The Thomas B. Fordham Institute recently issued a report critical of many teacher retirement plans across the country. (The Fordham Institute, with offices in Ohio and Washington D.C., is an education reform policy think tank and should not be confused with Fordham University in New York.) You may have seen this report’s conclusions reported on as fact lately in the New York Times, and education reform-oriented bloggers have echoed the report’s findings.
The report gets a number of facts wrong when it comes to understanding how Colorado PERA works, and indicates that a Jeffco teacher would need to remain in the PERA system for 21 years to receive ANY return on retirement contributions.
But in fact, any teacher (or PERA member) leaving PERA-covered employment is eligible for:
- a refund/rollover of their contributions plus interest at any point; or
- a 50 percent on match on contributions plus interest after earning five years of service credit;* or
- a 100 percent match on contributions plus interest or a lifetime monthly benefit once retirement eligible.
For PERA members, benefits paid out always exceed contributions put in, regardless of vesting status or years of service.
Public school teachers in Colorado PERA – including Jeffco teachers – participate in a hybrid defined benefit retirement plan, meaning that their plan includes features of both a traditional pension-type retirement plan and a 401(k) style plan. (We’ve written before about some advantages of hybrid defined benefit plans on PERA on the Issues.) One of these features is the option for any member to refund or rollover their contributions at any point after leaving PERA – whether that’s after one day of work or 10,000.
Members who have five years or more of service credit and choose to refund or rollover their account also receive a 50 percent match on their contributions plus interest. Members who are retirement eligible and choose to refund or rollover their accounts receive a 100 percent match on their contributions plus interest. And all members who leave PERA-covered employment but choose not to refund or rollover their contributions become eligible for a monthly PERA benefit at age 65.
A study commissioned by the Colorado General Assembly in 2015 showed that the PERA hybrid plan provides the most income replacement at retirement at the lowest cost compared to other types of retirement plans in use today, including 401(k)-type defined contribution plans. The study concluded that regardless of age or length of service, no plan “provides a more effective level of benefits than the PERA Hybrid plan.” (Read more about the independent Gabriel, Roeder, Smith & Company report on PERA on the Issues.)
*Refund and rollover provisions are somewhat different for DPS Division members who began membership prior to January 1, 2010. For details, see the Refund/Rollover Request: Terminating PERA-Covered Employment brochure.