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
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.
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?
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
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
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
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
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
“Fixed” Employer Rates
Options:
• Actuarially determined rates based on
projected retirement account goals
• “Market” based to be competitive
• Recognition of total compensation effects
Goals for ORP Rates
• Competitive – including total compensation
• Stable - reduced rate volatility
• Sustainable – responsive to budget and
funding limits