Board Holds Interest Rate Earned on Member Contributions, Rate Charged on Reinstatements and Purchases
May 2, 2014
Member contributions will continue to earn 1%, while reinstatements and affected service purchases will continue to accrue interest at 8%.
At the April 14 meeting of the Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS) Board of Trustees, the Board voted to keep the interest rate earned on eligible members' contributions at 1% for June 30, 2014. They also voted to keep the interest rate charged on reinstatements and those service purchases accruing interest at 8% for the 2014-2015 school year.
Interest on Retirement Contributions
Each April, the Board sets the interest rate paid on members' contributions to the Retirement Systems. On June 30 of each year, interest is credited based on the previous June 30 balance. This occurs until the membership is closed due to retirement, refund, death or absence from covered employment by a non-vested member.
Historically, the rate of interest paid on members' contributions has been set at a level similar to current rates on the average savings account. The interest rate has been 1% since June 30, 2010.
This interest rate has no impact on the amount of monthly retirement benefits. Interest is paid to inactive members who request refunds, and to the beneficiaries of deceased members who receive a lump-sum payment of a member's contributions and interest.
"Interest rates have remained relatively stable, but historically low again this year," said PSRS/PEERS Executive Director Steve Yoakum. "The Board and staff believe the 1% rate of interest continues to be fair for our members."
Interest on Reinstatements and Service Purchase Balances
The Board also voted to keep the interest rate charged on reinstatements of previously forfeited PSRS/PEERS service and applicable service purchases at 8%. According to Board regulations, the interest rate on reinstatements and purchases is based on the Systems' assumed, or target rate of return on investments. The actuarially assumed rate of return and interest rate on reinstatements/purchases have both been 8% since July 1, 1980.