What is PERA, the Public Employees Retirement Association?
Colorado Public Employees’ Retirement Association (PERA) provides retirement and other benefits to the employees of more than 500 government agencies and public entities in the state of Colorado.
PERA is a hybrid defined benefit plan. On behalf of PERA members, contributions are invested in common stocks of top-rated companies, corporate boards, U.S. Treasury and other government securities, mortgages, real estate property, and other investment vehicles. These investment earnings are used to fund the monthly retirement benefits paid out by PERA.
The pension operates on this simple formula:
Contributions from Employers & Employees
Benefits Paid Out
PERA members contribute 8% of their monthly salary (10% for Colorado Bureau of Investigation and State Troopers). Employers also contribute a percentage of their total payroll. The percentage depends on the organization. These contribution amounts were increased in 2006 & 2008 (AED & SAED). Here is the chart of contribution rates across all PERA divisions.
AED= Amortization Equalization Disbursement. The AED is an additional amount contributed by PERA employers that has gradual increases.
SAED= Supplemental Amortization Equalization Disbursement. The SAED is also an amount contributed by employers and is, to the extent permitted by law, to be funded by moneys otherwise available for employee wage increases. The SAED also has gradual increases.
Currently, the assumed rate of return is 7.25%. This was set by the PERA Board of Trustees in 2016. Even with down markets in 2001, 2002, and 2008, PERA has averaged a 9% rate of return over the last 25 years. In 2008, the investment portfolio lost 26% or $11 billion – which was still better than its peers (-26.8%) or 401(k) plans (-27%).
Retired workers receive benefits calculated by this formula: 2.5% x Highest Average Monthly Salary x Years of Service
- 2.5% is the multiplier as determined by the Legislature.
- Highest Average Salary is the average of the three highest yearly salaries earned under PERA employment. (It is only 1 year in the judicial division).
- Years of Service is the member’s years and months of work for a PERA employer.
PERA’s expenses total .4%. CEM Benchmarking awarded PERA the top honor in service compared to the other 77 national and international pension plans and praised PERA’s lower-than-average operating costs. PERA’s cost per member for operation is $57. National average per member operation costs is $73