Changes to the Tier 6 pension plan included in the 2026–27 state budget agreement mark another significant step toward pension equity for public employees.
“While pension equity for all Tier 6 members is not yet complete, this victory shows that when we organize and fight, we win,” said President Wayne Spence. “These changes increase the value of members’ pensions upon retirement and decrease out of pocket costs to pay for these enhanced benefits. The reduction in contributions and changes to allowable overtime for final average salary will generate $90 million in annual savings for state employees.”
Unlike prior years, the changes vary by retirement system, reflecting budget constraints and differences among state, municipal, and school district workforces.
Under the changes, a PEF member earning $90,000 annually would see their mandatory contribution drop by $1,575 per year (a 1.75% reduction). The cap on overtime earnings used in final average salary calculations will rise from $21,589 to $30,000 and be indexed 3% annually thereafter, strengthening retirement security for employees who regularly rely on overtime.
Learn more about how these changes affect different systems here (link to Q&A document).
Since 2022, PEF has made significant progress improving Tier 6, increasing benefits while reducing costs. These are the most significant reforms to date. PEF continues to advocate for a flat 3% contribution rate for all members and a retirement option for employees age 55 or older with at least 30 years of service.
“While PEF did not secure every priority, this agreement delivers meaningful, tangible savings for our members,” Spence said. “It marks real progress—but our work is not done. We will keep pushing to bring Tier 6 pensions in line with the fairness and parity of Tier 4.”