SB 401 Summary

• Creates a two-tier public school employee retirement system, with new employees hired on or after February 1, 2018 defaulting to a defined contribution "Tier 2" plan rather than the traditional defined benefit "Tier 1" plan unless they affirmatively elect otherwise within 75 days of employment.

• Tier 2 participants contribute 6% of compensation to individual accounts with employer matching of 3% (100% match on first 3%), while Tier 1 members maintain traditional pension benefits with separate contribution rates calculated by actuarial valuation.

• Establishes a 10-year amortization schedule for unfunded liabilities associated with Tier 2 members and sets investment return assumptions at 6% annually for Tier 2, compared to 8% for existing Tier 1 members.

• Closes service credit purchase options effective September 29, 2017 at 5 p.m., preventing future purchases of out-of-system public education service, nonpublic education service, sabbatical leave, parental leave, and other previously available service credits.

• Appropriates $5,000,000 to the Office of Retirement Services for fiscal year 2017 to administer the changes, with completion targeted for September 30, 2018.