Photo by PHILIP B. POSTON/Sentinel Colorado
AURORA | The organization that manages retirement benefits for public sector employees in Colorado has filed a lawsuit against the Tri-County Health Department and its three affiliated counties alleging that the entities are on the hook for $50 million in retirement benefits.
The lawsuit asks that Tri-County be ordered to pay the $50 million, and if it is unable to, Arapahoe, Adams and Douglas counties be forced to cover the shortfall.
Once the largest health department in the state, it became the center of a political storm during the pandemic over mask mandates, leading to a push last year to abandon it.
A Tri-County spokesperson said the department is unable to comment on pending litigation. The individual counties maintain, however, that the fee is not their responsibility.
“Arapahoe County and the other two counties’ position is that TCHD is a separate, independent legal entity under Colorado law, which is solely responsible for its own liabilities and financial obligations including any obligations owing to PERA,” Arapahoe County spokesperson Luc Hatlestad said in an email.
If the department is allowed to break up without paying its share, the lawsuit says, public sector employees all across the state will suffer financially.
The Colorado Public Employees Retirement Association, PERA, provides retirement benefits and other benefits to employees in over 500 government agencies in Colorado, including school districts, universities and state and local governments. Benefits are pre-funded and serve as a substitute for Social Security for most of those employees.
On Feb. 1, PERA filed a lawsuit against Tri-County and Adams, Arapahoe and Douglas counties in an Adams County District Court claiming that the department is violating the procedures required by state law to exit a partnership with the retirement association.
Those requirements primarily include a $50 million payment to PERA’s Local Government Division trust fund, the lawsuit said.
Tri-County has 400 active and 350 inactive PERA members and 180 PERA retirees, the lawsuit said. At the end of this year the department will cease to exist and therefore terminate its affiliation with PERA — and benefit payments.
By law, there are certain procedures that public entities in the local government division of PERA must follow in order to terminate their affiliation with the entity. As part of the process, PERA actuaries determine the amount of reserves necessary to maintain current benefits for members.
If there is a surplus, PERA is required to pay the disaffiliating employer, but if there is a shortfall, the employer is required to pay the difference of the employer’s share to PERA, known as a withdrawal liability.
This payment ensures the financial integrity of the PERA system, the lawsuit said.
According to the lawsuit, in January 2021 Tri-County reached out to PERA regarding the effects of Douglas County leaving the department (which it first announced its intention to do in July 2020) and Tri-County potentially dissolving entirely. It reached out again in June 2021 to ask if it would incur a substantial penalty if it left PERA.
In September of 2021 Tri-County said that it needed an evaluation of the reserves requirement “ASAP” because it would be a factor in the county commissioners of the individual counties deciding whether to form their own health departments, the lawsuit said.
On Sept. 24, PERA calculated the withdrawal liability as slightly more than $50 million. That number showed up in an independent report conducted by the Otowi Group and presented to the Adams and Arapahoe county commissioners, which projected that $50 million of an estimated $61 million it would cost to separate Tri-County would go to a one-time payment to PERA.
Tri-County’s entire adopted budget for 2021 was slightly over $55 million, according to online documents.
Days later on Sept. 28, Tri-County and the Douglas County board of commissioners entered into an intergovernmental agreement in which Douglas County promised to pay for the costs associated with its withdrawal including “the payment of any debt or penalties imposed by Colorado PERA,” according to the lawsuit.
“In sum, both TCHD and Douglas County acknowledged the existence and enforceability of PERA’s Termination Provisions in entering into the (agreement),” the lawsuit said. “Adams County and Arapahoe County are third-party beneficiaries of the IGA and thus similarly acknowledge the existence and enforceability of PERA’s Termination Provisions.”
After Adams County signaled its intent to withdraw in October, representatives from PERA reached out to Tri-County with a reminder that the dissolution of the department would trigger a requirement to pay the withdrawal liability, and they were told that their conclusion about Tri-County’s future were premature and inaccurate, according to the lawsuit.
By the end of the year, both Adams and Arapahoe counties had formally voted to form their own health departments, leading to Tri-County’s imminent dissolution at the end of 2022.
The lawsuit argues that Tri-County’s current position — de facto disaffiliating from PERA by ceasing to operate without paying its withdrawal liability — is illegal under Colorado law and will place an undue burden on all the other entities that contribute to PERA.
“A multiple-employer cost sharing pension plan such as Colorado PERA only succeeds if all the employers either stay in the plan to contribute to the obligations of their retirees and current employees (who will be future retirees), or pay their actuarial share of any unfunded liability to terminate their affiliation,” the lawsuit said.
In a statement, PERA executive director Ron Baker said the organization brought the lawsuit to protect its members’ benefits and ensure Tri-County’s liability isn’t shifted onto the other contributing employers.
Hatlestad declined to comment on whether Arapahoe County would have enough money to cover its share if required to pay part of the fee, saying it would need to know the amount of the deficiency and the timeframe for reimbursement.
To that end Adams, Arapahoe and Douglas counties jointly filed a motion to dismiss, arguing that the counties are not statutorily or legally responsible for the money.
Filed March 14, the motion argues that Tri-County is a separate legal entity responsible for its own debts and that the boards of commissioners have the sole legal authority to control the budgets for their counties.
“Here, PERA, without statutory authority, seeks to strip the elected county commissioners of their legal authority to control and set the budgets for their respective counties and instead seeks to permit an unelected board of health to obligate the counties to cover its debts and obligations for contracts to which the counties are not signatories and did not agree to,” the motion said.
Thank you Douglas County and Adams County for not only disregarding the health of your community members but for also putting this additional burden on Arapahoe county residents. And on your own. Which necessary program(s) will have to reduce services, or even worse cut, in order to pay for this shortfall?. Once again, let’s not put people first, just the egos of a few in power. PERA employees and recipients do matter, as do all the taxpayers in these three counties.
And to think: All this because some got their panties in a twist because of masks.
hello how are you
How much of what this lawsuit is over will we learn is curiously generated by Tri- County’s conduct itself. How much from its own heavy handed, overreach policies of fining, legal threats and shutdowns of businesses, we will discover a lot. Tri-Counties orders with masking and general shut downs was a Self-serving non-public accountability overreach. These counties through their commissioners, voted in- by the way (Unlike Tri-County Health officials) starting with Douglas Cty, said enough is enough to participating, and involvement with this unelected bunch, and their counterfeit authority. Tri-County was not some innocent victim. All the businesses they had a part in shutting down, and the financial fallout, who’s accountable for those incalculable losses? How about those people’s pensions affected by all the stupid shutdowns?
This lawsuit’s theory is creative but not some new invention.
– SOMEBODY OWES FROM SOMEWHERE? — SO SOMEBODY’S GOING TO PAY FROM SOMEPLACE…