Contribution Stabilization Program
How the Program Works
- We determine an employer’s normal annual contribution using the rates established according to our usual procedures. The Contribution Stabilization Program does not change these procedures or the method for determining the normal annual contribution. The normal annual contribution is the total bill, excluding payments for deficiency, group life, previous amortizations, incentive costs and prior year’s adjustments.
- We establish graded rates using the methods established by the Contribution Stabilization Program.
- We determine an employer’s graded contribution.
- The maximum amount an employer can amortize is the difference between the normal and graded contribution. Employers may choose to amortize less than the maximum amount.
- Employers will pay interest on the amortized amount, which will be determined by the Comptroller and be comparable to taxable fixed income investments of a similar duration. The interest rate will be set annually.
- The interest rate on an amount amortized in a given year will be the interest rate for that year and will be fixed for the duration of that ten-year payment period. Amounts amortized in other years will be at the interest rate set for the year of the amortization.
As the System’s average rates rise, your annual contribution under this program would be less than the normal contribution, since the graded rate increase is capped at 1 percent. When the System’s average rates begin to decline, the graded rates will decline in 1 percent increments. Therefore, it will be possible for the System’s average rates to be lower than the graded rates. In this case, you will be required to pay the graded rate. Any additional contributions you make will first be used to pay off existing amortizations. If all amortizations have been paid, any excess will be deposited into a reserve account and will be used to offset future increases in contribution rates.