Long-term expected contribution rates are the rates that would be realized if the Fund consistently earned a 7.5 percent rate of return annually. On a long-term basis, employers should expect to pay these rates as a percentage of their payroll to the Retirement System each year. Most Employees’ Retirement System (ERS) members are enrolled in Article 15. New members of the System will be registered in Tier 6, which began April 1, 2012.
The Tier 6 Article 15 long-term expected contribution rate is 6.5 percent of payroll (6.6 percent if you have elected Section 41-j, the sick leave benefit).
Most Police and Fire Retirement System (PFRS) employers offer their employees the 384-e retirement plan, which allows members to retire after completing 20 years of service. Employers have the choice between offering a contributory plan, where employees must also pay contributions, or a non-contributory plan, where only the employer makes contributions. The long-term expected contribution rate for the Tier 6, 384-e contributory plan is 10.8 percent of payroll and non-contributory is 16.2 percent of payroll.
If the Fund averages more than 7.5 percent over an extended period of time, you should expect your contribution rate to be less than the long-term expected rate. If the Fund earns less than 7.5 percent over an extended period of time, you should expect your contribution rate to be higher than the long-term expected rate.
You can compare the long-term expected rates to the actual annual contribution rates from 1985 to present for both ERS and PFRS employers on these charts.
You can compare the long-term expected rates for Tier 4 for the period FYE 1992 to FYE 2014 to the actual annual contribution rates for ERS employers on this chart, which shows that, beginning with Fiscal Year 2011, Tier 4 actual rates began becoming higher than the long-term expected rates.
You can compare the long-term expected rates for the Tier 2 384-e plan to the actual annual contribution rates for the period FYE 1992 to FYE 2014 for PFRS employers on this chart, which shows that, while the Tier 2 384-e long term expected rates have remained largely steady since 1992, and have recently actually started to go down, the actual annual contribution rates have been steadily increasing since 2003.