Simply put, this proposed change to Colorado Revised Statute allows the FPPA Board to award non- compounding, or one-time payments, in addition to, or in place of, the compounding COLAs it is currently allowed to grant. Existing COLA limitations remain in place to protect Plan funding. Importantly, this proposal does not provide additional funding for COLAs such as requiring an increase to Member or Employer Contributions.
Under Colorado law and the Board adopted COLA policy, COLAs are not guaranteed and are awarded on an ad hoc basis by the Board, based upon what the Plan can afford and still maintain its fully funded status. Automatic or guaranteed COLAs were not part of the defined benefit plan when it was created by the legislature. Ad Hoc COLAs were always intended to be used as a tool to maintain funding status of the plan.
FPPA’s Board adopted its existing COLA policy, in part, to protect the benefits of future generations of Colorado first responders. One of the Board’s primary responsibilities is to ensure that FPPA can pay all the benefits promised to current and future active Members as well as today’s retirees. In addition to current retirees, we need to prepare for retirees 30+ years in the future.
The policy points above do not change under the proposal.
The table below shows the redline language and a plain-language interpretation, side by side:
|What the Revised Language Says||What the Revised Language Means|
One hundred three percent of the benefits paid for the prior twelve-month period; or
The benefits paid during the prior twelve-month period multiplied by a fraction using the consumer price index for the immediately preceding calendar year as the numerator and the consumer price index for the calendar year prior to the immediately preceding calendar year as the denominator.
(b) As used in this section, “consumer price index” means the national consumer price index for urban wage earners and clerical workers prepared by the United States department of labor.
|With that requirement in mind, the maximum COLA the Board can pay is either:
whichever is greater and does not jeopardize the long-term funded status of the Plan.
When considering COLAs, FPPA’s Board calculates adjustments based upon the COLA’s financial impact to the Plan over several decades. By definition, when the Board grants a compounding COLA, it establishes a new baseline benefit for the recipient, which becomes the new basis for future COLAs. This makes compounding COLAs very expensive. By comparison, a non-compounding COLA, or a one-time payment, does not create a new baseline benefit.
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