This requirement is mandated under state law. Specifically, the law requires employers to pay contributions equal to 10% of a member’s salary into the Tier 2 retirement plan or system selected during their first year of employment. If the contribution rate exceeds 10%, the member in the Hybrid Option is responsible for paying the contributions for the amount above the 10% threshold. Beginning July 1, 2024, the preliminary contribution rate is 10.70%. Therefore, you will pay the equivalent of 0.7% of your salary beginning July 1, 2024. As an example, if you make $60,000 per year, you'll pay about $33 per month.
To understand contribution rates and how they impact your benefit, visit www.urs.org/rates.
Utah’s public sector has experienced significant wage growth in the past few years. This wage growth resulted in larger than previously anticipated future benefits for members. Accordingly, contributions are required to fund the increased cost of the retirement system.
You will be responsible for paying 0.7% of your salary to the Hybrid Plan. For example, if you make $60,000 per year, it will be approximately $33 per month.
Beginning on July 1, 2024, the requisite amount of 0.7% will be deducted from your paycheck and sent to URS.
Yes. Nearly all public employee pension plans throughout the country require a contribution by members. Utah has not had that requirement since the 1980s, so many members are unfamiliar with such a plan. On average, public employee pension plans require members to contribute 6.3% of their pay to their retirement system if they participate in Social Security. If members do not participate in Social Security, the average member contribution to their public retirement system equals 9.0%. (Source: https://www.nasra.org/files/Issue%20Briefs/NASRAContribBrief.pdf)
If you are within your first year of initial employment, you may change your Tier 2 election until the anniversary of your initial employment. However, if you are outside of your first year of employment, the election is irrevocable due to state and federal law.
URS and our consulting actuaries review several factors that may affect the funding of the retirement plans and systems and will impact whether the funding is adequat for the payment of retirement benefits. These factors may require changes in contribution rates that could potentially increase or decrease contributions in the future. However, we cannot project whether contribution rates will rise or fall in the future.
Your contributions are received by URS with after tax amounts. What this means for you is at the time you begin receiving retirement benefits, a portion of the retirement benefit payments will not be taxed.
The term “hybrid” generally refers to plans combining elements of defined benefit and defined contribution plans to generate a member’s benefit upon retirement. Although you will no longer receive the defined contribution (401(k)) portion of the plan pursuant to the applicable statutes, the elements still exist, and you could receive contributions again in the future. However, we cannot project whether contribution rates will rise or fall in the future.
An employer can only contribute up to the 10% threshold to your Tier 2 retirement plan. In addition, employers are prohibited by state law from making your contribution on your behalf. Some employers may offset the cost of member contributions by increasing salaries for Tier 2 employees or contributing additional amounts to their retirement savings plans. For example, beginning July 1, 2024, state employees in the Tier 2 Public Employee system will receive an additional 0.7% in salary (on top of their regular 3% increase) to offset the 0.70% member contribution to the Hybrid Plan.
If you are within your first year of employment, you must make member contributions because you may choose to be in the Hybrid plan. Further, under state law, a member is defaulted into the Hybrid Plan if you do not make an election. However, once the one-year election period has passed, if you have chosen the 401(k) Option, your contributions (including interest) are vested and will be transferred to your 401(k) account in an after-tax fund.
A member contribution is not required if you selected the Tier 2 Defined Contribution (401(k) Option) plan. However, your employer will only contribute to the Tier 2 threshold of 10% your salary to the 401(k), and you may make elective contributions to your 401(k).
You may forfeit your retirement benefit, with accrued years of service, and take a refund of your member contributions. Otherwise, you may keep the contributions with URS and retain your benefit until you are eligible for retirement. You will then receive your monthly retirement check upon applying for your benefit.
See this video of a previously conducted webinar about Tier 2 Contribution Rates.
For immediate assistance, contact the Retirement Benefits Department at 801-366-7770 or 800-695-4877.