From: Administrative E-Memo (memofrom@Colorado.EDU)
Date: Fri Apr 23 2010 - 12:44:51 MDT
Date: Fri, 23 Apr 2010 12:44:51 -0600 (MDT) From: Administrative E-Memo <memofrom@Colorado.EDU> Subject: PERA Information
TO: Boulder Campus Teaching & Research Faculty, Staff,
Deans, Directors, Dept Chairs
FROM: Office of the President
SENDER: E. Jill Pollock
Senior Associate Vice President and Chief Human Resources Officer
University of Colorado
DATE: April 23, 2010
SUBJECT: PERA Information
A number of you have asked questions about a forthcoming increase in
employees' PERA contributions. The matter can be both confusing and
troubling in this economy. The purpose of this communication, primarily
directed to those of you who are PERA participants, is to clarify elements
of the change.
What is driving this change?
On March 31, 2010, Governor Ritter signed into law SB 10-146, which his
office sponsored to address a number of budget challenges for FY 2011
(beginning July 1, 2010) within state government. One aspect of the law was
to shift a portion of the employer cost for PERA for one year to employees
of state government, thus, requiring them to make an extra contribution of
2.5% of salary to PERA.
Who will be affected by the 2.5% PERA shift?
Approximately 5,700 CU employees are in PERA and will be affected: 4,237
classified, 789 exempt professionals (41% of all exempt professionals) and
707 faculty (11% of all faculty).
What is the difference between PERA and Optional Retirement Plans?
PERA and the optional retirement plan (ORP) at CU are very different
structures. PERA is a defined benefit plan, which means the retirement
benefit is set by a formula that includes age, length of service and
contribution. The benefit does not change as a result of a good or bad
economy. Even during these difficult times, the benefit upon retirement for
an employee enrolled in PERA is assured. It may not rise as much without
pay increases, but the benefit is guaranteed. CU employees in PERA do not
have deductions for Social Security; PERA is an all-inclusive pension. PERA
participants, with the new 2.5%, will contribute 10.5% to their retirement
The ORP is a defined contribution plan, requiring both employer and employee
participation; the plan is largely self-directed by the employee through
various investment choices and ORP fund sponsors. CU employees in the ORP
must have Social Security deductions taken from their pay. ORP employees
contribute 11.2% into their retirement plans (5% to ORP and 6.2% into Social
Security). Future ORP benefits to employees are not guaranteed, because
account valuation changes according to world financial markets and
employees' individual investment choices. Since 2007, when the stock market
started falling, many employees in the ORP have experienced substantial
losses. If these employees had invested in Dow Jones funds or Standard &
Poors funds (and many of our ORP employees did), the overall loss over the
three-year period has been more than twenty per cent of their retirement
What is the effect of the new law if you are a PERA participant?
For one year beginning in July 2010, your pay will be reduced before taxes;
the 2.5% that you will pay to PERA through payroll deduction will go
directly into your personal account, so your monthly retirement savings will
not be cut. PERA will continue to invest these contributions for you.
Your take-home pay, however, will be diminished each month for a year, but
the effect will be less than the full 2.5% of your salary, because the PERA
deduction will be taken before federal and state taxes are calculated.
Here's an example of how the calculation will work (assuming married,
claiming two exemptions, but ignoring other pre-tax deductions and showing
only the effect of the new PERA deduction with the additional 2.5%):
Present base monthly salary based on $40,000 = $3,333;
Less Present PERA deduction (8%) = $267;
Less Federal and state taxes on $3,333 = $285;
Take-home pay = $2,781
- July 2010:
Base monthly salary of $3,333;
Less Present PERA + 2.5% (10.5%) = $350;
Less Federal and state taxes = $268;
Take-home pay = $2,715
For this example, the 2.5% increase to PERA ($83) results in a $66 decrease
in monthly take-home pay.
I realize, however, that any action reducing the amount of take-home pay
will require you to adjust your personal budget. Given the state of the
economy, we generally are not receiving increases to our pay, while health
care and other costs of living continue to rise. Conditions should improve.
The State of Colorado and CU have experienced financial difficulties before
I trust this memo has been helpful to you regarding the PERA contribution
change effective this July. Should you have questions, please contact your
human resources office or Payroll & Benefit Services at 303.735.6500.
E. Jill Pollock
Senior Associate Vice President
And Chief Human Resources Officer
University of Colorado
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