Tier IV Plan Update

The risk-sharing provision of the Tier IV pension plan – which covers most state employees hired after 7/31/2017 – was implemented for the first time on July 1, 2023 and will run through June 30, 2024. That provision permits the State to increase employee contributions by half of the amount by which the plan’s investment returns failed to reach the projected average amount of 6.9% in the prior calendar year, up to a maximum of  2%.

In calendar year 2022, the SERS fund’s investment income was far below the 6.9% annual benchmark with a net loss of 10.85% and for the first time since the 2017 agreement, Governor Lamont enacted this risk sharing, resulting in  Tier IV employees paying an extra 2% contribution for one year. 

The Administration enacted this risk sharing provision against the recommendation of SEBAC as we continue to voice concerns with recruitment and retention efforts leading to short staffing across state agencies. 

We recently received confirmation that the state employee pension fund hit the target of a 6.9% return rate for calendar year 2023. The 2% surcharge that went into effect on July 1, 2023 will cease on July 1.2024. Tier IV employees will not have the 2% pension surcharge deducted from their paychecks starting on July 1, 2024 service date. 

While we are glad that this financial hardship will not be impacting Tier IV members starting in July, we expect this provision to likely be an issue in the 2027 pension and healthcare negotiations. 

We will keep members informed and involved as we work to make progress on these issues.