Pension calculation error raises contributions for 100,000 Pennsylvania teachers
The Public School Employees’ Retirement System (PSERS) voted this week to raise contribution rates for about 100,000 workers in Pennsylvania.
The 12-1 vote comes after miscalculations in its investment portfolio performance over the last nine years were made public. The change means employees hired in 2011 or later will see rates increase on July 1.
In December, the board agreed to keep contributions flat after an analysis of the system’s rate of return over the last nine years averaged 6.38%. State law mandates that contributions increase when that figure falls below 6.36%.
Unnamed consultants alerted PSERS last month to miscalculations in the rate that put the average return closer to 6.34%, triggering a contribution increase.
“The Board regrets the uncertainty and confusion caused by these errors,” PSERS board of trustees said in a news release Monday. “PSERS will begin work immediately to notify school employees and school employers around the Commonwealth.”
The board also said it hired outside counsel to investigation how the error occurred in the first place.
PSERS represents about 500,000 current and former teachers and school workers. With assets valued at $64 billion, it’s the largest public pension system in the state. It’s also carrying a $40 billion deficit, the result of decades of state policy decisions and underperforming investments.
The situation places enormous strain on school district budgets and the taxpayers that help fund them, increasing local contributions $5 billion since the early 2000s, according to The Philadelphia Inquirer.
The decision also comes amid a federal probe of the system’s real estate investments, confirmed by the board in a statement earlier this month. The Inquirer reports that PSERS’ $13.5 million purchase of several parcels along Market Street in Harrisburg is at the center of its investigation. It’s unclear if the two incidents are related.