The Pennsylvania State Employees' Retirement System manages the pension benefits of more than 230,000 employees and retirees for 104 public sector employers. In 2013, SERS paid about $2.9 billion in benefits and managed more than $27 billion in assets.
Pension Plan: Just the Facts
Pension Plan: Members, Contributions, and Benefits
Created in 1923 by the Pennsylvania State Employees' Retirement Code, SERS is a multiple-employer, cost-sharing defined benefit plan. The law requires that most state employees be SERS members and, typically, employers automatically enroll new hires.
While there are different classes of service, most employees contribute 6.25% of their salary to SERS. Then, for most employees, after working for five years, they become eligible for a lifetime pension based on a formula set forth in the law. (Employees hired on or after January 1, 2010 must work for 10 years to become eligible.
Generally, the annual benefit equals an employee's final average salary x years of service x class of service multiplier x 2%, adjusted for their age at retirement. The law does not provide automatic cost of living adjustments after retirement. When employees leave state service before becoming eligible for a lifetime pension, they can withdraw the amount they have contributed to SERS, plus 4% interest.
Pension Plan: Employer and Investment Contributions
Employers also contribute to SERS. To pay for the retirement benefits earned by most employees this year, employers would need to contribute about 5% of payroll. Investment returns also add to the pension fund. In fact, from 2002 - 2013, investment earnings provided about 75% of the money contributed to SERS.
Deferred Comp: Supplemental Savings Opportunity
Governance and Service Delivery
SERS' work is guided by the 11-member State Employees' Retirement Board, managed by an executive director and chief investment officer, and carried out by approximately 195 public employees. The law charges each SERS board member with a fiduciary responsibility to act solely in the best interests of SERS members. Approximately a quarter of SERS professionals provide member services through a network of counseling centers statewide.
On September 16, 2015, the board engaged Funston Advisory Services, LLC of Bloomfield Hills, Michigan to conduct a governance review. The purpose of the review was to examine current processes and develop ways to improve the effectiveness of Board oversight and enhance the delivery of services to SERS' more than 236,000 active, vested, and retired members. This report will be the basis for a SERS governance manual to be published later in 2016.
Funston is recognized as one of the nation's preeminent advisors to public retirement systems in the areas of governance, operations and risk intelligence. Funston interviewed board members and SERS senior staff to identify improvements and efficiencies of the Board in serving the needs of the system's members.