Benefit Estimate Assumptions

Introduction

For participants in the PERAPlus 401(k) or 457 Plans who are active or inactive members of the Colorado PERA Defined Benefit (DB) Plan, the benefit amount presented in the Online Advice tool is a projected benefit estimate that uses assumptions regarding salary and service credit growth. The benefit information presented in the Online Advice tool is updated on a quarterly basis and the assumptions used are based upon the status of the participant at the date the benefit projection is calculated.

PERA Retirees

For PERA retirees, the benefit amount information presented in the Online Advice tool is the gross benefit amount being paid on the date the information was generated. The advice tool assumes a 2 percent annual increase amount on this benefit amount.

Vested Active Members

  • For active members with five or more years of service credit, the Online Advice tool contains projected benefit estimates at the following five ages: 50, 55, 60, 65, and 70.
  • The benefit amount presented is an estimate based on account information (Highest Average Salary [HAS] and service credit) taken on the date the projection is generated with the following assumptions made related to salary growth and service credit accrual.
    • Salary growth is projected at 2 percent per year.
    • Service credit is projected forward assuming a full month of service credit earned for each month from current age through each of the five ages.
    • The assumed growth in service credit and salary stops when the member reaches either age 65 or when the total service credit projected at the benefit estimate age has reached or exceeded 30 years.

Examples:

A 35-year-old member with 12 years of service credit: The benefit amount at age 50 will be based on 27 years of service with a 2 percent salary growth assumption over the 15-year period. At age 55, the estimate will be based on 32 years of service with a 2 percent salary growth assumption over a 20-year period. At this age, an assumption is made that the member will retire and the benefit amounts projected at age 60, 65, and 70 are based on the benefit calculated at age 55 assuming a 2 percent annual increase.

A 45-year-old member with seven years of service credit: The benefit amount calculated at age 60 will be based on 22 years of service credit with a 2 percent salary growth assumption over the 15-year period. At age 65, the estimate is calculated on 27 years of service with a 2 percent salary growth assumption over the 20-year period. At this age, an assumption is made that the member will retire and the benefit amount projected at age 70 is based on the benefit calculated at age 65 assuming a 2 percent annual increase.   

Inactive Members and Non-Vested Active Members

  • For inactive members and active members with less than 5 years of service credit, the Online Advice tool contains projected benefit estimates at the following five ages: 50, 55, 60, 65, and 70.
  • The benefit amount presented is an estimate based on account information (HAS and service credit) taken on the date the projection is generated with the assumption that the current service credit and HAS will not grow.
  • The benefit estimate will be the greater of the benefit formula calculation (based on service credit and HAS) or the money purchase calculation.
  • The account balance of the member used in the money purchase calculation will assume member contribution balance growth at the interest rate in place at the time of the calculation.  Currently, PERA pays a 3 percent per year interest rate on the member contribution balance (subject to change annually by the PERA Board of Trustees).
  • At age 65, the member is assumed to retire and the benefit amount projected at age 70 assumes a 2 percent annual increase granted to the benefit amount calculated at age 65. 

Examples:

A 35-year-old member with 12 years of service credit: No benefit amount calculated at 50 or 55 due to age and service credit requirements. The benefit amount at age 60 will be based on the greater of either the benefit formula calculation at 12 years of service or the money purchase benefit calculation based on the member account balance at age 60. At age 65, the estimate will be based on the greater of either the benefit formula calculation at 12 years of service using the member’s HAS at termination date with no salary growth over the 30-year period or the money purchase benefit calculation based on the member account balance at age 65. At this age, an assumption is made that the member will retire and the benefit amount projected at age 70 is based on the benefit calculated at age 65 assuming a 2 percent annual increase.

A 45-year-old member with seven years of service credit: No benefit amount calculated at 50 or 55 due to age and service credit requirements. The benefit amount calculated at age 60 will be based on the greater of either the benefit formula calculation at seven years of service credit using the highest member’s HAS at termination date with no salary growth over the 15-year period or the money purchase benefit calculation based on the member account balance at age 60. At age 65, the estimate is calculated based on the greater of either the benefit formula calculation at seven years of service credit using the member’s HAS at termination date with no salary growth over the 20-year period or the money purchase benefit calculation based on the member account balance at age 65. At this age, an assumption is made that the member will retire and the benefit amount projected at age 70 is based on the benefit calculated at age 65 assuming a 2 percent annual increase.     

Disclaimer

Your rights, benefits, and obligations as a Colorado PERA member are governed by Title 24, Article 51, of the Colorado Revised Statutes, and the Rules of Colorado PERA. The assumptions used in the advice tool are for illustrative purposes and do not guarantee the amount of your future benefit from the PERA DB Plan. If you would like to use different assumptions, please use the PERA Benefit Estimate calculator and input the resulting amount in the advice tool.