The amount each employee is required to contribute to the retirement system is set by statute. If you began employment on or after July 1, 1996, you must contribute nine percent of your regular compensation to the retirement system. If you were hired any time between January 1, 1984 and July 1, 1996 your contribution rate is set at eight percent. Members who joined the system any time between 1975 and 1983 contribute seven percent. Those employees who became members prior to 1975 are contributing five percent.
The law also mandates that for members whose employment commenced on or after January 1, 1979, an additional two percent will be withheld on regular compensation over $30,000. This two percent is in addition to the seven, eight or nine percent that is already being deducted from total regular compensation.
Your contributions are placed in an individual annuity savings fund, which earns annual interest at a rate comparable to that of a passbook savings account. The interest rate is determined by the Public Employee Retirement Administration Commission and the Commissioner of Banks. This annual interest rate is independent of that earned on the retirement system’s investments.
No. Your future retirement allowance is not based on your annuity savings account balance. It is instead determined by a formula consisting of your age, service and average salary at date of retirement. The money in your account is used to fund the annuity portion of your total allowance but the value of your account balance at retirement is not used in calculating your maximum retirement allowance.
No. Employee contributions are never used to fund administrative expenses. Operating expenses, including fees associated with actuarial and audit services, investment management, consultant and custodial fees, are funded solely through the system’s investment income.