3. What Are the Financial Requirements of CMERS membership?
The financial requirements of CMERS membership can be thought of as a three legged stool with the following three legs:
Service Contribution: This contribution varies from year to year and depends upon actuarial and financial experiences or changes in benefit provision. There are two components: (a) employer and (b) employee. The employer contributions are based upon the total payroll of gross pay received by all employees eligible for membership and forwarded monthly to CMERS. Employee contributions are deducted from each eligible employee’s gross wages and forwarded monthly to CMERS. Employer contributions are actuarially determined and are a percentage of gross wages of payroll. It is paid monthly and subject to change as of July 1st each year. The employee contribution portion is currently set at 4.75% for Social Security participants and at 7.5% for employees not covered by Social Security. This employee contribution amount is set by the legislature and may change every July 1.
UAL: “UAL” is the municipality’s unfunded accrued liability contribution. This amount can include contributions due for service prior to participation or for unfunded accrued costs associated with prospective membership. Such payments are usually determined by the CMERS actuaries prior to CMERS participation. This amount can be quite large depending on the number of employees and if past service is credited. It differs from the service contribution in that it is amortized over a fixed 30 year period and is paid on an annual basis. Municipalities may opt to accept a shorter term amortization. The CMERS actuaries will base the amortization on the requested term. A bill is sent to the municipality in June for July payment.
Please be aware that an adjustment to the UAL might become necessary if the data reported by the municipality on the original roster deviates substantially from the data eventually supplied on the initial entrants and reviewed during the first valuation. The municipality should also be aware that, while uncommon, certain changes to the actuarial assumptions, the actuarial funding methods, or to the fund’s structure might produce revisions to the UAL for all CMERS participants.
Administrative fee: CMERS charges each participating municipality an annual fee of $130 per current employee and retiree to cover all administrative expenses. This fee represents the proportionate share of the cost of the administration of the fund and can change depending on the cost and the number of employees/retirees covered by CMERS. A bill is sent to the municipality in June for July payment.