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Variable Annuity Adjustment

PERS will change the way Money Match retirements are calculated for members who participated in the variable account program and retire on or after July 1, 2004. The change is a result of the City of Eugene vs. PERS settlement. To avoid the variable calculation change, a member must have retired no later than June 1, 2004.

In the City of Eugene vs. PERS case, Judge Lipscomb ruled that doubling the interest on a member's variable account at retirement was not the correct method to use.
 
The administrative rule, (PDF) adopted by the PERS Board at its June 4, 2004 meeting, includes a process to calculate a Money Match retirement for a member who participated in the variable as if the member had only been in the regular account. The new method will mean that members whose allowances would increase because their variable accounts outperformed the regular will not receive as much of an increase, and those whose allowances would have decreased because their variable accounts under-performed the regular account will not be subject to as much of a decrease.
 
Variable account contributions before January 1, 1982, are not included in the calculation, and the rule does not apply if a member selects the total lump-sum option.

The following table shows if a member would have a positive or negative result from variable participation and applies only to a member that did not start and stop participation. A negative result means the monthly benefit amount will be lower; a positive result means the monthly retirement benefit will be higher. This is based on 2003 earnings crediting, and crediting in future years will change the results. The examples are for a Tier One member.
 
Clicking on a year shows an example.
 
Assumptions:

  • Annual salary of $35,000
  • Annual contributions of $2,100 (6 percent of assumed salary)
  • Member elected a 50 percent variable participation rate
  • Member’s salary, contribution rate, and variable participation rates remained constant
  • Member retires on July 1, 2004, at the age of 65
  • Member is Tier One, retirement benefit is calculated under Money Match, and member elects benefit payment Option 1
  • Sick leave, vacation hours, and member purchases are not used
  • 2004 annual variable rate projected at 10 percent
 
Key:
Blue color square graphic  Positive change in monthly benefit
Orange color square graphic  Negative change in monthly benefit
<>
Year variable participation began
Increase/decrease in monthly benefit
< $15/mo.

Increase/decrease in monthly benefit
> $15/mo.

1982   Negative change in monthly benefit - Orange color square graphic
1983   Negative change in monthly benefit - Orange color square graphic
1984  Negative change in monthly benefit - Orange color square graphic
1985   Negative change in monthly benefit - Orange color square graphic
1986   Negative change in monthly benefit - Orange color square graphic
1987   Negative change in monthly benefit - Orange color square graphic
1988   Negative change in monthly benefit - Orange color graphic
1989 Negative change in monthly benefit - Orange color square graphic  
1990 Negative change in monthly benefit - Orange color square graphic  
1991 Negative change in monthly benefit - Orange color square graphic  
1992 Positive change in monthly benefit - Blue color square graphic  
1993 Positive change in monthly benefit - Blue color square graphic  
1994 Positive change in monthly benefit - Blue color square graphic  
1995 Positive change in monthly benefit - Blue color square graphic  
1996 Positive change in monthly benefit - Blue color square graphic  
1997 Positive change in monthly benefit - Blue color square graphic  
1998 Positive change in monthly benefit - Blue color square graphic  
1999 Positive change in monthly benefit - Blue color square graphic  
2000 Positive change in monthly benefit - Blue color square graphic   
2001 Negative change in monthly benefit - Orange color graphic   
2002 Negative change in monthly benefit - Orange color graphic