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Contribution Stabilization Program

Calculating the Maximum Amount Eligible for Amortization

First, the System’s Actuary determines the System’s average and graded rates.

For fiscal year 2015:

  • The average rate is 20.1 percent for ERS (including 0.4 percent Group Life Insurance Program [GLIP]) and 27.6 percent for PFRS (including 0.1 percent GLIP).
  • The graded rate is 13.5 percent for ERS and 21.5 percent for PFRS.

For fiscal year 2016:

  • The average rate is 18.2 percent for ERS (including 0.5 percent GLIP and 24.7 percent for PFRS (no GLIP rate this year).
  • The graded rate is 14.5 percent for ERS and 22.5 percent for PFRS.

Then, the Actuary:

  1. Determines the employer’s normal contribution

    Subtracts the value of Group Term Life Insurance (GTLI) from employer’s invoiced contribution (not including payments for deficiency, previous amortizations, incentive costs or prior year’s adjustments).

  2. Determines the employer’s average rate

    Divides the normal contribution by the projected salary.

  3. Determines the employer’s graded rate

    Compares the employer’s average rate to the System’s average rate. If the employer’s average rate is ≥ 75 percent of the System’s average rate, the employer’s graded rate equals the System’s graded rate.

  4. Determines the employer’s graded contribution

    Multiplies the employer’s projected salary by the employer’s graded rate.

  5. Determines the maximum amortization amount

    Subtracts the employer’s graded contribution from the normal contribution.

Example of Amortization Calculation (For Fiscal Year 2015)

Employer’s projected salary $100,000,000
Employer’s normal annual contribution (invoiced contribution based on retirement plans offered and normal contribution rates minus the value of GTLI) 19,700,000*
Employer’s average rate (employer’s normal contribution divided by employer’s projected salary) 20.1%
Employer’s graded rate (since employer’s average rate is ≥ System’s graded rate, employer’s graded rate equals System’s graded rate) 13.5%
Employer’s graded contribution (employer’s projected salary multiplied by employer’s graded rate) 13,500,000
Maximum amortization amount (difference between the employer’s normal contribution and graded contribution) 6,200,000**

*Does not include payments for deficiency, previous amortizations, incentive costs and prior year’s adjustments.

**Lesser amounts can be amortized and employers are not required to amortize each year.

(Rev. 10/14)