ten percent, the contribution allocations specified in section 24-51-1601(2) (a) and (2) (b) shall each decrease by one-half of one percent of the amount of the salary and continue to decrease at said level unless revised by the provisions of this section. Notwithstanding the provisions of this subsection (3), member contribution allocations to the centennial reserves shall be not less than the allocations specified in section 24-51-1601 (2) (a), except for state troopers as provided in section 24-51-1601 (3), and employer contribution allocations to the centennial reserves shall be not less than the allocation specified in section 24-51-1601 (2) (b). (4) In the event that contribution allocations to the centennial program are revised pursuant to section 24-51-1602 (1) or (3), the member and employer contribution rates specified in section 24-51-401 shall be revised in a like manner and amount for centennial members. (5) The centennial retirees shall not be subject to or entitled to benefit revisions resulting from the provisions of section 24-51-1602 that are enacted after their effective date of retirement. 24-51-1603. Annual increase reserve - creation. (1) The centennial annual increase reserve shall be for the sole purpose of providing annual increases for eligible centennial retirees and benefit recipients as calculated in the manner provided in this part 16. Benefit payments to centennial retirees and benefit recipients including annual increases shall be paid from amounts allocated to the centennial retirement benefit reserves or the centennial survivor benefit reserves, as appropriate. No payments of benefits or annual increases shall be made from amounts allocated to the annual increase reserve. (2) A portion of the employer contribution allocation specified in section 24-51-1601 (2) (b) equal to one-half of one percent of centennial members' salaries together with a proportional share of the investment earnings thereon shall be allocated to the centennial annual increase reserve and retained in the reserve until removed from the reserve. Subject to the limitations specified in this section, an amount shall be reallocated each year from the centennial annual increase reserve to the centennial retirement benefits reserve of centennial survivor benefits reserve, as appropriate, for the purpose of paying the annual increases to centennial retirees and benefit recipients in an amount determined pursuant to subsection (3) of this section. (3) For the centennial annual increase reserve of each division, an actuarial determination shall be conducted each year of the market value of the assets in the reserve and for each division's centennial program a calculation of the net present value of the actuarial liabilities associated with paragraphs (a), (b), and (c) of this subsection (3). The amount that shall be reallocated from the centennial annual increase reserve to the centennial retirement benefits reserve or the centennial survivor benefits reserve, as appropriate, shall be the lesser of the amounts necessary to fund the net present value of the actuarial liability associated with the following: (a) A permanent increase equal to three percent of current benefits payable to benefit recipients then eligible for an annual increase in accordance with section 24-51-1001 (3); (b) A permanent increase of current benefits payable to benefit recipients then eligible for an annual increase in accordance with section 24-51-1001 (3) that is equal to the actual increase, as calculated by the United States department of labor, in the national consumer price index for urban wage earners and clerical workers for the year associated with the actuarial valuation of the centennial annual increase reserve; or (c) An increase of current benefits payable to benefit recipients then eligible for an annual increase in accordance with section 24-51-1001 (3) that will exhaust ten percent of the market value of the centennial annual increase reserve. (4) No calculation made pursuant to this section shall cause a reduction in current benefits of eligible centennial benefit recipients. SECTION 25. 24-52-204, Colorado Revised Statutes, is amended to read: 24-52-204. Employer and employee contributions. (1) For eligible employees who commence employment before January 1, 2007, rates for employer and employee contributions to a defined contribution plan established pursuant to this part 2 shall be the same as the rates that would be payable by such employer and employee to the association for the state division pursuant to section 24-51-401 section 24-51-401 (1.7) (a). (2) For eligible employees who commence employment on or after January 1, 2007, the member contribution rates to the defined contribution plan shall be the rates payable by the members pursuant to sections 24-51-401 (1.7) (e) and 24-51-1601. Such member contribution and an amount equal to such member contribution from the employer contribution shall be placed in the member's account in the defined contribution plan pursuant to this part 2. (3) On and after January 1, 2007, the state employer shall deliver all contributions to the association within five days after the date members are paid and consistent with the provisions of section 24-51-401 (1.7) (b) and (1.7) (d). After the association receives the contributions, the association shall deliver contributions in the amounts specified in this article to the bundled provider for the defined contribution plan pursuant to this part 2. SECTION 26. Part 2 of article 52 of title 24, Colorado Revised Statutes, is amended BY THE ADDITION OF A NEW SECTION to read: 24-52-209. Limitation of actions by eligible employees. Administrative actions or civil actions brought by employees to dispute the election for participation or failure to elect participation in the association's defined benefit plan, the association's defined contribution plan, or the defined contribution plan created pursuant to this part 2 shall commence within one hundred eighty days after the election or within one hundred eighty days of the last day on which the employee may make an election to participate in such plans pursuant to article 51 of this title and this article, whichever is earlier. SECTION 27. Safety clause. The general assembly hereby finds, determines, and declares that this act is necessary for the immediate preservation of the public peace, health, and safety.