Pension

What is PSERS?

The Public School Employees' Retirement System (PSERS) is an agency of the Commonwealth of Pennsylvania that administers the pension plan for Pennsylvania's public school employees. Under the Internal Revenue Service (IRS) Code, the PSERS pension plan is classified as a 401(a), governmental defined benefit plan. A defined benefit plan means that your retirement benefit is determined by a formula which includes a retirement factor, years of credited service, and the final average salary.

Since 1917, PSERS has been serving the public school employees of the Commonwealth of Pennsylvania. The number of individuals we serve has grown from 37,000 in 1919 to more than 600,000 today. Balancing stability and growth through prudent investment policies, PSERS' assets have grown from $6 billion in 1982 to approximately $52.0 billion as of June 30, 2014.

Source: PSERS.pa.gov

Why escalating pension costs are unsustainable

The problem facing the state and school districts is the high employer contribution costs to sustain the current retirement system. These mandated expenses continue to increase each year, taking larger shares of already-stretched budgets. In the coming fiscal year, both the state and school officials must figure out how to pay pension obligations that continue to mount, with the total employer contributions for 2017-18 projected by the Public School Employees Retirement System (PSERS) at nearly $4.4 billion. Beginning on July 1, 2017 the annual employer contribution rate that must be paid by the state and school districts will jump to 32.57%, up from 30.03% in 2016-17, and from the 2015-16 rate of 25.84%. The contribution will continue to climb over the next few years to a staggering 36.40% by 2021-22. Click here for a history of Pension rates from 1960

According to PSERS, those rising rates means that over the next five years the projected total employer contribution will surge from about $4.4 billion to about $5.2 billion, an increase of over $864 million. While half of that amount is a state responsibility, the other half must be paid by school districts.

Source: PSBA

Why does the Commonwealth need Pension reform?

As participants in the Public School Employees' Retirement System (PSERS), school districts are required to make contributions, which are an actuarially calculated percentage of district payroll, to help fund the system. These contributions continue to rise at unprecedented rates. PSBA wants to ensure school districts can provide a high quality public education and the association remains very concerned that the pension costs will impede the ability to do just that. If no action is taken soon by the General Assembly, school boards and taxpayers face the unenviable burden of coming up with millions of dollars to meet the system's underfunded mandate.

Source: https://www.psba.org/issue/pennsylvania-pension-crisis/

For more information on Pension reform, see the links below:

PSBA:

Articles:

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