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Changes to PERS - Special Session (September 30 – October 2, 2013)
Two bills impacting PERS members and employers were passed in the Special Session and signed into law.
Senate Bill 861 - COLA Changes and Supplementary Payments
Senate Bill 861 supersedes the 2014 cost-of-living adjustment (COLA) that was previously approved in Senate Bill 822 (2013). Senate Bill 822 capped the COLA payable on August 1, 2013 at 1.5% for all benefit recipients. Under SB 822, the COLA payable August 1, 2014, and beyond would have varied based on the amount of the yearly benefit.
Senate Bill 861 does not affect the August 1, 2013 COLA, but modifies the yearly COLAs for all PERS benefit recipients. Effective with the August 1, 2014 benefit payment, a COLA will be limited to 1.25% on the first $60,000 of a yearly benefit payment and 0.15% on amounts above $60,000.
Additionally, SB 861 provides a supplementary, one-time payment of 0.25% of their yearly benefit to all benefit recipients, not to exceed $150. Those who have a PERS benefit of less than $20,000 per year will receive a second supplementary, one-time payment of 0.25% of their yearly benefit. These supplementary payments will not be compounded into the member’s yearly benefit and will be in effect for six years (first payable after July 1, 2014 and ending after July 1, 2019).
Supplementary payments will be paid from the PERS Contingency Reserve, and payments are not anticipated to have a material impact PERS’ unfunded actuarial liability or employer contribution rates.
Senate Bill 822 and Senate Bill 861 COLA Comparison – Beginning July 1, 2014
Yearly Benefit
Senate Bill 822 COLA
(No longer in effect after approval of SB 861)
Senate Bill 861
First Supplementary payment for all benefit recipients*
Second Supplementary payment for benefit recipients whose yearly benefit is $20,000 or less*
 *Ends in 2019
Examples of SB 861 and Supplementary Payments for Different Yearly Benefits
Senate Bill 861 - Potential Impact to Employer Rates
The COLA changes are anticipated to reduce PERS’ accrued liability by $1.9 billion and lower long-term employer contribution rates by approximately 2%. The Budget Note for Senate Bill 822 (2013) directed the PERS Board to defer contributions of up to 1.9% of payroll. The one-time 1.9% rate deferral will be replaced by the long-term SB 861 reduction in liabilities and associated rate reduction.
The liability reductions from SB 861 will be combined with recent administrative actions by the PERS Board in calculating rates for 2015-17 and beyond. Those actions include:
·         A reduction in the assumed earnings rate from 8% to 7.75%;
·         Re-amortizing Tier One and Tier Two unfunded liabilities;
·         Governmental Accounting Standards Board changes to how retirement costs are allocated; and
·         A modification to the employer rate collar.
Combined, these changes are currently projected to result in a system-wide average employer rate increase of 2.6% of PERS covered payroll for the 2015-17 biennium based on the 2012 PERS valuation results. The liability reductions and eliminating the short-term employer rate deferral will reduce long-term employer contribution rates by 2.3% from what they would otherwise be beginning in the 2017-19 biennium.
Any legal challenge to Senate Bill 861 bypasses the lower courts and goes directly to the Oregon Supreme Court.
Senate Bill 862 – Modifications to Specific PERS Statutory Provisions
Senate Bill 862 contains three major provisions. First, for the purpose of “final average salary” for OPSRP members, the measure excludes certain increases in salary during the last 36 months of employment that are made by an employer so an individual employee may pay for insurance coverage previously paid by the employer. Second, the measure allows for garnishment of PERS benefits for restitution or compensatory damages if the member has been convicted of a felony. Third, the measure prohibits most new legislators from becoming members in PERS but allows them to choose to contribute to the Oregon Savings Growth Plan (OSGP.) Also, current legislators may opt out of the PERS and elect to make contributions to OSGP prospectively.
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