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 members include teachers, highway workers, department of corrections workers, state patrol officers, as well as other local, special district, and state employees. PERA is the 21st largest public pension plan in the United States.
Established by State law in 1931, PERA operates by authority of the Colorado General Assembly and is administered under Title 24, Article 51 of the Colorado Revised Statutes.
Its membership includes:
- employees of the Colorado state government,
- public school teachers in the state,
- many university and college employees,
- many employees of cities and towns,
- state troopers, and
- employees of other public entities.
PERA is a substitute for Social Security for most of these public employees. Benefits are pre-funded, which means while a member is working, he or she is required to contribute a fixed percentage of their salary to the retirement trust funds. Employers also contributes a percentage of pay to the trust fund. These contributions rates are set by the Colorado General Assembly.
PERA is managed by a 16-member Board of Trustees. Eleven of the trustees are elected by their respective divisions.
The number of member-elected Trustees are as follows:
- four members from the School Division;
- three members from the State Division;
- one member from the Local Government Division;
- one Judicial Division member;
- two PERA retirees.
Other members of the Board include:
- the State Treasurer, as an ex officio member;
- One non-voting member from the Denver Public Schools division; and
- Three members who are appointed by the Governor.
PERA invests the trust funds under the direction of this Board of Trustees and follows an investment strategy that uses established investment objectives with long-term goals and policies. 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.
In 2019, PERA provided over $4.1 billion in benefit payments to more than 100,000 PERA members. The average PERA benefit is about $3,200 per month. This is not a gold-plated pension plan. This is retirement security for the thousands of public employees in our state. PERA is also a tremendous economic generator for our state. In 2019, the benefits paid out generated $6.5 billion in economic output for our state.
The pension operates on this simple formula:
Contributions from Employers & Employees
Benefits Paid Out
How do contributions work?
PERA members contribute 8.75% of their monthly salary (10.75% for Colorado Bureau of Investigation and State Troopers and 8% for Local Government Employees). 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.
Additionally, as a result of SB18-200, there are periodic adjustments made to contribution rates for both employees and employers. These are also “Automatic Adjustments” and are based on how the funded status of PERA. More information about these “Automatic Adjustments” can be found here.
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.
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 or five highest yearly salaries earned under PERA employment, depending on when a member started in PERA.
- Years of Service is the member’s years and months of work for a PERA employer.
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%).
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