HARRISBURG -- The Board of Trustees of the PA Public School Employees' Retirement System [PSERS] voted Thursday to adopt six resolutions that finalized its fiduciary and operational rules for a new defined contribution retirement plan for school employees hired on or after July 1, 2019.
Each resolution was adopted unanimously pursuant to changes the Board had to make to the system to abide by a new Pennsylvania law, Act 5 of 2017. The act was the most significant change to the plan design since PSERS began issuing benefits a century ago.
“Today’s Board votes officially mark the beginning of a new chapter in our long history,” said PSERS Executive Director Glen Grell. “Our next generation of school teachers and other employees hired after July 1 will have a new defined contribution component to their retirement benefit. This is a significant change for PSERS and our staff are working very hard to make this new System as seamless as possible for the new incoming members and their future employers.”
Act 5 gives new employees the option of putting all their retirement savings into a private sector-like 401(a) defined contribution (DC) plan or in one of two hybrid plans. The hybrids divide retirement savings into a DC plan, which provides a market-impacted distribution, and PSERS’ traditional defined benefit (DB) system, which offers a guaranteed annuity based on a formula that considers years of service and final average salaries. (Act 5 also allows existing employees, hired before July 1, to freeze their current retirement account and put prospective retirement savings into the DC plan or one of the hybrids if they choose.)
PSERS previously selected Voya Financial through a competitive public bid process as its third-party administrator to provide record-keeping services for the DC plan. Both PSERS and Voya have been working with 775 school entities to prepare them for implementation. The resolutions the PSERS Board of Trustees debated and approved at its May 22 and 23 meetings were the final regulatory pieces needed before the new plans could be offered to new employees who will begin work on or after the July 1 start of the 2019-20 school year.
“It may be a statutory provision for us to implement a defined contribution plan, but I see it as an opportunity to put members in charge of their retirement in ways they never had before,” said Jennifer Mills, PSERS Deputy Executive Director and Director of Defined Contribution Investments.
One Board resolution adopted the Plan Document of School Employees’ Defined Contribution Plan and Trust. This document establishes the Board of Trustees’ overall investment, cost and legal strategies for administering the DC plans pursuant to the state Retirement Code and federal guidelines of the Internal Revenue Service.
A second resolution created a new six-member committee among the 15-member Board of Trustees. The committee’s job will be to meet at least quarterly to spearhead the oversight of the DC plan’s performance, cost and investment options for participating employees.
The third and fourth resolutions adopted an Investment Policy Statement for the DC plan and made technical changes to three of PSERS’ existing policies by adding language concerning the DC plan.
The fifth resolution approved the hiring of Vanguard to invest the assets of the administrative accounts of the DC plan. The final resolution amended the share class of an existing investment option employees can consider for the DC plan. For more details on the resolutions go to: https://www.psers.pa.gov/About/Board/Resolutions/Pages/default.aspx
About the Pennsylvania Public School Employees' Retirement System
Founded in 1917, PSERS is the 15th largest state-sponsored defined benefit public pension fund in the nation. As of March 31, 2019, PSERS had net assets of approximately $57.2 billion and a membership of over 256,000 active school employees and over 233,000 retirees.