June 9, 2022
IMPORTANT EMPLOYER ANNOUNCEMENT
Please read carefully
As part of its ongoing review of all system operations, PSPRS has identified and is addressing two separate issues affecting employers and members related to calculating Tier 2 contribution rates and applying interest to DROP payments. These issues will not have a material impact on employer funded status and contribution rates, but will need adjustment. Employers are being notified of this in keeping with the Board of Trustees’ and PSPRS staff commitment to transparency.
The board took action on these issues at the May 26, 2022, meeting and instructed staff to communicate with stakeholders and to adjust the affected accounts. The meeting agenda (agenda items 6 & 7) is available online and revised copy of the presentation materials is available here.
PSPRS expects to initiate the adjustment process – including communicating with all impacted members – during the 2023 fiscal year (which begins July 1, 2022). The current target date for resolution is September 2022.
For Tier 2, impacted public safety and corrections Tier 2 and select Tier 1* members working for impacted employers contributed too much to the system under plan contribution statutes. In accordance with statute, Tier 2 and select Tier 1* member contribution rates should have been calculated at the individual employer level based on employer funding status.
In the near future, PSPRS will work with impacted employers to ensure that all impacted members are identified and issued accurate excess contribution refunds plus interest. A preliminary review has identified approximately 140 impacted employers. However, a final report will be made available after the June 30, 2022, end of the current fiscal year. Please note that not all Tier 2/Tier 1* members will receive excess contribution refunds, depending on fiscal year(s) worked for the impacted employer(s).
All employers are encouraged to review their FY2021 valuations https://www.psprs.com/investments--financials/annual-reports, which include correct Tier 2 member contribution rates to be implemented for the 2023 fiscal year beginning July 1, 2022.
For DROP interest, some public safety retirees and members were overpaid interest based on a computer programming error, beginning in 2011. The DROP interest issue affects a number of members that exited DROP July 1, 2011 and after, but also must have entered DROP prior to July 1, 2018. PSPRS will provide more information, but is not anticipating seeking recovery for any excess DROP interest paid out of the plan to members. This issue will not require any action from employers.
We will be communicating with you on our review process and these two issues as more information becomes available after the June 30, 2022, end of the current fiscal year. Thank you for your understanding as we work to make PSPRS the most accurate, accountable and best-managed pension system in the U.S.
Tier 2 public safety members were hired Jan. 1, 2012, to June 30, 2017
Tier 2 corrections members were hired Jan. 1, 2012, to June 30, 2018
*Public safety members hired between July 20, 2011, and Dec. 31, 2011, are eligible to receive Tier 1 benefits but make contributions under Tier 2 statutes. This is due to a discrepancy in state law.