What does Act 184 (formerly Senate Bill 18) do?
Under the new law (Act 184 of 2023), TRSL-participating employers will directly fund PBIs. Essentially, funding will become a part of the annual employer contribution rate, and deposited into a new PBI funding account.
Employer contributions have been declining in recent years, and are projected to continue to fall. Capturing a portion of these decreases to fund PBIs is a clear and transparent method that will likely allow for PBIs to be granted on a more regular basis.
Starting in 2024, deposits to the new PBI funding account will equal one-half of the decrease in the total employer contribution rate, growing over time until PBI deposits reach 2.5% of payroll. As a cost protection measure for employers, PBI deposits cannot exceed 2.5%, and the total employer contribution rate will be capped.
Act 184 FAQs
How much will PBIs be?
PBIs will be limited to 2% of the first $60,000 of the retirement benefit.
Can a PBI over 2% be granted?
The most the TRSL Board of Trustees can recommend will be a 2% PBI, subject to available funds. However, through legislative enactment, lawmakers can choose to authorize a PBI in excess of 2%, subject to sufficient funds and gubernatorial approval.
Will PBIs be automatic?
No. While it is expected that PBIs could be paid every two to three years, PBIs will not be an automatic benefit. They can only be granted when there are enough funds in the new PBI funding account to pay for them. Additionally, granting a PBI still requires two-thirds legislative approval, and PBIs can be vetoed by the governor.
When will the first PBI be paid from the new PBI account?
Currently, it is anticipated that there will be enough funds in the new PBI account to pay the first PBI in 2029. After that, it is expected that a PBI can be paid every 2-3 years. Ultimately, Act 184 provides a more reliable and straightforward way to fund future PBIs.
Will eligibility criteria for a PBI change under the proposed model?
Yes, but not right away. When the first PBI is paid from the new PBI funding account, eligibility criteria for age and years retired will go up.
- Regular retirees will need to be age 62 and receiving a benefit for at least two years to receive a PBI.
- Disability retirees will need to be receiving a benefit for at least two years regardless of age.
Will money be deposited in the new PBI funding account every year, and will there be a limit?
Deposits to the new PBI funding account will occur every year, unless one of the employer safeguards prevents a deposit. Safeguards include reducing or foregoing a PBI deposit if it will cause the total employer contribution rate to exceed the established cap. Additionally, the new PBI funding account balance will be limited to the cost of paying two PBIs.
What happens to the current PBI Experience Account and the money in it?
Initially, the Experience Account and the new PBI funding account will exist side by side. The Experience Account will be phased out with any remaining balance transferred to the new PBI funding account.
When can the new PBI funding account be debited (money paid out of the account)?
The ability to debit the PBI funding account will be the same as with the current Experience Account—for investment losses on the balance of the account as well as payment of a PBI. Also, just like the Experience Account, the new PBI funding account cannot fall below zero.
Will Act 184 add new debt to the system?
No, funding for the cost of PBIs must be available before the legislature can grant a PBI.