Because a significant portion of OUS faculty has chosen to participate in the Optional Retirement Plan (ORP) authorized by ORS 238.100, AOF weights in on legislation and administrative issues that affect the ORP.
Currently AOF is monitoring OUS’ efforts to “decouple” the ORP employer rate from the PERS employer rate, which historically resulted in lower employer contributions to employee pensions.
After AOF announced it would fight any legislation to decouple the rate, OUS announced in late 2006 that it would not introduce decoupling legislation in the next legislative session.
AOF led the fight to reverse the November 1, 2003 reduction in ORP employer contribution rates. AOF retained Portland’s Bennett Hartman law firm to conduct basic research on what avenues of legal recourse might be available to ORP members.
AOF only supports “decoupling” if there is a floor of the PERS/OPSRP employer rate.
Optional Retirement Plan Fact Sheet
The Association of Oregon Faculties (AOF), on behalf of its members and other faculty members who are participating in the Optional Retirement Plan (ORP) under ORS 243.800, has retained legal counsel to contest the action by the Oregon University System (OUS) that reduced employer contribution rates to the ORP from 11.31% to 3.71% for Tier One members and from 11.31% to 4.27% for Tier Two members.
Currently, OUS is promoting legislation that would de-couple the ORP employer contribution rate from the employer contribution rate for members of the PERS system. AOF opposes this concept for a variety of reasons, including those discussed below.
How is the PERS employer contribution rate established?
The PERS system retains an actuarial firm, currently Milliman USA, to calculate employer contribution rates for the upcoming biennial period. While the process of determining actuarial estimates is complex, generally the actuary takes into account such factors as the number of active and retired members in PERS, expected interest earnings for the PERS fund, estimates of funds needed to pay benefits for currently retired members and an estimate of long-term actuarial liabilities of the PERS system.
The process for calculating the PERS employer contribution is well established and is subject to scrutiny and challenge. Shifting from this process to an undefined process under the authority of the State Board of Higher Education will unavoidably result in less certainty in the rate calculation process and less opportunity to challenge that process if necessary.
Why is it important for the ORP rate to be statutorily tied to the PERS rate?
The whole foundation for the current legal challenge being brought by AOF is the fact that the ORP rate is tied to the PERS rate and that relevant Oregon Administrative rules relating to employer contributions define how those contributions are to be calculated.
Under OAR 459-009-0084(10), amounts paid by OUS to “…offset any pooled, unfunded actuarial liabilities… shall be treated as pre-funded contributions and additional assets for the payment of obligations of the employer under ORS chapter 238, rather than as a reduction of those obligations.” (Emphasis added). As a result, the legal position AOF is promoting would require the OUS employer contribution rate to include amounts that it has pre-paid against future liabilities of the PERS system.
Without the current tie to the PERS contribution rate, the administrative rule that is the basis for this challenge would no longer apply to the ORP. It is AOF‘s position that the added security of the existing statutory language is an absolute must in these days of uncertain funding.