The Oregon Investment Council and Oregon State Treasury are focused on securing sustainable risk-adjusted returns on behalf of beneficiaries. Treasury does not have information about individual account balances, but designed the overaching program reform to increase growth potential for younger workers and decrease the risk of losses for older workers.
The bottom line for participants: The risk of investment losses will decline gradually as they approach retirement, and during retirement.
A comment was made by the president of a public employee union, during the Oregon Investment Council meeting on Sept. 20, that some IAP participants would be interested in having the choice to personally opt out of the Target Date Fund framework, and keep their accounts invested under the current model.
Thank you for visiting and taking an active interest in your retirement planning.
Questions and answers: The Individual Account Program is evolving to reduce risk exposure as
It aligns with “investment best practices,” which is great. And you
won’t need to do a thing. That’s also great.
Hello and thank you for
visiting. As you know, your future quality of life may depend on how prepared
you are financially for your next chapter.
This page was created for
Oregon public workers to answer any questions you may have to the investment format
change approved for the PERS Individual
Account Program (IAP). The IAP is part of your retirement benefit, and is
separate from the pension portion.
We hope this page is a good
resource for you. If you do not have an IAP account but are curious how this
all works, we hope this is informative for you, as well.
It is important to us that PERS
beneficiaries understand these changes and are comfortable with the logic. The
bottom line is that IAP accounts will no longer be a one-size-fits-all format,
and instead will get less risky as you age. Under the previous system, an older
public employee had been exposed to the same exact investment risk as a young
Going forward, you will be better protected in the event
of a market downturn in the years as you approach retirement.
That’s what the Oregon
Investment Council voted to adjust on Sept. 20, 2017. The Council is in charge
of setting policies for the investment of all Oregon public trust funds.
Your IAP funds will shift to a
new, risk-adjusted format based on your age. These are known as “target date
funds.” Reducing risk exposure as the time approaches that you need your money
is an investment best practice.
This change will be automatic.
You won’t need to do a thing when it comes to your IAP change.
We are pleased about this
strategic adjustment to the IAP because, as fiduciaries, we are committed to
managing your retirement assets smartly, strategically, and sustainably for the
long term. Your financial wellbeing matters. The new format for the IAP is
consistent with our fiduciary obligation to you.
While you are here, you should
also think about your own retirement. Are you saving smartly? It is likely that
if you only have PERS and an IAP, you aren’t saving enough and you might want
to consider an additional option to save more, such as the Oregon Savings Growth
Plan, an IRA or other programs.
If you have questions that
aren’t here, let us know at email@example.com
If they are questions about the
IAP, we will get back to you and maybe add them below!
One more thing: At Treasury we invest
the Oregon Public Employees Retirement Fund, which is really big and
diversified around the globe for the exclusive benefit of trust fund
participants. We don’t have any of your personal information or information
about your personal IAP balance.
If you want to know what
your balance is, you can log in to the IAP portal at IAP.Voya.com, which is managed by Voya.
If you have questions that
involve your personal account, those are best addressed to the Public Employees Retirement System, which is a separate agency that is the
plan “administrator.” Questions
about retirement benefits may be directed to PERS Member Services at
888-320-7377. Representatives are available Monday-Friday, 8:30 a.m. to 5 p.m.
Thanks again for visiting the
Oregon State Treasury.
Q: First of all, what is an IAP?
The Individual Account Program
is part of your retirement benefit. All PERS members who have worked in a
qualifying position after January 1, 2004, have two components to their “hybrid”
A monthly pension benefit [Tier
One, Tier Two, or Oregon Public Service Retirement Plan (OPSRP)]. These pension
amounts are generally based on a formula; and
An account balance-based benefit [the
Individual Account Program (IAP)] which is not guaranteed and returns
are tied to market performance. This is the defined contribution part of your
retirement. Your IAP balance is made up of member contributions plus investment
earnings or losses over time.
Q: How does money get into my Individual Account?
Currently, 6 percent of your salary (whether
contributed by you or paid by your employer) goes into your IAP. This will not
Q: Where did the IAP originate?
The IAP was created by the Legislature in 2003, and
started in 2004. Until now, all the funds have been managed in the same manner
for every worker, invested in the Oregon Public Employees Retirement Fund.
The Legislature’s idea for the IAP was to create a
non-guaranteed investment vehicle like a 401(k) to help augment the pension
benefit of public workers.
Q: Hold on a second. IAPs aren’t guaranteed?
That’s right. The returns on your IAP investments
are based on the markets. In a “defined contribution” program like the IAP, the
risk is on the participant.
That’s different from the pension part of your
The change to the IAP program won’t have any impact
on your monthly pension benefit.
Q: So all IAP money has been invested the same way? How has the IAP
money been invested, under the one-size-fits-all approach?
A: It has all been invested in the Oregon Public
Employees Retirement Fund (also called OPERF because we like long and
confusing-sounding acronyms). That fund is global and diversified into lots of
sorts of investment types like real estate and bonds and stocks. It also is
rather large (as of now, about $74 billion) and has performed strongly compared
to peer funds in other states.
OPERF is managed by the Oregon State Treasury under
policies set by the Oregon Investment Council, and is managed on a 25-year
horizon with the goal of strong returns to pay pension benefits.
While the fund has performed well, it is a trust
fund for more than 350,000 PERS workers and retirees -- and it is not invested
with the career trajectory of any single employee in mind. That means that it
could experience losses in a downturn. That is OK for a large institutional
fund that is built to ride out all market phases and capitalize on
opportunities during recessionary cycles. It’s less OK for an individual on the
eve of retirement.
Q: OK. So, how are IAPs going to change?
A: The program will be divided up so that workers will
move into customized portfolios based on their current age, and years to
expected retirement (estimated to be 65, but that’s a decision for every public
worker). These will be known as “IAP Target Date Funds.”
These are custom funds and they don’t even exist
yet. They are being created specifically for you. Under the IAP Target date
funds, at least half of your money will remain in the Oregon Public Employees
Retirement Fund (or OPERF). Remember, it is a diversified and strong performing
The rest will go into either more conservative
(less risky) or more aggressive, growth-oriented alternatives, based on your age.
Q: What’s a Target date Fund?
A: A target date fund typically has a date in its
name—this is called the fund’s “target date.” The target date is the
approximate year when you expect to retire and begin withdrawing from your
account. A target date fund adjusts its investments over time. It does not mean
you will actually retire in that year.
If you’re in your early working years, the emphasis
of the fund is on growth to build savings. As you move toward retirement, the
investments of the fund gradually evolve, becoming more conservative to help
protect against market fluctuations—and it all happens automatically.
Q: What is the Oregon Investment Council?
A: The Oregon Investment Council (OIC) is a public
board and oversees the policies and asset allocation for several funds,
including the Oregon Public Employees Retirement Fund (OPERF), the State
Accident Insurance Fund, Oregon Short-Term Fund, and the Common School Fund.
The council members have a fiduciary obligation to
beneficiaries and must strive to ensure that the investments are managed for
the sole and exclusive long-term benefit of beneficiaries. The council’s
mandate is to achieve the highest “risk-adjusted return” possible on
investments, including for the OPERF.
Q: What does the Oregon State Treasury do?
The Oregon State Treasury is the state’s financial
hub and helps Oregonians to improve their financial security and confidence. As
part of that goal, Treasury manages Oregon’s public trust fund portfolio,
following the policies and asset allocation targets set by the Oregon
Treasury manages the investment of public employee
retirement assets between the time the money is received, and when it is needed
to pay for benefits. An estimated 73 cents of every dollar in retirement
benefits comes from investment returns. The rest comes from contributions by
employees and government employers.
Treasury also helps to improve the financial
literacy of Oregonians to help them make sound financial decisions. That
includes encouraging people to plan for retirement and ensure they are saving
Q: What does the Public Employees Retirement System do?
A: The PERS agency is the administrator of the
retirement system and your touch point when it comes to your retirement
account. PERS collects the money, maintains records for each worker, and then
is responsible for calculating and paying your retirement benefit. They also
have a call center with very nice people who answer questions.
Questions about retirement benefits may be directed
to PERS Member Services at 888-320-7377. Representatives are available
Monday-Friday, 8:30 a.m. to 5 p.m. (Pacific Time).
Q: When is the IAP switchover going to happen?
On Sept. 20, 2017, the Oregon Investment Council
made the decision to change the investment strategy of the IAP as of the end of
2017. Formally, the switch will take effect at the end of the workday on Dec. 29,
Again, Treasury does not maintain records for
individual accounts. You can track your individual balance through the PERS
Q: What do I need to do as part of the IAP transition?
A: Nothing! Really. We’ll handle it.
Q: I’m really nervous about my retirement funds, especially with all
the negative news coverage these days. That makes me anxious that this change
will somehow impact my pension or something.
A: This has nothing to do with your pension. You
will remain in the same pension tier. This strategic change only impacts the
IAP to make it less risky as you age. Remember, the IAP is the PERS
market-based account part of your pension.
Q: Can you say I won't lose money after this switch?
A: Like today, the IAP will continue to be a market-based account. That
means the returns are based on what is happening in the markets, which
sometimes go up and sometimes go down. But as history shows, they tend to go up
more than they go down.
With this change, we can say that older workers will be less likely to lose
money -- and as much money -- because their risk will be lower.
Q: You’re going to say “investment best practice” again, aren’t you?
A: Yes! It’s an investment best practice – also a
fiduciary best practice -- to reduce risk as the target time approaches that
you need your money.
Q: OK, got it. But who says that Target Date Funds are an investment
A: Target date funds are recognized by finance
educators and regulators because they automatically adjust risk without any
action needed by investors. They are noted as a preferred “qualified” option under
federal law for some retirement plans, known as ERISA (another complicated
acronym), for the Employee Retirement Income Security Act of 1974.
Q: Which IAP Target Date Fund I will automatically be invested in?
A: There are a series of 10 IAP Target date Funds.
One of those is a Retirement Allocation Fund once you reach retirement age.
Each PERS Member with an existing IAP account will
be invested in a single IAP Target date Fund based on a five-year range of
birth years (see bottom of this page for a chart of birthdates and funds). Please note that the “target date” in no way dictates
when you have to or will be eligible to retire (see normal retirement age
eligibility for Tier
One, Tier Two, and OPSRP
members); the date is based on an approximate retirement age of 65.
Q: So I could be invested in a different Target Date Fund than my
spouse, if he or she is a PERS employee, and coworkers?
A: Yes, unless you are in the same age range as all
your coworkers and your spouse. Which seems unlikely. Your coworkers are
different ages. And your spouse, if he or she is a PERS member, will be in the
IAP that corresponds to his or her birth year. That’s even if he routinely
fails to act his age at social gatherings.
Q: Can I be invested in more than one IAP Target Date Fund?
A: No. You will be invested in a single target date
fund based on your birth year and an expected retirement age of 65.
Q: Are all owners of IAP accounts affected?
Q: How do you decide the investment strategy for each tier for IAP
Target Date Funds?
A: The IAP funds are a custom target date framework
that will only be available to public workers and will continue to have a
substantial amount of assets in the Oregon Public Employees Retirement Fund.
Again, OPERF is already diversified.
Younger workers will have some additional exposure
to growth strategies. Older workers past the age of 50 will begin to see an
age-appropriate shift that raises exposure to bonds and “fixed income”
strategies, and reduces exposure to other investment types.
The objective for each retirement fund is to
achieve the highest total return over time combined with an appropriate level
of risk that is consistent with its asset mix. Target date funds that are
furthest away from their target dates invest primarily in stocks, emphasizing
the growth potential you need to build wealth over the long term.
Q: What will my investment mix be at retirement?
When your fund reaches its target date (approximate
retirement age of 65), its investment mix is 60% defensively oriented
strategies (such as core bonds, Treasury Inflation-Protection Securities (TIPS),
and short duration) and 40% growth strategies (including stocks, private equity
and real estate).
Q: How much of my money will stay in the Oregon Public Employees
A: It depends on your target date fund, which is a
function of your age. In working years, more than half of your assets will
remain in OPERF. In retirement, it will be half.
Q: What if I’m like, really into risk, and I just want to stay fully
exposed to OPERF and not do the target date thing, even though I know it will
be less risky when I am younger and more risky when I approach retirement?
A: At this time, everybody is being shifted to the
new format. But as you can tell from the chart above, every IAP investor will
continue to have a substantial share of their balance in the Oregon Public
Employees Retirement Fund. Again, OPERF is highly diversified. It just isn’t
built with your individual needs and personal retirement date in mind.
Q: When will performance data be available for the IAP Target Date
A: You can check your
IAP account balance any time at IAP.Voya.com, however, returns (earnings or
losses) are applied to accounts once on an annual basis, typically in the
spring of the following year. If you are curious and want to know more often
the performance of the funds, quarterly fact sheets will be available as of the
first quarter of 2018 on our website at www.oregon.gov/treasury.
Q: In addition to OPERF, what will the other funds in the IAP Target
Date Funds be?
A: The funds will be
from State Street Global Advisors.
State Street Russell
All Cap Index Fund
State Street Global
All Cap Equity Ex U.S. Index Fund
State Street U.S. Bond
State Street 1-10 Year
U.S. Treasury Inflation Protected Securities (TIPS) Index Fund
State Street U.S.
Short-Term Government/Credit Bond Index Fund
Q: I understand that Target Date Funds are good for older workers. But
I’m a younger worker. How do they help me?
A: Target date funds that are furthest away from
their target dates are primarily invested in growth-oriented strategies (including
stocks, private equity, real estate and other alternatives) that emphasize the
earnings potential needed to build your retirement account balance over the
long term. For the IAP custom target date funds, workers who are younger than
45 will have exposure to OPERF plus additional stock funds, which will make
their accounts more aggressive.
To use a baseball metaphor, earlier in your career
you swing for the fences more often.
Q: How will the shift to
IAPs impact my payment options at retirement?
A: All payment options will remain the same. When
you retire, you can receive your IAP account balance as a lump-sum payment or
installment payments over a 5, 10, 15, or 20-year period. The PERS agency can
help you with questions about payment options.
Q: How will this change
impact current retirees receiving IAP installment payments?
A: If you are currently receiving IAP installment
payments, or choose to receive IAP installment payments at retirement, then
under the new IAP TDF investment strategy, your IAP account balance will be
placed in the “IAP Retirement Allocation Fund.” This fund is designed to help
preserve existing account balances, which may lead to a more predictable
The PERS agency can answer specific questions about
Q: Who is AllianceBernstein L.P. and what is their role in the IAP
The Oregon State Treasury, under direction of the
Oregon Investment Council, selected AllianceBernstein to help manage the custom
series of target date funds. In this role, AllianceBernstein designs, monitors
and adjusts the Fund’s asset mix. The money will not be invested in
AllianceBernstein funds. The firm was selected because it specializes in target
date fund development. It provides global perspective, independent research and
investment discipline across all asset classes.
Q: How can I learn more about public trust fund investments?
You can visit the Oregon Treasury website at www.Oregon.gov/Treasury.
In addition, you can read our twice-yearly newsletter, called “Invested for
You can access it at http://www.oregon.gov/treasury/Newsroom/Pages/Invested-for-You-newsletter.aspx
Thank you again for learning
more about the changes to improve the risk profile of your IAP. If you have
additional questions about investments, please contact us at the Oregon State