Colorado public employees get a retirement benefit most private-sector workers would envy, and almost no coordinated advice about what to do with the rest of their financial life around it. The pension is only one of three or four moving parts, and the parts nobody explains are usually where the money is.

This is a plain-language guide to the two systems Colorado public employees actually fall under, what each one pays, and the four decisions that matter more than any investment choice you will make.

First: which system are you in?

This trips people up constantly, including people who have been paying into one for a decade.

Colorado PERA covers the large majority: state employees, school district employees across the state, Denver Public Schools, judicial branch employees, and most Colorado municipalities and special districts. If you work for a school district anywhere in Colorado, you are in PERA.

The Denver Employees Retirement Plan (DERP) covers a much narrower group: employees of the City and County of Denver, plus a few affiliated employers. If you work for the city itself, you are in DERP, not PERA. Note the confusing edge case: Denver Public Schools employees are in PERA, not DERP, despite both being Denver institutions.

Everything below depends on which of those two you answered.

What a PERA benefit actually pays

The PERA Defined Benefit formula is straightforward: your highest average salary, multiplied by 2.5%, multiplied by your years of service credit, gives your monthly lifetime benefit.

Highest average salary is your three highest years if you had five years of service credit as of January 1, 2020, and your five highest years if you did not. That distinction is worth checking, because a three-year average on a rising salary produces a materially higher number than a five-year average.

You vest at five years of service credit. Retirement eligibility runs on an age-plus-service rule: the Rule of 80 for members hired before 2011, and the Rule of 88 for those hired after. Thirty years of service at age 50 gets a pre-2011 hire to full eligibility; a post-2011 hire needs to reach 88.

Member contribution rates for 2026 depend on your division: 11.00% for State, School, and DPS members, 13.00% for Safety Officers, 9.00% for Local Government, and 11.00% for Judicial. Those rates are not fixed forever. Under the Automatic Adjustment Provision established by SB18-200, they can move by up to half a percentage point a year in either direction depending on PERA's progress against its unfunded liability. Plan on the number moving over a career.

What a DERP benefit pays, and why your hire date matters so much

DERP members contribute 8.45% of pay on a pretax basis, and the benefit formula follows the same shape as PERA's: average monthly salary times a multiplier times service credit. The multiplier is where the tiers diverge sharply.

Members hired before September 1, 2004 (Tier 1) earn a 2% multiplier. Everyone hired after that date (Tiers 2 and 3) earns 1.5%. That is a 25% reduction in benefit for identical salary and service, and it is entirely a function of a hire date most people have not thought about in years.

The tiers differ on eligibility too, and this is the part of the plan most often misread. Normal retirement is age 65 for everyone. Tiers 1 and 2 can also retire unreduced as early as 55 under the Rule of 75, where age plus service credit reaches 75. Tier 3, covering anyone hired on or after July 1, 2011, can retire unreduced as early as 60 under the Rule of 85. Meeting your rule is what removes the reduction, not what causes it.

Early retirement is a separate option, for anyone who reaches the minimum age with five years of service credit but has not met their rule. That is where the reduction applies: 3% for each year under 65 for Tiers 1 and 2, and 6% a year for Tier 3. Both work out to a 30% cut at the earliest age each tier allows.

The difference is worth real money. A Tier 1 member aged 55 with 20 years of service has 55 plus 20, meets the Rule of 75, and retires on a full benefit. The same member at 55 with 15 years does not meet it, and takes the 30% reduction for retiring ten years early. Two people the same age, one working five years longer, and a third of the benefit between them.

Tier 3 also averages over 60 months rather than 36, which lowers the benefit again for anyone with a rising salary.

Vesting is five years of service credit, or reaching 65, whichever comes first, for Tiers 1 and 2. For Tier 3 it is five years of service credit regardless of age.

The Social Security change that most advice has not caught up with

First, the question we hear most: does PERA replace Social Security? For most members, yes. PERA-covered employment is not covered by Social Security, no Social Security tax is withheld from your pay, and the pension stands in its place. The same is true of DERP. Social Security still enters the picture if you paid into it in other jobs before or after your public career, or through a spouse, and that is where the two rules below did their damage.

For decades, the two rules that mattered most to Colorado public employees were the Windfall Elimination Provision and the Government Pension Offset. WEP cut the Social Security benefit of anyone who also received a pension from work not covered by Social Security. GPO cut or eliminated spousal and survivor benefits on the same logic. Between them they affected roughly 175,000 Coloradans.

Both were repealed by the Social Security Fairness Act, signed in January 2025 and retroactive to January 2024. PERA retirees now receive their full Social Security benefit alongside their full PERA benefit.

If you built a retirement plan before 2025 that assumed a reduced Social Security benefit, or you decided years ago not to bother claiming a spousal benefit because GPO would wipe it out, that plan is now wrong in your favor. It is worth redoing the arithmetic. Note that the repeal changed Social Security only. Your PERA or DERP benefit itself is unaffected.

The supplemental account most members underuse

Every PERA employer offers the PERAPlus 401(k) alongside the pension, and it accepts Roth contributions as well as pretax ones.

For 2026 you can defer up to $24,500 into it, plus a catch-up of $8,000 from age 50, or $11,250 for ages 60 to 63. Because the pension already feels like a retirement plan, the 401(k) is easy to leave at a token contribution, or at nothing.

Four decisions worth getting right

Whether to take the DB plan or the DC plan. New PERA members in eligible classifications can elect the Defined Contribution plan instead of the pension. In the State Division, DC participants receive 10.15% of salary into their own account, with the balance of employer contributions going to the DB trust to service the unfunded liability. The DB plan transfers longevity risk to PERA; the DC plan gives you a portable balance and control. Neither is universally right, and the election is generally irreversible.

How to handle a mid-career departure. Leaving before vesting refunds your contributions. Leaving after vesting usually means choosing between a refund and a deferred benefit that starts decades later. That choice is frequently made under time pressure and rarely modeled properly.

Where your tax diversification comes from. A pension is entirely ordinary income, and so is a traditional 401(k). Retiring with a pension plus a pretax 401(k) leaves you with little ability to manage your bracket. The Roth option inside PERAPlus is how you fix that, and the years between retirement and required distributions are when Roth conversions are cheapest.

When to claim Social Security now that WEP and GPO are gone. The claiming calculus changed materially for this group in 2025, and for married couples the survivor benefit consequences run for decades. Our Social Security optimizer is a starting point.

Where to start

Confirm which system you are in, pull your annual statement and check whether your highest average salary uses a three-year or five-year window, check how much you defer into the PERAPlus 401(k) and how much of it is Roth, and if you retired before 2025 under WEP or GPO assumptions, revisit the whole plan. That last one is the single highest-value item on the list for anyone already retired.