Last year I suggested PERA-related legislation that eventually turned into HB26-1026 and became law. I am now reaching out to my Colorado representative and the other two co-sponsors of that bill with a new PERA-related proposal. Here is the email I sent to those legislators. If you think this is a good idea, please consider calling or mailing these three legislators as well as your Colorado Representative and Senator and asking them to support this idea.
Representative Marshall, Representative Hamrick, and Senator Kolker:
In the 2026 session you proposed and eventually passed HB26-1026: Expanding Plan Options for PERA (thank you again). As you’ll recall, this included a provision around purchasing service credit as well as requiring all PERA employers to offer both the traditional and Roth versions of PERA’s 401k and PERA’s 457b. I would like to engage with you on a prospective bill for the 2027 session that also addresses retirement security for Colorado’s public employees. The bill I would like to discuss would include two proposals: an auto-enroll proposal and an auto-escalate proposal for PERA’s 457b plan.
Auto-Enroll for New PERA-Covered Employees in PERA’s Traditional (pre-tax) 457b
I would like to see a requirement that all PERA employees be auto-enrolled into PERA’s Traditional (pre-tax) 457b plan with an initial amount of 3% of salary. There is plenty of research (here, here, and here) that shows that auto-enrollment significantly increases participation in retirement plans and significantly enhances retirement security for employees. More than 60% of plan sponsors now use auto-enrollment, yet very few (if any?) PERA employers do. Employees could, of course, choose to opt-out of the auto-enrollment, or choose to change the amount from the default percentage. But simply by making enrollment the default choice, it can have hugely beneficial effects on employees. Participation rates triple to 91% under automatic enrollment, compared with 28% under voluntary enrollment (Nudge is a great read that talks about the power of default options). As you are aware, the Colorado legislature passed SB19-173 in 2019 that created the Colorado Secure Savings program for Colorado employers without a retirement plan which had similar goals. That plan has an initial default contribution of 5%, but I’m suggesting 3% for this proposal for PERA-covered employees.
While auto-enrolling in PERA’s 401k plan would also be great, I would recommend auto-enrolling them in PERA’s traditional 457b plan instead, because it’s much easier for employees to access the funds in a 457b plan before age 59.5 if they leave their employer through retirement or job change. This not only allows them to access the funds without penalty if they retire early, but if they change employers it gives them the option to roll over the funds into a low-cost IRA if they choose. This added flexibility is a great feature of 457b plans. This also keeps the 401k available for potential Roth contributions.
Auto-Escalate for New PERA-Covered Employees
In addition to auto-enrolling employees in PERA’s 457b plan, I would also like to see an auto-escalate program. Auto-escalate automatically increases the amount employees contribute to their plan over a period of time, typically on a yearly basis. For example, new PERA employees might be auto-enrolled with a 3% contribution and then increase that by 1% each year up to a maximum percentage. That way employees automatically increase their contributions as their salary increases each year, which increases their savings and investments dramatically over time. Just as with auto-enrollment, that same research supports this and employees can always choose to opt-out of auto-escalation or change the amounts at any time. The Colorado Secure Savings that the legislature authorized currently has an auto-escalate provision of 1% per year with a maximum of 8%. I would recommend an auto-escalate of 1% per year with a maximum of 12% for this proposal.
As you know, retirement security is a huge issue for Coloradans, including Colorado’s public employees. While PERA is terrific, the current 1% COLA that begins after three years of retirement doesn’t come close to keeping up with inflation and often is not enough for a comfortable retirement for public employees. For example, with the historical average annual inflation of 3.3%, over a 30-year retirement the purchasing power of a PERA pension declines by more than 50% (and that’s not even considering that the increase in both health insurance and health care costs typically exceed the rate of inflation). While I would love it if PERA’s COLA could be changed to CPI, that simply isn’t possible with the State of Colorado’s budget. Instead, this proposal helps Colorado’s public employees make up that difference themselves. PERA’s 457b plan already has the capability for employees to self-enroll online once they have a PERA login (and there’s even an auto-escalate option), and the contribution information is then sent to each employer. This proposal would simply auto-enroll all new PERA employees at a 3% contribution level, and automatically set the auto-escalate to 1% per year with a 12% maximum. It would require a minimal amount of change (and de minimis cost) to PERA’s onboarding process and the procedure on the employer end would not change. This proposal would provide the behavioral scaffolding to help public employees achieve a more secure retirement with absolutely no cost to the state of Colorado, to employers, or to PERA (this bill would have a $0 fiscal note). If you want to see what this could look like for a new teacher, this spreadsheet gives an example.
I know that there are many important issues and you have a limited number of bills you can introduce. But, just like with HB26-1026, I feel like this bill would be a win-win-win (good for PERA employees, good for PERA employers, good for Colorado) with no cost to anyone. I hope you are willing to explore this proposal and I am happy to talk with you further about this if that would be helpful. Again, thank you for your work in the state legislature and I hope to hear from you soon.
Sincerely,
Karl Fisch
Highlands Ranch, CO