An Update on COLAs From the Executive Director

To our Members, Employers, and other stakeholders,

I want to begin this note by sincerely thanking you. This past year, I have enjoyed speaking with many of you about how we can better serve our stakeholders. In visiting with our Members, I’m often struck by the passion you have for public service; it’s inspiring to hear about the ways you impact our communities. I also admire the interest many of you have taken in the future of FPPA’s retirement plans, especially the Statewide Retirement Plan (SRP) and Statewide Death & Disability Plan (SWDD).

In these discussions, the most common questions I’ve received in recent months are:

• Is FPPA on track to pay meaningful Cost of Living Adjustments (COLAs) in the future?
• What is FPPA doing to protect and improve future benefits?

To answer these questions in the simplest terms, yes, we believe FPPA is on target to pay meaningful COLAs to retirees in the future, and is taking proactive actions to secure and improve benefits.

Key highlights include:

• As of 1/1/2024, our most recent actuarial valuation shows that the Statewide Retirement Plan remains fully funded. This means that the Plan is projected to have enough assets to pay all promised retirement benefits
• Contributions into the Statewide Retirement Plan remain higher than the cost of base benefits. This surplus contribution is necessary to fund future COLAs
• Investments in the Long-Term Pool achieved a 9.97% return last year, beating our expectation of 7%. Long-term out performance of our assumed rate of return also helps fund future COLAs
• FPPA hired an independent auditor to review the actuarial conclusions, assumptions, and calculations made by our actuary. The audit showed everything to be in order and offered no substantive concerns about our actuary’s projections

These factors, among others, will add up to more positive news for current Statewide Retirement Plan retirees regarding COLAs over the long term.

In the near term, eligible payees in this Plan will receive some relief against inflation: a 0.14% compounding COLA, effective with their October 2024 benefit payment. In addition, the conditions were met to also pay eligible retirees in the SRP a One-Time Lump Sum. Calculated according to the Board’s adopted COLA policy, eligible payees will receive a lump sum payment equal to 3.66% of their annual benefit, also included in their October 2024 benefit payment. Statewide Retirement Plan payees who are eligible to receive these benefit enhancements can expect to receive a letter or email from FPPA with their updated payment amounts by October 10th.

Please note that these COLA and One-Time Lump Sum factors only apply to eligible Members of the Statewide Retirement Plan, and do not apply to the Statewide Death & Disability Plan or any other FPPA-administered retirement plans (Colorado Springs New Hire, Old Hire Plans, Volunteer Plans). For COLA information specific to these plans, please see the Annual Rates page on our website.

In addition, there is positive news for the Statewide Death & Disability Plan:

• The Statewide Death & Disability Plan’s funded status has increased to 83.6%, a positive step in the Plan’s journey towards full funding
• The contribution rate continues to increase in order to fully fund the Plan
• Recent FPPA-sponsored legislation passed in May, and the resulting contributions from the state will also help the Plan regain its funding status over time

Unfortunately, despite its improved funding, the SWDD Plan is still not in a place to pay meaningful COLAs to all retirees. Current contribution increases and the upcoming payments from the state are expected to bolster Plan funding, but it will take more time for the Plan to recover to the point where it can pay meaningful COLAs to all payees in this Plan.

In closing, let me reiterate the most important takeaways: FPPA’s flagship retirement plans are in solid financial shape, and are well positioned for future success. On behalf of our staff, let me say that your concerns about COLAs remain top of mind, and it is truly an honor to serve you every day.

Regards,

Kevin B. Lindahl, FPPA Executive Director