Among the most significant employee retirement benefit duties of a SERS-participating employer is withholding employee contributions and budgeting for employer contributions, and forwarding both of them to SERS.
While the most often referenced employee rate is one that applies to the majority of SERS members and the most often referenced employer rate is a composite of all then-current rates, there are specific employee and employer rates for each class of service in the system as detailed in the following charts:
Employee contribution rates are set by the State Employees' Retirement Code and are largely determined by the employee’s class of service.
The rates are generally fixed with the notable exception of the shared-risk/shared-gain provisions that apply to most employees who entered SERS membership since 1/1/11. If SERS investments fail to achieve the assumed rate of return over a number of years; or conversely, if SERS investments outperform the assumed rate of return over a number of years, the employee rate could increase or decrease. Although no changes have occurred yet, the employee rate could change in the future as follows:
For most employees who enter SERS membership between 1/1/11 and 12/31/18, the rate may change by 0.5% every three years and by no more than 2% overall. The next possible rate change is in July 2020, considering investment performance for calendars years 2011 through 2019.
For most employees who enter SERS membership on or after 1/1/19, the rate may change by 0.75% every three years and by no more than 3% overall. The first possible rate change is in July 2023, considering investment performance for calendar years 2020 through 2022.
The SERS Board certifies the employer contribution rates each year, typically in April, to become effective the following fiscal year beginning in July.
It is customary for rates to result from an independent actuarial valuation of the pension system. The valuation assesses the pension system's current funds and determines its future expected liabilities. The employer contribution rate is set so that it can fund all retirement benefits earned by employees working during the year and pay toward any unfunded liability that may exist.
In some years, however, the actuarially calculated employer contribution rate has been changed by Pennsylvania law.