Why do employers “pick-up” the 6% employee contribution?
Many bargaining units negotiated with school districts to have pay this contribution instead of getting raises. Employers pay a percentage of their total payroll as taxes. By “picking-up” the 6% employee contribution, employers no longer paid payroll taxes on that contribution which saves the district money.
Why do we allow people who are collecting PERS retirement benefits to work for PERS-covered employers, essentially “double-dipping”?
Retirees who continue to work part-time actually save districts money because the district is no longer paying into PERS for that employee. The employee would collect his/her retirement benefit regardless of whether he/she worked for the school district.
Employee continues to work
District hires new part-time employee to replace retiree
District hires employee on a part-time basis
Employer’s 20% required PERS contribution
Employer’s 5% payroll takes
Total district dollars
How are employer PERS rates set?
The PERS board uses information from the actuarial value of the PERS fund to determine the percentage of payroll employers must pay. A valuation is a mathematical calculation of the financial health of a pension plan. Although the actuary prepares a PERS valuation every year, only the odd-year valuations are used to set rates. The even-year valuations are only advisory information.
Valuations are released approximately 1 year after the end of the valuation period. The rate changes take effect 18 months after the valuation date. Therefore, the payroll rates that took effect July 1, 2011 are based upon the December 31, 2009 valuation. These payroll rates will be in place until July 1, 2013. As a result, the rates paid in June 2013 are based on data which is almost 4 years old.
What is being done about the PERS challenge?
For information about the 2013 Legislative reforms, check out the PERS reform page.