PSERS Contribution Rate and Shared Risk: What You Pay and Why It Changes

What You Pay Into PSERS Every Paycheck

Every PSERS member has a percentage of their salary deducted and contributed to the retirement system. Unlike Social Security's standard 6.2% employee rate on covered wages, your PSERS contribution rate depends on your membership class — and for newer members, it can change every three years.

Understanding your contribution rate matters for two reasons: it affects your take-home pay throughout your career, and the total of those contributions (plus credited interest) becomes the pool you can withdraw under Option 4 when you retire.

Current Contribution Rates by Membership Class

These rates are effective July 1, 2024 through June 30, 2027, following the PSERS Board's December 2023 shared-gain certification:

Class T-C: 5.25% (hired before July 22, 1983) or 6.25% (hired July 22, 1983 or later). These rates are fixed by statute and never change.

Class T-D: 6.50% (hired before July 22, 1983) or 7.50% (hired July 22, 1983 or later). Also fixed by statute.

Class T-E: 7.50% base rate, subject to shared-risk adjustment. The current rate reflects a shared-gain reduction from the December 2023 evaluation.

Class T-F: 10.30% base rate, subject to shared-risk adjustment. T-F members elected the higher contribution rate to receive a 2.5% multiplier instead of T-E's 2.0%.

Class T-G: 5.50% to the DB component plus 2.75% to the DC component, totaling 8.25%. The DB portion is subject to shared-risk adjustment.

Class T-H: 4.50% to the DB component plus 3.00% to the DC component, totaling 7.50%. The DB portion is subject to shared-risk adjustment.

Class DC: 7.50% employee contribution to the defined contribution account only. No DB component.

How Shared Risk Actually Works

The shared-risk mechanism, introduced by Act 120 of 2010 and expanded by Act 5 of 2017, applies to Classes T-E, T-F, T-G, and T-H. It ties employee contribution rates to the PSERS fund's actual investment performance.

Every three years, the PSERS Board evaluates investment returns over the prior 10-year period and compares them to the Board's actuarial assumed rate of return. Based on that comparison:

Shared gain: If investments exceeded the target, employee DB contribution rates decrease. The July 2024 adjustment lowered the rate by 0.50 percentage points for T-E and T-F, and by 0.75 percentage points for T-G and T-H.

Shared risk: If investments fell short of the target, employee DB contribution rates can increase within class-specific statutory limits, which range from 1.0% to 3.0%.

The most recent evaluation (December 2023, covering the 10-year period ending June 30, 2023) determined that investment returns met the shared-gain threshold. As a result, DB contribution rates for T-E, T-F, T-G, and T-H members decreased for the July 2024–June 2027 period.

The next evaluation will look at the 10-year period ending June 30, 2026, with new rates taking effect July 1, 2027 through June 30, 2030.

Why Your Contribution Rate Matters for Retirement

Your accumulated member contributions plus credited interest form the pool available for Option 4 withdrawal at retirement. Over a 30-year career at an average salary of $60,000, a member contributing 7.50% accumulates roughly $135,000 in contributions alone (before interest). With credited interest, that total can grow substantially.

Active and vested DB account balances accrue 4.00% interest compounded annually; contributions made during the current school year earn 2.00% for that year because they are not in the account for the full year. For Classes T-E through T-H, the 7.00% Board-assumed rate is used to calculate the Option 4 actuarial reduction; it is not the interest credited to the DB account. Because the Option 4 conversion rate is higher for those classes, withdrawing the same lump-sum amount can result in a larger monthly pension reduction.

Higher contribution rates mean more of your salary goes to PSERS during your career. PSERS reports that mandatory contributions are federally tax-deferred. Monthly PSERS annuity payments are subject to federal income tax; any nontaxable recovery depends on your contribution tax basis.

Checking Your Contributions and Rate

Log into the PSERS Member Self-Service portal to view your Annual Statement of Account. It shows your total accumulated contributions, credited interest, and current contribution rate. If the rate on your pay stub doesn't match what PSERS shows for your membership class, contact your employer's payroll office — discrepancies can affect both your take-home pay and your eventual retirement benefit.

The Pennsylvania PSERS Retirement Guide includes detailed breakdowns of how contribution rates interact with payout options and the Option 4 lump-sum calculation for each membership class.

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