Cash Balance Rates of Return & Dividends

The interest credit rate is defined in statute as the greater of 5%, or the applicable federal mid-term rate plus 1.5%. If the federal mid-term rate falls below 3.5%, you are guaranteed to receive a 5% return on your account. The interest credit rate is to be determined each calendar quarter (January, April, July and October) based on the federal mid-term rate that is published by the Internal Revenue Service as of the first day of that quarter. The rate is to be compounded annually.

Each year, the Public Employees Retirement Board (PERB) uses the results of the annual actuarial valuation and the actuary’s recommendation to determine if a benefit improvement can be made, such as payment of a dividend. They are required to ensure benefit adequacy and must maintain a 10% cushion of the assets.

Effective 2007, any dividends granted in the future will conform to the PERB’s new policy which states that a dividend plus the annual interest credit (set by statute as the federal mid-term rate plus 1.5%) cannot exceed 8.0% unless a majority of the PERB agrees.