One advantage of working in a position covered by PERA is the 580+ affiliated employers throughout Colorado—each of which you could work, and continue to grow your PERA benefit. But, what if you decide to leave Colorado, or transition into the private sector? A common misconception about PERA is that you're not entitled to anything if you haven't accrued at least five years of service credit. That's not the case.
You’re eligible for a lifetime retirement benefit at age 65 with any amount of service credit.
If you decide to leave PERA-covered employment, consider leaving your account at PERA. It'll continue to accrue interest, and, when you reach retirement age, you'll be eligible to receive a lifetime retirement benefit.
If you have five or more years of service credit, the benefit amount you're entitled to is determined by the higher of two calculations:
1.) Defined benefit calculation
2.) Money purchase benefit calculation
If you have less than five years of service credit, the benefit amount you're entitled to is determined by the money purchase benefit calculation.
The defined benefit calculation is:
Your Highest Average Salary (HAS) x Years of Service x 2.5% (assuming you meet the age requirements for service retirement)
The money purchase benefit is determined by your life expectancy and the value of your PERA account at the time of retirement, plus a matching amount of 100 percent of your contributions and interest. PERA takes the amount in your PERA retirement account, matches the contributions and interest, and then annuitizes the amount over your remaining life expectancy to arrive at a monthly benefit that you will receive for your lifetime.
Another benefit to leaving your account at PERA and then taking a lifetime retirement benefit when you are eligible, is that you will also be eligible to enroll in PERACare, PERA’s group health plan for retirees. PERACare has the advantage of being able to negotiate very competitive group rates for PERACare.
*Note – If you are under the DPS benefit structure then you must have 5 years of service credit to receive a retirement benefit. If you have less than 5 years, you will receive a refund of your account.
It’s always your money.
If you leave PERA-covered employment and decide to leave your account at PERA, it will earn a guaranteed interest rate (currently 3 percent). Over a period of time, your account will grow significantly with compounded interest.
In a PERA publication we show how a hypothetical PERA member who left his account at PERA from age 30 to age 65 will have his account grow from $14,555 at age 30 to $41,769 at age 65, all due to compounding interest. That is quite an impact!
Your member contributions and interest are always your own, and you can withdraw them at any time after you leave PERA-covered employment. (Keep in mind the potential IRS penalty if you take the money and do not roll it over to another tax-deferred plan such as a 401(k) or 457 plan.)
If you leave your account at PERA until you are retirement eligible and then withdraw it, you will receive a 100 percent match on your member contributions and interest. This portability feature allows you to rollover or withdraw your money whenever you choose.
When you are considering your options, think about whether you are likely to return to a PERA-covered position in the future. If you think it's a possibility, then it may be a good idea to keep your account at PERA so you can continue growing it when you return to PERA employment down the road. If you withdraw it, you will start over when you return to PERA employment.
With these features, PERA allows you to choose what is best for your own personal situation, no matter how much service credit you have.