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The Frequently Asked Questions below pertain to the 2014 employer contribution rates for the Indiana Public Retirement System (INPRS) that oversees seven funds in the system. Employers recently received communication regarding their employer contribution rate for 2014.
What is the current employer contribution rate for 2013?
The current rate is 7.5 percent beginning July 1, 2012 through June 30, 2013.
The contribution rate varies based on employer.
The current rate is 19.7 percent beginning Jan. 1, 2013 through Dec. 31, 2013.
When does the new 2014 rate become effective?
Effective dates are as follows:
How often are employer rates reviewed?
Employer contribution rates are reviewed annually by the INPRS Board of Trustees and are based on the actuarial valuation of the prior fiscal year (July 1 through June 30). Thus, the 2014 employer contribution rate was based on the actuarial valuation of the fiscal year ending June 30, 2012.
Who has the authority to set the contribution rates?
The INPRS Board of Trustees is authorized to set the employer contribution rates. The board uses the expert assessment of actuaries and considers liabilities, assets, and the amount needed to fund past and estimated future benefit payments while maintaining the health of the fund.
Why did my rate go up?
Market gains and losses are phased-in over a four-year period, meaning investment losses experienced in fiscal years 2008 and 2009 are reflected in your employer contribution rate.
What determines my employer contribution rate?
The employer contribution rate is determined by investment performance over a rolling four-year period, as well as the demographics of fund members, such as age, salary and years of service.
Actuarial assumption changes can also play a role. To determine funds necessary to pay member benefits, INPRS’ actuaries use economic and demographic assumptions to predict the amount and timing of the benefits that will be paid as well as the amount and timing of contributions required. Those assumptions are periodically compared to the actual experience of our members and to economic forecasts to ensure that they reflect recent trends and expectations. Lower expected returns on investments means higher employer contributions are needed to fund benefits. In addition, recent studies show that, on average, people are living longer. As such, the mortality assumption used by our actuaries was updated to reflect longer life expectancy. Since benefits are paid to our members for life, longer life expectancy means more funds are needed to pay the benefits.
What is Senate Enrolled Act 549?
Previously, a separate contribution rate was calculated for each of PERF’s employers. Senate Enrolled Act 549, which passed in 2011, allows INPRS to create a pool of employers with a common rate. This is intended to reduce the year-to-year volatility of employer contribution rates.
How does Senate Enrolled Act 549 affect PERF employer contribution rates for 2014?
In 2014, most PERF employers will participate in the composite rate pool. However, the board of trustees limited the maximum rate increase to 1.5 percent for any PERF employer from year to year. Assuming a relatively stable market in the coming years, INPRS anticipates stable rates for employers in future years, once all employers are in the composite pool.
Does the employer contribution rate include the 3 percent (3%) that employers may “pick up” for employees?
No. The employer contribution rate is used to fund the pension component of the retirement benefit. The 3 percent (3%) that employers may resolve to pick up for employees goes toward the Annuity Savings Account (ASA) component of the members’ retirement benefits.
When will employers be required to submit their reports and payments through the Employer Reporting and Maintenance (ERM) system?
Starting with payroll dates that occur on or after October 1, 2012, employers will be required to submit their reports and payments on a payroll basis through ERM. Employers may also go online to er.inprs.in.gov for updates on ERM progress.
What should I do if I have additional questions about my employer contribution rate?
Please call our office at (888) 876-2707 or via e-mail at firstname.lastname@example.org. We are available Monday through Friday from 8 a.m. to 5 p.m. EST.