Administration December 2, 2003

OPERS Passes Pension Funding Hat to State, Local Governments

February 12, 2003 (PLANSPONSOR.com) - Taking another step to shore up its pension fund, Oregon's state pension board has officially adopted new rates charged to state and local governments to pay for the Public Employees Retirement System (PERS).

Reported by

Nevin E. Adams

Beginning in mid-2003, state government and community colleges will be charged 17.64% of payroll costs for PERS, compared with a contribution rate of 10.03%, according to the Statesman Journal.

Most school districts will be charged 18.58% versus 13.09% currently. However, those figures do not include the extra 6% “employee share,” which most governments also pay under a longstanding agreement, according to the report. Adoption of the rates is expected to trigger a round of appeals from school districts and local governments, which hope to challenge the rates in court and force PERS to lower its costs.

Of course, the actual rates paid by the government could wind up being lower because a variety of reforms are being discussed to lower state pension costs, including updating the outdated actuarial tables employed by the system (see OPERS Board OKs Scrapping of Old Life Tables ). The Board approved updates to the life expectancy tables, now about 25 years old, in August. While the PERS Board expects to adopt new mortality tables before the end of February, doing so could trim payments to pensioners in the future by about 7% to 12% lower than they would have received under the old tables.

Use of the 25-year-old tables to figure out when retirees would pass away has ended up costing the fund $135 million and tacked on another $1.5 billion to the system’s shortfall, according to published reports (see Have Oregon PERS Tables “Out-Lived” Their Usefulness? ). That change decision was controversial – and is expected to lead to litigation by workers and/or labor unions. Public employees are living five years longer than in 1978, but their pension checks aren’t adjusted to last that long, according to change supporters.

New Democrat Governor Ted Kulongoski has called for changes, but offered only a few specific details of his own to revamp the roughly $32 billion Public Employees Retirement System (PERS), currently faced with a $15 billion shortfall (see OR Governor Calls For State Pension Changes ).