Once a year, as a participating employer, you pay your share of the annual cost of your employees’ future benefits. Annual contribution rates play a major role in the total amount of your annual payment. But, do you know the criteria we use to determine those annual contribution rates?
The value of the Common Retirement Fund (the Fund) and the rate of return on our investments have a significant impact on the rates. That’s only part of the story, however. The System’s actuary has to ensure that adequate assets are being accumulated to pay benefits as they become due. And in order to do that, the actuary has to make assumptions about factors such as employee mortality, turnover, expected investment returns, salary growth and even inflation.
To gain a more complete understanding of how contribution rates are established and the relationship between actual investment returns and those rates, we encourage you to read on.