## Facts

- Colorado’s Public Employees’ Retirement Association (PERA) is a statutory, defined-benefit pension system for public employees.
- In 1969, the General Assembly added a cost-of-living adjustment (COLA) to PERA benefits and later modified the COLA provisions multiple times (including eligibility, rates, and calculation method).
- From roughly 2001 to 2009, PERA provided a compounded annual COLA of 3.5%, subject to statutory conditions.
- By 2009, PERA faced substantial unfunded liabilities and concerns about long-term sustainability.
- In 2010, the General Assembly enacted Senate Bill 10-001 (SB 10-001), which reduced the COLA from a flat 3.5% to a maximum 2% of the base benefit and added limitations, including years when no COLA would be paid if investment returns were insufficient.
- Retirees and beneficiaries sued, asserting that the COLA formula in effect at retirement was a contractual right protected by the federal and state Contract Clauses.

## Issues

1. Whether PERA statutes created a contractual right to receive the specific COLA formula in effect when a member retired or became eligible to retire.
2. If so, whether SB 10-001’s reduction and restructuring of the COLA unconstitutionally impaired that contract under the U.S. and Colorado Contract Clauses.

## Decision

- The Colorado Supreme Court reversed the court of appeals and reinstated summary judgment for the State.
- The court held PERA statutes did not show a clear legislative intent to create a contractual right to a fixed COLA formula for life.
- Because no contractual obligation existed regarding the 3.5% COLA, SB 10-001 did not impair a contract and did not violate either Contract Clause.
- The court did not reach the remaining Contract Clause inquiries (substantial impairment and justification) because the threshold requirement of a contract was not satisfied.

## Legal Principles

- Statutes are presumed to declare policy, not create contractual obligations; a claimant must show “clear and unmistakable” legislative intent to bind the legislature contractually.
- Absent express, unmistakable statutory language, public pension provisions—especially post-retirement adjustment mechanisms like COLAs—remain subject to legislative revision.
- Prior pension decisions recognizing certain enforceable benefit expectations do not eliminate the requirement of clear legislative intent and do not establish an immutable right to every component of a pension plan.

## Conclusion

The court upheld SB 10-001’s COLA changes, ruling that PERA retirees lacked a statutory contractual right to the 3.5% COLA formula in effect at retirement; without such a contract, the COLA reduction did not violate the federal or state Contract Clause.


Justus v. State, 336 P.3d 202 (Colo. 2014)