A Look at DROP Plans, Disability, & Transparency Jonathan Small, CPA Fiscal Policy Director

1. A Look at DROP Plans, Disability, & Transparency Jonathan Small, CPA Fiscal Policy Director Oklahoma Council of Public Affairs, Inc. www.ocpathink.org

2. Jonathan Small, CPA • Certified Public Accountant • Bachelor’s Degree in Accounting • Budget Analyst – Office of State Finance • Fiscal Analyst – House of Representatives • Auditor – BKD, LLP • Research Analyst – House of Representatives • Dir. of Government Affairs – Insurance Dep. www.ocpathink.org

3. Mission “OCPA's mission is to accumulate, evaluate, and disseminate public policy ideas and information for Oklahoma consistent with the principles of free enterprise, limited government, and individual initiative.” www.ocpathink.org

4. Sources • Oklahoma Firefighters Pension and Retirement System • Oklahoma Law Enforcement Retirement System • Oklahoma Police Pension and Retirement System www.ocpathink.org

5. Deferred Option Plan Source: OK House Legislative Appropriations www.ocpathink.org

6. DROP • Allows members eligible for a normal retirement to defer the receipt of retirement benefits while continuing employment • Participation limited to 5 years • DROP accounts are credited with interest at a rate of 2.0% less than the total fund growth, or • DROP accounts are guaranteed a minimum interest rate equal to the valuation interest of 7.5% Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports www.ocpathink.org

7. DROP • “Forward” DROP elections are made at the beginning of the 5 year period • “Back” DROP elections are made at the end of the 5 year period Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports www.ocpathink.org

8. DROP • “Forward” DROP accounts accumulate the retirement benefit amount prior to DROP election, plus half of the employers contribution • “Back” DROP accounts accumulate the retirement benefit amount prior to DROP election, plus half of the employers contribution, plus the contribution of the employee Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports www.ocpathink.org

9. DROP • OFPRS allows DROP elections for members receiving disability benefits • OPPRS & OLERS prohibit DROP elections for members receiving disability benefits Source: OFPRS, OPPRS, & OLERS www.ocpathink.org

10. DROP Challenges www.ocpathink.org

11. DROP Challenges • Significantly increasing in share of system total assets • Overly generous benefit, considering all pension/market risk being born by tax payers • Leads to barrier to new public safety participants entering workforce www.ocpathink.org

12. Disability www.ocpathink.org

13. Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports www.ocpathink.org

14. Transparency www.ocpathink.org

15. Transparency • Only reasonable for the public to know the amounts paid to entities and particularly the amounts of salaries or benefits paid individually to public employees • This principle is reasonably applied to public employee salaries, thus www.accountabilityok.com and http://data.ok.gov • Retirement benefits paid individually to members can be acquired for the OTRS, OPERS, URSJJ , thus www.accountabilityok.com • OFPRS, OPPRS & OLERS interpret confidentiality statutes to mean the individual amounts paid members can not be disclosed www.ocpathink.org

16. Thank You! Q & A Jonathan Small, CPA jonathan@ocpathink.org (405) 602-1667 www.ocpathink.org