Employer contributions paid to NYSTRS in 2018 will be lower than 2017 contributions – which will be less than they contributed in 2016.
NYSTRS has advised participating employers to budget for an employer contribution rate (ECR) of 9.80% applicable to 2017-18 school year salaries. The figure represents a decrease of approximately 16% from the 11.72% ECR that will be applied to 2016-17 salaries. It will be the third consecutive year that the rate has declined.
When the 2018 rate is officially adopted by the Retirement Board in July, it will mark the first time in seven years the ECR will be in single digits. NYSTRS expects to collect approximately $1 billion less from its more than 820 employers in 2018 than was collected in fall 2015.
The ECR is the percentage of member payroll employers contribute to NYSTRS. This rate is determined annually through an actuarial valuation of NYSTRS' assets and liabilities. These contributions have been collected without fail throughout the System's history, keeping NYSTRS among the best-funded and most secure plans in the country.
Rates have declined in each of the past three years primarily because System investment returns over the last several years have generally been strong. While NYSTRS’ assumed annual rate of return is 7.5%, the actual return has averaged 8.3% over the past five years. In general, when investment returns exceed expectations, the System requires less in contributions from employers and the taxpayers that fund them.
A continuing downward trend in the ECR is not assured, however. Challenging financial markets have led to low single-digit returns over the last two fiscal years and could lead to increasing employer contribution rates in the future.
An estimated range for the ECR applicable to 2018-19 school year salaries will be provided to employers in November of this year.