Implicit Compensation for Career Employees in Public Defined Benefit Pension Plans: The Colorado PERA Case

We report on implicit compensation provided by the Colorado Public Employees Retirement Association plan using a unique data set of salary histories of recent university retirees. Implicit compensation is the difference between the expected present discounted value of retirement benefits and retirement account balances. Our results indicate sizable implicit compensation across four measures with strong evidence of significant relations on job class, retirement age, retirement period, and service years and some evidence of a gender effect. The results provide a historical baseline that should be useful in the design of compensation models with more realistic estimates of implcit retirement compensation.