First, the Retirement System’s Actuary determines the System average and graded rates.
Graded rates are calculated based on a System average rate that does not include employer Group Term Life Insurance (GTLI) owed that fiscal year.
Then, the Actuary:
- Determines the employer’s normal contribution
Subtracts the value of Group Term Life Insurance (GTLI) from employer’s invoiced contribution (not including payments for deficiency, previous amortizations, incentive costs or prior years’ adjustments). - Determines the employer’s average rate
Divides the normal contribution by the billable salary. - Determines the employer’s graded rate
Multiplies the System graded rate by the ratio of the employer’s average rate divided by the System average rate (not to exceed the System graded rate). - Determines the employer’s graded contribution
Multiplies the employer’s billable salary by the employer’s graded rate. - Determines the maximum amortization amount
Subtracts the employer’s graded contribution from the employer’s normal contribution.
OR
Determines the Graded Payment Amount
Subtracts the employer’s normal contribution from the employer’s graded contribution.
Example of a Graded Payment Calculation for an ERS Employer (for Fiscal Year End 2024)
| Employer’s billable salary (reported salary between 4/1/22 and 3/31/23) | $100,000,000 |
| Employer’s normal contribution* (invoiced subtotal “Regular Pension Contribution”) | $10,000,000 |
| Employer’s average rate (employer’s normal contribution divided by employer’s billable salary) | 10.000% |
| Employer’s graded rate (employer’s average rate multiplied by the ratio of the System graded rate to the System average rate, not to exceed the System graded rate) | 10.565% |
| Employer’s graded contribution (employer’s billable salary multiplied by employer’s graded rate) | $10,565,000 |
| Graded payment (employer’s graded contribution minus employer’s normal contribution) | $2,400,000 |
| *Does not include payments for deficiencies, previous amortizations, incentive costs and prior years’ adjustments. | |
Example of Amortization Calculation for a PFRS Employer (for Fiscal Year End 2024)
| Employer’s billable salary (reported salary between 4/1/2022 and 3/31/2023) | $80,000,000 |
| Employer’s normal contribution* (invoiced subtotal “Regular Pension Contribution”) | $20,000,000 |
| Employer’s average rate (employer’s normal contribution divided by employer’s billable salary) | 25.000% |
| Employer’s graded rate (employer’s average rate multiplied by the ratio of the System graded rate to the System average rate, not to exceed the System graded rate) | 24.729% |
| Employer’s graded contribution (employer’s billable salary multiplied by employer’s graded rate) | $19,783,200 |
| Maximum amortization amount (employer’s normal contribution minus employer’s graded contribution) | $261,800 |
| *Does not include payments for deficiencies, previous amortizations, incentive costs and prior years’ adjustments. | |
Rev. 12/23