Employee contribution to retirement

  • Published: June 21, 2011
  • We have received several calls regarding the new law that adjusts the employees’ contribution toward retirement costs. We will provide an explanation of the new law and a copy with the end-of-session Legislative Report, but felt that some details would help address some confusion that seems to exist.

    This new law adjusts the contribution that public employees will be required to pay toward the costs of their participation in the State Employees Retirement System. This new law does not change the retirement benefit that will be received by the employees, but only shifts the costs that are being paid by the employee and the employing entity.

    For state agencies and departments, the law REDUCES the costs that will be paid by the agency and INCREASES the costs that will be paid by the employee. Initially the employee contribution is increased from 5 to 7.25 percent of their salary beginning on Oct. 1, 2011. This amount is then increase to 7.5 percent of salary on Oct. 1, 2012. The cost paid by the state agency is, therefore, reduced by the additional amount that is paid by the employee.

    This step was taken by the Legislature as a way to reduce the costs of the state agencies (and education agencies, as well) in order to balance the state budgets. As introduced, the law would have also applied to counties. However, it was amended during the legislative process and is not now mandatory for the local agencies that participate in the retirement system.

    Again, it is important that you know that the increased employee contributions are NOT mandatory for counties. The contributions required by your employees will remain at 5 percent unless the county commission adopts a resolution electing to come under the provisions of the changes in this new act. This decision by the commission can be made at any time. However, should the commission elect to have the act apply to the county employees, the full increase will be applied to all employees. (There are no provisions for the commission to elect for a partial increase.)

    Because the increase does not apply until Oct. 1, 2011 (at the earliest) there is no rush to make a decision on this matter. The commission can elect to make this change now or at any time in the future.

    If you have any questions, please let us know. We also plan to discuss this issue at the ACCA convention in August.