PERA files suit against city, UCH in retirement benefits battle

It’s time for round two in the legal battle between the city of Colorado Springs and the Public Employees Retirement Association.

The city filed a suit two weeks ago, asserting that it doesn’t owe PERA for additional retirement benefits for employees of Memorial Health System once the University of Colorado Health takes over the hospital. That suit was filed in the Fourth Judicial District, which includes El Paso and Teller counties.

PERA filed a suit of its own Friday, Aug. 31, in Adams County against the city and the University of Colorado Health. The suit is asking the court to take control of the funds from the lease transaction, according to a press release from PERA.

PERA is asking the court to determine that in order for Memorial to terminate its affiliation with PERA, the city must pay for retirement benefits already earned by Memorial employees.

“Colorado State law sets forth requirements for when an employer in PERA’s local government division ‘disaffiliates’ and moves its employees into another retirement system,” the press release said. “In particular, the law calls for reserves to be created for the payment of benefits earned as of the disaffiliation date by the employees of the disaffiliating employer. The law requires that the reserve be sufficient to ensure that there is no adverse impact on the remaining employers in the division.”

PERA has said the city owes about $190 million to create the reserves. As part of the lease agreement, UCH has given the city $185 million to settle its PERA obligations.

“If an employer leaves PERA and does not provide an adequate reserve for the liabilities already earned by their employees, the cost of providing these benefits would be shifted to the remaining employers in the local government division, including the City of Colorado Springs and Colorado Springs Utilities,” said Gregory W. Smith, PERA’s interim executive director. “PERA believes this is unfair because these benefits have already been earned as a result of work performed for the disaffiliating employer.”

Memorial is the largest employer in the local government division. The city of Colorado Springs and Colorado Springs Utilities are the third and fourth largest employers in the division, respectively.

For its part, the city says it isn’t creating a new retirement plan for city employees – it’s no longer employing anyone at the city enterprise.

“We’ve paid every penny that they’ve asked us to pay, over the years,” said City Attorney Chris Melcher. “We consider that these employees don’t work for the city any longer, so we won’t owe them any money. Memorial as an enterprise still exists, we’re leasing the assets, but it doesn’t have any employees.”

Melcher said that the city doesn’t owe PERA when it fires employees or when someone leaves of their own accord.

“We don’t think we owe anything now,” he said. “These people no longer work for the city. They work for a different entity.”

The city filed a suit asking the court to affirm its stance – that no further money is owed to PERA as a result of the lease agreement.