FAQ-Member Contributions

What is my contribution rate?

  • Your contribution rate is based on your membership date.  If you had service and membership with another Massachusetts public retirement system you are eligible to retain your original contribution rate provided you had not previously terminated your membership rights by taking a refund. If you took a refund from previous service, you re-enter the system as a new member with a new membership date and contribution rate.

Membership Date

Contribution Rate

Prior to January 1, 1975:   

5% of "Regular Compensation"

January 1, 1975 to December 31, 1978:

7% of "Regular Compensation"

January 1, 1979 to December 31, 1983:

7% of "Regular Compensation" plus additional 2% on "Regular Compensation" in excess $30,000 annually (576.92 weekly rate)

January 1, 1984 to June 30, 1996:

8% of "Regular Compensation" plus additional 2% on "Regular Compensation" in excess $30,000 annually (576.92 weekly rate)

On or after July 1, 1996:

9% of "Regular Compensation" plus additional 2% on "Regular Compensation" in excess $30,000 annually (576.92 weekly rate)

What happens to the money that I contribute to the system?

  • Your employer forwards your contributions to us on a monthly basis. We establish and maintain an annuity savings account on your behalf for your retirement. Your annuity savings account consists of two parts:
    • contributions, which are deducted from your paycheck by your employer
    • interest, which is earned on your prior year's ending balance and credited at a rate determined annually by the Public Employee Retirement Administration Commission.
  • The interest rate is set annually by law as equal to an average passbook savings return. The interest you earn on your balance does not reflect the fund's actual investment return.

Can I direct the investment of my contributions?

  • No.  Although individual contributions and annual interest are attributed to members' annuity savings accounts, the contributions from active members are pooled and invested by the Board to fund present and future benefits. 
  • Your retirement benefit is guaranteed and defined by a formula of age, service and salary.  Although member contributions and investment income contribute to the funding of your retirement benefit, they do not determine the amount of your retirement benefit.  

Why is the interest rate I earn on my annuity savings account so much lower than the returns now generally being earned on investments?

  • This interest rate earned on your annuity savings account is set by law as the average passbook savings rate obtained from a representative sample of financial institutions in Massachusetts.  The rate is established annually by the Public Employee Retirement Administration Commission (PERAC).  There is no relationship between the interest rate paid to your annuity savings account and the actual investment return earned by the fund.
  • After individual members' annuity savings accounts are credited with interest, the remaining investment "excess earnings" are held in the pension reserve fund to pre-fund retirement benefits. 
  • Your retirement benefit is not determined by your annuity savings balance but rather by a guaranteed formula based on your age, service, and salary at time of retirement.

As an actively employed member, do I have access to the funds in my annuity savings account?

  • No. Your annuity savings account is not an individual retirement account. If you are actively employed by a public employer or are on an authorized leave of absence, you are not eligible to withdraw any portion of your annuity savings account balance. The funds must remain in your account until you retire, die or become an inactive member who is eligible to receive a refund of the money.

May I borrow against my annuity savings account?

  • No! Under State Law, there are no provisions to borrow against your annuity savings account under any circumstance.

Will I eventually get this money back?

  • At some point and in some form, yes. Depending on what you do in your career and how long you live, you or your survivor will receive all or a portion of your contributions and interest. The funds in your annuity savings account will be paid out to you or your survivor when one of the following occurs:
  • you retire and receive a retirement allowance, or you become an inactive member who is eligible to receive a refund of your money (in other words, you leave all public service in Massachusetts), or you die while you are an active member, in which case an eligible survivor will receive a monthly benefit or your beneficiary(s) will receive a lump-sum payment of your annuity savings account.
  • If you leave our system for employment with another Massachusetts public agency which requires your membership in its retirement system, we cannot refund your balance; in that event, we must transfer your funds directly to that other Massachusetts contributory retirement system.

What is the difference between after-tax contributions and pre-tax contributions?

  • The difference is that you have already paid taxes on your after-tax contributions-and therefore you do not have to pay taxes on them again when you receive them in the form of a lump-sum payment or a retirement allowance-but you have not yet paid taxes on your pre-tax contributions so, you will have to pay taxes on those when you receive them.

Is the interest on my account considered a pre-tax or an after-tax amount?

  • All interest is paid on a pre-tax basis; as such, all interest is included in the taxable portion of your annuity savings account balance, which you may need to reference for tax purposes in the event you take a refund of your account.

How do I know what amount is nontaxable and what is taxable?

  • For tax purposes, the balance in your annuity savings account (the total of your contributions and interest) is divided into the nontaxable and taxable portions:
  • Nontaxable portion ("After-Tax"portion):  Prior to January 12, 1988 contributions were deducted from your paycheck after taxes had already been taken out of the entire amount of your paycheck. Contributions and interest paid directly by you for make-ups or re-deposits of prior service are also "after-tax".Taxable portion (Pre-Tax portion): On or after January 12, 1988 all contributions were deducted from your paycheck before taxes were taken out. Since you have not yet paid taxes on this portion, it is taxable.  Likewise, interest is paid to your account on a "pre-tax" basis and is taxable.
  • Note: For your reference, your retirement contributions are not taxed at the state level in Massachusetts, either when your contributions are deducted from your paycheck or when they are withdrawn or paid out.  But they are taxed at the federal level.

May my account be assigned or attached by a lien?

  • No.  You may not assign your account, nor may your account be attached by a lien.  The funds must remain in your account until you retire, die or become an inactive member who is eligible to receive a refund.  When you begin to draw on your account in a monthly benefit or receive a refund of contributions, your account at that time may be assigned in limited circumstances by the Internal Revenue Service, the Massachusetts Department of Revenue or for court approved child support orders and domestic relations orders.  No other assignment or attachments are allowed.   

How much does my employer contribute to my retirement?

  • Your employer does not make contributions on the basis of individual member accounts. Instead, your employer pays into the retirement system in the form of annual appropriations calculated on an actuarial basis to fully fund the system by the year 2028. An actuary determines how much money is needed to fully fund benefits (past, current and future), subtracts members' contributions, subtracts income from investment returns, amortizes the funding to the year 2028 and establishes a funding schedule for annual employer appropriations.  
  • Benefits + Expenses – Member Contributions – Investment Income = Employer Contributions.