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PA Pension Overview

PA Pension Overview. PSFC Meeting 2.7.13. Factors contributing to PSERS debt. 2 % 2%. 13%. 43%. Act 120 of 2010. CHANGES TO FUNDING: Required employer to pay the set rate Eliminated 2012 rate spike Committed employers to stepped up contributions subject to rate collars

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PA Pension Overview

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  1. PA Pension Overview PSFC Meeting 2.7.13

  2. Factors contributing to PSERS debt 2% 2% 13% 43%

  3. Act 120 of 2010 CHANGES TO FUNDING: • Required employer to pay the set rate • Eliminated 2012 rate spike • Committed employers to stepped up contributions subject to rate collars • Created employee “Risk-Sharing” contributions

  4. Act 120 of 2010 CHANGES IN BENEFITS (New Hires Only): • Dropped Multiplier to 2.0% with Option of 2.5% if member pays full cost difference • Increased age for full retirement to 65 or “Rule of 92” w/35 years of service • Eliminated the Option 4 lump sum withdrawals • Increased vesting period to 10 years • Increased the cost of the purchase of credit for non-school service (except for military service)

  5. Act 120 of 2010:Impact on Cost of Benefits Employer Normal Cost Rate (Pre-Act 9) Employer Normal Cost Rate (Class T-E) Normal Cost Rate 10.50% Member Rate (7.50) Employer Normal 2.20% Cost Rate Normal Cost Rate 16.06% Member Rate (av.) (7.40) Employer Normal 8.66% Cost Rate What is Normal Cost? The cost of benefits earned by school employees during the school year. Along with projected investment earnings (currently 7.5%) this amount should fully fund the retirement benefits for a member by the time they reach normal retirement age.

  6. Total ECR Unfunded Liability Rate

  7. Employer Cost Rates

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