401kRollover Blog

Colorado lawmakers’ expense reimbursements are being used to increase lawmakers’ pension payments. Increased pensions are costing taxpayers as much as $99,000 annually. Lawmakers are entitled to daily per diems or expense reimbursements; a standard procedure. However, reimbursements are being paid as salary per diems rather than expense per diems. Salary per diems are treated like salaries and contribute towards pensions, increasing the state’s liability.

Colorado Public Employees’ Retirement Association (PERA) defends their payment method, saying that per diems are standard procedure. However, if reimbursements were covered by expense per diems, lawmakers could still have their expenses covered without increasing liability.Colorado’s increased pension liability will increase by over $500,000 annually. Government employees contribute 8% to PERA meanwhile taxpayers pay up to 18.35% depending on how often lawmakers ask for reimbursements. As pensions increase, taxpayers are expected to cover the costs.

The most daunting aspect is what all this will mean to the unfunded liability. As pensions increase, PERA is promising more money than what has been paid by lawmaker or taxpayers. It was calculated that PERA’s underfunded liability for the upcoming 30 years is approximately $22 billion. This could have potentially serious implications when PERA is forced to make pension payments. We have recently seen the drastic negative consequences that arise when pensions are underfunded. Short term “solutions” make the situation worse, often at the taxpayers burden. PERA maintains that there is nothing wrong with how reimbursements are currently handled. However, a continuation is certainly going to increase liability and leave taxpayers to pay for it.

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