Updated September 3, 2026. Quick answer: Public Employees Retirement Association of New Mexico (PERA): the COLA is automatic, calculated by a funded-ratio-linked statutory formula (floor 0.50%, cap 3–5%), service credit can be purchased, and no DROP was found. Vesting takes five years of service credit under both membership tiers.
Provisional. This page is published at medium confidence. The specific points that could not be confirmed are listed under What could not be verified below, and are named rather than smoothed over.
The verdicts
| Is the COLA granted? | Automatic (statutory formula, funded-ratio based) |
|---|---|
| Is the COLA compounded? | Not stated |
| Vesting | 5 years of service credit |
| Buy service credit? | Yes |
| DROP? | None found |
| State | New Mexico |
Those first two rows are separate questions and are routinely confused. Whether you get an increase at all is one thing; whether it compounds is another. A system can grant an increase automatically every year and still compute it against your original benefit forever, which is a materially worse deal than it sounds.
The COLA
Each July, PERA adjusts the gross pension benefits of all eligible retirees to include a Cost-of-Living Adjustment (COLA), calculated only on pension amounts tied to Public Employees Retirement plan service credit. Pension reform enacted by Senate Bill 72 during the 2020 legislative session requires PERA to set the annual COLA using a statutory formula: [Return on Actuarial Value of Assets minus COLA Hurdle Rate] multiplied by Funded Ratio equals Initial COLA. The COLA cannot be less than 0.50%. The ceiling depends on funding: 3.00% maximum if the plan’s funded ratio is under 100%, 5.00% if over 100%. No compounding language was found in the materials reviewed.
Buying service credit
PERA members can purchase withdrawn/refunded service credit, military service credit, and “air time” service credit, priced from an audited cost estimate PERA provides on request. The exact underlying cost formula was not published on the pages reviewed this session.
Run your own numbers before deciding: some purchases never recover their cost, and the calculator shows which.
Coordinate this with your overall retirement plan
An adviser can help weigh a COLA that may not compound, a service-credit purchase that may never pay for itself, or a DROP election against the rest of your retirement plan, but that does not replace the numbers in your own member statement.
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Vesting
“As a TIER 1 member, you are considered a vested member when you accrue 5 years of service credit.” Tier 1 = hired on or before June 30, 2013; Tier 2 = hired on or after July 1, 2013. The archived source pages for this system covered PERA’s Tier 1 eligibility page only, so the Tier 2 vesting period, and the separate vesting schedules PERA uses for its Judicial and Magistrate plans, were not confirmed in the materials reviewed.
DROP
No DROP program appears in PERA’s COLA, career-stage, or FAQ pages reviewed this session.
DROP is rarer than it appears across the systems on this site: most have none.
What could not be verified
REFUND TERMS: this page does not state what happens to your contributions if you take a refund instead of leaving your account with the system: that comparison was not independently researched for this system this session, and is left as an open gap rather than guessed from another system’s rule. Consult your own plan’s refund/forfeiture terms before deciding. Any additional field marked “not stated” in the verdicts table above was genuinely absent from the official materials read, not omitted for space.
Sources
Read September 3, 2026.
Related public pension systems: New Mexico ERB · Oklahoma TRS.
General information drawn from each system’s own official published materials, not legal, tax or financial advice. Vesting, COLA and buyback rules are set by state statute and plan tier, differ materially by hire date, and can change by future legislation. This page cannot see your own member statement, which governs. We are not a law firm, a tax adviser, or a fiduciary, and this is not personalized advice.