Man in suit with sign asking "what's your plan for retirement?"

The last time we wrote about PERA was during the Covid pandemic, when the deadline to submit orders was temporarily lifted. And now, this is one of those cases where the PERA Co-Beneficiary statute seems clear enough that I’m surprised it was litigated all the way up to the Colorado Supreme Court.

Colorado state employees participate in PERA, or the Public Employees’ Retirement Association, and as required by federal law for any defined benefit plans, offers employees three options with respect to PERA Co-Beneficiary survivor benefits to ensure that their family members are not left in the cold if the employees die:

  • Option 1 – no survivor benefits.
  • Option 2 – the PERA co-beneficiary receives an amount equal to one-half of the monthly benefit payment.
  • Option 3 – the PERA co-beneficiary receives the entire monthly benefit.
Colorado PERA Co-Beneficiary

Options 2 & 3 have a monthly premium which is deducted from the PERA payments during the retiree’s life. Sixty days after a benefit option has been selected, per C.R.S. 24-51-802(1) the election becomes non-modifiable, except in limited situations, including divorce, which is what was at issue in this new case. (For more information on PERA benefits, see our Division of Government Pensions article in the Colorado Family Law Guide.)

Husband Selected PERA Co-Beneficiary Benefits at Retirement

In Mack,1In re: Marriage of Mack, 2022 CO 17. the parties were still married at the time of the husband’s retirement in 2012, and the husband selected option 3, with the wife as co-beneficiary to receive his entire monthly benefit upon his death.

Fast forward several years, and the parties obtained a dissolution of marriage. Husband asked the trial court to order the wife removed as co-beneficiary, and order that his PERA plan convert to an Option 1, which would result in no PERA co-beneficiary benefits, and therefore a higher monthly payout as there would be no survivor benefit premiums. The trial court denied this request, finding that the PERA account would be equitably divided, and the wife would remain as the Option 3 PERA co-beneficiary. The parties subsequently executed a PERA agreement to comply with that order.

The husband subsequently asked the trial court to reconsider its order, relying upon C.R.S. 24-51-802(3.8), which provides that in a dissolution, “the court shall have the jurisdiction to order or allow [the] retiree . . . to remove the spouse that was named cobeneficiary by the retiree at retirement, in which case an option 1 benefit shall become payable.”

The trial court rejected the husband’s argument that this provision gave him an “absolute right” to remove the wife as co-beneficiary, and the husband appealed. The Court of Appeals denied his appeal, but on a “technicality” that the husband did not make that argument at trial so therefore did not preserve the issue for appeal. The husband appealed again, this time to the Colorado Supreme Court, which affirmed the denial of relief to the husband, but on the merits of the matter, not the technicality.

Absolute Right to Remove PERA Co-Beneficiary?

The specific legal issue addressed by the Court was framed as follows:

“The question here is whether a divorcing retiree can trigger the statute’s removal-and-conversion mechanism, or whether that power lies only with the presiding court. Husband contends that the language “the court shall have the jurisdiction to order or allow [the] retiree” to remove the cobeneficiary spouse, id., does not simply enable the court to remove the cobeneficiary but in fact requires the court to do so upon the retiree’s request.”

Mack.2In re: Marriage of Mack, 2022 CO 17, ❡ 16.

The husband’s argument relied upon various interpretations, all of which were rejected by the Court:

The husband first argued that the trial court’s role was only “ministerial” – i.e. it was required to implement whatever option the PERA employee/retiree had selected. This interpretation relied upon a convoluted read of statutes providing for a co-beneficiary by agreement of the parties, and the position that the court’s only function was to implement this agreement, and absent agreement, the court was required to exercise its jurisdiction to remove the wife as co-beneficiary.

The husband next argued that since the statute did not vest any power in the spouse, necessarily he had absolute power to remove the spouse as co-beneficiary.

The husband’s next two interpretations were even weaker, so are not discussed here.

Ultimately, the Court held that under the plain language of the statute “the authority to trigger a shift in cobeneficiary status unambiguously lies with the court, not with the retiree.” Mack.3In re: Marriage of Mack, 2022 CO 17, ❡ 22.

The takeaway? PERA is treated the same as other defined benefit pension plans in Colorado divorces, with the family law judge having the authority to not only divide the pension, but to order PERA co-beneficiary survivor benefits as well.

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PERA Co-Beneficiary

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