Prior to 1979, state employees paid 6% of their salary toward PERS (Public Employees Retirement System). In 1979, during bargaining, the State and the union (SEIU – Service Employees International Union) agreed that the State would begin paying the 6% into employees PERS accounts. This increased employee’s take-home, pay even though salary rates remained the same because employees no longer had to pay the 6% out-of-pocket.
Beginning November 1, 2016 for SEIU represented employees and February 1, 2019 for the majority of the remainder of State employees, rather than the State continuing to “pick up” the 6% by paying it directly into an employee’s PERS individual account program (IAP), these funds have been transferred to the employee’s pay.
Contributions as a pre-tax deduction are then made by the employee, into the employee’s PERS IAP. To help offset this transfer from state paid contributions to employee paid contributions, the State agreed to a 6.95% base wage increase.
Any additional payroll tax (Social Security, Medicare, and Mass Transit tax), and increased PERS contribution, incurred as a result of the “buy back”, will be covered by an additional 0.95 % paid by the state into the employee’s pay. While this will increase employee’s base wages by 6.95%, the intent of the buyout is to be relatively cost neutral to employees.