Upcoming Interest Rate Change
Posted 7/05/17 (Wed)
The interest rate NDPERS pays on member retirement accounts and accrues on service purchases with payment plans will change as set forth in N.D.A.C. 71-02-01-01(e) and 71-02-03-02.2 effective January 1, 2018.
What does this mean for you?
Member Retirement Account
Under N.D.A.C. 71-02-01-01(e), the interest NDPERS pays on a member’s retirement account is one-half of one percent less than the actuarial interest (investment return) assumption. Therefore, the interest NDPERS pays on member’s retirement contributions will be lowered from 7.50% to 7.25%.
- This impacts members or beneficiaries that choose to take a full refund or rollover of their account balance.
- This does not impact monthly retirement benefit payments.
Service Purchase with Payment Plans*
Under NDAC 71-02-03-02.2, if a purchase payment installment method is used, simple interest at the actuarial rate of return must accrue monthly on the unpaid balance. This will lower the simple interest on all open active purchase accounts prospectively from 8.00% to 7.75%.
- Members who choose to set up an ongoing payment plan will pay less interest on the service purchase effective January 1, 2018.
- Members with payment plans already in place will experience a decrease in the interest rate on January 1, 2018.
*Refer to the Thinking about Purchasing Service Credit article in this publication for additional information on changes to the cost of purchasing service credit effective January 1, 2018.
Why is this change taking place?
The NDPERS Board consulted with our actuarial consultant Gabriel Roeder Smith & Co (GRS) regarding the NDPERS retirement plan actuarial assumptions. GRS recommended that NDPERS lower the actuarial investment return assumption from the current 8.00% to 7.50%.
In addition to the actuarial assumptions review summary provided by GRS, the Board reviewed information relating to return assumptions used by other public sector plans and NDPERS historical returns. Using this information, the Board decided the current investment return assumption of 8.00% will be lowered to 7.75%.