Question:  How do employers make payments on prior service liability?

Answer:

Your monthly retirement contribution rate includes a small component for prior service liability (about one to two percent for most employers). Each month as you make retirement contributions, you are also making a payment for your prior service liability.

Your prior service contribution percentage rate is fixed at a level that is projected to be adequate to fully pay off the liability over the 40-year amortization period.

To minimize future interest charges, you have the option of paying off your liability faster. You can pay off the entire liability in a single payment, or simply make larger-than-required payments each year. If you are interested in paying off your liability early, ETF will develop a customized payment plan for you.