Updated October 7, 2026. Quick answer: A Denver Employees Retirement Plan member applying for a pension chooses one of four options: the maximum, or a joint and survivor option of 100%, 75% or 50%. Once retirement begins the choice cannot be changed. A married member needs a signed Spousal Consent at Retirement form to take the maximum. If the beneficiary dies first, the pension rises to the maximum. A refund of contributions is open only to a member with fewer than five years of service credit, and it forfeits all of that credit. Early retirement cuts the pension 3% a year under 65 for members hired before July 1, 2011, and 6% a year for those hired on or after that date.
Colorado firefighters and police officers belong to a separate association with its own rules: Colorado FPPA retirement decisions.
What this page covers and what it does not
This page works from four documents published by the Denver Employees Retirement Plan (DERP): its Active Member Handbook, its Service Credit Purchase Guide, its DERP Pension Benefit page and its frequently asked questions page. The handbook carries no edition date in its text, so it is cited here as the handbook read on October 7, 2026.
DERP sets different rules by hire date, so every figure below is tied to the tier it belongs to. The handbook names three tiers: Tier 1 for members hired before September 1, 2004, Tier 2 for those hired on or after that date, and Tier 3 for those hired on or after July 1, 2011. Tiers 1 and 2 together are the members hired before July 1, 2011. The FAQ gives the formula for the latest group this way: “your DERP Pension Benefit calculation is 1.5% of your average monthly salary (based upon your highest 60 consecutive months’ salary) times your service credit.” Tiers 1 and 2 use a highest 36 consecutive months average instead of 60, and the multiplier is 2% for Tier 1 and 1.5% for Tier 2. The average and the early retirement cut both depend on the tier.
State taxes are covered separately on Colorado retirement taxes and does Colorado tax pensions, and the system-by-system view is public pension retirement decisions by system.
When a pension can start and what retiring early costs
Normal retirement in every tier is at age 65, and the Rule of 75 and Rule of 85 are the ways to start earlier without a cut. For members hired before July 1, 2011, the handbook says “the Rule of 75 enables you to retire as early as age 55 without a benefit reduction.” For members hired on or after July 1, 2011, “the Rule of 85 enables you to retire as early as age 60 without a benefit reduction.”
A vested member who does not meet the rule can still retire at the tier’s minimum age, at a price. “You may retire early if you have a minimum of five years of service credit and meet the minimum age requirement for your membership tier.” For Tier 1 and Tier 2: “Your DERP Pension Benefit is permanently reduced by 3% for each year you’re under age 65.” The FAQ adds that the cut applies unless the member meets the Rule of 75.
For Tier 3 the handbook says: “Your DERP Pension Benefit is permanently reduced by 6% for each year you’re under age 65”. The same age costs a Tier 3 member twice the percentage a Tier 1 or Tier 2 member pays, 6% a year against 3%, and the handbook calls the reduction permanent.
A computed example from assumed figures, not DERP figures: a member with an assumed average monthly salary of $6,000 and 20 years of service credit, at the 1.5% multiplier, has an unreduced benefit of $6,000 times 1.5% times 20, a computed $1,800 a month. If that member were hired before July 1, 2011 and retired at an assumed age 58, the cut would be 65 minus 58, or 7 years, times 3%, a computed 21%, leaving a computed $1,422 a month. If the same $1,800 belonged to a member hired on or after July 1, 2011 who retired at an assumed age 62, the cut would be 65 minus 62, or 3 years, times 6%, a computed 18%, leaving a computed $1,476 a month.
The election: four options, one permanent choice
Every retiring member makes one election. DERP’s FAQ describes the structure: “When you apply for your DERP Pension Benefit, you’ll choose one of four options: maximum or one of three joint and survivor options.” The table sets out each option using DERP’s descriptions.
| Option | What the member receives | What a survivor receives |
|---|---|---|
| Maximum | The highest monthly benefit, for the member’s lifetime only | No lifetime benefit is paid to a beneficiary, and the member’s monthly benefit payments stop at death. A married member needs the spouse’s signed consent on the Spousal Consent at Retirement form. |
| Joint and survivor, 100% | A reduced monthly benefit for the member and beneficiary for life | 100% of the amount the member was receiving, for the beneficiary’s lifetime |
| Joint and survivor, 75% | A reduced monthly benefit for the member and beneficiary for life | 75% of the amount the member was receiving, for the beneficiary’s lifetime |
| Joint and survivor, 50% | A reduced monthly benefit for the member and beneficiary for life | 50% of the amount the member was receiving, for the beneficiary’s lifetime |
The table carries no dollar figures for the reductions because the pages read publish none. DERP says how they are set: “Joint and Survivor options can be 100%, 75%, or 50% of the amount you’ll receive prior to death and is calculated based on the assumed life expectancies of both you and your beneficiary.” It adds: “Because the Joint and Survivor benefit option covers two lifetimes, your monthly DERP Pension Benefit is reduced.” “You’ll need to include your expected retirement date and your beneficiary’s date of birth.” For the general trade between a single-life pension and a survivor pension, see single-life versus joint-and-survivor pension.
What each option does for a survivor
The maximum leaves a beneficiary with no lifetime benefit, so DERP builds in a spousal check: “If you’re married, you can’t choose this option unless your spouse formally consents by completing and signing the Spousal Consent at Retirement form.”
Under a joint and survivor option, the survivor’s percentage is read against the member’s own payment before death. A computed example from an assumed $1,500 reduced monthly benefit, not a DERP figure: the beneficiary’s lifetime benefit would be 100% of $1,500, a computed $1,500 a month, under the 100% option, 75% of $1,500, a computed $1,125, under the 75% option, and 50% of $1,500, a computed $750, under the 50% option. The $1,500 would come from DERP’s calculation, which the pages read do not show, and the reduced amount would differ from one option to the next.
One feature limits the downside of choosing a survivor option and then outliving the beneficiary: “If your beneficiary passes away before you, your monthly DERP Pension Benefit will be increased to the maximum benefit as if no joint and survivor option had been elected.” The pages read do not say whether the increase is automatic or on request.
What is irrevocable, and the beneficiary rules
The election cannot be revisited. “Once retirement begins, you can’t change your benefit payment option or your joint and survivor beneficiary. This is a permanent decision.” The beneficiary is locked in the same way: “You can’t change your primary beneficiary designation after you retire, nor can you have a contingent beneficiary.” On who can be named: “You may not list an estate, trust, or charity as your primary or contingent beneficiary.” For a married member, “If you’re married, your spouse must be your beneficiary unless they formally consent to you naming another beneficiary by completing and signing the Spousal Consent at Retirement form.”
The beneficiary form and the election both deserve a check against current family facts, including after a divorce, since DERP’s handbook says the benefit is marital property that a Domestic Relations Order can divide.
The lump-sum death benefit and how it is paid
Apart from the monthly pension, DERP describes a separate payment on death after retirement. “When you retire from active service, a single lump-sum death benefit payment is available to be paid upon your passing to your beneficiary, or to your estate if your beneficiary is no longer living.” The amount depends on the retirement type, and the FAQ breaks it down.
| Retirement type | Lump-sum death benefit as DERP’s FAQ states it |
|---|---|
| Normal retirement, Rule of 75, Rule of 85 | $5,000 |
| Early retirement, Tier 1 and 2 (hired before July 1, 2011) | $2,500 at age 55, reduced by $250 for each year under age 65 |
| Early retirement, Tier 3 (hired on or after July 1, 2011) | $2,500 at age 60, reduced by $500 for each year under age 65 |
The FAQ does not show how a $2,500 starting amount at the minimum age combines with a reduction for each year under 65, so the amount for a given early retirement age is one to confirm with DERP.
The benefit can also be drawn during life. “These regular payments may be made in 50 or 100 equal monthly installments while you’re still alive.” A computed example using the $5,000 figure, not a DERP-stated payment: 50 equal installments would be a computed $100 a month, and 100 equal installments would be half of that, a computed 50 dollars a month. The cost to a beneficiary: “Once you have withdrawn the complete death benefit, the payments will stop and there won’t be a lump-sum death benefit for your beneficiary.”
Leaving before retirement: vesting and the refund
What happens to contributions on leaving depends on vesting. “After earning five years of service credit, you’re vested and eligible to receive a lifetime monthly DERP Pension Benefit.” Tier 3 members vest on five years regardless of age, while Tier 1 and 2 members also vest on reaching 65.
A vested member has no refund option: “Your employee contributions can’t be refunded when you separate from employment.” Instead, “your contributions remain a part of the DERP trust fund and will be used to fund your future DERP Pension Benefit.” For a vested member the question is therefore when to start the pension, not whether to take cash.
A member with fewer than five years of service credit does face a choice. “your employee contributions, plus interest, can be refunded to you in a lump sum or rolled over into another qualified retirement account.” The refund covers the member’s own money only: “Contributions made by your employer can’t be refunded.” The cost of taking it: “If you request a contribution refund, you forfeit all years of service credit and any future DERP Pension Benefit eligibility.” The refund ends the pension claim. For the general framework, see pension refund versus leaving it.
A refund is paid out or rolled over, not both. “You must choose either a payout or a rollover for your refund. We can’t split it between the two or among multiple rollover accounts.” On tax, “There is a mandatory federal withholding when contributions are taken as a lump sum.” A Domestic Relations Order can also reach a refund: “a DRO may require that a portion of your refunded contributions be paid directly to your former spouse.”
A computed example from an assumed $4,000 taxable refund paid out directly, not a DERP figure: at the IRS’s general 20% rate quoted in the tax section below, withholding would be a computed $800, leaving a computed $3,200 in cash. A member who then wanted to roll over the full $4,000 would need to find the withheld $800 from other money. The pages read do not state the amount DERP would withhold, so the 20% is the IRS’s figure, not a DERP rate.
On timing: “Your refund will be paid on the second Friday of the month after we receive your final earnings information from the city.”
Coming back after a refund
A refund is not necessarily permanent. If a former member returns to a DERP-eligible job, the forfeited credit can be restored. “You’ll need to repay the amount of your refund, plus interest, within 24 months of your rehire date.” Inside the window, the guide gives the interest rate: “Interest at the rate of 3% is compounded every year on June 30.” A member who may return to covered work should weigh this repayment, with interest, as part of the refund decision.
Buying service credit: what DERP says about cost and deadlines
Service credit is the multiplier in the benefit formula, so buying more raises the pension. On cost: “The cost to purchase service credit is based on your current age, service credit, average monthly salary (based on the highest-earning 36 or 60 consecutive months of salary), and other actuarial factors.” The guide adds: “The cost calculation you receive from DERP will be good until your next birthday.”
On what can be bought, the FAQ summarizes the limits: “You can purchase unlimited prior governmental service credit, and up to five years of non-governmental service credit.” The guide lists five types: prior governmental service, up to 60 months of non-governmental service, U.S. military leave, a payback of refunded contributions, and authorized leave without pay.
The conditions are strict. “We must receive payment for your service credit purchase prior to your separation from employment.” “You can’t purchase service credit in installments or through payroll deduction.” “A service credit purchase is irrevocable and non-refundable.” Payment can be made directly or by rollover. “Payments made directly are considered an after-tax contribution.”
A purchase has a limit on what it buys: “Purchased service credit will only be used to calculate your retirement benefit and isn’t used to help you meet the Rule of 75, Rule of 85, or the health insurance premium reduction benefit.” A purchase raises the formula amount but does not move a member’s Rule of 75 or Rule of 85 date.
DERP offers a way to judge whether a purchase pays. “To determine the number of months it will take you to recover the service credit purchase cost, divide the cost by the estimated increase to your DERP Pension Benefit.” A computed example from assumed figures, not DERP figures: if a purchase cost $24,000 and raised the monthly pension by $200, the recovery period would be $24,000 divided by $200, a computed 120 months of benefit payments. See also the pension buyback calculator for the general method.
Cost-of-living adjustments
DERP’s FAQ answers the COLA question directly: “The Revised Municipal Code of the City and County of Denver, which governs DERP, does not have a mandatory inflation adjustment or COLA formula.” The pages read state no COLA amount or schedule, so they give no basis for assuming a starting amount will grow.
What the IRS adds on tax
A refund or lump sum from a public pension is a distribution, so the IRS rules apply on top of DERP’s own. On withholding, the IRS says that a taxable eligible rollover distribution paid to you “is subject to mandatory income tax withholding (generally at a rate of 20%), even if you intend to roll it over later”, and that if you roll it over yourself “you’ll have to add funds from other sources equal to the amount withheld”. DERP’s own pages say that a refund can be paid out or rolled over, and that mandatory federal withholding applies when contributions are taken as a lump sum. The rollover clock, if the money is paid to you: “you have 60 days from the date you receive it to roll it over to another eligible retirement plan”.
On early distributions the IRS says “the law imposes a 10% additional tax on certain early distributions from certain retirement plans”. Its list of exceptions includes “Distributions made to you after you separated from service with your employer after attainment of age 55” and “Distributions made to a qualified public safety employee from a governmental plan” if the employee separated from service during or after the year they attained age 50 or 25 years of service under the plan, whichever is earlier. Whether an exception fits a particular refund depends on your own plan and facts, so confirm it with a tax preparer before you take one.
What this page could not settle
- The pages read do not state the size of the reduction for any joint and survivor option; DERP says it is based on the assumed life expectancies of the member and the beneficiary, and gives an estimate on request.
- The pages read do not state the interest rate credited on a refund of contributions beyond the words plus interest, and give no figure for what a refund would be.
- The pages read do not state how the $2,500 starting amount of the early retirement lump-sum death benefit combines with the reduction for each year under 65, so no early retirement figure is computed here.
- The pages read do not describe a partial lump sum, a deferred retirement option program, or any lump sum at retirement other than the refund for a member with fewer than five years and the death benefit.
- The pages read do not state whether the pension increase after a beneficiary dies first is automatic or on request.
- The pages read do not state any COLA formula or amount, and the handbook is undated in its text, so a newer edition could differ from the one read on October 7, 2026.
Common mistakes
- Electing a joint and survivor option or the maximum and assuming the choice can be reversed later; DERP says that once retirement begins the benefit payment option and the joint and survivor beneficiary cannot be changed.
- Applying the Tier 1 and 2 early retirement figure of 3% a year to a member hired on or after July 1, 2011; the handbook gives 6% a year for Tier 3.
- Taking a refund of contributions with fewer than five years of service credit without realizing it forfeits all service credit and any future pension.
- Buying service credit expecting it to unlock the Rule of 75 or Rule of 85; DERP says purchased credit is used only to calculate the benefit.
Related on this site: Colorado retirement taxes, does Colorado tax pensions, single-life versus joint-and-survivor pension, pension refund versus leaving it, pension buyback calculator and public pension retirement decisions by system.
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Answer againSources
- Denver Employees Retirement Plan, Active Member Handbook: https://derp.org/wp-content/uploads/2023/04/DERP_ActiveMemberHandbook.pdf
- Denver Employees Retirement Plan, Service Credit Purchase Guide: https://derp.org/wp-content/uploads/2026/03/DERP-Service-Credit-Purchase-Guide.pdf
- Denver Employees Retirement Plan, DERP Pension Benefit: https://derp.org/benefits/derp-pension-benefit/
- Denver Employees Retirement Plan, Frequently asked questions: https://derp.org/education/faq/
- IRS, Topic no. 413, Rollovers from retirement plans (irs.gov): https://www.irs.gov/taxtopics/tc413
- IRS, Topic no. 558, Additional tax on early distributions from retirement plans other than IRAs (irs.gov): https://www.irs.gov/taxtopics/tc558
Sources: the primary documents linked above, read on October 7, 2026. General information from each system’s own published materials, not legal, tax or financial advice. Your own member statement and the system’s current rules decide your benefit, and a pension counsellor at the system or a fee-only adviser is the right place to confirm anything consequential.