Employer and employee contribution rates to SCERS are both set to decrease slightly next year, based on an actuarial analysis being presented to the Board of Retirement on December 6.

The employer rates will mark the second year in a row of lower pension contributions, a reversal from years of rate increases due to more prudent funding policies and investment losses following the Great Recession.

At its December 6 meeting, the SCERS Board of Retirement will be reviewing the actuarial valuation and adopting contribution rates for the next fiscal year that begins July 1, 2024. The agenda materials can be found here. The Board meeting begins at 10 a.m. and will be live-streamed from the quick link at scers.org.

The aggregate employer contribution rate is decreasing by 0.85% of payroll for the 2024-25 fiscal year. The aggregate employer contribution rate fell by 0.6% of payroll for the current 2023-24 fiscal year.

The aggregate employee contribution rate is also decreasing by about 0.3% of pay for 2024-25. The specific rates vary by employer and retirement tier.

The drop in employer rate is largely due to an extraordinary 27.7% net investment return in 2020-21, which provided a funding cushion for future years. Employer rates may continue to drop slightly for each of the next several years if SCERS meets its investment target. 

Overall, the long-term funding outlook for SCERS remains strong despite the pension fund falling just short of the investment target of 6.75% this past fiscal year, finishing with a 6.1% investment return. SCERS ended the 2022-23 fiscal year with a funded status of 86.1%, a decrease from last year’s 87.1%. 

The funded status is the ratio of pension assets to liabilities. It represents a “temperature check” on how the pension fund is performing at a point in time and guides SCERS’ actuaries on how to adjust contribution rates to ensure the funding is sufficient over the long term to support the benefit obligations due to more than 30,000 employees, retirees, and beneficiaries. SCERS targets a 100% funded status over a 20-year period, and remains on track to achieve that goal.