Portability, Choice, Transparency: This Isn’t Your Grandparents' Pension

November 10, 2014

When people find out I work at PERA, a common response is “I’m a PERA member, but I don’t really know much about it.” It’s easy to put thoughts of retirement out of your mind, especially when you are just starting your career. It seems like a long way off, and not something you need to worry about now. But, whether your retirement savings plan is through PERA, or some other employer or private plan, it’s a good idea to think about the different options available to you as you move through your career.

Here are some common things you might not know about your PERA retirement savings account:

1 ) It is highly portable.

PERA doesn’t just cover teachers, or just state workers – there are over 500 Colorado public employers  affiliated with PERA. You can go to work for any of them, switch to another, and continue to build on the same retirement account. That means you can be a teacher in one school district, switch to another school district, and then leave teaching all together to work for a state agency – and you will keep building your same retirement account through all of it.

2) You are eligible for a monthly benefit, for life, at retirement.

A common misconception is you need at least 5 years of time in PERA before you are eligible for a monthly retirement benefit. That is not the case. If you are in the PERA Defined Benefit (DB) plan, you are eligible for a monthly retirement benefit once you reach age 65, regardless of how much time you have in PERA. That means you could work for 1 year as a teacher in your 20s, leave the account at PERA until you are 65, and then receive a guaranteed monthly lifetime benefit based on the accrued amount, plus interest, plus 100 % of your employer’s matching contribution. This is in contrast to if you are in a defined contribution (DC) plan such as a 401(k), your benefits run out when your account goes to zero – under a DB plan you are guaranteed to receive monthly benefits no matter how long you live.

3) You have options if you leave your PERA-affiliated job.

A) You can take the account with you. If you decide you don’t want to leave your money invested in PERA to grow with interest in order to receive a monthly lifetime benefit, you can take a lump-sum refund of your account. You can take it as cash (you’ll pay taxes) or you can roll it over to another plan and have it retain its tax-deferred status.

B) If you can’t make up your mind about what to do, you can leave it with PERA where it will earn a risk-free guaranteed rate of return. Currently that rate is 3 percent. So if you have an account here and you aren’t sure what you might want to do, leave it and let it grow without any risk of loss.

4) You will have access to PERACare health coverage at retirement.

One great benefit of being a PERA retiree is you have access to PERACare, PERA’s health benefits program for retirees. This is a great benefit because it gives you access to group rates for health care. You will receive a subsidy towards your premiums based on how long you worked.

5) Your PERA benefit is never affected by any other pension or Social Security payment.

PERA will never reduce your monthly retirement benefit based on income you are receiving from other retirement plans, including Social Security.