DERP Pension Benefit

By law, eligible employees are automatically enrolled in the Denver Employees Retirement Plan (DERP). Employees become members of DERP on their first day of employment.
Employees eligible for membership include:

• Appointed officials
• Elected officials
• Any employee designated by the Mayor to be exempt from Career Service as an administrative position
• Any employee of:
• Board of Adjustment for Zoning
• Career Service who regularly works 20+ hours per week
• City Council
• Civil Service Commission
• County Court
• Denver Employee Retirement Plan
• District Attorney
• Library Commission
• Undersheriff
• Certain employees of Denver Health and Hospital Authority hired before December 31, 2000

Employees not eligible for membership include:

• Career Service employees who regularly works less than 20 hours per week
• Denver Health and Hospital Authority employees hired on or after January 1, 2001
• Judges
• On-call employees
• Uniformed fire and police

Membership tiers refer to groups of members whose benefits are determined by hire date. Each tier has benefit eligibility requirements unique to their group.

Rehired Member Benefits

If you are rehired with the city in an eligible position, your DERP Pension Benefit for all future service credit earned will be based on the calculation criteria in effect at that time you are rehired. The age you can retire at is based on your DERP status when rehired.

Email Help@DERP.org for questions about your specific situation.

Review the Active Member Handbook to see how being rehired will impact your DERP Pension Benefit.

On your first day of employment in an eligible position, you and the City and County of Denver, Denver Health and Hospital Authority (DHHA), or the Denver Employee Retirement Plan (DERP) start contributing to your DERP Pension Benefit. Each pay period, both you and your employer contribute a pretax percentage of your total gross salary to your retirement plan. Currently, those contributions are:

• Employer contributions – 17.95% of payroll
• Employee contributions – 8.45% of payroll
  Employer and employee contributions are made on a pretax basis through a payroll deduction.

Your contributions are pooled with thousands of other DERP Pension Benefit members and become part of the DERP trust fund. Together, you and your employer’s contributions, plus income from investments, fund the retirement benefits for members and their beneficiaries.

Contribution Refunds

• Not Vested – If you have less than five years of service credit, you are not vested. When you separate from the city, DHHA, or DERP, or you transfer to a position that is no longer eligible for membership, your personal contributions, plus interest, can be refunded to you in a lump sum*, or as an alternative, you may roll your personal contributions over to another qualified retirement account. If you request a contribution refund, you forfeit all years of service credit and any future DERP Pension Benefit eligibility. Your employer’s contribution remains with DERP.
  *There is a mandatory federal withholding when contributions are taken in a lump sum.

• Vested but Not Age-Eligible to receive your DERP Pension Benefit – Your personal contributions cannot be refunded when you separate from the city, DHHA, or DERP. Instead, your contributions will remain a part of the DERP trust fund and will be used to fund your future DERP Pension Benefit.

Once you reach the milestone of earning five years’ service credit, you become vested and qualify to receive your guaranteed monthly DERP Pension Benefit upon reaching retirement age. When you are vested, no matter how much longer you work for the city, your accumulated benefits will be there when you retire. If you leave before you are vested, only your contributions, plus interest, can be refunded or rolled over into a qualified retirement account. Your employer’s contribution remains with DERP.

Earning Service Credit

Service credit is an important factor in determining eligibility for, and the calculation of your DERP Pension Benefit.

• You earn service credit for each pay period you receive pay and contribute to DERP even if they only work a portion of the pay period
• You can earn up to 12 months service credit per calendar year
• Because payroll periods do not align with calendar months, it is possible to earn 5 years of service credit before their 5-year anniversary date
• Refunded members who are rehired into an eligible position and become an active member, may receive service credit for the years of service forfeited if the amount refunded, plus interest, is repaid to DERP within 24 months of being rehired. If the refund is repaid after 24 months of being rehired, the amount will be based on the full actuarial cost of the service.

When you became member of DERP, you took your first step in attaining your financial security in retirement. But what about the financial security of your loved ones?

Since your DERP Pension Benefit provides benefits to your survivors, it’s important to designate beneficiaries who will receive survivor benefits upon your death. You should review and update your beneficiary designations on your MyDERP.org account when you experience a major life event. Keeping your beneficiary information current ensures your DERP Pension Benefit is paid in accordance with your wishes in the event of your death.

Important facts to keep in mind when designating a beneficiary…

• If you are married, your spouse must be your primary beneficiary, unless your spouse formally waives this right and consents in writing to the designation of another beneficiary. If you die without designating a beneficiary, your spouse is automatically the beneficiary.
• If you are not married, but have children under the age of 21, you must name all your children under age 21 as your primary beneficiaries.
• If you are not married, and do not have children under age 21, you may name any one individual person to be your primary beneficiary.
• If you pass away while working as a DERP eligible employee, DERP will pay a monthly DERP Pension Benefit to a qualified beneficiary.
• You may name one contingent beneficiary. Your contingent beneficiary will only receive a benefit from DERP if you were to pass away and your primary beneficiary on file has also passed away.
• You may not list an estate, trust, or charity as either your primary or contingent beneficiary.
• After you retire you cannot change your beneficiary designation.

To review and/or update your beneficiaries, log in to your MyDERP.org account and click the Beneficiary button.

DERP offers four retirement types based on a range of unique factors, including your age at the time of retirement, your employment status with the city, your interest in receiving a reduced benefit in order to retire early, and more.

Normal Retirement
You are eligible to retire and to receive your full DERP Pension Benefit once you meet the age and service credit requirement for your membership tier.

Early Retirement
You may retire early if you have a minimum of 5 years’ service credit and have met the minimum age requirement of your membership tier. It’s important to know, if you choose an early retirement your DERP Pension Benefit will be reduced.

Deferred Retirement
If you leave you job with the city and are vested but have not met the retirement age requirement based on your membership tier, you will be eligible for your DERP Pension Benefit when you reach your membership tier retirement age.

Disability Retirement
If you become totally and permanently disabled and are unable to work, you may be eligible for a disability retirement. There is no age requirement and the disabling condition(s) need not be job related. If you are eligible for this retirement option, your DERP Pension Benefit is payable for life, provided the you continue to meet the eligibility requirements. You must notify DERP of any change in status.

If you qualify for disability retirement, your DERP Pension Benefit becomes effective the first day of the month following your termination of employment with the city, Denver Health and Hospital Authority, or the Denver Employee Retirement Plan because of the disability.

Refer to the DERP Plus Benefits Disability page for more information.

Your DERP Pension Benefit reflects your working career. The longer you work and contribute, the greater your benefit will be. Your DERP Pension Benefit is determined by a defined formula based on the three factors. These factors vary from member to member.

1. Average Monthly Salary (determined by your membership tier)
2. Multiplier (determined by your membership tier)
3. Years/Months of Service Credit (you earn service credit each pay period that you receive pay and contribute to your DERP Pension Benefit)

Average Monthly Salary x Multiplier x Years/Months of Service Credit

Log in to your MyDERP.org account and click the Benefit Estimate button. To get a precise calculation, email Help@DERP.org.

There are many factors you need to consider as you plan for retirement. One question probably at the top of your list is: What will my monthly DERP Pension Benefit be when I retire?

DERP offers several resources to assist you in calculating your future DERP Pension Benefit.

1. Log in to your MyDERP.org account – Your MyDERP.org account is your most useful resource to see your DERP Pension Benefit.
   • Click the Benefit Estimate button
     • You’ll be able to view an estimate based on your membership tier, data, and provisions as they exist at that time. Click on the links to see your estimated net benefit without deductions and with deductions such as taxes and insurance.
     • Click the Create New Estimate button to populate fields with hypothetical data to see your maximum benefit that ceases upon your death or an estimate that provides a reduced monthly lifetime benefit in order to provide a lifetime benefit for your beneficiary.
   • Click the Member Statement link to see your official Annual Member Statement. Your statement shows your estimated DERP Pension Benefit based on different retirement types:
     • Normal
     • Normal (Rule of 75)
     • Deferred Normal
     • Deferred (Rule of 75)
       

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       Your statement is created every June 30 and is available to you in your MyDERP.org account.

Email Help@DERP.org – We will calculate your estimated DERP Pension Benefit upon request. To provide an estimate we’ll need to know your intended date of retirement, and if you were hired prior to January 1, 2010, your anticipated sick and vacation leave or paid time off payout.

Furlough Days

Service credit is not impacted by individual furlough days. The amount of salary reported for a pay period that includes a furlough day will be less by that day’s salary, but you will earn the same service credit for the pay period.

Furlough days may impact the average monthly salary piece of your DERP Pension Benefit calculation if the furlough days fall within your highest 36 or 60 consecutive months of salary. You can negate the impact of the furlough day on your DERP Pension Benefit by purchasing the furlough day.

If you would want to purchase a furlough day, email Help@DERP.org to request your cost. You will need to provide a copy of the payslip(s) showing the furlough day and missed salary.

Divorce and Domestic Relations Orders

Your DERP Pension Benefit is considered marital property. In the event of a divorce, Colorado law may require DERP to divide your retirement benefit when a Domestic Relations Order (DRO) has been filed with the Court. Your DERP Pension Benefit will be divided based on your employment status.

• Vested – If you are vested when the DRO is entered, the division is based on either an agreed upon percentage or an exact amount of the retirement benefit earned while both married and employed.
• Retired – If you are retired when the DRO is entered, the calculation for the division of your DERP Pension Benefit is based on what you are currently receiving.
• Not Vested – If you are non-vested, contact DERP to discuss if a DRO is appropriate for your situation.

For more information about how divorce and a DRO may impact you in regards to your DERP Pension Benefit, and the specific instructions to create a valid DRO that DERP will recognize, review Your Guide to Divorce and Domestic Relations Orders.

Payout of Accrued Leave

• • Sick and Vacation Leave – If you were hired prior to January 1, 2010 and accrue sick and vacation leave any unused leave cashed-out upon separation is treated as salary for pension calculation purposes. The cashed-out amount is added to your final month of salary, boosting your average monthly salary component of the pension calculation formula if the 36 consecutive months of salary were your final 36 months.
  • Paid Time Off (PTO) – If you were hired prior to January 1, 2010 and accrue PTO any unused leave cashed-out upon separation is treated as salary for pension calculation purposes. If you were hired on or after January 1, 2010, and accrue PTO, any unused PTO that is cashed-out upon separation is not legally able to be treated as salary for benefit calculation purposes and does not alter your average monthly salary.

If you received a cash-out of unused accumulated leave you may be eligible to have some, or all, of that amount directed to an account to defer taxes on funds. This deferral will not impact the calculation of your DERP Pension Benefit.

Employment Separation and Your DERP Contributions

If you separate from the city, DHHA, or DERP, or you transfer to a position that is no longer eligible for membership, the impact to your benefit is dependent on if you are vested.

• Not Vested – Your personal contributions, plus interest, can be refunded to you in a lump sum* or, as an alternative, you may roll your personal contributions over to another qualified retirement account. Your employer’s contribution remains with DERP. You forfeit all years of service credit and any future DERP Pension Benefit eligibility.
  *There is a mandatory federal withholding when contributions are taken in a lump sum.
• Vested but Not Age-Eligible to receive your DERP Pension Benefit – Your personal contributions cannot be refunded. Instead, your contributions will remain a part of the DERP trust fund and will be used to fund your future DERP Pension Benefit.

Taxes in Retirement

When you begin receiving your DERP Pension Benefit it is subject to federal and state income tax. Colorado law excludes from state taxation pension income up to $24,000 per year for those over age 65 and $20,000 per year for those under age 65. DERP can withhold federal and Colorado state taxes from your benefit. DERP cannot withhold taxes for any other state.

DERP cannot provide tax counseling. Specific questions about your taxes should be directed to your personal tax advisor, the IRS, and/or the Colorado Department of Revenue.

You can change your federal and state withholding by logging in to your MyDERP.org account and clicking the Tax Withholding button.

Returning to Work After You’ve Retired

If you have retired and are considering resuming employment with the city after you begin to receive your monthly DERP Pension Benefit, you must keep in mind the following to ensure your monthly benefit payments are not interrupted:

• You must be separated from employment and not receive any monies from the city, including any payment for accrued vacation and sick leave or paid time off, for a minimum of 30 days, and
• You cannot work more than 1,000 hours in any calendar year after the initial date of re-employment.

If you do not wait at least the minimum amount of time before resuming employment, or you work over 1,000 hours in a calendar year, your monthly DERP Pension Benefit will be suspended and you will be considered re-employed with the city in a benefitted position. You will be required to pay the applicable employee contributions to DERP, and in return will receive additional service credit until you separate again from employment. At that time, your initial monthly DERP Pension Benefit will resume. You will be required to apply for an additional DERP Pension Benefit, to be calculated based upon the new service and earnings accrued during the re-employment period. This new benefit will be paid in addition to the previously calculated benefit.

Federal Limits on Benefits

Internal Revenue Code (IRC) §415(b) sets limits on the retirement benefits that DERP can pay from its qualified trust. Most members are not affected because their DERP Pension Benefit will not exceed the §415(b) limits however a few highly paid members may exceed the limits.

Although §415(b) imposes these limits, IRC §415(m) allows DERP to use a replacement benefit arrangement (RBA) to provide relief for a retiree who exceeds the 415(b) limit. If it is determined that your DERP Pension Benefit will exceed the §415(b)  limits, a DERP membership services representative will contact you to discuss what it may mean for you.