For Immediate Release
December 7, 2018
For More Information Contact:
Public School Employees’ Retirement System
PA PUBLIC SCHOOL EMPLOYEES’ RETIREMENT SYSTEM BOARD OF TRUSTEES CERTIFIES EMPLOYER CONTRIBUTION RATE FOR FISCAL YEAR 2020
FY 2020 Employer Contribution Rate is lower than projected
HARRISBURG, PA – The PA Public School Employees’ Retirement System (PSERS or System) Board of Trustees met today and certified an annual employer contribution rate of 34.29% for fiscal year (FY) 2020, which begins on July 1, 2019. The FY 2020 employer contribution rate is less than the previously projected 34.79% due in part to positive FY 2018 economic and demographic experience, including growth in active membership after a seven year decline and investment outperformance.
Today’s certification of the employer contribution rate marks the fourth consecutive year the employer rate provides 100% of the actuarially required rate which is necessary to pay down existing pension debt. In the past, various pieces of pension legislation suppressed the employer contributions paid to PSERS by school employers and the Commonwealth. FY 2017 was the the first time in fifteen years that the actuarially required rate was paid.
PSERS Executive Director Glen R. Grell commented, “Full funding is making a difference. We are very pleased that since 2017 the Commonwealth has remained committed to paying the full actuarially required rate which is needed to pay down the existing pension debt. While the employer contribution rate remains high, these rates are necessary to pay down the existing pension debt which built up over a lengthy 15 years of underfunding the System.”
Grell continued, “There is no doubt it is difficult for school employers and the Commonwealth to pay these rates but it must be done to pay down the debt that already exists. Various pieces of pension legislation like Act 120 and Act 5 have already significantly lowered benefit levels and resulting costs in the future. The pension debt that already exists today is a separate issue, as it is already earned and must be paid by law.”
The increase in funding from school employers and the Commonwealth has already had a positive impact on the System. The 56.5% actuarial funded ratio as of June 30, 2018 is a significant turning point for the System as future funded ratio projections are now projected to rise; reversing years of decline since the 123.8% funded peak at June 30, 2000. On a market value basis, PSERS’ funded ratio, which began to improve in 2016, also continued to increase.
Additionally, large annual employer contribution rate increases are in the past. The impact of the historic Great Recession of 2008/2009 has now been fully recognized in PSERS’ actuarial value of assets and the employer contribution rate. Pension costs have stabilized and any future projected employer rate increases are now expected to be more in line with inflation.
Total employer contributions to PSERS of $4.8 billion are estimated in FY 2020. The Commonwealth directly reimburses school employers for no less than 50 percent of the total employer contribution rate.
PSERS is also funded through investment earnings and mandatory member contributions. For FY 2018, PSERS’ investments added $4.7 billion in net investment income to the Fund. PSERS members contribute between 5.25% to 10.30% of their pay depending on their membership class and when they joined PSERS. Members are expected to contribute an average of 7.59% percent or approximately $1.1 billion in FY 2020
Other business that occurred during the meeting included:
*During the Board meeting PSERS Chief Investment Officer James H. Grossman Jr. was congratulated by PSERS Board for being named to the 2018 “Power 100” list by During the Board meeting PSERS Chief Investment Officer James H. Grossman Jr. was congratulated by PSERS Board for being named to the 2018 “Power 100” list by Chief Investment Officer Magazine. This award recognizes the “best of the best” asset owners throughout the world for their innovative new concepts and investment strategies.
*PSERS Board selected the following Tier 2 Fund options for the new PSERS Defined Contribution (DC) Plan that will be in place on July 1, 2019. PSERS Board selected the following Tier 2 Fund options for the new PSERS Defined Contribution (DC) Plan that will be in place on July 1, 2019.
-ICMA-RC VT Plus
-PIMCO Total Return Instl
-BlackRock High Yield Bond K
-Templeton Global Bond R6
-Fidelity® 500 Index Premium
-Fidelity® Extended Market Index Premium
-American Funds Europacific Growth R6
-Oppenheimer Developing Markets 1
-PIMCO Real Return Instl
-Fidelity® Real Estate Index Premium
-Calvert Balanced 1
These Funds will join T. Rowe Price Retirement Blend Target Date Funds which was selected as the default option for the DC Plan back in May 2018.
*PSERS Chief Investment Officer James H. Grossman Jr. reported the Fund earned a positive 1.40% for the quarter ended September 30, 2018. Longer-term, the Fund earned 7.78% for the 25-year and 8.47% for the 30-year periods ended September 30, 2018. Additional details on PSERS investment performance are available on PSERS’ website at: http://www.psers.pa.gov/About/Investment/Pages/default.aspx
*PSERS Chief Financial Officer Brian S. Carl reported that PSERS FY 2018 Comprehensive Annual Financial Report (CAFR) is completed and posted online. PSERS continues to be one of the first large public pension funds to post its CAFR online. PSERS received a clean audit opinion with no findings or recommendations for the last nine consecutive years and recently received its 35th consecutive Government Finance Officers Association Award for Excellence in Financial Reporting. Carl commented, “PSERS professionals are committed to providing timely, accurate and comprehensive financial reporting resulting in excellent financial governance at PSERS.” PSERS CAFR can be found on PSERS’ website at: https://www.psers.pa.gov/FPP/Publications/General/Pages/CAFR.aspx
About the Pennsylvania Public School Employees’ Retirement System
PSERS is the 15th largest state-sponsored defined benefit public pension fund in the nation. As of September 30, 2018, PSERS had net assets of approximately $57 billion and a membership of over 256,000 active school employees and over 233,000 retirees.