Retirement insights from a Colorado PERA perspective

A distant view shows a mountainous landscape with sloping peaks, green trees in the foreground, and a cloudy sky above.

We’re more than halfway through the 2026 legislative session, which kicked off in mid-January and will continue until mid-May. So far, state lawmakers have introduced nearly 500 bills that could become law.



For an update on this session’s legislative activity, we checked in with Michael Steppat, PERA’s Director of Public and Government Affairs. Throughout the session, Steppat, along with PERA executives, meets with legislators, educates them on and discusses PERA-related issues and policy, and testifies at bill hearings.



Can you start by updating us on PERA-related bills that have been introduced so far?



As of mid-March, legislators <a href="https://www.copera.org/pera-on-the-issues/2026-proposed-pera-related-legislation-status">have introduced four PERA-related bills</a>, one of which is still making its way through the General Assembly.



<a href="https://leg.colorado.gov/bills/HB26-1026" target="_blank" rel="noreferrer noopener">House Bill 1026</a> would make changes to PERA provisions related to purchasing service credit and expand access to the PERAPlus 401(k) and 457 plans. Under current state law, qualified PERA members can purchase service credit based on previous periods of employment, and this bill would allow for limited purchases based on periods of unemployment, such as taking time off to raise a child or care for a loved one. It would also require all PERA-affiliated employers to offer the PERAPlus 401(k) and 457 plans, in both pre-tax and Roth options, to their employees.



Many employers already offer these plans to their employees, which have competitive advantages compared to others available in the marketplace. The bill does not mandate that employees participate in them, and it allows employers to continue offering any other existing plans if they choose. That bill has passed the House and is now under consideration in the Senate.



<a href="https://leg.colorado.gov/bills/HB26-1146" target="_blank" rel="noreferrer noopener">House Bill 1146</a> would allow approved facility schools to apply for affiliation with PERA to provide retirement benefits to their employees. These are schools serving students whose needs aren’t being met in a regular classroom. That bill has passed.



<a href="https://leg.colorado.gov/bills/HB26-1027" target="_blank" rel="noreferrer noopener">House Bill 1027</a>, which would allow executive directors of boards of cooperative services (BOCES) to return to work after retiring for unlimited amounts of time without facing a reduction in their PERA benefits, has passed. That bill was signed into law by Governor Polis on March 12.



MORE INFO: <a href="https://www.copera.org/pera-on-the-issues/2026-proposed-pera-related-legislation-status">2026 Proposed PERA-Related Legislation Status</a>



Let’s talk about the State budget. As lawmakers work to cut spending and balance the budget, they’ve been discussing the potential privatization of Pinnacol Assurance. Can you explain more about that and why PERA is part of the conversation?



Pinnacol Assurance is a quasi-public entity that provides workers’ compensation coverage, serves as the State’s “insurer of last resort,” and is an affiliated employer in the State Division of PERA. The Governor’s Office has proposed to convert it to a private company and to use the proceeds of the State’s interest in Pinnacol for other priorities to help alleviate the budget shortfall. Pinnacol also wants to privatize so it can modernize and serve the needs of its customers, which may include expanding its business outside of Colorado, something it’s currently prohibited from doing.



The privatization of Pinnacol has been a point of discussion in many recent legislative sessions, and the reason PERA comes into play is because Pinnacol’s employees are public employees and therefore PERA members. If Pinnacol were to become a private entity, its employees could no longer be PERA members, and they and Pinnacol could no longer contribute to the Defined Benefit Plan, and so there would be a requirement for Pinnacol to disaffiliate from PERA.



That kind of conversion has financial implications for PERA, since those employees would still be entitled to the retirement benefits they’d earned prior to disaffiliation and given the current unfunded liability of PERA, there is a cost to disaffiliate. Under state law, any employer who disaffiliates from PERA must pay for its share of that unfunded liability. PERA’s actuaries calculate the cost of disaffiliation based on current law, which means using a 5.25% discount rate—PERA’s actuarial investment assumption rate (currently at 7.25%) minus 200 basis points, or 2%—to account for the inherent risks and ensure PERA has the assets to pay the earned benefits over time without that liability shifting to the rest of the State Division fund.



The potential conversion of Pinnacol to a private entity has also been the topic of ballot measures filed recently for the upcoming November election. We’ll continue to monitor this issue and ensure that if privatization moves forward, it won’t have any negative financial effect on PERA.



Are there other aspects of the budget process that might affect PERA?



The Joint Budget Committee is nearing the finish line when it comes to producing the State budget for the next fiscal year. The budget bill, known as the long bill, will be introduced later this month, and there will be a handful of companion bills that relate to the State budget.



The JBC is tasked with cutting hundreds of millions of dollars to produce a balanced budget, which is required by law, as the costs of providing certain governmental services has been increasing faster than what the State is allowed to keep and spend each year. That’s no easy task, and they’ve had to juggle many competing priorities throughout the process.



PERA doesn’t rely on the State budget for the administration or operating costs of the plan, but we always monitor the budget-writing process to watch for any potential impacts. Any changes to PERA contributions—either the State’s annual $225 million direct distribution to PERA or the State’s contributions as a PERA employer—would require separate legislation to go through the regular legislative process and be signed into law by the Governor.



The Governor had included in his budget proposal a temporary 1% reduction in the State’s contributions to PERA as an employer, but the Joint Budget Committee denied that request earlier in the session. We’re grateful that the Legislature remains committed to making consistent contributions to fund public employees’ retirement benefits.



READ MORE: <a href="https://copera.org/pera-on-the-issues/joint-budget-committee-rejects-proposal-to-reduce-pera-contributions">Joint Budget Committee Rejects Proposal to Reduce PERA Contributions</a>



What other legislative issues can we expect to come up between now and the end of the session?



We’re currently working with legislators on a companion bill to the long bill that we think will put PERA on even stronger footing as we make progress toward our funding goal.



PERA’s actuaries conducted a study into some potential changes that could reduce the likelihood of triggering the&nbsp;<a href="https://www.copera.org/automatic-adjustment-provision" target="_blank" rel="noreferrer noopener">Automatic Adjustment Provision</a>&nbsp;(AAP) that took effect with Senate Bill 200 in 2018. The AAP automatically adjusts member and employer contributions, the State’s direct distribution, and retiree annual increases based on our funding progress.&nbsp;



We know those adjustments can be really challenging for our members and retirees, so the bill will include two proposals that are meant to make adjustments less likely in the near future—without jeopardizing our progress toward reaching full funding by 2048.



Those proposals include providing PERA flexibility to&nbsp;allocate&nbsp;the&nbsp;State’s annual $225 million direct distribution&nbsp;to whichever division trust funds&nbsp;would help minimize the likelihood of&nbsp;triggering automatic&nbsp;adjustments and&nbsp;redirecting a&nbsp;portion&nbsp;of employers’ health care trust fund contributions to instead help pay off&nbsp;pension&nbsp;liabilities.&nbsp;The health care trust fund is closer to full funding than the pension trust funds, so we want to make sure those contributions are going where they’re needed most and benefit the largest number of retirees.



It’s also likely that the Legislature will consider a bill suspending certain interim committee activities like they did last session, in order to save money in between sessions. 



For the latest updates throughout the session, be sure to <a href="https://www.copera.org/pera-on-the-issues/subscribe">subscribe to the biweekly PERA On The Issues newsletter</a>.

Checking in on the 2026 Legislative Session So Far

October is National Retirement Security Month, providing a great opportunity as the year winds down to take a look at one’s finances, goals, and plans for retirement.



With recent research showing that many of us <a href="https://www.usatoday.com/story/money/2023/10/12/how-long-does-retirement-last/71074947007/" target="_blank" rel="noreferrer noopener">greatly underestimate how long we’ll live</a>, it’s important to plan ahead and make sure you’re on track to reach your retirement goals.



If you’re a member of the PERA Defined Benefit Plan, you’re already set for lifetime income in retirement. But if you’d like to do more to ensure your retirement security, there are steps you can take.



PERA has been sharing tips throughout October on <a href="https://www.facebook.com/ColoradoPERA" target="_blank" rel="noreferrer noopener">Facebook</a> and <a href="https://twitter.com/ColoradoPERA" target="_blank" rel="noreferrer noopener">Twitter</a>, and we’re wrapping up National Retirement Security Month with some more helpful information here.



Consider some of the items below if you’re taking stock of your financial health this month:



<ul>
<li>Save additional money in a PERAPlus plan: PERA offers a voluntary <a href="https://www.copera.org/peraplus-401-k-457-plans" target="_blank" rel="noreferrer noopener">PERAPlus 401(k) Plan</a> to all members, and some PERA employers also offer the <a href="https://www.copera.org/peraplus-401-k-457-plans" target="_blank" rel="noreferrer noopener">PERAPlus 457 Plan</a>. Both plans allow you set aside additional pre-tax dollars (there’s also a Roth option) on top of what you contribute to your PERA Defined Benefit Plan or PERA Defined Contribution Plan account.</li>



<li>Make a savings plan: A recent survey found that a surprising number of Americans <a href="https://content.copera.org/national-retirement-security-month-highlights-importance-of-planning-for-future/" target="_blank" rel="noreferrer noopener">have no savings account at all</a>. Saving money is easier said than done, but making a plan to save even a little bit at a time can make a huge difference (not to mention you can take advantage of historically high rates on savings accounts right now).</li>



<li>Take full advantage of your HSA, if you have one: If you have a high-deductible health plan with a health savings account (HSA), you might not be aware of its retirement-planning benefits. In addition to setting aside pre-tax dollars for health care expenses (one of the biggest expenses in retirement), your HSA balance is available to spend on other needs once you reach age 65. Your HSA is also exempt from required minimum distributions (RMDs).</li>



<li>Don’t forget estate planning: Estate planning isn’t just for the wealthy, and it’s not just for deciding who inherits your assets. Good estate planning can also make sure your loved ones <a href="https://www.kiplinger.com/retirement/overlooked-benefits-of-estate-planning" target="_blank" rel="noreferrer noopener">know what to do if you’re no longer able to care for yourself</a>.</li>



<li>Download the new PERA mobile app: The <a href="https://www.copera.org/pera-mobile-app" target="_blank" rel="noreferrer noopener">PERA app</a> allows members to access important information like account balance, projected monthly benefit, and service credit history, as well as fill out forms (and even apply for retirement) from their mobile phone.</li>
</ul>



Regardless of where our members are in their public service career, we have a lot of helpful resources on PERA benefits available online, including:



<ul>
<li><a href="https://www.copera.org/pera-frequently-asked-questions" target="_blank" rel="noreferrer noopener">Frequently asked questions (FAQs)</a></li>



<li><a href="https://www.copera.org/quick-tip-videos" target="_blank" rel="noreferrer noopener">Quick Tip videos</a></li>



<li><a href="https://www.copera.org/webinars" target="_blank" rel="noreferrer noopener">On-demand and live webinars</a></li>



<li><a href="https://www.copera.org/financial-wellness-library" target="_blank" rel="noreferrer noopener">Financial wellness articles</a></li>
</ul>

National Retirement Security Month Highlights Importance of Planning for Future

The last week of February is America Saves Week. From Feb. 27 to March 2, financial institutions across the country will aim to raise awareness about the importance of saving money and share tips for saving more.



The week comprises five themes:



<ul>
<li>Monday: Saving automatically</li>



<li>Tuesday: Saving for the unexpected</li>



<li>Wednesday: Saving for major milestones</li>



<li>Thursday: Paying down debt is saving</li>



<li>Friday: Saving at any age</li>
</ul>



Whatever the goal, setting money aside for the future is vital to financial security, and recent polling shows it’s something that many Americans continue to struggle with.



<h2 class="wp-block-heading">The state of savings in 2023</h2>



Bankrate has been polling Americans about their emergency savings since 2014. <a href="https://www.bankrate.com/banking/savings/emergency-savings-report/" target="_blank" rel="noreferrer noopener">This year’s survey</a>, which was conducted in December, found less than half of respondents could pay for an emergency expense from their savings, and reliance on credit cards is at an all-time high.



If faced with a $1,000 expense for an emergency room visit or a car repair, 43 percent of people told Bankrate that they would use their savings to pay the expense. Twenty-five percent of people said they would use a credit card, which is the highest percentage since the survey began in 2014.



The Bankrate survey also found that people across generations are concerned about their level of emergency savings — particularly younger generations. Bankrate said 85 percent of Generation Z and 79 percent of Millennials are worried about having enough savings to cover a month’s worth of living expenses, compared to 69 percent of Generation X and 53 percent of Baby Boomers.



When it comes to retirement savings, Americans express similar sentiments. According to the <a href="https://www.fool.com/research/average-retirement-savings/" target="_blank" rel="noreferrer noopener">most recent survey from the Federal Reserve</a>, less than half of respondents nearing retirement age said they felt like they were on track. That survey also found that a quarter of all non-retirees had no retirement savings at all.



<h2 class="wp-block-heading">PERA offers built-in options for additional savings</h2>



Colorado PERA members are already saving automatically for retirement with every paycheck. PERA also offers several options for members who want to set aside even more money.



All PERA members have access to the optional <a href="https://www.copera.org/peraplus-401-k-457-plans" target="_blank" rel="noreferrer noopener">PERAPlus 401(k)</a> to set aside extra pre-tax money each month. Some employers also offer the PERAPlus 457 plan. Both plans feature a variety of investment choices as well as <a href="https://peraontheissues.com/pera-offering-new-lifetime-income-options-to-dc-plan-participants/" target="_blank" rel="noreferrer noopener">lifetime income options</a> to make savings go further in retirement.



America Saves Week is a great opportunity to take stock of your savings and make a plan for saving more. If you’re already enrolled in a PERAPlus plan, <a href="https://www.copera.org/member-login-registration" target="_blank" rel="noreferrer noopener">log in today</a> to check your balance, and consider increasing your contributions if you’re not on track to meet your goals.



Follow Colorado PERA on <a href="https://www.facebook.com/ColoradoPERA/" target="_blank" rel="noreferrer noopener">Facebook</a>, <a href="https://twitter.com/ColoradoPERA" target="_blank" rel="noreferrer noopener">Twitter</a> and <a href="https://www.instagram.com/coloradopera/?hl=en" target="_blank" rel="noreferrer noopener" class="broken_link">Instagram</a> for more tips during America Saves Week.

Do You Have a Savings Plan for 2023?

In 2019, Congress passed sweeping legislation known as the SECURE Act that ushered in some major changes in retirement plans. One of those changes was making it easier for employer-sponsored plans like 401(k)s to offer annuities to plan participants.



Since then, consumer interest in annuities has grown, and 2020 <a href="https://www.fa-mag.com/news/total-annuity-sales-rose-16--last-year-to--255b-66117.html" target="_blank" rel="noreferrer noopener">saw the highest annuity sales in over a decade</a>, totaling nearly $255 billion.



PERA now has two annuity products to offer participants in the <a href="https://www.copera.org/peraplus-401-k-457-plans" target="_blank" rel="noreferrer noopener">PERAPlus 401(k), 457</a> and DC plans.



<h2 class="wp-block-heading" id="what-is-an-annuity">What is an annuity?</h2>



Simply put, an annuity is a financial product that provides guaranteed, regular payments — either for a fixed amount of time or for a person’s life. PERA’s Defined Benefit (DB) plan and Social Security are both annuities that provide a lifetime retirement benefit.



While PERA’s DB plan offers lifetime income in retirement, workers who save on their own in a defined contribution plan like a 401(k) risk running out of savings in retirement. Annuities, which are usually available for purchase through insurance companies, can help offset this risk by converting all or a portion of a person’s account balance into regular income. Like a pension, annuities collect or “pool” assets from a large number of individuals in order to provide each person with guaranteed payments.



There are many types of annuities with a variety of features, but PERA, through its partner Empower, is able to offer two types of annuities for participants in the PERAPlus 401(k), 457 and DC plans: A single premium fixed immediate annuity and Qualified Longevity Annuity Contracts (QLACs).



<h3 class="wp-block-heading" id="single-premium-fixed-immediate-annuity">Single premium fixed immediate annuity</h3>



Empower’s parent company Great-West Life &amp; and Annuity Insurance Company offers a <a href="https://www.copera.org/pera-offering-new-lifetime-income-options-to-dc-plan-participants" target="_blank" rel="noreferrer noopener" class="broken_link">single premium fixed immediate annuity</a> through the PERAdvantage Capital Preservation Fund within the PERAPlus 401(k)/457 and DC plans. This allows participants to use all or a portion of their account balance to make a one-time purchase that immediately converts to guaranteed payments. The participant can choose the frequency of the payments as well as how long they’ll continue.



This annuity can be a good option for plan participants who are entering retirement and are ready to start receiving income right away.



<h3 class="wp-block-heading" id="qlac-marketplace">QLAC marketplace</h3>



Plan participants who want to wait until later in retirement to begin collecting payments can take advantage of the <a href="https://www.blueprintincome.com/copera/" target="_blank" rel="noreferrer noopener">Qualified Longevity Annuity Contract (QLAC) marketplace</a> offered by Blueprint Income.



While an immediate annuity provides income right away, a QLAC is a deferred annuity that is designed to begin providing income after age 72, and as late as 85. QLACs are exempt from IRS required minimum distribution (RMD) rules, so they can be a good option for retirees who wish to reduce their RMDs and taxes between the ages of 72 and 85.



Blueprint Income facilitates the rollover of the purchase amount from the participant’s retirement account into the annuity option the participant chooses.



Both annuity options provide retirees the ability to turn their savings into reliable income, and both offer joint annuity options, which can provide income to a surviving spouse. While an annuity might not be the right fit for everyone, it can be a helpful tool in planning for one’s golden years.



For more information on these annuity options, visit <a href="https://coperaplus.org" target="_blank" rel="noreferrer noopener">coperaplus.org</a>.

PERA Offering New Lifetime Income Options to DC Plan Participants

The PERAPlus 401(k)/457 plans and the Defined Contribution (DC) Plan — collectively known as Capital Accumulation Plans — have become an important part of PERA, with more than $5.5 billion invested as of Dec. 31, 2020.



There are some important changes coming to the CAPs in the coming months, including increased contribution limits and a new recordkeeper. Continue reading for an overview of these changes and what they mean for plan participants heading into 2022.



<h2 class="wp-block-heading">New contribution limits</h2>



Earlier this month, the Internal Revenue Service announced <a href="https://www.irs.gov/newsroom/irs-announces-401k-limit-increases-to-20500" target="_blank" rel="noreferrer noopener">updated contribution limits</a> for 401(k) and 457 plans for 2022. Participants will be able to contribute up to $20,500 into a 401(k) or 457 plan next year, up from $19,500 in 2020 and 2021.



The IRS said the catch-up contribution limit for participants who are 50 and over will remain unchanged at $6,500, making for a contribution limit of $27,000 in each type of plan for that age group.



<h2 class="wp-block-heading">PERAPlus and DC plans moving to Empower</h2>



In March, the PERA Board <a href="https://www.copera.org/what-to-know-about-peraplus-401k-457-dc-plans-in-2022" target="_blank" rel="noreferrer noopener" class="broken_link">selected Empower Retirement as the new recordkeeper</a> for the PERAPlus 401(k)/457 and DC plans, replacing Voya Financial. That transition will take place in late November and early December.



Greenwood Village-based Empower is one of the largest retirement providers in the country, with significant experience administering large public plans like PERA. The Board selected Empower based on its experience, customer service, mobile-friendly technology tools, and its modern approach to communicating with members.



With the transition to Empower, plan participants will have access to:



<ul>
<li>Expanded call center hours</li>



<li>A robust technology platform, including Empower’s website and mobile app</li>



<li>Financial wellness tools</li>



<li>Retirement planning tools, including personalized, one-on-one financial advice at no additional cost</li>
</ul>



The PERAdvantage funds available for investments in the 401(k)/457 and DC plans will not change — account balances will transfer to the same funds within Empower.



For more information on the Empower transition, including key dates, fees and more, visit <a href="http://coperaplus.org" target="_blank" rel="noreferrer noopener">coperaplus.org</a>.

What to Know About PERAPlus 401(k)/457, DC Plans in 2022

The last week of February is <a href="https://americasavesweek.org/" target="_blank" rel="noreferrer noopener">America Saves Week</a>, and now more than ever, it’s vital to have a plan for saving money.



The events of the past year made clear the importance of having money set aside. The COVID-19 pandemic and the resulting shutdowns and layoffs threw a wrench in the finances of families across the country.



Despite the turmoil, surveys have shown that many Americans are actually <a href="https://apnorc.org/projects/economic-consequences-of-the-coronavirus-outbreak/" target="_blank" rel="noreferrer noopener">saving more money</a> and paying down debt during the pandemic. In an informal poll on PERA’s <a href="https://facebook.com/ColoradoPERA/" target="_blank" rel="noreferrer noopener">Facebook</a> and <a href="https://twitter.com/ColoradoPERA" target="_blank" rel="noreferrer noopener">Twitter</a> pages, more than 200 people weighed in and nearly 60 percent of them said they, too, have been saving more.



Increasingly, PERA members know the value of participating in the voluntary PERAPlus 401(k) and 457 plans to boost their retirement savings.



In 2019, the average PERA benefit was $3,153 a month, or $37,836 a year. Reliable lifetime income is a financial cornerstone for many PERA members, but many also plan to have additional income in retirement. To do this, they participate in voluntary retirement savings plans. In 2019, more than 87,000 PERA members contributed to a PERAPlus 401(k) or <a href="https://www.copera.org/peraplus-401-k-457-plans">457 plan</a>, up several hundred from the year before.



The nonprofit Consumer Federation of America organizes America Saves Week every year to encourage even more people to take up good money habits and start saving for the future. Each weekday has its own theme to get people thinking about different aspects of saving.



They are:



<h2 class="wp-block-heading">Save Automatically</h2>



One of the easiest ways to save money is to do it automatically. The PERAPlus 401(k) and 457 retirement plans allow members to make automatic contributions every time they get paid. Those in the plans also have the option to contribute a percentage of each paycheck, rather than a simply flat dollar amount. This makes increasing retirement savings automatic, too, as the amount of savings increases any time pay increases.



Another option for automatic saving is rounding up debit card purchases and putting that extra change into a savings account. A growing number of banks and mobile banking apps offer this hands-off saving feature.



<h2 class="wp-block-heading">Save for the Unexpected</h2>



Many experts recommend having three to six months’ worth of living expenses stashed away, but that’s easier said than done. Starting small and aiming for an emergency fund of $500 can make a big difference, as research has shown that even before the pandemic, many Americans <a href="https://www.cbsnews.com/news/most-americans-cant-afford-a-500-emergency-expense/" target="_blank" rel="noreferrer noopener">couldn’t afford an unexpected $500 expense</a>. Setting aside about $1.37 a day (roughly $42 a month) will result in savings of $500 in one year’s time.



<h2 class="wp-block-heading">Save to Retire</h2>



Members of PERA are already on the path to saving for retirement, as workers and their employers both automatically contribute to the employee’s PERA account each month. PERA invests these funds on behalf of its members in the Defined Benefit (DB) plan in order to provide a monthly benefit that retirees cannot outlive. PERA members in the Defined Contribution (DC) plan have the flexibility to choose their investments to meet their retirement goals.



The voluntary PERAPlus 401(k) and 457 plans, available to those in both the DB and DC plans, offer even more flexibility with the option to set up additional retirement savings and invest that money to plan for a more secure future.



<h2 class="wp-block-heading">Save by Reducing Debt</h2>



Accrued debt like student loans and credit cards can be a big obstacle to saving more money. That’s why it’s important to make a plan to reduce debt wherever possible – a good rule of thumb is to focus on high-interest debt like credit cards first. This results in saving money on interest charges long-term.



<h2 class="wp-block-heading">Save as a Family </h2>



It’s never too early to learn about saving money! Parents should think about setting aside some time to talk to their children about money and the importance of saving. This could even be a great opportunity to set a young child up with a piggy bank, if they don’t already have one.



<hr class="wp-block-separator has-css-opacity"/>



Have a helpful savings tip to share? Leave a comment&nbsp;below!

America Saves Week: Five Savings Tips for Getting Finances on Track

For the first time, PERA members have amassed $1 billion in savings in PERAPlus 457 accounts. The account plays a unique role in the world of retirement planning. For those in PERA’s DB plan, a 457 plan can serve as a source of flexible savings.



The 457’s Place in the Savings Universe



A 457 plan is a type of tax-advantaged retirement plan (like a 401(k), 403(b), etc.) that is primarily reserved for government employees. Jeffrey Cable, the Defined Contribution Manager at PERA, says changes in federal law over the last 15 years have minimized the number of differences among these types of accounts, which can make them seem indistinguishable. But one key difference remains, and it’s significant.



Whereas in most retirement accounts you must reach a certain age before making penalty-free withdrawals, the 457 allows a person to take penalty-free distributions immediately upon leaving the person’s job.



What a 457 Looks Like in Practice



Say a person starts a position at a PERA-covered employer at age 25 and saves $1,000 each year. That person is able to invest those dollars in the same <a href="https://copera401k.voya.com/einfo/fundinfo.aspx?cl=CORADO&amp;pl=650301PU&amp;page=investment_informationfundperformance&amp;s=&amp;d=139350e7368e378d6f4496c683ba94fa190f1047" target="_blank" rel="noreferrer noopener">PERAPlus funds</a> available to participants of PERA’s 401(k).



Between savings and investment gains, imagine that person leaves employment at age 35 with $15,000 in their 457 ($1,000 annual savings x 10 years, plus $5,000 in gains from investments). That person is able to access these funds at age 35 without the tax penalty.



If those same funds were instead in a 401(k), distribution of the funds would be penalized by the IRS in the form of additional taxes until that person turned 59.5.



Taking Advantage of the 457



The lack of age restrictions can add flexibility to financial planning, Cable said. Although 457 savings are retirement savings, the ability to withdraw them before retirement can allow those funds to serve double duty–a backup emergency fund, for example. “It can be perfect for young people who may or may not have a full career in their current role,” he said.



PERAPlus 457 Facts and Figures



Administered by PERA since: 2009



Number of PERA participants as of December 31, 2019: 18,919



Available to: Every PERA employer can offer the 457 to employees, though not every employer has enrolled in the program.



Tax advantages: You make contributions to a 457 account on a pre-tax basis; then you pay taxes when you take distributions in the future. Some employers offer a <a href="https://peraontheissues.com/colorado-pera-launches-roth-option-for-peraplus-401k-and-457-plan-participants/" target="_blank" rel="noreferrer noopener">Roth 457</a> option as well. In that case, you may choose to also make tax-paid contributions, and qualified distributions are tax free.



The maximum amount you can save in a 457 plan in calendar year 2020 is $19,500. This is not a coordinating limit—you may contribute the maximum to a 457 and a 401(k) this year. If you are 50 or older, you may contribute up to $26,000 in each plan—or, if you are in your last three years before retirement, you may be eligible to contribute even more.



However, few members hit that max. In fact, most PERA members with a 457 account contribute between $1 and $416 each month. Here’s the breakdown:



<figure class="wp-block-table"><table><tbody><tr><td class="has-text-align-center" data-align="center">Annual contributions</td><td class="has-text-align-center" data-align="center">Number of PERA participants</td></tr><tr><td class="has-text-align-center" data-align="center">$0-$5,000</td><td class="has-text-align-center" data-align="center">7,237</td></tr><tr><td class="has-text-align-center" data-align="center">$5,001-$10,000</td><td class="has-text-align-center" data-align="center">1,151</td></tr><tr><td class="has-text-align-center" data-align="center">$10,001-$15,000</td><td class="has-text-align-center" data-align="center">530</td></tr><tr><td class="has-text-align-center" data-align="center">$15,000+</td><td class="has-text-align-center" data-align="center">1,614</td></tr></tbody></table></figure>

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