When you make your monthly LAGERS contributions, you are ensuring that your employees’ future retirement benefits are fully funded so that they can count on financial security in retirement. But how does LAGERS ensure that the contributions you make each month are enough to fund these benefits?
Each year, LAGERS evaluates your employer’s contribution rates to look at your employer’s unique experience: what was your turnover, how many people retired, what kind of pay increases did you award? All of these experiences impact your cost in LAGERS and each year your new rate reflects any changes. But your experience is only half the story. To set your employer’s future contribution rates, LAGERS has to make assumptions about what we think will happen not just with demographic experience, such as mortality, but also economic experience, such as how much the system will earn in investment income.
The assumptions that LAGERS uses in calculating your rates are determined through an experience study. LAGERS performs an experience study at least once every five years. This study, which is conducted in collaboration with LAGERS’ actuary, examines past trends and future expectations. Through this evaluation, LAGERS looks at all assumptions used in calculating your rates and determines if they are still reasonable or if some should be adjusted.
Strong assumptions are important because they help ensure that your cost remains stable from year to year and that your benefits are fully funded. Although you probably aren’t even aware of when an experience study is happening, you may see the impacts on your contribution rates if the LAGERS Board of Trustees adopts any changes to the system’s assumptions. When LAGERS does make changes to your assumptions, it is important to note that the goal is always to make small, proactive changes to protect your rates from wild swing or large increases. Through this process, you can have peace of mind knowing that LAGERS is continuously evaluating and promoting sound funding practices for your retirement benefits.
LAGERS is currently conducting our regularly scheduled 2025 experience study and expects the preliminary report to be presented at the December Board of Trustees meeting. LAGERS will share more information with you if the board adopts any changes. Any potential impact would be seen on your contribution rates beginning in 2027.
For more information or additional questions, contact [email protected].
