How does PSERS work?
The premise of a defined benefit pension plan like PSERS is that the benefit or, the annual pension payment an employee can expect, is defined when the plan is established. Funding then is based upon the number of participants, their years of service, their expected earnings at retirement and the actuarially calculated rate of retirement, life expectancy and expected number of years of payments. Most importantly, in a defined benefit plan the members do not benefit when the investment performance of the fund is good. The commonwealth and school employers’ (taxpayers) benefit through a reduced employer contribution rate to PSERS. Likewise, the employees do not bear the investment risk of a down market. Investment risk is borne by the commonwealth and school employers through the employer contribution rate.
