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<p class="wp-block-paragraph">A new independent study found Colorado PERA continues to be a valuable tool for recruiting and retaining public employees by providing cost-effective retirement benefits.</p>



<p class="wp-block-paragraph">As part of its regular review and oversight of PERA, the General Assembly approved the study with <a href="https://leg.colorado.gov/bills/hb24-1427" target="_blank" rel="noreferrer noopener">House Bill 1427</a> and directed the Office of the State Auditor to enlist an actuarial firm experienced with public pension plans to conduct the analysis. The State last performed a study like this one a decade ago.</p>



<h2 style="color:#000000;" class="wp-block-heading has-black-color has-text-color has-medium-font-size">Methodology</h2>



<p class="wp-block-paragraph">The study, conducted by Cheiron, compared PERA’s Hybrid Defined Benefit (DB) Plan to various theoretical alternative plan designs, compared the DB Plan to the PERA Defined Contribution (DC) Plan, and included results from a survey of current and former state employees on the importance of retirement benefits in their employment decisions.</p>



<p class="wp-block-paragraph">The nine alternative plans included in the analysis incorporated a variety of benefit accrual and payment methods, from a combination of Social Security and a defined contribution plan like many employers in the private sector offer, to a cash balance plan in which a worker’s account balance is converted to an annuity at retirement.</p>



<p class="wp-block-paragraph">The study primarily looked at the costs associated with each plan and potential income replacement ratios—or the percentage of pre-retirement pay a person can expect to receive in retirement—for both short- and long-term public employees.</p>



<h2 style="color:#000000;" class="wp-block-heading has-black-color has-text-color has-medium-font-size">PERA vs. other plans</h2>



<p class="wp-block-paragraph">While no single plan design offers the best possible benefits for every individual, the study found the PERA DB Plan provides higher income replacement than the alternatives for employees who spend the majority of their careers in public service.</p>



<p class="wp-block-paragraph">Some of the alternative plan designs and the PERA DC Plan can provide higher income replacement for non-career employees, according to the study, because of the “front-loaded” nature of accruing savings in a defined contribution plan. Contributions an employee makes early in their career have a lot of time to grow, which is more beneficial for workers who switch jobs throughout their careers. By contrast, a defined benefit pension is “back-loaded” since a worker’s benefit is based on their highest earnings, which are usually toward the end of their career. This can encourage late-career workers to remain in their jobs, which benefits employers by retaining experienced employees and reducing costly turnover.</p>


<div class="wp-block-image">
<figure class="alignright size-full is-resized"><a href="https://content.copera.org/wp-content/uploads/2025/08/db-vs-dc-accrual-graph.png"><img loading="lazy" decoding="async" src="https://content.copera.org/wp-content/uploads/2025/08/db-vs-dc-accrual-graph.png" alt="A line chart showing the different accrual patterns between defined benefit and defined contribution plans. The DB plan line slopes upward as years increase, while the DC plan line slopes downward." class="wp-image-59806" width="463" height="285" srcset="https://content.copera.org/wp-content/uploads/2025/08/db-vs-dc-accrual-graph.png 926w, https://content.copera.org/wp-content/uploads/2025/08/db-vs-dc-accrual-graph-300x184.png 300w, https://content.copera.org/wp-content/uploads/2025/08/db-vs-dc-accrual-graph-768x472.png 768w" sizes="auto, (max-width: 463px) 100vw, 463px" /></a><figcaption class="wp-element-caption">The &#8220;back-loaded&#8221; accrual of benefits in a traditional defined benefit plan compared to the &#8220;front-loaded&#8221; nature of defined contribution plans. In a DC plan, a worker&#8217;s early-career contributions have more time to grow, while in a DB plan the worker&#8217;s contributions later in their career have a larger effect on the benefit. Source: Cheiron.</figcaption></figure>
</div>


<p class="wp-block-paragraph">The study noted plans that tend to be more beneficial for non-career employees also come with trade-offs, such as higher costs and more risk placed on the employee. For example, plans that require the worker to manage their own retirement savings and investments also require that worker to manage the risks associated with overspending in retirement or outliving their savings.</p>



<p class="wp-block-paragraph">It&#8217;s also important to note that in the PERA DB Plan, income replacement ratios are predictable—a member can use their <a href="https://copera.org/highest-average-salary-tables/" target="_blank" rel="noreferrer noopener">highest average salary (HAS) table</a> to estimate their benefit well before they retire. In a DC plan, on the other hand, retirement income depends significantly on investment returns, which are much less predictable.</p>



<p class="wp-block-paragraph">The PERA DB Plan’s “hybrid” nature also carries features that make it attractive to members regardless of career tenure. Those include portability—members can take their contributions with them when they leave PERA employment—as well as compounding interest, an employer match, and a money purchase benefit calculation that can provide a higher benefit for some non-career employees.</p>



<p class="wp-block-paragraph">Because every employee has different financial goals, PERA offers a choice between DB and DC plans for some public employees, and the PERA DB Plan remains a valuable and desirable benefit for career employees.</p>



<h2 style="color:#000000;" class="wp-block-heading has-black-color has-text-color has-medium-font-size">State employee survey results</h2>



<p class="wp-block-paragraph">An important part of any analysis of retirement benefits is the perspective of the workers receiving those benefits. For this study, Cheiron surveyed thousands of State employees who had <a href="https://copera.org/welcome-pera-members/new-members/new-members-with-the-option-to-choose-plans" target="_blank" rel="noreferrer noopener">the option to choose</a> between the PERA DB Plan and the PERA DC Plan.</p>



<p class="wp-block-paragraph">Of those surveyed, 81% said retirement benefits were a factor in their decision to work for the State of Colorado and 83% cited retirement benefits as a factor in their decision to remain in State employment.</p>



<p class="wp-block-paragraph">When it came to choosing which plan to enroll in, the PERA DB Plan was the clear choice with 77% of those who gave it a great deal of thought choosing DB over DC, according to the survey.</p>



<h2 style="color:#000000;" class="wp-block-heading has-black-color has-text-color has-medium-font-size">Conclusions</h2>



<p class="wp-block-paragraph">While career patterns shift over time, the report makes it clear that providing a secure lifetime retirement benefit continues to draw people to careers in public service. This study confirms that as Colorado’s public workforce evolves, PERA is well-positioned to meet the changing needs of its diverse membership and provide retirement security for generations to come.</p>



<p class="wp-block-paragraph">For more information, <a href="https://content.copera.org/wp-content/uploads/2025/07/PERA-hybrid-defined-benefit-plan-study-july-2025.pdf" target="_blank" rel="noreferrer noopener">read the full report</a>.</p>


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Study Confirms PERA a Valuable Tool for Recruiting, Retaining Public Workers