PERA is more stable than a 401K
It never ceases to amaze me how many misperceptions there are concerning PERA (Public Employees Retirement Association).
PERA is the retirement fund for all public employees in the state of Colorado. It has been in existence for 81 years and has never needed to be bailed out by the taxpayers. Public employees also are taxpayers, and PERA is not a “free handout.” Public employees contribute a percentage of their salary to the fund, as do their employers. PERA is a defined benefit program just like Social Security.
A defined benefit program means that retirees receive a monthly benefit check, calculated based on years of service and a percentage of their highest annual salary. The PERA fund is managed by a board of directors, not the state Legislature. For 81 years, that board has successfully invested PERA funds and has always been able to handle expenses.
More than $500 million of PERA’s investments are with companies headquartered in Colorado. PERA’s annual financial report for 2011 shows that $3.03 billion (3.3 percent of the state’s payroll) in pension benefit payments are important factors in the Colorado economy. These payments generate $230 million in tax revenue to local and state government, and sustain over 23,000 jobs in Colorado.
There seems to be a movement to eliminate defined benefit programs across the nation and replace them with defined contribution programs. A defined contribution program puts the responsibility upon the employee to invest wisely in a retirement plan. Have we forgotten how many hundreds of thousands of people lost their entire retirement savings during the economic downturn? Have we forgotten that 401K’s are not always stable? How many of us have the knowledge and/or the time to wisely choose investment options, especially when we first start working at the ripe age of 22 or younger?
It has been my experience that 401K’s are nice supplements to a defined benefit program (for example, that monthly Social Security check or that monthly PERA check). As a retired educator, I appreciate having the security of a defined benefit program that I contributed to during a career that spanned 30 years.