A recent report by the Thomas B. Fordham Institute looked at pension plans across the country and made some critical pronouncements. In the case of Colorado, however, they made a fatal flaw in one of their assumptions, negating the validity of their arguments regarding Colorado PERA.
Namely, CO PERA is a hybrid defined benefit retirement plan. This is important because it differentiates CO PERA from other defined benefit plans. Put simply, for PERA members, the benefits paid out always exceed the contributions they put in, regardless of how long they stay in their position and in the pension system.
Here is how this works. A PERA member may refund or rollover their contributions, plus interest, at any point after they leave PERA. That might be after a couple of months or multiple years. Every PERA member is eligible for:
- Years 1 - 4 — a refund/rollover of their contributions plus interest at any point (currently 3% interest compounded annually); or
- After Year 5 (Vested) — all of their employee contributions with interest plus a 50% match on employer contributions and interest; or
- Retirement Eligible — a 100% match on all contributions plus interest or a lifetime monthly benefit
It’s no surprise really that an education reform policy think tank in Washington, D.C. didn’t understand how we operate in Colorado. If you’re looking for more (accurate) information on CO PERA and the benefits it offers compared to a 401(k) style plan, for example, don’t look to D.C., look right here in Colorado at the study commissioned in 2015 by the Colorado General Assembly. That study, conducted by the independent actuarial firm Gabriel, Roeder, Smith & Company, found that regardless of age or length of service, no plan “provides a more effective level of benefits than the PERA Hybrid plan.” Read more about this study here.