2011-2012 Member Contribution Rate Set
The time has come for the PSRS/PEERS Board of Trustees to set the contribution rate for the upcoming school year. Each fall the Board receives a report from the System’s actuaries, PricewaterhouseCoopers, with a recommendation on the contribution rate for the upcoming school year.
Based on that recommendation for PSRS members, the contribution rate for the 2011-2012 school year has been set at a combined total of 29%, a 1% increase over last year (the statutory maximum), with Missouri’s educators paying 14.5% and employers matching at 14.5%. The current member contribution rate is 14.0% matched by the employer. The actuary calculated an annual required contribution (ARC) rate of 31.34% for PSRS, but state law limits the increase to 1% year over year. The current rate is 28%.
Based on that recommendation for PEERS members, the contribution rate for the 2011-2012 school year for PEERS has been set at a combined total of 13.72%, a .46% increase over last year (the statutory maximum is .5%), with PEERS members paying 6.86% and employers matching at 6.86%. This rate represents the annual required contribution (ARC) rate as calculated by the actuary. The current member contribution rate is 6.63% matched by the employer.
Each year, the actuaries do an in-depth study of the Retirement System and make recommendations based on what is best for the overall strength and stability of the plan. Their review includes an analysis of the demographic characteristics of plan members, a look at the System’s financial assets and liabilities, and consideration of the statutes and regulations governing the plan. Based on this research, they then make numerous assumptions about future member demographics, life expectancies, retirement patterns, and most importantly, future investment returns. All of this information is used to determine the contribution rate needed to adequately fund the plan in the future.
“Given the challenging economic times and the financial strain on members and employers, the Board’s decision to increase the contribution rate was not taken lightly,” stated PSRS/PEERS Executive Director, Steve Yoakum. “This year, more so than any other year in the history of the System, the Board, actuaries, legal counsel and staff did extensive analysis to ensure the proposed contribution rate increase was in fact the most financially sound decision for the overall stability of the fund.”
Upon completion of the additional analysis, it was determined by the Board of Trustees that to ensure the financial stability of the fund and to fulfill their fiduciary responsibility, a rate increase of 1% (PSRS) and .46% (PEERS) as recommended by the actuaries was in order. The actuaries' additional analysis concluded that the benefits of making contributions sooner rather than later are clear. Higher contribution rates in the short-term actually lead to lower cumulative contributions over 30 years, as well as a higher value of plan assets.
“As a Superintendent, I, too, will feel the impact of the rate increase in my district. But as an elected member of the PSRS/PEERS Board I know this is the responsible decision for the long-term security of the fund,” said Aaron Zalis, PSRS/PEERS Board of Trustees Chair and Superintendent, Rolla Public Schools.