Question:  Why are employers charged 7.8% interest on the unpaid balance when prevailing interest rates are lower?

Answer:

The interest rate charged on the unpaid prior service balance is based on the assumed rate of investment return for the assets in the WRS. The WRS cannot charge an interest rate that is less than what it expected to earn had the entire prior service liability been paid off immediately. To do so would not only violate the fiduciary requirements of the trust, but would result in higher liabilities to the system as a whole.