Retirement insights from a Colorado PERA perspective

Inside Colorado PERA

Colorado PERA Plan Design Compared to Other Non-Social Security Public Employee Retirement Plans

A view of empty chairs in the Colorado PERA Board Room.

The PERA Board of Trustees has recommended reforms to PERA designed to reduce the overall risk profile of the plan and improve PERA’s funded status. In light of these recommendations, it can be helpful to see how PERA as it exists today compares to similar plans across the country and how the Board’s proposal for future changes might compare as well. Comparing the PERA benefit to that of public employees in others states can also help ensure that Colorado’s public employers can attract and retain talented employees.

In a time of shifting economic and fiscal realities, PERA is not alone in considering reforms that will impact funding levels and benefit structures over time. Significant changes have been proposed to Kentucky’s public pension systems, and in Ohio, the board of the retirement plan for teachers recently reduced the cost-of-living adjustment to zero.

(More information on the Board’s recommendation is available at a dedicated website, PERAtour.)

Looking at various features of similar public pension plans across the United States – that is, large public plans with members who, for the most part, do not participate in Social Security – shows that PERA is somewhat typical. Features such as member and employer contribution rates, cost of living adjustments (COLAs) or automatic increases, and benefit multipliers vary across plans, but Colorado’s plan tends to fall in the middle of a range of these features.

The charts below indicate how these public retirement plans compare, and where PERA fits in – both today and if the Board’s proposal were to be implemented in the future.

One area where PERA is an outlier is in excluding Section 125 and 132, or so-called “Cafeteria Plan” and flexible spending account deductions from PERA-includable salary. In a survey conducted by the National Association of State Retirement Administrators, Colorado is the only one of 28 plans surveyed that excludes these deductions.

(It should be noted that the data presented here are simplified for purposes of this discussion and caution must be used in interpreting the information. For example, in Colorado, State Troopers pay a higher employee contribution because they can retire sooner than other members. While a few of those exceptions are noted, in most cases the most common or average data point for a given plan is used. Our sources include data compiled by PERA staff in February of 2017 and comparison data from the Wisconsin Legislative Council from December, 2016.)

Member contribution rate by state
State Rate as percent of payroll
Connecticut Teachers 6
Alaska Public Employees 6.75
Maine 7.65
Colorado (current)* 8
Louisiana State Employees 8
Louisiana Teachers 8
Illinois State Universities 8
Alaska Teachers 8.65
Illinois Teachers 9
Kentucky non-University 9.105
California 9.205
Colorado proposal* 10-11
AVERAGE of current plans 10.34
Massachusetts State Employees 11
Massachusetts Teachers 11
Ohio Public Employees 14
Ohio School Employees 14
Ohio Teachers 14
Nevada 14.5
Missouri 14.5
Texas 15.1

*Note that Colorado State Troopers currently contribute 10 percent of payroll. The Board proposal would increase contributions for members hired before January 1, 2020, by an additional 3 percent above current contribution rates and for those hired on or after January 1, 2020, by an additional 2 percent. This is because for new hires starting in 2020, and for members with less than five years of service credit as of January 1, 2020, more years of salary will be considered to calculate an average salary used to determine the total retirement benefit and the retirement age will be higher.

Employer contribution rate by state
State Rate as percent of payroll
Massachusetts State Employees 12.41
Ohio Public Employees 14
Ohio School Employees 14
Ohio Teachers 14
Missouri 14.5
Nevada 14.5
Texas 15.1
Colorado (current)* 19.13
Maine 19.29
Massachusetts Teachers 19.61
Colorado (proposed)* 21.13
Alaska Public Employees 24.84
Louisiana Teachers 26.3
California 26.58
Alaska Teachers 29.27
Connecticut Teachers 30.35
Kentucky non-University 30.755
Illinois Teachers 36.64
Louisiana State Employees 37.8
Illinois State Universities 45

*More detailed information on PERA contribution rates may be found in this fact sheet. Note that while the SAED is paid by employers, it is to be funded by foregone wage increases. The figure here is for the State Division, the AED and SAED, minus 1.02 percent which is dedicated to the Health Care Trust Fund. Contribution rates shown in this table generally reflect teachers, higher education faculty, school employees, and regular state employees.

The multiplier in a defined benefit plan is a factor used to determine the monthly benefit. An example of PERA’s multiplier is 2.5 percent times years of service times the Highest Average Salary (HAS). For a member with 30 years of service credit, the monthly benefit would be 75 percent (30 times 2.5 percent) multiplied by the HAS. (The PERA Board reviewed changes to the multiplier, but decided to maintain the current 2.5 percent factor.)

Benefit multiplier by state
State Benefit multiplier*
Maine 2
Connecticut Teachers 2
Ohio Teachers 2.2
Illinois State Universities 2.2
Illinois Teachers 2.2
Nevada 2.25
Texas 2.3
California 2.4 (varies by age)
Alaska Public Employees 2.5 (varies by service)
Alaska Teachers 2.5 (varies by service)
Colorado (current and proposed) 2.5
Louisiana State Employees 2.5
Louisiana Teachers 2.5
Massachusetts State Employees 2.5
Massachusetts Teachers 2.5
Ohio Public Employees 2.5 (varies by service)
Ohio School Employees 2.5 (varies by service)
Missouri 2.5
Kentucky non-University 3 (varies by service)

*Where noted, plans have variable multipliers based on age or years of service at retirement. Those listed are the highest possible multipliers earned.

Annual increase provisions by state
State Rate as percent of payroll Notes*
Ohio Teachers 0 Fixed/Simple
Texas 0 Ad hoc
Illinois Teachers 1.25 Indexed/Simple
Illinois State Universities 1.375 Indexed/Simple
Colorado (proposed) 1.5 Fixed/Compound
Kentucky non-University 1.5 Fixed/Compound
Louisiana State Employees 1.5 Ad hoc/Typically simple
Louisiana Teachers 1.5 Ad hoc/Typically simple
Missouri 1.5 Indexed/Compound
Connecticut Teachers 1.75 Indexed/Compound
Alaska Public Employees 1.95 Indexed/Compound
Alaska Teachers 1.95 Indexed/Compound
California 2 Fixed/Simple
Colorado (current) 2 Fixed/Compound
Maine 2.2 Indexed/Compound
Massachusetts State Employees 3 Ad hoc, Indexed/Simple
Massachusetts Teachers 3 Ad hoc, Indexed/Simple
Nevada 3 Indexed/Compound
Ohio Public Employees 3** Fixed/Simple
Ohio School Employees 3 Fixed/Simple

*Annual increase provisions vary by state. Those that are indexed are tied to various measures, including Consumer Price Index (CPI), or Social Security benefit increases. Ad hoc increases may be recommended by a board or set by the state legislature. The COLA PERA pays is compounding, increasing the base benefit each year. However, some systems pay COLAs that are not compounded (simple interest) and do not increase the base benefit for the next year’s COLA payment.

**This figure does not reflect the recent decision of the Ohio Public Employees Retirement System to recommend a reduction in its cost of living adjustment to a 2.25 percent cap.

ColaAcronym for cost-of-living adjustment; a type of annual adjustment meant to prevent a person from losing buying power due to inflation.ColaAcronym for cost-of-living adjustment; a type of annual adjustment meant to prevent a person from losing buying power due to inflation.Defined benefitAlso known as a pension, this is a type of pooled retirement plan in which the plan promises to pay a lifetime benefit to the employee at retirement. The plan manages investments on behalf of members, and the retirement benefit is based on factors such as age at retirement, years of employment and salary history.


  1. Mark Trostel says:

    Good information to know. Fairly useless overall however without the bigger picture to consider. What are the various amortization timelines of the various funds? Colorado is now at 30 years due to changes (previously 40 years) for reasons that still elude me. Benefit recipients living longer is a weak argument for the change. Over the last year we’ve seen stock market growth that is unsurpassed. Hard to believe we need to mak such significant changes at this time with such a strong economy and continued growth in Colorado. What’s up PERA Board and staff??

    • Colorado PERA says:

      Mr. Trostel,
      Thank you for your comments and questions. The current amortization period for the School Division is 78 years, the State Division is 58 years, 55 years in the Local Government Division, 54 years in the Judicial Division, and 56 years in the DPS Division. All of these periods to reach full funding are in excess of the Board’s goal of 30 years. While the stock market is currently doing well, the long-term financial markets outlook is less optimistic. The Board’s proposal is designed to reduce the risk associated with these extended amortization periods.

      • Lynn Larson says:

        Dear PERA,
        You stated in a reply to Mr. Mark Trostel (11/1) ” While the stock market is currently doing well, the long-term financial markets outlook is less optimistic.” Long term investments that aren’t being timed and invested in quality funds have as you know done well. Long term 7 to 8 percent returns are not unreasonably. Thank you by the way for your professional expertise in these investments. However, pessimistic views seem unreasonable and are often fueled by fear!
        A secondary point; I remember a time when PERA was fully funded. Can you substantiate that? As I believe due to incredible market returns; government stepped in and forced PERA to alter contributions by employers and employees, increase returns, etc.. Believe this occurred in the late 70’s or early 80’s. My point being, stay the course and stand strong against the doubters or politicians looking to make a name for themselves at the expense of PERA participants.

  2. Bill Killip says:

    As a retiree I again advise PERA that it’s statement that employers, employees and retirees need to share in the burden to make PERA better. The proposals to employees and employers is generically fair. One could argue that employees should and would want to increase the payment. I would event argue that should have been done years ago. But to say that the reduction of the AI from 2% to 1.5% is fair is patently wrong. Retirees cannot work one or 2 more years to make up the differences we were told we should expect. Most retirees cannot just go back to work to earn more money. Many physically cannot at this time of their lives, nor even if they can work cannot find meaningful or reasonable employment. Age discrimination is not legal but is impractical to expect a senior adult to compete for most jobs. we simply cannot just go back to work to make up the differences. PERAs areduction proposal for retiree benefits is neither fair nor an equal burden. I assure PERA I have every intention of resisting this current proposal.

  3. Jerry E. says:

    While the average member contribution rate by state is listed in that chart, what are the average contribution rates by states/employers and the average COLA/AI for the states? Wouldn’t the Governor’s proposal of no increase to the State’s portion or contribution while increasing salaries 3% with no corresponding employer funding just increase the unfunded liability?

    With member (active, retired and future) benefits that paid 90% of the cost of the then enacted solution for Senate Bill 1 in 2010 and only 10% paid by employers, a new proposal that allocates at least 50% of the cost of any solution to employers is fair and reasonable. The PERA Board’s proposal only increases the employer contribution to 19% of the cost of the fix. Increased required employer contributions are critical to any solution for full funding to be achieved in 30-years.

    • Colorado PERA says:

      Jerry, The average member contribution for all the states listed above (without Colorado) is 10.46. The average employer contribution is 23.6. The average COLA is 1.86, but it should be noted that some states do not compound COLA payments and some pay them on an ad hoc basis.

  4. Darrell Gorre says:

    Is any of this going to help PERA retiree’s with the CUT-CUT-CUT- Tax Bill?

    • Colorado PERA says:

      Darrell, That’s a good question. It’s probably too soon to predict how any tax legislation at the federal level will impact Americans, let alone Colorado PERA retirees.

  5. Dave Casdan says:

    What was the reasoning behind using only 12 other states to compare to instead of all 50 states? I wonder if they were picked to make Colorado appear to be in the middle. I hope I am wrong.

    Where are we in relationship to all 50 states?

    • Colorado PERA says:

      Hello Dave,
      There are 15 states in the U.S. where public employers and their employees do not participate in Social Security. We used systems in these states for comparison purposes because the retirement plan designs include being a replacement for Social Security.

  6. Dm says:

    So, the Governor’s proposed budget rejects the increased employer contribution contemplated by PERA’s plan, and there will likely be little if any conservative support for it either. Do I recall correctly from your recent “townhall” meeting, that PERA will continue to push for the employee increases and retiree cuts, even without the employer contribution element of its plan?

  7. Glenda Ready says:

    My question is how do we get rid of the Windfall tax fiasco so that those of us who are retired can collect Social Security, too? I worked and paid into Social Security as well as PERA. I’m assuming that those 15 states are in the same boat as Colorado? I can’t imagine trying to live on a 1.5 AI as compared to a 2.0 AI and then have two years without any increases in addition. I worked many extra years to receive a higher percentage of my school salary but it still is not enough for me to live on. Certain rural school districts pay much less than other districts. If Medicare costs increase for us, it will be impossible to live on my retirement. I do not think the 1.5 AI is fair. Please find a better solution. I would’ve been fine with paying more into retirement when I was working but it’s not possible to work in the schools at my age.

  8. Kevin says:

    As Bill stated above, it is patently unfair to cut a retirees benefit structure AFTER they have already retired. We planned our retirement with these benefits in place and trusting that PERA wouldn’t pull a bait-&-switch on us by lowering our COLA not once but twice (so far).
    Many of us have already been cheated out of over 66% of our earned (and paid for) Social Security benefits due to GPO/WEP. Once again, most of us didn’t discover this until AFTER we retired. Now PERA keeps taking away our promised benefits. So why doesn’t PERA help us to get GPO/WEP repealed? It seems as if we’re expendable once we retire.

  9. Michael Cole says:

    Diddo on Kevin’s comments above.

  10. Erroll Giddings says:

    Denver Public Schools (DPS) was paying an additional $20 million annually into the DPS fund. This was to allow the fund to be solvent. Two years ago the legislature and the governor approved a bill allowing DPS to stop paying this additional retirement amount. PERA took ‘No’ position on this request and action. It is obvious PERA believes DPS retirees should be equal to the rest of the State’s retirees. Full funding is a figment of one’s imagination which is not supported by PERA’s Board, the Legislature or the Governor.

  11. Larry Sage says:

    A mere 16 years ago the school division of the pension fund was “overfunded” at 105+%. Today, after several fixes to the system, it stands at 58+%. The governor, now that he cannot run for re-election, comes out in favor of not putting more burden on taxpayers. He suggest that COLA adjustments be limited to 1.25%. We all know about the financial crisis, but the DOW Industrial Average is now at an all-time high, about 64% above the pre-crisis high and nearly 4 times what it was at the low of March, 2009. Yet, the funding status continues to decline. One can only wonder if there has been actuarial incompetence going on or what! When the pension fund was “overfunded” active members were enticed–yes ENTICED–to purchase service credit to increase their “years of service.” At the time, the COLA was statutorily set at 3.5%. It was a no-brainer. Many people “invested” tens of thousands of dollars to increase their pensions knowing that the main benefit was the locked-in 3.5% COLA. Given the opportunity, I suspect many people would like their money back! Is that an option?

    • Colorado PERA says:

      Mr. Sage,
      At retirement, members have the option to withdraw their accounts and receive their contributions, interest, and a matching amount. Once members are receiving retirement benefits, accounts cannot be refunded or withdrawn.

  12. Herbert Clevenger says:

    At one time one could feel like PERA was in our corner and fighting for us. Something definitely has changed. I have asked them why they never answered our questions prior to retirement and state to us that they could take our 3.5% away from us. I wonder why they don’t respond to these questions? Apparentl1y they don’t hold themselves accountable for neglecting to tell us. Definitely they informed us of just the opposite. Once vested that benefits could be increased and not decreased. I looked at the information that PERA provided to me and made my decision to retire on that. My decision to retire at that time would of been delayed if they would of been truthful about what they now claim that they can do. PERA has changed the funding status on new assumptions. Assumptions can change like the wind blows. PERA wants to impose the whole package if the legislature approves. I don’t approve that retirees continue to sacrifice more of their annual increases. It goes against what PERA is saying that their objective is for retirees to maintain their standard of living. The current 2% may not even do that. One thing for sure is that it’s not an assumption that retirees will be hurt tremendously if PERA follows through with this unjust act! It is totally ridiculous for PERA to impose this package as a whole at this time!

  13. S Shipley says:

    I too, want to know when I will receive my Social Security Benefits that I paid into since age 16, while in college and while teaching (working 2 jobs). After my retirement from teaching for 26 years in Colorado I worked in a hospital and paid into Social Security which I do not get! My husband died 4 years ago~ I DO NOT GET HIS SOCIAL SECURITY… this is because I receive PERA that I paid into!?? I have been substitute teaching for 8 years paying 8% into PERA which doesn’t increase my own PERA… now I read the deduction will increase to 11%. I need to work as I can’t live off my PERA but i DON’T GET SOCIAL SECURITY THAT I PAID INTO~ there is something wrong here!

  14. S. R. says:

    So tell us all about the $570,090 remodel project of the building on Pennsylvania that PERA has going on right now..!???
    How are PERA employees sacrificing in order to help with the long Gevity of the fund. Not by tearing down walls to make bigger offices and get new furniture.

    The decrease from IA 2.0% to 1.5% is unrealistic! As it is, my entire increase for 2017 will be completely depleted with the increase in medical premiums alone, not to mention all the other cost of living increases.

    • Colorado PERA says:

      Thank you for your comments. In the Board’s legislative recommendation, 17 percent of the costs for returning PERA to a 30-year amortization period are borne by retirees, 28 percent by employers, and the remaining 55 percent are being paid for by current and future members. We acknowledge that retirees would be the first to be impacted if this recommendation were passed into law by the legislature. Please know that the Board made every effort to protect the annual increase and achieve the goal of full funding in 30 years. PERA would be at significant risk if the annual increase was not suspended and reduced as the Board proposed.

  15. John Collins says:

    Why does PERA continually show the contribution split as 8% and 20.15%? Should not the 5% SAED, which was taken from my salary increase, be credited to employee amounts? So the current contributions are really 13% and 15.15%? If that was money I should have received, but did not, should not I receive credit for it?

    • Colorado PERA says:

      Mr. Collins,

      Thank you for your comment. You are correct that the Supplemental Amortization Equalization Disbursement (SAED) is, by law, to come from employees in the form of foregone wage increases. The contributions are paid by employers, do not go into member accounts, and are used to reduce PERA’s unfunded liabilities. More on contribution rates may be found here:

  16. Larry Robbins says:

    Did the “deadbeat” State of Colorado fully pay into PERA what it owes? Where’s the $4.5 billion the State of Colorado owes PERA (Denver Post 11/24)? Where is their shared responsibility? To those that say it shouldn’t be on the back of the taxpayers, balderdash! Let’s look at it another way. I don’t have children yet a large percent of my income tax goes to pay for education. Why should I have to pay for someone’s kids. It’s just the way it is. Maybe like giving PERA retirees the retirement we were promised.

    • Michael Merrill says:

      Two points that PERA Board should continue to inform the citizens of Colorado, the Legislature and the PERA members.

      First, (Denver Post article of Nov. 24h) “$4.5 BILLION owes PERA. Second the 66% of our earned (and paid for) Social Security benefits due to GPO/WEP issues continue to create inequities.

      Please keep these two key issues in the media and public’s focus on every occasion!

  17. Irma Princic says:

    I understand the angst my fellow responders have shared about the proposed PERA plan to bring the teaching/school account where it needs to be for the future. I too remember the “surplus” days and the adjustment in 2008. I know actuaries predict costs and income based on history. I also know that teachers tend to retire early, after earning 30 years credit, and live longer. If we and PERA knew we retirees would all die within fifteen years of retirement, the situation would be different. Finances ebb and flow for us personally and for institutions. The “windfall” tax does hurt widows of social security beneficiaries. We do need to work on this issue. But I would rather wait on an income increase until 2020 (at least that is how I count the two years), than to loose all benefits with the next recession or depression.

  18. Andrew Szakmary says:

    Regarding the annual increase provisions by state, what is listed for Illinois pertains to Tier 2 employees who were hired after January 1, 2011. Tier 1 employees who began working prior to that date receive 3% annually, compounded. When this reduction was made it applied only to new employees, unlike the shameful situation in your state where COLAs were cut for existing employees and retirees. Actually politicians in Illinois, in 2013, similarly tried to cut automatic annual increases for current (and future Tier 1) retirees, but the Illinois Supreme Court, in a 7-0 bipartisan ruling, overturned that decision on constitutional grounds, because the Illinois Constitution very explicitly states that membership in a state pension system is a contractual relationship, the benefits of which cannot be diminished or impaired. Have you all thought about amending your state constitution to add such a provision – because without it, I am afraid your benefits will be diminished again and again and again, and the promises public employees and retirees have been made will prove to be hollow.

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