Contribution Stabilization Program
- Normal Rates
- Rates for each retirement plan, established by the System’s actuary. These rates are based on the annual valuation of the System and determined using prescribed policies and procedures.
- Normal Annual Contribution
- An employer’s annual contribution to the Retirement System based on the rates established by the System’s actuary. The normal contribution is an employer’s total bill, excluding payments for deficiency, group life, previous amortizations, incentive costs and prior year’s adjustments.
- System’s Average Rates
- Average rates for the Employees’ Retirement System (ERS) and the Police and Fire Retirement System (PFRS) are determined by the System’s actuary. For fiscal year 2014, the average ERS rate is 20.9 percent and the average PFRS rate is 28.9 percent. For fiscal year 2015, the average rate will be 20.1 percent in ERS and 27.6 percent in PFRS.
- Employer’s Average Rate
- Average rate for a particular employer determined by dividing an employer’s normal contribution by that employer’s projected salary.
- Graded Rates
- Rates for the ERS and PFRS are determined following the procedures established by the Contribution Stabilization Program. For the annual contribution payment due February 1, 2014, the graded rate is 12.5 percent for ERS and 20.5 percent in PFRS.
- Each year, the graded rate will increase or decrease by up to 1 percent depending on the gap between the increase or decrease in the System’s average rate and the previous graded rate. So for the annual contribution payment due February 1, 2015, the graded rate is 13.5 percent for ERS and 21.5 percent for PFRS. Graded rates exclude any employer group life insurance owed that fiscal year.
- Graded Contribution
- The annual contribution to the Retirement System based on the graded rates established by the Contribution Stabilization Program.
- Maximum Amortization Amount
- The difference between an employer’s normal annual contribution and graded contribution. Employers that elect to participate in the Contribution Stabilization Program can choose to amortize the maximum amount or a lesser portion. Amortizations are paid over a ten-year period at an interest rate comparable to taxable fixed income investments of a similar duration.
- The interest rate on the amortized amount in a particular rate year will be fixed for the duration of the ten-year repayment period. If an employer chooses to amortize in the next rate year, the interest rate on that amortized amount will be the rate set for that year, and may be different from the previous rate year.
- The interest rate for amounts amortized in fiscal year 2014 is 3.67 percent.