SB 1040 Summary

• Creates a two-tier retirement system for public school employees effective September 4, 2012, with Tier 1 for existing members and Tier 2 for new hires after July 1, 2010.

• Increases employee contributions to the member investment plan for members hired after July 1, 2008, with contributions reaching up to 6.4% of compensation over $15,000 annually.

• Reduces pension benefit calculation from 1.5% to 1.25% of final average compensation for service accrued after the transition date (December 1, 2012) for members who do not elect to continue under original terms.

• Reduces employer-paid retiree health insurance coverage from 90-100% to 80% of premiums effective January 1, 2013, with limited exceptions for certain early retirees.

• Establishes Tier 2 defined contribution plan with employer matching contributions of up to 4% for new employees and those selecting the alternative benefit structure, replacing traditional pension accrual.