What Types of Colorado State Pensions are offered?
Colorado only has one administrative body that controls the state’s entire pension fund. The Public Employee’s Retirement Association of Colorado is divided into five distinct sections: the School Division, the State Division, the Local Government Division, the Judicial Division, and the Denver Public Schools Division. These divisions administrate the pension funds for employees that fall under these five categories, but many of the general benefits are the same for all members.
Unfortunately, as of 2014, the current funded level of the state pension fund is 60%, which is 20 percentage points under the federal recommended level of 80%. More alarmingly, this is down nearly 6 percentage points from the previous year. In recent months, the pension plan has become the centerpiece of arguments surrounding restructuring the state’s budget. Political reform is sure to focus on the PERA as it looks to be in danger of failing to fulfill its obligations to future retirees.
General PERA Membership Information
Unless otherwise noted, there are several general benefits that are shared by every member of the PERA program.
- Members contribute 8% of their gross monthly income to the retirement fund.
- Member contributions earn compounded interest based on a fixed rate. As of 2013, the fixed interest rate was 3.0%. The interested rate is set annually by the PERA Board.
- Unlike other pension plans, PERA members receive vesting based on years of participation, regardless of creditable service. After 5 years of participation in PERA, a member is considered vested.
- Members who are eligible for retirement may refund their account and receive 100% of their contributions, including interest. Members who are not eligible for retirement, but have accumulated at least 5 years of creditable service may refund their account for 50% of their contributions, including interest.
- Members with at least 5 years of creditable service are also eligible to apply for disability benefit packages.
PERA Retirement Requirement and Benefits
The standard retirement age, under the general PERA program, is 65. There are some other possibilities, listed below.
- Members who began employment on or before June 30, 2005 and have accumulated at least 5 years of creditable service may retire at age 50 with 30 years of creditable service or at age 60 with 20 years of service.
- Members who began employment between July 1, 2005 and December 31, 2006 may retire at age 55 with 30 years of creditable service, at age 60 with 20 years of service, or at any age with 35 years of service.
- Members who began employment on or before December 31, 2006, but had less than 5 years of service accumulated on January 1, 2011 may retire at age 55 with 30 years of creditable service, at 60 with 25 years of service, or at any age with 35 years of service.
- Finally, members who began employment on or after January 1, 2011 may retire at age 58 with 30 years of creditable service, or at any age with 35 years of service.
PERA provides survivor benefits to beneficiaries of its members. If an employee dies before retirement eligibility, the beneficiary will receive a lump sum payment, calculated based on the employee’s contribution and years of service at the time of death. Dependent children are eligible to receive this payment first, followed by spouses and co-beneficiaries. If the employee were eligible for retirement at the time of death, the co-beneficiary is the first to receive a portion of the employee’s monthly retirement benefit, calculated based on total years of service and age of the employee at the time of death.
PERA also provides its members with a Cost of Living Adjustment that is equal to 2.0% or the federal inflation rate, whichever is greater. This rate is calculated annually and added onto the monthly retirement benefit. The COLA is prorated in the first year of newly retired employees.
Terminating PERA Coverage
Members of the PERA system may choose to terminate their retirement pension coverage at any time.
If a member transfers employment from one PERA employer to another, membership does not discontinue. If there will be a gap in employment that is more than one month long, the member will need to submit an official notice of Leave of Absence. Membership will not cease during this gap in employment, provided that the employee has the intention to resume employment in the near future.
Members may opt to leave their PERA retirement account, despite concluding employment with a PERA agency. In this case, their account will continue to accrue tax-free interest until the retirement age is reached.
Vested members will then be eligible to receive their calculated monthly retirement benefit as normal.
Members who have not vested or satisfied the requirements to be entitled to a monthly retirement benefit may still choose to leave their account with PERA until they reach retirement age. In this case, they will only be paid out a lump sum payment of their account contributions, plus compounded interest.
Members may also choose to leave their PERA account and return to employment at a later date. In this case, they will not lose any of their previously accumulated creditable years of service and their account will continue to accrue compounded interest.
PERA Benefit Exceptions
Though the PERA administers most of the same general benefits to all of its members, there are a few notable exceptions.
- State Troopers and CBI agents contribute 10% of their salary to their fund, rather than the standard 8%.
- State Troopers and judges may apply for disability immediately if they sustain injury during their service. They do not need to wait for the 5 years of service requirement.
- State Troopers may retire at age 50 with an accumulated 25 years of service and at age 55 with 20 years of service.
- Both State Troopers and judges receive higher employer contributions to their retirement funds.
These distinctions are outlined in the individual handbooks for PERA members who fall under these specialized categories.