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OPERS Update - Recommended Benefit Changes. OPERS TOWN HALL MEETING PowerPoint Presentation. Why Are We Considering Benefit Changes Now?.
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OPERS Update - Recommended Benefit Changes OPERS TOWN HALL MEETING PowerPoint Presentation
Why Are We Considering Benefit Changes Now? • OPERS has a long history of proactively addressing issues as early as possible (examples include the Choices Health Care Plan, the Healthcare Preservation Plan, separating pension trust from healthcare trust). • OPERS has a long history of responsible funding and conservative fiscal practices (examples include intergenerational equity value, funding healthcare benefits at inception in 1974, best practices in actuarial assumptions). • OPERS is committed to member involvement and communication. 2
Goal: Finding the Right Balance More Than Needed Less Than Needed May cause undue hardship on members May create need for more drastic changes later Key to Achieving Balance Incremental Changes Over Time 3
What is Driving the Consideration of Benefit Changes Now? • Retirees living longer in retirement and we need to adjust our benefits to recognize that • Eliminate unfair subsidization of benefits of subsets of members • Encourage member engagement in their retirement planning • Economic environment 4
Key Funding Measures • Funded Ratio – the ratio of assets accumulated to pay pension benefits to corresponding liabilities • Amortization years – reflects how long it will take to fund our unfunded liabilities based on expected inflows and outflows 8
2007 Pension Plan In-Flows and Out-Flows (Percentages)
Historical Fluctuation of Market Returns Data regarding OPERS investment returns is available back to 1979. A review of this historical data shows that OPERS has only had 4 years with negative investment returns since 1979. 12
Recent Changes in Key Funding Measures * In order to stay within 30 years of funding, OPERS adopted a schedule of decreasing healthcare funding down to 0% by 2014, which means the assets in the healthcare fund would run out within 10 years 13
2009 Contribution Rate Allocation Changes To Retain 30-Year Funding
What Do We Want To Do? Actuary helped define goals for savings from plan design changes. GOALS: 16
Recommended Benefit Changes Assumptions Components 17
COLA 22
FAS 24
Assumptions 25
Recommended Benefit Changes Assumptions Components 26
Transition Plan(Age & Service Eligibility, Benefit Formula, COLA & FAS) How we transition to this new plan will be important. The Board recommended the following three-group phase-in once legislation is passed. This will ensure adequate notice of the transition to our members. Group A – Must be eligible to retire within five years after the effective date of the legislation.* Grandfathered under current plan design except for COLA provision. Group B – Must be eligible to retire within 10 years after the effective date of the legislation or have attained 20 years of service credit prior to the effective date.* Grandfathered under current plan design except for COLA provision and for those seeking an early retirement their pension will be reduced to reflect longer life expectancies. Group C – All others and new hires after the effective date of the legislation. All elements of the new plan design apply. *To be counted toward determining group eligibility, all service purchases must be completed during the applicable transition period. 27
Transition Plan(All other plan design changes) Age reduction factors actuarially neutral – Will apply to Groups B and C Elimination of minimum benefit calculation – Will apply to all three Groups Intersystem transfers actuarially neutral – Will apply to all three Groups Limit retroactive benefits to within 90 days of application receipt – Will apply to all three Groups 28
Other Board Changes • Purchase Service credit – eliminate subsidization • Increase minimum earnable salary to $1,000/month • Establish a statute of limitations on membership determinations • Grant Board authority to establish mitigating rate • Disability program changes • Corrective changes 29
Other Board Changes • Disability program changes: • Implement industry-accepted standards for eligibility determinations and exclude disabilities resulting from felony or elective cosmetic surgery • Utilize “any occupation” standard after three years (up to five) of receiving benefits and limit employer responsibility for reinstatement to three years (up to five) • Adopt case management model for benefit recipients • Require offset for SSDI benefits (if applicable) • On return to work limit free service credit grant (minimum 2 years/ maximum 5 years) 30
Transition Plan(Other Board changes) Purchase Service credit actuarially neutral – Six-month window after bill’s effective date to purchase credit at current cost Increase minimum earnable salary to $1,000/month – If bill becomes effective in 2011, will apply to service earned after January 1, 2012 Establish a statute of limitations on membership determinations – One-year window to seek a determination for service prior to bill’s effective date; five-year statute of limitations will apply to all service after bill’s effective date Grant Board authority to establish mitigating rate – Will apply after bill’s effective date Disability program changes – Will apply to members with an effective date of benefits that is after the bill’s effective date Corrective changes – Will apply after bill’s effective date 31
2009-10 Funding Plan Estimated 12.26 years Estimated Total Impact *Does not require statutory authority for change 32
Next Steps • Continue communication to members, retirees and stakeholders • Work with members of the Ohio General Assembly 33