Your defined contribution benefits are funded by your contributions and the investment earnings from those contributions. The amount of your benefit depends on the amount you contribute and the performance of your investments.
Your future defined benefit is funded by contributions made by your employer during your period of membership and the investment earnings from those contributions. Employer contributions are held in trust and invested by the State Investment Board.
PERS Plan 3 is a 401(a) defined benefit plan. This means that at retirement you will receive a benefit based on service credit and average final compensation. The amount of contributions made will not be a factor in calculating your defined benefit.
Employer contributions are based on a percentage of your salary and are not matching. Employer contributions go toward future retirement benefits, are not credited to your account and cannot be withdrawn.
A defined contribution retirement plan is one in which your benefit is based entirely on the amount you contribute and the performance of the investments you choose. Contributions may be deducted from your salary before taxes. Check with your employer to find out if your contributions are tax-deferred. Investment returns (both gains and losses) are tax-deferred. They are credited to your account as long as you have money in the plan.
Contributions to your retirement plan are mandatory. Under federal law, once you select a contribution rate you cannot change it unless you terminate employment or you change PERS-covered employers. Currently, there are six contribution rate options:
| Option A: | 5% fixed rate at all ages |
|---|---|
| Option B: | 5% up to age 35 |
| 6% ages 35 through 44 | |
| 7.5% ages 45 and older | |
| Option C: | 6% up to age 35 |
| 7.5% ages 35 through 44 | |
| 8.5% age 45 and older | |
| Option D: | 7% fixed rate at all ages |
| Option E: | 10% fixed rate at all ages |
| Option F: | 15% fixed rate at all ages |
If you become a PERS Plan 3 member by transferring from PERS Plan 2, or if you are a new member who irrevocably chooses PERS Plan 3, you must decide your rate option at the time you choose Plan 3.
If you changed employers or are a returning Plan 3 member, you have 90 days from your date of hire to choose a rate. If you do not select a rate option within 90 days, the law requires that Option A be assigned automatically. Refer to the Contribution Rate Brochure available through the plan record keeper or your employer.
If your contributions are tax-deferred (consult your employer) and you are participating in other tax-deferred plans, be aware that your tax-deferred contributions can be limited based on your annual taxable income. Remember, tax-deferred contributions decrease your taxable income. Consult the Internal Revenue Service (IRS) and/or a tax adviser for detailed information.