Calculating a Retirement Benefit Under the
PERA Benefit Structure

Your PERA benefit is based on your years of service credit and your age at retirement. It is calculated using a percentage of your Highest Average Salary (HAS).

HAS is one-twelfth of the average of the highest annual salaries on which PERA contributions were paid that are associated with three periods of 12 consecutive months of service credit. The three 12-month periods do not have to be consecutive or the last three years of employment.

In calculating your HAS, PERA determines the highest annual salaries associated with four periods of 12 consecutive months. The four 12-month periods selected do not have to be consecutive nor do they have to include the last four years of employment. The lowest of the four periods becomes the base year used as a starting point for the annual limit on salary increases. The annual limit will apply regardless of when the annual salaries used in the HAS occurred. The percentage applied is dependent on when you began PERA membership and when you are eligible to retire:

• If you began PERA membership on or before December 31, 2006, and you were eligible to retire on January 1, 2011, your annual increase limit is 15 percent.

• If you began PERA membership on or before December 31, 2006, and you were not eligible to retire on January 1, 2011, your annual increase limit is 8 percent.

• If you began PERA membership on or after January 1, 2007, your annual increase limit is 8 percent.

For more information on how HAS is calculated, see the Highest Average Salary Calculation fact sheet.

Any money placed in a Section 125 flexible spending account is not considered salary. So, if you contribute to a Section 125 plan to reduce your salary during one or more of the periods used in the HAS calculation, your HAS will be reduced. Subsequently, the amount of your PERA benefit will be lower. For more information, refer to the PERA & Section 125 Plans brochure.

If you receive a cash payment based on unused annual leave, vacation time, or personal leave at termination of PERA employment, it will be included as PERA salary with member and employer contributions reported on it. Note: If you use the PERA Highest Average Salary Calculator to estimate your HAS and you receive this type of cash payment, your HAS will be inflated. For service credit, such a payment will be projected forward at your regular monthly rate of pay. See Colorado PERA's Accrued Leave Policy fact sheet for more information.

PERA has seven Highest Average Salary Percentages tables. State Troopers and CBI Agents have two Highest Average Salary Percentages table. See the HAS Percentages Tables page for more information.

Calculating Your Benefit

The example below uses a retiring member with 20 years of service credit at age 60, with a cobeneficiary who is age 55.

1. Calculate HAS

2. Calculate Option 1
Multiply the HAS in number 1 above by the benefit percentage on the PERA Highest Average Salary Percentages table. Table 1 is used in this calculation. See the HAS Percentages Tables page. Note: Years of service in the Highest Average Salary Percentages table show full years only; you receive credit for each month that you work.

Retiree

$2,021 x 50.0% =$1,011*

*Up to the maximum allowed by law, see Federal Limits on Benefits below.

3. Calculate Option 2
Multiply the Option 1 amount by the percentage from the Current Option Percentages table Option 2 below. (The cobeneficiary receives half the benefit amount the retiree received before death.)

Current Option Percentages Effective March 1, 2010
(Rounded to 3 decimals; actual factors are 6 decimals)
Tables are revised periodically to account for changes in life expectancies and other factors

4. Calculate Option 3
Multiply the Option 1 amount by the percentage from the Current Option Percentages table Option 3 below. (The cobeneficiary receives the same amount the retiree received before death.)

Current Option Percentages Effective March 1, 2010
(Rounded to 3 decimals; actual factors are 6 decimals)
Tables are revised periodically to account for changes in life expectancies and other factors

Conversion of Leave

Unused annual leave, vacation time, or personal leave converted to a cash payment at termination of PERA-covered employment is includable as PERA salary with member and employer contributions reported on it. Generally, this payment is made in a lump sum to you in your last month of pay. (A cash payment based on unused sick leave is not includable as PERA salary.)

Because the cash payment is not compensation for services rendered in the last month of employment, PERA projects this payment out into future months using your monthly rate of pay. For example, a cash payment of $3,400 is made to you in January (the terminating month) and your monthly rate of pay is $2,500; $2,500 of the payment would be projected into February and the remaining $900 would be projected into March. You would earn two more months of service credit and, for most retiring members, the HAS would increase slightly.

Federal Limits on Benefits

An Option 1 benefit can never exceed 100 percent of HAS. In addition, federal law places other limits on the annual amount of retirement benefits that PERA retirees may receive under the Internal Revenue Code (IRC) Section 415(b). IRC Section 415 benefit limits are designed to prevent individuals from accruing excessive pension benefits on a tax-deferred basis.

Benefits paid under the PERA benefit structure are subject to a federal annual limit on the amount of retirement benefits that PERA retirees may receive under Internal Revenue Code (IRC) Section 415.

PERA has developed a process called a Replacement Benefit Arrangement that provides for your employer to pay you the amount you are not being paid by PERA because of the federal tax limit. This is done at little or no cost to the employer.

For more information on how this limit may affect your future PERA retirement benefit, see the Federal Limits on Benefits page.

For more information on PERA retirement benefits view, print or order the PERA Retirement Process booklet.

Also view:

• HAS Percentages Tables

• PERA's Benefit Calculators

• Highest Average Salary Calculation fact sheet