In August of each year, PMRS sends a Minimum Municipal Obligation (MMO) worksheet to each employer. The MMO must be completed by September 30 by the plan’s chief administrative officer and then provided to the employer’s governing body. A copy is returned to PMRS to be processed and used to prepare the plan’s bill for the upcoming year. By completing the MMO worksheet, the employer calculates its pension bill for the upcoming calendar year. Most cost components needed to calculate the MMO are provided by PMRS; however, the employer must provide payroll information and follow the instructions provided on the worksheet. There are different types of worksheets, one for defined benefit plans; one for overfunded defined benefit plans; and one for cash balance plans.

In early January of each year, PMRS mails the annual pension bill to each employer. Defined benefit plans must pay their bills by December 15 to ensure that payment can be credited before the close of the calendar year to avoid any funding deficiency. Cash balance bills also are mailed in early January but the only item that appears on the bill is the $20 per year administrative fee for each plan member.

In cash balance plans, the employer contributions to be credited to each employee’s account are then remitted to PMRS on a monthly or quarterly basis. Also, in a cash balance plan any forfeited monies, e.g., an employee terminates and is not entitled to a benefit, are credited to the employer account, and may be used as a credit toward future employer contributions.

PMRS accepts ACH, Wire Transfer, and check. Each payment must be accompanied by a completed Revenue Transmittal Form (PMRB-20). Accurate representation of the source of the payment, i.e., Fund Money, State Aid, Employee Deduction, or Other, is very important. Employers also must indicate on the form where the money should be credited, i.e., Employer’s Account, Members’ Account, Administrative Cost, or Other. Revenue Transmittal Forms are provided by PMRS.

Generally, two laws regulate PMRS plans. Act 15 of 1974 regulates the Pennsylvania Municipal Retirement System and specifies the benefits which are available to its member employers. Act 205 of 1984, known as the Municipal Plan Funding Standard and Recovery Act, requires that pension plans be adequately funded, requires that biannual actuarial valuations be performed, and specifies how state pension aid is calculated for eligible employers.

The employer should contact PMRS for information. If the plan is a defined benefit plan, our consulting actuary must first perform a cost study to determine how much the pension plan upgrade will cost. Cost studies typically take within six to eight weeks after we receive all the necessary information. If the plan is a cash balance plan, a cost study is not required because the cost of the plan is the employer contribution plus the administrative fee. With either type of plan, the employer must notify PMRS, in writing, of the pension plan change(s) to be made. PMRS then provides the appropriate ordinance or resolution and agreement to modify the plan. When the documents are completed by the employer, they are forwarded to PMRS for approval by its board and legal counsel.

The PMRS board uses a formula to determine what must be paid in regular interest and administrative fees, and any additional monies becomes excess interest. The board determines annually whether to distribute the excess interest to the employers who have agreed in their plan to distribute excess interest. The plan outlines the percentages and who the distribution goes to.

For over 20 years, PMRS has offered consistent rates and market competitive rates.

Excess interest is investment earnings on PMRS assets in excess of that required for allocation to regular interest (currently 5.25%), administrative expenses, and to maintain an asset reserve in accordance with a PMRS board-approved formula. Learn more about excess interest.

What are the Pennsylvania Municipal Retirement System’s rates of return?
The Pennsylvania Municipal Retirement Fund’s annualized rates of return can be found here.

Cities, boroughs, towns and townships who establish a pension plan and fund it for three calendar years are eligible for state pension aid. State aid is paid by the Auditor General’s Office to cities, boroughs, towns and townships. Authorities and counties are not eligible for state pension aid.

In January of each year, the Auditor General’s Office mails a Certification for Foreign Fire Insurance Tax Distribution and General Municipal Pension System State Aid form to each employer eligible to participate in the state aid program. By completing the form and returning it to the Auditor General’s Office will make a employer eligible for state pension aid. Information from the Act 205 actuarial valuation that is submitted to the Department of the Auditor General also is used to calculate state aid.

The state pension aid program is financed by a 2% tax on out-of-state insurance companies. Presently, the commonwealth collects approximately $329 million each year and these monies then are allocated by the Auditor General’s Office by the last business day of September each year to help defray pension expenses in that calendar year.

For step-by-step instructions on what to do with your state aid, click here to view the flowchart.