Introduction
The City of Aurora, Colorado, administers a structured retirement system for its general employees that balances long-term security with sustainable municipal financing. Unlike police and fire personnel, who often participate in separate pension systems, Aurora’s general employees are covered under a dedicated General Employees’ Retirement Plan. This plan ensures that civilian staff who dedicate their careers to public service in Aurora have access to reliable income in retirement, supplemented by Social Security and optional deferred compensation savings.
Overview of the General Employees’ Retirement Plan
Aurora’s retirement system for general employees follows a Defined Benefit (DB) pension structure, which provides guaranteed lifetime income based on years of service and salary.
| Feature | Description |
|---|---|
| Plan Type | Defined Benefit (DB) pension |
| Eligibility | Full-time civilian/general employees |
| Funding Source | Employer contributions, employee payroll deductions, and investment earnings |
| Benefit Formula | Based on years of credited service and final average salary |
| Vesting | Typically 5 years of service required |
| Social Security | Employees also contribute to and receive Social Security benefits |
This combination creates a dual retirement income system: guaranteed pension plus federal Social Security benefits.
Legal and Regulatory Framework
Federal Oversight
The Aurora plan operates under the Internal Revenue Code rules for public pensions and is exempt from ERISA, as are most government-sponsored retirement systems. Benefits are taxed as ordinary income when distributed, but contributions made pre-tax reduce taxable income during employment.
State and Local Oversight
The City of Aurora establishes plan terms through municipal ordinance. Plan assets are managed by a retirement board, with fiduciary responsibility for ensuring long-term solvency. Colorado’s state constitution places limits on altering accrued benefits, protecting employee rights.
Benefit Formula
The General Employees’ Retirement Plan provides lifetime monthly payments determined by a set formula. For example:
Annual\ Benefit = Multiplier \times Years\ of\ Service \times Final\ Average\ Salary- Multiplier: Typically 2.0% (0.02) for each year of service.
- Final Average Salary (FAS): Often calculated as the highest 3–5 consecutive years of pay.
Example Calculations
Case 1: 30-Year Employee
Final Average Salary (FAS): $65,000
Years of Service: 30
Multiplier: 2%
This employee would receive $39,000 per year for life, plus Social Security benefits.
Case 2: 20-Year Employee
FAS: $50,000
Years of Service: 20
Multiplier: 2%
This employee would receive $20,000 per year, supplemented by Social Security.
Supplemental Savings Opportunities
In addition to the pension, Aurora employees may participate in a 457(b) Deferred Compensation Plan:
- Voluntary contributions deducted from payroll.
- Tax-deferred growth until withdrawal.
- No early withdrawal penalty after separation from service.
- Provides flexibility to save more for retirement beyond the pension and Social Security.
Funding and Sustainability
The City of Aurora and employees both contribute to the plan. For example:
- Employee contribution rate: 9% of pay.
- Employer contribution rate: 11% of pay.
- Investment returns help sustain the system.
Example of Annual Contributions
Employee salary: $60,000
Employee contribution (9%): $5,400
Employer contribution (11%): $6,600
Total annual contribution: $12,000
Over 30 years, without considering investment earnings, the combined contributions would total $360,000, funding the employee’s pension benefit.
Strengths and Risks
Strengths
- Guaranteed lifetime income independent of market performance.
- Predictable formula makes retirement planning clearer.
- Integration with Social Security provides additional security.
- Survivor benefits and disability coverage offer protection.
Risks
- Pension funding depends on city contributions and investment performance.
- Cost-of-living adjustments (COLAs) may not fully keep up with inflation.
- Employees who leave before vesting may forfeit benefits.
- Rising life expectancy increases long-term liabilities.
Best Practices for Employees
- Stay informed about benefit accruals and vesting timelines.
- Supplement the pension with 457(b) savings to hedge against inflation.
- Coordinate retirement planning with Social Security claiming strategies.
- Evaluate survivorship and spousal benefit options carefully.
- Attend retirement workshops or counseling sessions offered by the city.
Conclusion
The City of Aurora’s General Employees’ Retirement Plan provides a secure foundation for retirement through a defined benefit pension combined with Social Security coverage. While challenges such as funding obligations and inflation exist, the plan remains a strong asset for civilian employees dedicating their careers to municipal service. By supplementing pension benefits with personal savings and strategic planning, Aurora employees can ensure financial stability and peace of mind in retirement.
