Congrats on starting your new job in the public sector! You may have been aware of the Colorado PERA retirement benefit when you applied or just learned of it at orientation, but either way, you are now saving for your retirement through the Colorado PERA Defined Benefit (DB) Plan. (Some members may be contributing to the PERA Defined Contribution Plan, but this article will focus on the DB Plan). So what does that even mean? Let’s walk through it.
What is PERA?
The Colorado Public Employees’ Retirement Association (PERA) was founded in 1931 and has been providing retirement benefits to Colorado’s public workforce (like teachers, CDOT workers, judges, and many more) ever since. For the majority of members, PERA is a substitute for Social Security, so you won’t see money taken out of your paycheck for Social Security taxes. Instead, PERA offers a DB Plan, otherwise known as a pension. That means once you retire, you can receive money from PERA every month until you die. Some benefits may even continue to a loved one after your death.
Contributions and Service Credit
A percentage is automatically deducted from your paycheck every pay period and deposited into your PERA account—we call this your member contribution. Your employer also contributes a percentage of its total payroll toward your retirement benefits. PERA then invests all these contributions on your behalf.
As you continue to work in a position covered by PERA, you’ll earn PERA service credit, or years of service. Your years of service and age will be used to determine when you can retire and the amount you receive in retirement will be based on the salary you earned while working.
We know retirement can seem like a long way off when you have just started a job, but it’s always good to keep at least one eye on the prize. You become eligible for your PERA retirement benefits when you meet specific requirements based on your age and number of years of service. You will then receive a monthly payment for the rest of your life. The longer you work for an employer that offers the PERA DB Plan, the more your monthly retirement payment will be. Which brings us to the next point…
We are sure you are super psyched about starting your new job, but we get that you may want to change jobs sometime down the road. If you take a job at another PERA employer (like if you transfer from one Colorado school district to another), your PERA account automatically transfers with you. You will continue to build upon your service credit earned and contributions made in this job. If you take a job in the private sector or for another public entity that isn’t affiliated with PERA, you can simply leave your account at PERA where it will continue to earn interest until you are ready to retire. You also have the option of refunding your PERA account if you leave PERA employment, but we would warn that you lose retirement savings for this period of time and you could face tax penalties.
Benefits to Take Advantage of BEFORE Retirement
In addition to providing lifetime retirement income after a fulfilling career in public service, PERA offers lots of other benefits to help members while they are still working. In addition to the PERA DB Plan, all PERA members have access to the PERAPlus 401(k) Plan to save even more for retirement. You may also have access to the PERAPlus 457 Plan and the Roth option in both Plans. Simply check with your employer to learn what options are available to you. PERA also offers disability benefits if you get injured or become ill and are unable to work. You can also provide for your loved ones through survivor benefits built in to the PERA DB Plan, or by purchasing optional life insurance through PERA.
We encourage you to learn more about your PERA benefits through our website and publications, or even by attending one of our many member education meetings held throughout the state. But if you are happy just knowing that you are automatically saving for your retirement simply because you took a job that offers the PERA retirement plan, then that’s ok too. PERA will always be here to help if you have any questions now or along your way to retirement.