PSERS for New Employees

The Public School Employees’ Retirement System (PSERS) is an agency of the Commonwealth of Pennsylvania that administers the pension plan for Pennsylvania’s public school employees.   The PSERS pension plan is a governmental defined benefit plan, classified by the Internal Revenue Service Code as a 401(a) plan.

A defined benefit plan means that your retirement benefit is determined by a guaranteed state based formula which includes a retirement factor, years of credited service, and the final average salary.  Final average salary is calculated using the last 36 months of salary as reported by your employer.

If you are hired as a full-time employee, membership with PSERS is mandatory.

Members who work full-time contribute a percentage of their salary toward a retirement benefit from the first day of employment.

New members of PSERS hired on or after July 1, 2011 are automatically enrolled in PSERS as a member of Class T-E.

New members will receive information from PSERS explaining that an account has been established for you and will ask you to verify your personal information, contact information, and employer information. In addition to the informational packet, Class T-E members will receive a separate letter containing a T-F Membership Class Election Form. Class T-E members who wish to choose Class T-F must complete and return the election form to PSERS within the deadline stipulated in the letter.

What is the difference between Class T-E and T-F?  There are two distinct differences between Class T-E and Class T-F. These are:

  1. The member contribution rate (the percent of money your employer withholds from your pay as your contribution toward your retirement benefit).
  2. The pension multiplier used to determine your retirement benefit at the time you retire.

*New employees have 45 days from the date of notification to elect membership into Class T-F*.  If you are a new employee, please be aware of the following:

  • No action is required to stay in Class T-E.
  • Your election of Class T-F is binding and irrevocable.
  • Once your class is determined by your election, or your inaction, you will remain in that class permanently.
  • You will not have another opportunity in the future to elect to change your class of membership.
Class T-E Class T-F
Your Contribution Rate 7.50% (base rate) with “shared
risk” provision that could cause your total contribution level to fluctuate
between 7.50% and 9.50%
10.30% (base rate) with “shared
risk” provision that could cause your total contribution level to fluctuate
between 10.30% and 12.30%
Pension Benefit Multiplier 2.0% 2.5%

Class T-E members will receive an annual retirement benefit, payable monthly, under the following calculation: 2.0% x Final Average Salary x Years of Credited Service = Yearly Benefit under the Maximum Single Life Annuity

Class T-F members will receive an annual retirement benefit, payable monthly, under the following calculation: 2.5% x Final Average Salary x Years of Credited Service = Yearly Benefit under the Maximum Single Life Annuity.

Example:

Class T-E: 2.0% x 35 years worked = Annual Pension is 70% of Final Average Salary
2.0% x 35 x $83,381 = $58,367 yearly pension benefit
Class T-F: 2.5% x 35 years worked = Annual Pension is 87.5% of Final Average Salary
2.5% x 35 x $83,381 = $72,958 yearly pension benefit

$72,958 (T-F annual pension) – $58,367 (T-E annual pension) = $14,591 higher pension benefit every year in retirement.

Example:

Class T-E Step 1 Bachelors Degree: $46,766 annual salary * 7.5% (T-E base rate) / 26 pays = $134.90 per pay contribution
Class T-F Step 1 Bachelors Degree: $46,766 annual salary * 10.3% (T-E base rate) / 26 pays = $185.26 per pay contribution
Contribution Difference per pay: $50.36

You must be ‘vested’ to receive the pension benefit. Vested means you are eligible for a monthly retirement benefit after termination of employment. As a member of Class T-E or Class T-F, you must meet the below requirements to be vested:

  • You have at least 10 years of qualifying service.
  • You are age 65 or older with at least three (3) years of service at termination of employment
  • If you leave employment prior to vesting, you will receive your contributions and interest only

 

Additional factors to consider:

Could you stay with Class T-E, and invest on your own the difference between the T-F per pay contribution and the T-E per pay contribution ($50.36) over your 35 year career? Absolutely. Will you do better investing on your own, rather than electing Class T-F?  You’d need to speak to a trusted financial advisor. This informational handout is being presented so that you understand the options.