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ORP Contribution Concepts IFS-Sponsored Presentation

ORP Contribution Concepts IFS-Sponsored Presentation. Denise Yunker, Benefits Director Human Resources Division, OUS denise_yunker@ous.edu. Goals for ORP Rates. Competitive – including total compensation Stable - reduced rate volatility Sustainable – responsive to budget and funding limits.

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ORP Contribution Concepts IFS-Sponsored Presentation

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  1. ORP Contribution ConceptsIFS-Sponsored Presentation Denise Yunker, Benefits Director Human Resources Division, OUS denise_yunker@ous.edu

  2. Goals for ORP Rates • Competitive – including total compensation • Stable - reduced rate volatility • Sustainable – responsive to budget and funding limits

  3. ORS 243.800 (9) The State Board of Higher Education shall • contribute monthly to the optional retirement plan … the percentage of salary of each employee • … equal to the percentage of salary that would otherwise have been contributed as an employer contribution on behalf of the employee • to the Public Employees Retirement System • if the employee had not elected to participate in the optional retirement plan.

  4. Measure 29 Bond Sale and Payment to PERS • November 2003 – March 2004 • Why Measure 29 reduced ORP contributions • Measure 29 Correction • How much • When • What’s Next?

  5. 2003 PERS “Reform” • Created two pension plans and the IAP • PERS pension – hired before 8/29/04 • OPSRP pension - hired on or after 8/29/04 • IAP – all PERS members • Legal challenges to benefit changes pending • Set employer rate at 11.31% • Directed employee 6% to IAP

  6. Reason to Amend ORS 243.800(9) • PERS and ORP are “apples and oranges” • Employer contribution rate changes do not affect PERS benefits, but significantly change ORP participants’ retirement account growth • New PERS/OPSRP plan funding could decrease employer contribution rate; market returns could increase it • Frequent contribution rate changes undermine dollar cost averaging and retirement planning for ORP participants

  7. Employer ORP Rate Options • Revise portions of the statutory language and retain PERS Total Employer Cost Rate • Adopt PERS Normal Cost Rate • Adopt a Fixed Rate • Set a “floor” rate in combination with any of the above

  8. Employer Total Cost Rate • Made up of: • Normal cost • Accrued actuarial liability • Asset valuation • Actuarial gains and losses • Affected by investment performance; asset smoothing that delays recognition of gains and losses; Employee entry age changes, turnover, wage changes

  9. Employer Normal Cost Rate • Normal Cost Rate – Annual cost associated with service accrued during the current year • Oregon PERS – uses Entry Age Normal method • Normal cost is average level percentage of payroll from entry age to retirement age • Can increase or decrease over time due to changes in: • Actuarial funding method • Actuarial assumptions • Plan benefits • Employee demographics

  10. “Fixed” Employer Rates Options: • Actuarially determined rates based on projected retirement account goals • “Market” based to be competitive • Recognition of total compensation effects

  11. Goals for ORP Rates • Competitive – including total compensation • Stable - reduced rate volatility • Sustainable – responsive to budget and funding limits

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