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. All dividends must conform to the requirements stipulated in state statute and board policy. The plan must remain 100% actuarially funded before and after the dividend has been credited to eligible member accounts. Dividends will not be issued when poor market returns reduce plan 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.