HARRISBURG, PA – Today, the Board of Trustees of the Pennsylvania Public School Employees' Retirement System (PSERS) adopted a resolution certifying the employer contribution rate at 34.00% for the upcoming fiscal year.
The employer contribution rate (ECR) for the July 1, 2025-June 30, 2026, fiscal year is slightly higher than the current rate of 33.9%, according to the Board's actuarial firm, Gallagher. The change represents the first rate increase in two fiscal years. The ECR fell slightly for Fiscal Year 2024 and again for the current fiscal year.
“While projections have always indicated that contribution rates would need to rise, I am pleased to see such a modest increase and that it is lower than what our actuary had initially projected for FY 2026,” Trustee Eric DiTullio, Chairman of the PSERS Finance and Actuarial Committee said. “It is also helpful to remember that any such future increases are starting from a lower base rate, after the last two years of unexpected, though welcome, declines."
The system’s long-term pension debt decreased due to payment of the full FY 2023-24 actuarially determined contribution by policymakers and school employers. More than 80% of the newly certified employer contribution rate will go toward paying down the debt, which was the result of years of suppressed employer contributions, unfunded benefit enhancements, and two major market downturns since 2000.
The FY 2026 ECR change is the net result of actuarial losses and gains PSERS experienced in FY 2024. The losses were caused by slightly unfavorable demographic changes related to salaries, mortality, and retirements, according to Gallagher’s report. Those changes were partially offset by gains associated with higher-than-expected total employer payroll growth. At the same time, PSERS actuarial funded status rose from 63.6% to 64.8%, per Gallagher.
Gallagher estimated PSERS’ total employer contributions to be $5.5 billion in FY 2026, a 4% increase over the current fiscal year estimate. The Commonwealth directly reimburses school employers for at least half of the total ECR payment.
PSERS’ second funding source, investment earnings, more than doubled to $5.7 billion in FY 2024 compared to the previous fiscal year, Gallagher reported. PSERS’ third funding source, mandatory employee contributions, range from 5.25% to 10.30%.
“The ongoing budgetary commitment, higher employer payrolls, and positive net investment income are stabilizing the ECR and leading to the system’s overall financial improvement,” said PSERS’ Chief Financial Officer Brian Lyman. “This past fiscal year, PSERS achieved its highest funded ratio in over a decade, nearly 65%, and its actuarial unfunded liability fell 6% since FY 2017.”
In other business today, it was announced that PSERS had recently received the Public Pension Standards Award for Funding and Administration for 2024 from the Public Pension Coordinating Council, comprised of three national pension organizations.
Trustees also reviewed the system’s Sept. 30, 2024, quarterly investment report showing the following net market returns :
Quarter/FYD | CYTD | 1-Yr | 3-Yr | 5-Yr | 10-Yr |
4.66% | 9.36% | 15.76% | 5.17% | 8.15% | 7.24% |
Two new investment commitments totaling $315 million were approved:
$165 million to Sixth Street Specialty Lending Europe Fund III L.P., Private Credit
$150 million to WCP NewCold III, L.P., private real estate
Trustees were also pleased to welcome Interim Acting Secretary of Education Angela Fitterer to the Board. Secretary Fitterer has enjoyed a long career in public service, where she has used her passion for education and public policy to create coalitions and work with vested partners to realize a shared vision and accomplish common goals.
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About the Pennsylvania Public School Employees' Retirement System
PSERS, founded in 1917, began operations in 1919 to oversee a statewide defined benefit pension plan for public school employees. PSERS' role expanded upon the passage of Act 5 of 2017 to include oversight of two new benefit options consisting of defined benefit and defined contribution (DC) components and a stand-alone DC plan. As of June 30, 2024, PSERS had total net position of $77.4 billion and a membership of about 255,650 active, 253,900 retired school employees and beneficiaries, and 26,330 vested inactive members.