Pension Issues in Education: Why are we talking about PSERS?

Under a defined benefit plan, your benefit is fixed by law. Under a defined benefit plan, your benefit is fixed by law. Average of Highest Three Years of Salary (FAS) x2.5%x Years of School Service The complete benefit formula includes calculations for any applicable non-school service and for any applicable Early Retirement Factor.

Under a defined benefit plan, your benefit is fixed by law. Under a defined benefit plan, your benefit is fixed by law. $10,000 (FAS) x2.5%x 35 years = $8,750 (annual annuity) For each $10,000 in Final Average Salary, your annuity would be $8,750 (or 87.5%) if you work 35 years. The complete benefit formula includes calculations for any applicable non-school service and for any applicable Early Retirement Factor.

How retirement systems work There are, basically, two sources of revenue into any retirement system: –contributions (from employers and employees), and – investment returns (on the assets already in the system). When employer contributions are high, the system is less dependent on investment returns. If Investment returns are low and/or the employer chooses to postpone payments into the system, then, eventually, the delayed payments will catch-up in the form of even higher required contribution rates. At the turn of the century, the Investment returns were negative and the contributions were nearly zero.

The “Pension Spike” results from two primary causes: 1. historically bad investment markets -- two in just one decade, and 2. underfunding by the employers.

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