GERP Definitions



In a defined benefit plan (such as GERP) contributions from the employer and participants are pooled together and managed by investment professionals.  At retirement the plan pays a monthly pension which lasts for the lifetime of the participant (and beneficiary, if a survivor option is selected).  This benefit is designed to replace a specified percentage of the participant’s compensation, based length of service worked.

In a defined contribution plan (e.g., a 401-k plan) participants have individual retirement savings accounts which they and their employer contribute to.  Participants must choose which investments to hold in their accounts.  Upon retirement the participant (or beneficiary) is entitled to receive the value of the contributions and investment earnings that have accumulated.  A defined contribution plan provides no assurance that value of the account will be adequate for the participant’s retirement.


If you chose to rollover your distribution, GERP will issue a check directly to the Individual Retirement Account or qualified employer plan that you have selected.   When you are setting up your new account, please inform the administrator or record-keeper that you will be making a rollover contribution from GERP.

The funds that you rollover will not be taxed in the current year and no income tax will be withheld.  Your distribution will be taxed later when you take it out of the new IRA or qualified employer plan.  Please refer to GERP’s “Special Tax Notice Regarding Plan Payments” for further guidance.


When a participant’s employment terminates by reason of disability and the participant receives long term disability insurance payments from the City, he or she is considered a disabled participant in GERP.  Credited service under the Plan continues to accrue for disabled participants until either they no longer qualify for disability insurance payments under the City’s long term disability plan or they reach their normal retirement age.

If the participant’s benefits under the City’s long term disability plan cease prior to normal retirement age and he or she is not reemployed by the City, credited service ceases accruing and the participant can elect to receive a refund, a rollover, or a monthly pension at a later date.

If the participant continues to receive benefits under the City’s long term disability plan until normal retirement age, he or she becomes eligible for a disability pension at that time.

In computing the pension amount for a disabled participant, his or her final average monthly compensation is multiplied by accrued years of credited service and by 1.75% to determine the monthly benefit amount.  The final average monthly compensation for a disability pension is defined to be the higher of (1) the monthly rate of compensation on the date of disablement or (2) the average of the highest consecutive 36 months of pensionable earnings within the last 10 years worked.  If a disabled participant elects to begin receiving a disability pension before reaching normal retirement age, a reduction for early retirement may apply.


Final average monthly compensation is the average of the highest consecutive 36 months of pensionable earnings within the last 10 years worked.

Pensionable earnings are the portion of a participant’s compensation from the City that are subject to GERP contributions.  They are defined as total base pay including acting pay, longevity pay, longevity credit and any amounts contributed by employees under sections 125, 414(h) and 457 of the United States Internal Revenue Code (contributions to an Aurora Choice flexible spending account, to GERP and to the City’s deferred compensation plan).


Before benefits can begin, a prospective retiree must choose from the following seven payment options.  Once selected, the form of payment may not be changed, nor may the beneficiary of a joint and survivor benefit be changed.

1.  Straight Life
Payments are made for the lifetime of the retiree and end upon his or her death.

2.  100% Joint and Survivor with Pop-Up Feature 
Payments are made for the lifetime of the retiree and continue in the same amount to the retiree’s beneficiary upon the retiree’s death.  In the event that the beneficiary dies before the retiree, the retiree’s pension will increase (“pop-up”) to the original straight life benefit amount, plus cost of living adjustments.

3.  75% Joint and Survivor with Pop-Up Feature 
Payments are made for the lifetime of the retiree and 75% of the pension continues to the beneficiary upon the death of the retiree.  If the beneficiary dies before the retiree, the pension will increase to the original straight life amount, plus cost of living adjustments.

4.  50% Joint and Survivor with Pop-Up Feature 
Similar to the 75% Joint and Survivor, except that 50% of the pension continues to the retiree’s beneficiary.

5.  10 Year Certain and Lifetime 
Payments are made for the lifetime of the retiree.  In the event that the retiree dies before receiving 120 monthly payments, his or her beneficiary will receive the remaining payments, until the total number of payments is 120.

6.  15 Year Certain and Lifetime 
Similar to the 10 Year Certain and Lifetime, except the guaranteed number of monthly payments is 180.

7.  Partial Lump Sum Payment 
The participant may elect to receive up to 20% of the actuarial equivalent of his or her accrued benefit valued on a single life basis in the form of a lump sum payment.  The remaining accrued benefit shall be paid in the form selected by the participant from one of the six options listed above.  The monthly benefit will be reduced on an actuarially equivalent basis to reflect the lump sum payment.  The lump sum is payable upon pension commencement.

Note that the reduction factors used to compute optional forms of payment vary depending on the participant’s (and joint annuitant’s) age at the time the pension  begins.  Participants who would like more precise figures may request a customized benefit estimate.  Link to page

The pop-up feature is only applicable to 100%, 75% and 50% joint and survivor pensions (with or without a partial lump sum payment) that begin on or after January 1, 1998.  A retiree whose beneficiary pre-deceases him or her should notify the Retirement Board.


GERP currently credits interest on participant contributions each pay period at an annual rate of 4%.  With biweekly compounding this results in a 4.07% annualized percentage yield.

The 4% rate of interest became effective January 1, 2010.  The Retirement Board reviews this rate in December of each year and has the authority to change it.


The number of years (and daily fractions of a year) between the participant’s credited service date and termination date.  For most participants their credited service date is the same as their hire date.  However, periods of unpaid leave other than for military duty or disability are excluded when credited service is calculated.  Participants who quit and are later rehired by the City may also have adjustments to their credited service


The Internal Revenue Service requires that GERP distribute this pamphlet to participants receiving taxable lump sum payments.  It explains how participants can avoid the mandatory 20% income tax withholding if they direct GERP to rollover eligible payments to a traditional IRA or other qualified plan.  It also provides tax information for surviving spouses, alternate payees and other beneficiaries who receive payments from GERP. Tax Notice.