The Board of the PA State Employees’ Retirement System Wednesday formally adopted the composite employer contribution rate set by current law at 29.5 percent of payroll for the Commonwealth’s 2016-17 fiscal year.
The contribution rate for FY 2016-17 was 25 percent.
“Even during very difficult budget negotiations, policymakers and our employers have remained disciplined to restoring funding to employee pensions according to the levels established in Act 120,” explained SERS Executive Director David Durbin. “Only two budget cycles remain until the employer contribution rate peaks and begins to steadily drop each year.”
The board adopted the employer rate following a report by the system’s actuary, Hay Group, on the 2015 actuarial valuation key results. Hay Group will proceed in producing the full 2015 valuation report to be published this June.
The employer rate reflects a 4.5 percent “collar” established by Pennsylvania Act 2010-120 which limits year-to-year increases in employer contributions while still gradually increasing funding to the pension system over time.
According to the key results, the actual cost of retirement benefits earned by new employees in FY 2016-17 – the “employer normal cost” – is approximately 4.52 percent of payroll.
This is the rate employers would pay if there were no unfunded liability and all other actuarial assumptions proved to be exactly accurate over the year. Incorporating the unfunded liability, however, the composite employer rate to fully fund the system would be more than 32 percent of payroll without the Act 2010-120 rate collar.
The composite employer rate represents a weighted average of 18 different rates for the system’s various classes of service; SERS will notify each employer of the actual rates for its employees.For more information, visit the PA State Employees’ Retirement System website.