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PERA members can purchase withdrawn/refunded service credit, military service credit, and “air time” service credit, priced from an audited cost estimate PERA provides on request.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.
Refunding or rolling over your PERA contributions
PERA of New Mexico describes a refund or rollover as an option that opens when employment ends. Its refund page says “If you terminate employment, you can apply for a refund or a rollover of your member contributions and interest” and sets a condition: “as long as you are not employed by another affiliated employer for 30 calendar days.” For the general trade-off between taking a refund and leaving the money in a plan, see pension refund versus leaving it.
The page is explicit about what is not returned: “You will not receive a refund or rollover of the employer contributions.” The members FAQ gives the reason in its answer on account balances: “by statute, employer contributions remain in the PERA Fund and are used for investments and to pay the costs of the fund.”
The cost of taking the money is stated just as plainly. PERA says “When you refund or rollover your member contributions and interest, you forfeit your service credit and all rights to any pension benefit from PERA, including disability or survivor benefits.” For a member weighing a refund against a deferred pension, that sentence is the center of the decision: the refund ends the claim to a monthly benefit, and the disability and survivor protections go with it.
A later return to public work does not restore the credit automatically. The refund page says “If you return to a PERA-affiliated employer, you will start from zero on service credit and contributions.” The way back is described next: “you can recover the prior credit by repaying the withdrawn amount, along with interest calculated from the date the contributions were withdrawn to the date of repayment.” The members FAQ repeats the point for a member who thinks credit is missing: “You may be able to reinstate the service credit by purchasing the withdrawn service credit.” The buyback arithmetic is covered in the pension buyback calculator.
On process, the refund page says “All refund requests must be made by filling out a Member Request for a Refund or a Co-payee Request for a Refund.” Rollover requests use a parallel pair of forms. It adds that “your employer must also submit a termination form prior to processing a refund or rollover.” On timing it says “Please allow up to 60 business days to process.”
One beneficiary rule bears on the same decision. The FAQ says “The refund beneficiary designation is very important if you have not vested.” It explains that “If you die before you are vested and your death is not duty-related, your member contributions plus interest are paid in a lump sum to your designated refund beneficiary.” and that “If you do not designate a refund beneficiary, your member contributions will be paid to your estate.”
| Item | Figure | Where PERA states it |
|---|---|---|
| Wait after leaving affiliated employment before a refund or rollover can be requested | 30 calendar days | PERA refund or rollover page |
| Processing time for a refund or rollover | up to 60 business days | PERA refund or rollover page |
| Refund forms by type | member request, co-payee request | PERA refund or rollover page |
| Employer contributions returned | none | PERA refund or rollover page |
No computed example is given here, because the pages read state no interest rate or crediting method for the interest added to member contributions, so no refund amount can be recomputed. What the pages read do not state: the rate of interest paid on a refund, whether a refund is taxed or can be rolled over without tax, how a rollover is sent, or the interest rate charged on repayment. For the tax side of a lump sum, see the 20 percent withholding page.
Sources for this section:
- Public Employees Retirement Association of New Mexico, nmpera.org refund-or-rollover: https://www.nmpera.org/members/life-events/refund-or-rollover
- Public Employees Retirement Association of New Mexico, nmpera.org members-faqs: https://www.nmpera.org/members/members-faqs
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.