I’ve written previously about Colorado HB26-1026 and am happy to share that the legislature passed it and the Governor has now signed it. This bill has three provisions.
- New Option for Purchasing PERA Service Credit: PERA members have previously been able purchase up to 5 years of nonqualified service credit, but they had to have the work experience and earnings to qualify for it. This bill adds on a new provision that allows members to purchase time they were out of the workforce (after the age of 21). This rectifies the inequity that previously existed that if you worked at McDonalds (as an example) during high school and college you could purchase service credit, but if you stayed home to raise children or take care of elderly parents (as just two examples) you could not.
- PERA’s 401k Plan: PERA employers have always had to offer PERA’s traditional, pre-tax 401k plan, but had to opt in to the Roth version. They now will have to offer the Roth version as well.
- PERA’s 457b Plan: PERA employers have had to opt in to PERA’s 457b plan and will now have to offer it (both pre-tax and Roth).
While many PERA employers already offered the Roth version of 401k, and many had also opted in to the 457, there were still a large number who had not (often smaller employers, but also some larger ones like Denver Public Schools and Douglas County Public Schools). They now will have to offer both beginning no later than January 1, 2027.
This means that starting January 1, 2027, there will be no reason any Colorado public employee will have to contribute another dollar to a 403b plan (unless they want to, this won’t eliminate them). So many of the 403bs offered are horrible with high administrative fees and poor investment choices, whereas PERA charges $1/month plus 0.01% of assets for the 401k and 0.02% of assets for the 457b (along with low expense ratios for investments). With both PERA’s 401k and 457b bucket available, it eliminates any reason to have to use the 403b. (Not that some folks won’t still contribute to 403bs, they will, but hopefully with better options and some education fewer and fewer will.) The 457b also has some advantages for pre-tax contributions, and can also be used for Roth if you wish (and the 401k can be used for either as well).
Thank you to Representative Bob Marshall, Representative Eliza Hamrick, and Senator Chris Kolker for listening to a constituent (umm, that would be me), crafting a good bill, and then shepherding it through the legislature.