Association of Oregon Faculties
Talking Points Relating to the Optional Retirement Plan (revised as of 10-08-06)
1. ORS 243.800 authorizing an Optional Retirement Plan (ORP) for faculty at
Oregon’s institutions of public higher education was approved by the Oregon
Legislature during the 1995 session.
2. Faculty groups, including the Association of Oregon Faculties (AOF), supported
adoption of the ORP plan because it resulted in a retirement option that offered
faculty much greater portability than the PERS system.
3. Currently, over 3,100 Oregon University System (OUS) faculty have chosen to be
members of the ORP rather than PERS.
4. Under current law, the employer contribution rate for the ORP must be identical
to the employer contribution rate for PERS. AOF strongly supports maintaining
this link to PERS.
5. In the 2003 and 2005 legislative sessions, OUS introduced legislation that would
have “uncoupled” the employer contribution rate from PERS and given the State
Board of Higher Education discretionary authority to set the rate. In 2003 this
legislation was defeated. In 2005, an ORP bill was passed with AOF’s approval
that made minor, needed changes in the ORP but the “uncoupling” provisions
were deleted from the bill.
6. In late 2003, OUS attempted to lower employer contribution rates for the ORP
based on a lowering of PERS rates that resulted from the sale of bonds to reduce
future unfounded liabilities of the PERS system. Since ORP is a totally separate
plan from PERS, AOF sued and prevailed in a settlement with OUS under which
OUS agreed to restore the contribution rate to the level it would have been had the
PERS rate not been reduced because of the bond sale. The system also agreed that
it would not attempt to lower the rate in the future based on bond sales that
reduced PERS liabilities and lowered rates for PERS employers. Indeed, OUS did
lower the employer rate to 3.71% from 11.31% in November 2003. The letter
from OUS to ORP participants dated 11/14/03 said in one paragraph that their
effort with the 2003 Legislature to de-couple the PERS and ORP [employer]
contribution rates failed. In the next paragraph they announced the new reduced
employer rate without giving any justification. After the lawsuit brought about by
AOF the reinstated the old rate in April 2004 and compensated participants for the
lost months of earnings.
7. The State Board of Higher Education has again directed OUS to introduce
legislation in the 2007 session to “uncouple” the rates. The system’s rationale is
that the money saved in ORP employer contribution rates could be used to
increase faculty salaries. To expect faculty to happily increase salaries by
lowering their own retirement benefits is absurd.
8. AOF will vigorously oppose the 2007 OUS bill to “uncouple” the ORS rate from
the PERS rate. PERS rate setting is a definable process conducted by professional
actuaries. The State Board of Higher Education could use whatever rate setting
criteria it felt was appropriate. Changing the process would result in biennial
uncertainty and AOF believes that the rate level would quickly be lowered.