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Educational Disclosure: This article provides general educational information only and is not financial, investment, legal, tax, employment, pension, or retirement advice. State Employee Advisor Network is a marketing and referral platform operated by Revenx LLC. It is not affiliated with the Maryland State Retirement and Pension System, the Maryland State Retirement Agency, the State of Maryland, or any participating employer. Official Maryland law, actuarial reports, financial statements, member records, and plan documents control.
The Maryland State Retirement and Pension System receives money from three main sources: member contributions, employer contributions, and investment income.
The Maryland State Retirement Agency administers the System, while the Board of Trustees is responsible for its governance and investment programme. The System includes several plans covering eligible State employees, teachers, police officers, judges, correctional officers, law-enforcement officers, legislators, and employees of participating governmental units.
During fiscal year 2025, the System provided more than $5 billion in retirement benefits. Its investment portfolio reported a market value of approximately $73.2 billion as of June 30, 2025.
This guide explains where pension funding comes from, how employer contribution rates are calculated, how investments affect the trust, and what the funded ratio means. It does not calculate an individual pension or recommend an employment or retirement decision.
For fiscal year 2025, the System reported the following funding sources:
These amounts can change from year to year. Member and employer contributions are generally more predictable, while investment income can rise, fall, or become negative depending on financial-market performance.
Many active members contribute a percentage of their earnable compensation through payroll deductions.
The applicable rate depends on the employee’s retirement system, membership provisions, benefit selection, and other plan-specific rules. A contribution rate applying to a teacher may not be the same as one applying to a State Police member, judge, correctional officer, or employee of a participating local government.
Member contributions are not the same as deposits to an individually directed 401(k) account. Members do not select investments for their pension contributions.
Maryland’s financial statements explain that member contributions and applicable statutory interest are credited to the Annuity Savings Fund. When a member retires, accumulated contributions and interest are transferred to the Accumulation Fund, from which retirement, disability, and death benefits are paid.
An individual pension is generally determined under the benefit provisions applying to that member. It is not based solely on the amount the employee personally contributed.
The System also receives contributions from the State of Maryland, participating governmental units, local boards of education, and other covered employers.
Employer contribution rates are developed through the annual actuarial valuation. They generally include two broad components:
Employer contributions support the applicable retirement system as a whole. They are not credited to an individual employee account.
The rates can differ substantially between systems because the plans have different benefit structures, member demographics, retirement ages, service patterns, and existing liabilities.
For fiscal year 2027, the State employer contribution rate is 17.98% for the Teachers’ Retirement and Pension System and 21.67% for the Employees’ Retirement and Pension System. The State Police, Judges’, and Law Enforcement Officers’ systems have different rates.
Maryland’s 2025 Popular Annual Financial Report states that the State contributes 100% of the amount recommended by the actuarial valuation in accordance with the System’s funding policy.
The System invests pension assets across multiple asset classes.
The portfolio can include:
Investment income is important because pension obligations extend across many decades. Contributions received today may be invested for years before being used to pay benefits.
For fiscal year 2025, the System reported a net investment return of 9.83%, compared with its 9.54% policy benchmark and 6.8% assumed investment-return rate. After benefit payments and other activity, the market value of assets increased from approximately $67.9 billion to $73.2 billion.
A positive return in one year does not establish what the portfolio will earn in a future year. Investment returns can be above or below the assumed rate, and periods of negative performance can affect funded status and future employer contribution requirements.
Member payroll deductions, employer contributions, and other authorised payments are deposited into accounts maintained under Maryland law.
Member contributions and statutory interest are initially recorded in the Annuity Savings Fund. Employer contributions, other contributions, and investment income are credited to the Accumulation Fund.
The Board of Trustees establishes investment policies, and the System’s Investment Division manages the portfolio within those policies.
Assets are pooled for investment management, but contribution rates, liabilities, benefit provisions, and funded ratios are evaluated for the applicable component systems and employer groups.
Retirement, disability, and death benefits are paid from the Accumulation Fund. Administrative and investment-management expenses are recorded through the Expense Fund.
In fiscal year 2025, annual retirement allowances totalled approximately $5.25 billion for 177,885 retirees and beneficiaries.
The pension is therefore not funded only by contributions from current workers. Benefits are paid from accumulated trust assets that include contributions and investment results from current and earlier years.
An actuarial valuation is an annual assessment of the System’s financial position.
The valuation uses member information, benefit provisions, current assets, and assumptions about future events. Its purposes include:
The June 30, 2025 valuation used a 6.8% assumed annual investment return, 3% wage inflation, 3% aggregate payroll growth, and separate assumptions for salary progression, mortality, retirement, disability, and termination.
These are assumptions rather than predictions. Actual investment returns, salary growth, employee turnover, retirement patterns, mortality, inflation, and legislative changes can differ from what was assumed.
When actual experience differs, actuarial gains or losses can change contribution rates, liabilities, and future funded-ratio measurements.
The actuarial funded ratio generally compares the actuarial value of assets with the actuarial accrued liability:
Actuarial value of assets ÷ actuarial accrued liability
As of June 30, 2025, the combined State and municipal systems reported:
The ratio increased from 73.43% in 2024.
A ratio below 100% means the actuarial value of assets is below the actuarially measured value of benefits already accrued under the valuation assumptions.
It does not mean the System has no assets or that current benefits automatically cannot be paid. The System had more than $73 billion in actuarial assets and paid more than $5 billion in benefits during fiscal year 2025.
A funded ratio is also a point-in-time measurement. Its meaning is better understood together with contribution practices, investment performance, benefit payments, plan maturity, and the schedule used to address unfunded liabilities.
Maryland’s employer contributions include amounts intended to fund current normal costs and amortise unfunded actuarial accrued liabilities.
The 2025 financial report states that the System’s unfunded actuarial accrued liability is generally funded through a closed amortisation period ending June 30, 2039. The contribution method expresses payments as a percentage of covered payroll.
This approach spreads payments over time instead of requiring the entire unfunded amount to be paid immediately.
Actuarial projections may illustrate how the funded ratio could change under specific assumptions. Those projections are not guarantees. Results can differ when investment returns, contribution practices, payroll growth, demographics, or plan provisions differ from the assumptions.
Several factors can affect future funding measurements:
Returns below the assumed rate can increase unfunded liabilities or future contribution requirements. Returns above the assumption can improve asset values, although Maryland’s actuarial method recognises market gains and losses over time.
Pension liabilities and contributions are affected by covered payroll and salary growth. The 2025 valuation reported that actual salary increases were higher than assumed for the year, contributing to actuarial losses.
Benefits may be paid earlier, later, or for a different period than assumed. Actuaries periodically study experience and update assumptions when appropriate.
Cost-of-living adjustments are controlled by Maryland law and differ by system and service period. Eligible payees received a 2.698% COLA rate in July 2026, although a 2.5% statutory cap applied to the post-July 2011 portion of many allowances.
Changes to benefits, funding policies, contribution requirements, or actuarial methods can affect liabilities and employer costs.
Members seeking information about their own pension may review:
For a broader educational overview, see the related Maryland State Retirement and Pension System guide.
System-wide funding information does not determine the benefit payable to an individual member. Official records and estimates from the Maryland State Retirement Agency provide the appropriate source for individual plan information.
State Employee Advisor Network is a marketing and referral platform operated by Revenx LLC. It is not affiliated with the Maryland State Retirement and Pension System, the Maryland State Retirement Agency, the State of Maryland, or a participating employer.
State Employee Advisor Network does not administer pension assets, calculate Maryland benefits, or provide pension, investment, financial-planning, retirement-planning, legal, tax, insurance, or employment advice.
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State Employee Advisor Network receives compensation from participating professionals for marketing and referral services. This creates a financial incentive to make referrals.
Eligible consumers may schedule a consultation today to request an introduction to an independent participating professional. The introduction is free to the consumer and does not mean State Employee Advisor Network has determined that a professional or service is suitable.
The Maryland State Retirement and Pension System is funded through member contributions, employer contributions, and investment income.
Employer contribution rates are developed through annual actuarial valuations and differ between the component retirement systems. Investment performance can materially affect trust assets, actuarial experience, and future funding measurements.
As of June 30, 2025, the combined State and municipal systems reported a 73.92% actuarial funded ratio and approximately $26.05 billion in unfunded actuarial accrued liabilities. Those figures are based on actuarial methods and assumptions and will change over time.
Official actuarial valuations, financial reports, Maryland law, and State Retirement Agency publications provide the controlling system-wide information.
The System receives funding from member contributions, employer contributions, and net investment income.
The System reported approximately $1.13 billion in member contributions, $2.95 billion in employer contributions, and $6.59 billion in net investment income.
No. Contribution rates differ based on the retirement system, benefit structure, membership characteristics, and actuarial results.
The combined State and municipal systems reported an actuarial funded ratio of 73.92% as of June 30, 2025. Individual systems reported different ratios.
Not necessarily. It means actuarial assets are below actuarially measured accrued liabilities at that point in time. Available assets, contributions, investment income, benefit payments, and the amortisation policy provide additional context.
No. The System reported a 9.83% net return for fiscal year 2025, but future returns may be positive or negative.
No. State Employee Advisor Network is a marketing and referral platform. It does not administer, invest, calculate, or interpret Maryland pension benefits.
Jeremy contributes regularly to State Employee Advisor Network. With a deep understanding of state pension systems and public-sector benefits, he offers readers insights and strategies to optimize their retirement outcomes.
State Employee Advisor Network is a marketing and referral platform operated by Revenx LLC. We connect consumers with independent, licensed financial professionals. We are not a registered investment adviser, broker-dealer, or insurance agency, and we do not provide investment, legal, or tax advice.
All financial services are provided solely by third-party professionals. Revenx LLC receives compensation from financial professionals for marketing and referral services, which may create a financial incentive to refer individuals to participating professionals. Users should independently evaluate any financial professional before engaging their services.
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