New Defined Benefit Member Rates for Shared Risk Membership Classes Beginning July 1, 2021
In December 2020, the PSERS Board certified the member contribution rates for Class T-E, Class T-F, Class T-G, and Class T-H members effective from July 1, 2021 to June 30, 2024. The PSERS Board was subsequently advised of errors in the data used for the calculation which has caused it to recertify the member contribution rates.
It has been determined that the PSERS investment performance did not meet the shared risk target range for the nine-year evaluation period ending June 30, 2020. This means the Defined Benefit (DB) member contribution rates will increase by 0.50% or 0.75%, depending on a member's membership class within PSERS (see chart below) until the next evaluation period in three years.
This change does not have any impact on the amount that is required to be contributed by participants to the DC Plan. This also does not impact the employer contribution rate for fiscal year 2021-2022, which will remain at 34.94%.
What Is Shared Risk?
With a "shared risk/shared gain" provision, Class T-E, Class T-F, Class T-G, and Class T-H members can benefit when PSERS investments are doing well and share some of the risk when PSERS investments underperform. DB contribution rates may increase or decrease by 0.50% or 0.75% within the specified range every three years.
Act 120 of 2010 and Act 5 of 2017 created a risk-sharing program for all members who first enrolled in PSERS after June 30, 2011 (Class T-E, Class T-F, Class T-G, and Class T-H members).
|Class ||Base DB Contribution Rate ||Shared Risk Increase ||Total DB Contribution Rate Starting July 1, 2021|
|Class T-E ||7.50% ||+0.50% ||8.00% |
|Class T-F ||10.30% ||+0.50% ||10.80% |
|Class T-G* ||5.50% ||+0.75% ||6.25% |
|Class T-H** ||4.50% ||+0.75% ||5.25% |
*+2.75% DC Contribution Rate; **+3.00% DC Contribution Rate
Next Steps For You
- PSERS is providing notification of this change to software providers at the same time that this is being shared with you. If you do not hear from your software provider in the next few days, you should contact your software provider and begin working with them to ensure that your reporting software accommodates these changes in contribution rates.
- These new rates will begin July 1, 2021 for impacted employees for service rendered in FY 2021-2022.
- Remember, reporting to PSERS is based on when the service occurred, not when it is paid. This means that your payroll system will need to allow for old or previous contribution rates to be used if reporting withholding for an employee for service rendered prior to July 1, 2021. This will be true for reporting balance of contract funds for FY 2020-2021, late reporting, and for any adjustments for service prior to July 1, 2021.
Next Steps For PSERS
- PSERS will be sending correspondence to all impacted members informing them of their upcoming contribution rate change.
- Please note that there is no change for Class T-C, Class T-D, and Class DC members so they will not receive a communication from PSERS.
- PSERS will also be providing information to employers so that they can also assist in communicating this change through email websites or payroll inserts.
- The next evaluation will be based on PSERS investment experience for the period ending June 30, 2023 and will impact the DB member contribution rate for impacted members beginning July 1, 2024.