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Shared Risk/Gain Contribution Rate FAQ
The Shared-Risk/Gain Contribution Rate is the additional Defined Benefit (DB) contribution rate added to the Basic Contribution Rate for Class T-E, Class T-F, Class T-G, and Class T-H. With this "shared risk/shared gain" provision, Class T-E, Class T-F, Class T-G, and Class T-H members can benefit when PSERS’ investments are doing well but share some of the risk when PSERS’ investments underperform. The parameters for when the Shared-Risk/Gain Contribution Rate is triggered are set forth in the Retirement Code. Generally, if the actual investment rate of return (net of fees) is less than the Board’s assumed rate of return by 1% or more, then the Shared-Risk/Gain Contribution Rate will increase by 0.5% (Class T-E and Class T-F) and by 0.75% (Class T-G and Class T-H). Conversely, if the actual investment rate of return (net of fees) is more than the Board’s assumed rate of return by 1% or more, then the Shared-Risk/Gain Contribution Rate will decrease by 0.5% (Class T-E and Class T-F) and by 0.75% (Class T-G and Class T-H). The DB contribution rates may increase or decrease by 0.50% or 0.75% within the statutory range every three years.
In December 2020, the PSERS Board certified the member contribution rates for Class T-E, Class T-F, Class T-G, and Class T-H members effective from July 1, 2021 to June 30, 2024 based on the statutory calculation set forth in the Retirement Code. The PSERS Board was subsequently advised of errors in the data used for the calculation. The error in the data resulted in PSERS investment performance not meeting the shared risk target range for the nine-year evaluation period ending June 30, 2020. Therefore, the Board recertified the member contribution rates on April 19, 2021.
The DB member contribution rates for all public school employees who first became members of PSERS after June 30, 2011 (Class T-E, Class T-F, Class T-G, and Class T-H members) will increase by 0.50% or 0.75%, depending on a member's membership class, until the next evaluation period in three years (see chart below). This includes the DB member contribution rate for employees who become members of the system in the next three fiscal years leading up to the next evaluation. In fiscal year 2021, there were nearly 100,000 active members reported to PSERS from these membership classes.
|Class ||Base DB Contribution Rate ||Shared Risk Increase ||Total DB Contribution Rate Starting July 1, 2021|
|Class T-E ||7.50% ||+0.50% ||8.00% |
|Class T-F ||10.30% ||+0.50% ||10.80% |
|Class T-G* ||5.50% ||+0.75% ||6.25% |
|Class T-H** ||4.50% ||+0.75% ||5.25% |
*+2.75% DC Contribution Rate; **+3.00% DC Contribution Rate
Similar to the Basic Contribution Rate for all members, the Shared-Risk/Gain Contribution Rate is mandated by law and cannot be waived. Act 120 of 2010 and Act 5 of 2017 created a mandatory risk-sharing program for all members who first enroll in PSERS after June 30, 2011 (Class T-E, Class T-F, Class T-G, and Class T-H members).
No. Only qualified part-time salaried, part-time hourly, or part-time per diem employees have the opportunity to waive membership with PSERS but must do so within 90 days of notice. Additionally, to qualify to waive membership with PSERS, you must have an Individual Retirement Account (IRA) or other eligible retirement plan such as a Traditional IRA, Roth IRA, Simplified Employee Pension (SEP), or a Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) IRA. Once you waive membership, the waiver remains in effect until you accept a position for which membership is mandatory or you later elect to enroll in PSERS.
No. The Shared-Risk Contribution Rate is only for the DB Plan. The DC contribution rate is also mandated by law, but does not fluctuate based on investment earnings or any other factor, and, therefore, is not subject to change.
The new rates will remain in effect until June 30, 2024. In December 2023, the Board will review the results of the next evaluation period and certify the Shared-Risk/Gain Contribution Rate for the impacted membership classes beginning July 1, 2024.
The next evaluation will occur for the period ending June 30, 2023. The PSERS' investment performance for the previous 10 years will be used to calculate whether the targeted investment rate of return was met within the applicable parameters and conditions set forth in the Retirement Code and as discussed generally above. (See "What is the Shared-Risk/Gain Contribution Rate?")
Yes. The DB account of active and vested members of PSERS accrue interest on their contributions and interest at a statutory rate of 4% compounded annually, which will continue to accrue until a refund or retirement is requested. The contributions, including the Shared-Risk/Gain Contributions, and interest on such contributions are available to withdraw at termination. Remember, though, that when retiring, the DB monthly retirement benefit is reduced based on the amount of contributions and interest that is withdrawn and the chosen benefit payment option.
The Shared-Risk/Gain Contribution Rate is part of the overall, total PSERS contribution rate required to be deducted from payroll for all school service rendered on and after July 1, 2021. As in any year, reporting to PSERS is based on when the work was performed, not when it was paid. Thus, the Shared-Risk/Gain Contribution Rate will not be deducted for work performed at the end of June 2021 because such service is reported for the 2020-2021 year. All school service performed on and after July 1 will be reported for the 2021-2022 year and the contributions deducted and remitted to PSERS will include the Shared Risk Contribution Rate. If you have a pay period that crosses over fiscal years, the work reporting should be properly split to reflect payment and retirement credit in the proper fiscal years.
Every school employer is required to include the Shared-Risk/Gain Contribution Rate for affected members for all service rendered on and after July 1, 2021. Once employers log into their Employer Self-Service dashboard, they can use the "Generate Reports" Quick Link to access the Total Service Credit Report. This report displays all members that employers report to PSERS and includes the membership class and updated contribution rate for each member. The member and the employer must ensure that the correct amount of contributions are deducted and remitted to PSERS timely. You should review your pay stubs and contact your employer with any questions.