Funding for your retirement benefit is provided from three sources:
- employer contributions,
- employee contributions, and
- investment earnings.
Each year, SCERA engages an independent actuarial firm to conduct an accounting of the Plan's funded level. The main purpose of the actuarial valuation is to determine the employer and employee contribution rates that will sufficiently fund the plan.
If all of the assumptions occur exactly as predicted, the Plan will be funded at 100%. However, it is very unlikely that all assumptions will be exactly on target. Therefore, each year the plan is likely to be overfunded--when earnings are greater than expected, or underfunded--when earnings are lower than expected. The Plan will always experience some years that exceed earnings and some years when the earnings assumption is not met. The ideal is to create a well-funded plan over time by having more overfunding than underfunding.
In addition to the annual actuarial valuation, SCERA's actuary conducts an experience study every three years that compares prior actuarial assumptions to actual experience, and sets assumptions for the future based on current data. This adjustment is crucial to ensuring the assumptions used in the actuarial valuation are appropriate and will provide a good basis for establishing the employer and employee contribution rates needed to fund the plan.