Adoption/Repeal of Rules to Implement HB 2740 (2023)
During the 2023 legislative session, House Bill (HB) 2740 was passed amending ORS 238.074 and 238A.142. Prior to HB 2740’s passage, these statutory provisions provided a special method to calculate hours used to determine PERS membership eligibility for academic employees of community colleges. They allowed community colleges to convert an academic employee’s full-time equivalency (FTE) to hours. Such converted hours were subsequently reported to PERS and used to determine whether the academic employee has worked the requisite 600 hours in a calendar year to be considered employed in a “qualifying position,” entitling them to any PERS benefits that require 600 hours of service in the calendar year. These statutory provisions previously did not apply to employees of public universities.
HB 2740 became effective January 1, 2024, and made three specific changes to the statute. First, HB 2740 removed the general FTE hour conversion method and replaced it with a new method that only converts hours of lecture or classroom time worked by an academic employee. Each assigned hour of lecture time or hour of classroom time is multiplied by 2.67. Second, HB 2740 limits the multiplier conversion method only to hours of lecture or classroom time. Other hours of employment are reported without any conversion. Lastly, HB 2740 expanded the special conversion method to apply to academic employees of public universities (who previously were not covered under ORS 238.074 or 238A.142) as well as community colleges. These proposed rule amendments clarify how the revised statutory provisions work, providing guidance to employers on their reporting obligations.
As part of rulemaking, PERS is presenting this clarification in a new rule in Division 5, because the rule applies to all PERS programs including Chapter 238 Programs (Tier One and Tier Two), and the Oregon Public Service Retirement Plan (OPSRP). The existing rule (OAR 459-010-0012) is a part of Division 10 and only applies to the Chapter 238 Programs. As such, it will be repealed to avoid any potential confusion.
Adoption of Annual Plan Limits Rules
The Internal Revenue Service revises various dollar limits annually based on cost-of-living adjustments. These revisions are used throughout the PERS plan’s statutes and rules, but revisions to the limits must be adopted by the legislature or PERS Board to be effective.
The proposed rule modifications incorporate these federal adjustments for calendar year 2024 and are necessary to ensure compliance with the federal limits regarding the amount of annual compensation allowed for determining contributions and benefits.
Under ORS 238.005, 238A.005 and 238A.330, as amended by SB 1049 (2019), on January 1 of each year, the PERS Board shall adjust the overall salary limit, and the salary threshold for EPSA contributions to reflect cost of living increases from the previous year, based on the Consumer Price Index (CPI) for All Urban Consumers, West Region (All Items), as published by the Bureau of Labor Statistics of the United States Department of Labor. The 12-month CPI for December 2023 was 3.3%. The amendments to the rules reflect the 3.3% increase, updating these amounts to $232,976 for the calendar year salary limit, and $3,688 for the monthly threshold for contributions to the EPSA for 2024.
Lastly, we have updated the income limits for retirees who receive Social Security payments and return to work. Note that the Social Security income limits are rarely, if ever, applied under the work after retirement provisions of SB 1049 (2019).
Adoption of Distributions During Employment (OSGP) Rule
OSGP is a voluntary 457(b) deferred compensation plan. It can and does receive rollover funds from other qualified retirement plans, including IAP account from PERS. For rollovers coming from non-457(b) plans, OSGP is required under federal law to account for the funds separately under the plan. Except for the specific distributions outlined in OAR 459-050-0075, distributions from OSGP while the participant is employed with a participating employer are not allowed. Under IRS Revenue Ruling 2004-12, if a 457(b) plan such as the OSGP separately accounts for amounts attributable to rollover contributions to the plan, the plan document may permit the distribution of such amounts at any time pursuant to a plan participant’s request. Note that the OSGP plan document consists of the statute (ORS 243.401-.507) and OARs (Chapter 459, Division 50).
OSGP staff is seeking to amend OAR 459-050-0075 so that any rollover amount in a separate account established under OAR 459-050-0090(4)(c)(A) can be distributed while a plan participant is still employed by a participating employer.
Rules to Implement 2023 Legislation
Staff have compiled amendments to administrative rules necessary to implement several PERS-related bills enacted during the 2023 Oregon Legislative session.
House Bill (HB) 2284 PERS Administrative Fee
This was a PERS-sponsored bill that raises the statutory cap on the amount the agency can charge to process a divorce decree that requires PERS to administer an alternate payee award. The existing statutory limit of no more than $300 for total administrative expenses and related costs incurred in obtaining data or making calculations related to divorce decrees was originally set in 1993. In 1996, the PERS Board adopted OAR 459-045-0090, which acknowledged that “The Board has determined that actual and reasonable administrative expenses incurred by PERS for obtaining data and making calculations to administer an alternate payee award will always exceed $300.” As of 2019, the approximate cost to process a divorce decree was ~$1,300 and PERS processes approximately 1,000 decrees per year.
HB 2284 increased the maximum allowable administrative fee to administer a divorce decree from $300 to $1,300 and directs the board to increase the fee threshold by the Consumer Price Index (CPI) as published by the Bureau of Labor Statistics annually beginning January 1, 2025. Staff analyzed the potential ways that a divorce decree can be administered and evaluated the amount of work necessary to administer each decree variation. Using this research, fee tiers were developed to account for the different levels of work and administrative efficiency. The proposed revision of OAR 459-045-0090 amends the rule to incorporate the changes as effected by HB 2284 and establishes the structure to allow for different pay tiers depending on the complexity of the decree administered. HB 2284 is effective January 1, 2024.
House Bill (HB) 2283 Valid Request for Distribution of Pre-Retirement Death Benefits
House Bill (HB) 2417 (2019) established a new Optional Spouse Death Benefit (OSDB) for surviving spouses of Tier One and Tier Two PERS members who died before retirement. The bill included a requirement that surviving spouses must elect the OSDB within 60 days of the member's date of death. During implementation of HB 2417 (2019), PERS staff observed that the restrictive timing language of HB 2417 (2019) meant that at least one-third of spouses who would have been eligible to elect the benefit were missing the required window to notify PERS of their election. In January 2020, the PERS Board amended OAR 459-014-0040 to accommodate surviving spouses to the extent allowable by statute by establishing a preliminary election which allowed a surviving spouse to request an estimate within 60 days from the date of death and providing an additional 60 days to notify the board in a final written election if they wished to elect the OSDB.
To address this issue more directly, HB 2283 included a provision amending ORS 238.395(2)(b) and (d) to require the surviving spouse to make an election for the OSDB within 60 days of the date of the benefit estimate instead of the member’s date of death.
The proposed revision of OAR 459-014-0040 amends the rule to remove the provisions that were previously put in place to clarify when the OSDB was deemed effective. Since the statute was amended to allow more time for the surviving spouse to elect the OSDB, these provisions are no longer needed. HB 2283 becomes effective January 1, 2024.
House Bill (HB) 2296 Reemployment of Retired Members
The work after retirement provisions of Senate Bill 1049 (2019) allow retired PERS members to be reemployed by a participating public employer for an unlimited number of hours in a calendar year without reduction in pension benefits. HB 2296 (2023) extends these provisions until the end of calendar year 2034. This means these retired members can retain their retired member status and continue to receive their PERS retirement benefits while working for a PERS participating employer as a retiree.
The bill also removed certain sunset provisions for special work after retirement exceptions for Tier One and Tier Two members which would have otherwise been repealed, making these exceptions permanent. The work after retirement exceptions impacted by HB 2296 include the following:
- Retired member employed as a nursing instructor and who is a registered nurse. (Was set to expire January 2, 2026.)
- Retired member employed by Department of Public Safety Standards and Training (DPSST) for training purposes. (Was set to expire January 2, 2026.)
- Retired member employed by a school district or educational service district (ESD) to provide services in the following positions:
- As a speech-language pathologist, or as a speech-language pathology assistant. (Was set to expire January 2, 2026.)
- As a teacher of career and technical education (CTE). (Was set to expire June 30, 2023.)
The proposed revisions to OAR 459-017-0060 amend the rule to incorporate the changes made under HB 2296.
Reemployment of a retired member of the OPSRP pension program
This rule provides guidance on PERS administration when retired members of the Oregon Public Service Retirement Plan (OPSRP) return to work for a PERS-participating employer.
PERS continues to operate under the simplified current “work after retirement” framework created by Senate Bill (SB) 1049 (2019) that allows most retirees in all programs to work unlimited hours for PERS-participating employers during calendar years 2020-24, while continuing to receive their retirement benefits.
However, to comply with federal regulations, PERS carves out an exception for early retirees that only allows them to work unlimited hours if they have a bona fide retirement.
The rule already explains that an early retiree who does not have a bona fide retirement may not be employed in a qualifying position or work 600 hours or more in a calendar year within six months of their effective retirement date.
However, it does not clearly explain the consequences if an early retiree fails to comply with these restrictions. These proposed rule amendments provide such clarification.
Oregon Administrative Rule (OAR) 459-075-0300 Section (2)(c) clarifies that if an early retiree returns to active membership within six months of their effective retirement date, PERS will cancel their retirement retroactively, as if it had not occurred.
The member will reestablish active membership effective on the date they are hired into a qualifying position; they must then repay all retirement benefits that they received. This requirement is already provided in the corresponding administrative rule for Tier One and Tier Two retirees in OAR 459-017-0060.
OAR 459-075-0300 Section (2)(b) clarifies that if the early retiree returns to active membership after six months or more have passed from their effective retirement date, their retirement will only be canceled effective the first of the month in which the member was hired into the qualifying position. They will be allowed to keep retirement benefits paid before the calendar month in which the member was hired into the qualifying position.
Other amendments include removing the word “net” from Section (7) of the rule to be consistent with how the term “contribution” is used in OAR 459-009-0070; updating the sunset provisions to comply with House Bill (HB) 2296 (2023), which extended SB 1049’s work after retirement allowances through calendar year 2034; and removing language from Section (8) that was already addressed in Section (9). The removal of the language from Section (8) also resulted in some numbering changes.
Survivorship benefit conversion rules
Tier One and Tier Two members have thirteen retirement options, including a one hundred percent survivorship option (Option 2) and a fifty percent survivorship option (Option 3). Options 2A and 3A provide similar benefits as Options 2 and 3 but provide that, if the member’s beneficiary should die before the member, or the beneficiary is the member’s spouse and they divorce after member’s retirement, the member may elect to convert (“pop-up”) their benefit to a single life benefit (Option 1). In both scenarios, the change to the higher Option 1 benefit is not processed until PERS has been notified in a format acceptable to PERS.
Oregon Public Service Retirement Plan (OPSRP) members have five retirement options, including similar pop-up options. An OPSRP member who elects to receive a conditional joint and survivor pension may convert their benefit to the single life option if the member’s beneficiary dies after the member retires or the marriage relationship with the beneficiary is terminated after the member retires.
Administration of pop-up requests is generally straightforward; however, staff has identified two aspects where clarification of PERS’ application of the statutes would benefit members and beneficiaries. First, in order to convert a member’s benefit to the higher paying Option 1 or Single Life Option, PERS must receive the member’s request prior to the member’s date of death. Second, in order for PERS to comport with federal law, in cases where the conversion is triggered by the termination of the member’s marriage, a member is only eligible to convert their benefit if the member was married to the beneficiary on the member’s date of retirement.
Assumed rate change
The PERS Board reviews the assumed rate in odd-numbered years as part of the board’s adoption of actuarial methods and assumptions. The rate is then adopted in an administrative rule. PERS Board decide on an assumed rate of 6.9% at the September Board meeting.
The rule specifies that the new assumed rate will be effective for PERS transactions with an effective date of January 1, 2024, consistent with this board’s policy decision from 2013 that changes to the assumed rate will be effective January 1 following the board’s adoption of the new rate. This decision gives staff ample time to perform the necessary preparations and communicate with members and employers. A January 1 effective date also provides equitable treatment to all members who retire in a year that a change is adopted, no matter in which month they retire. The new assumed rate will be aligned with the new actuarial equivalency factors (AEF), which will allow for a clear effective date for all transactions that involve calculations using both the latest year-to-date rate and AEF components.
Oregon Savings Growth Plan (OSGP) self-directed brokerage option rule
The self-directed brokerage option (SDBO) within OSGP has been available since 2011 and offers participants flexibility, increased diversification, and the ability to manage specific investments within their OSGP account. Currently, to take advantage of the SDBO, participants must have a minimum OSGP balance of $10,000, and can transfer a maximum of 50% of their account to the SDBO. With recommendation from both the OSGP Advisory Committee and the Oregon Investment Council, PERS staff is seeking to amend OAR 459-050-0120 to lower the minimum account balance requirement for trading into the self-directed brokerage option to $5,000 and increase the maximum percentage of account balance that can be traded into the self-directed brokerage option to 90%.
Required minimum distributions
The federal SECURE Act of 2019 modified the required minimum distribution (RMD) rules under the Internal Revenue Code (IRC) with respect to distributions of death benefits under defined contribution plans. Although the Individual Account Program (IAP) is qualified as a separate account within the defined benefit program under IRC §414(k) and is not a defined contribution plan, for purposes of the RMD rules, distributions from the IAP are treated as distributions from a defined contribution plan.
The new RMD rules establish a new term for eligible designated beneficiary (surviving spouse, minor child, disabled or chronically ill, etc.) as well as new standards for these beneficiaries regarding when they must receive distributions. The rules also vary depending on whether the member dies before or after the date they are required to begin receiving payments.
Staff have amended the existing RMD OAR 459-005-0560 to remove references to the IAP and created a new OAR 459-0005-0570 which outlines the new RMD rules specific to distributions from the IAP. The new RMD rules also apply to the Oregon Savings Growth Plan (OSGP), so staff have amended the OSGP RMD OAR 459-050-0300 with the new federal standards as well.
Salary and contribution limit rules
Before enactment of Senate Bill (SB) 1049 (2019), ORS 238A.120 allowed certain vested inactive OPSRP members to withdraw from the pension program and receive the value of their pension benefit as an actuarially equivalent lump-sum distribution. OAR 459-007-0340 provided limitations for crediting earnings and distribution interest to these withdrawal amounts.
SB 1049 amended ORS 238A.120 to eliminate withdrawal distributions from the OPSRP pension programs. Under current law, inactive members who withdraw from the Individual Account Program cancel their membership in the pension program.
Staff recently determined that OAR 459-007-0340 was inadvertently omitted from the original package of SB 1049-related rule amendments. Section (2) of the rule still references earnings crediting and distribution interest for amounts withdrawn under ORS 238A.120, although withdrawals are no longer a part of the statute or the OPSRP pension program. Staff therefore recommends amending the rule to remove section (2) and bring the rule into alignment with the current statutory framework.
Salary and contribution limit rules
The Internal Revenue Service revises various dollar limits annually based on cost-of-living adjustments. These revisions are used throughout the PERS plan’s statutes and rules, but revisions to the limits must be adopted by the legislature or PERS Board to be effective.
The proposed rule modifications to OAR 459-005-0545 and 459-080-0500 incorporate the federal adjustments for calendar year 2023 and are necessary to ensure compliance with the federal limits on the amount of contributions. In addition, the proposed modifications to OAR 459-017-0060 adopt the 2023 Social Security earnings limitations.
Also, under Oregon Revised Statute (ORS) 238.005, 238A.005 and 238A.330, as amended by SB 1049 (2019), on January 1 of each year, the PERS Board shall adjust the overall salary limit and the salary threshold for Employee Pension Stability Account (EPSA) contributions to reflect cost-of-living increases from the previous year, based on the Consumer Price Index (CPI) for all urban consumers, west region (all items), as published by the Bureau of Labor Statistics of the United States Department of Labor. The year-over-year change for November 2022-2023 is 7.1%. Accordingly, amendments to OAR 459-005-0525 update the 2023 calendar-year salary limit to $225,533, and amendments to 459-080-0400 update the monthly threshold for redirecting a portion of member contributions to the EPSA to $3,570 for calendar year 2023.
Required minimum distributions
Staff learned in mid-December that Congress would be passing the SECURE 2.0 Act of 2022 (SECURE 2.0) by the end of 2022. SECURE 2.0 is follow-up legislation of the federal Setting Every Community Up for Retirement Enhancement (SECURE) Act, which was passed in 2019. The bill moved very quickly and was signed into law on December 29, 2022. Among other provisions, it raises the required minimum distribution (RMD) age once again from 72 to 73 effective January 1, 2023; and to age 75 effective January 1, 2033, which is applicable to both the PERS programs and the Oregon Savings Growth Plan (OSGP).
The RMD age is specified in the PERS statutes, and with SECURE 1.0, we waited until the age was updated in statute before updating the rule; however, the RMD age is a federal standard stated in federal law. Particularly in this instance, federal law takes precedent over state law; meaning, we need to administer the new age effective January 1, 2023. We anticipate the necessary changes to the PERS statutes will be addressed in the annual federal tax reconnect bill at the next available opportunity.
While this SECURE 2.0 change is effective January 1, 2023, there are numerous other provisions that will need to be implemented for the PERS Plan and for OSGP. As governmental plans, we have until 2027 to incorporate the relevant changes into the plan terms.
Return to work rules
Oregon Revised Statute (ORS) 238.175 provides that a Chapter 238 Tier One or Tier Two member may accrue retirement credit for the period during which the member receives a PERS disability retirement allowance or workers’ compensation payments under ORS Chapter 656. Under the statute, the accrual of retirement credit is triggered “only if the member returns to employment with a participating public employer after the period of disability.”
ORS 238A.155 contains a similar requirement for Oregon Public Services Retirement Plan (OPSRP) members. The statute allows an OPSRP member to accrue retirement credit while disabled so long as the member returns to employment with a participating public employer after the period of disability.
Administration of these statutory requirements is straightforward when a member applies for and receives a PERS disability retirement allowance (Tier One or Tier Two) or disability benefit (OPSRP) because the agency has established processes for returning to work. However, when a period of disability ends is less clear in the context of members who receive workers’ compensation payments. Specifically, it is not uncommon for members who were out of work with a compensable injury to return to work in some limited or modified capacity while still receiving workers’ compensation payments. These payments can continue for an indefinite period after the member returns to work.
The current administrative rules do not address how PERS calculates a member’s retirement credit when this situation arises. The statutes raise a question as to when a period of disability ends, either when a member’s workers’ compensation payments end, or when the member returns to work.
The proposed rulemaking is intended to clarify how PERS determines the end of a member’s period of disability in the context of workers’ compensation injuries. The amendments clarify that, for purposes of calculating retirement credit under ORS 238.175 and 238A.155, a period of disability for a member who receives workers’ compensation payments ends either when payments end or when the member returns to work with a participating public employer, whichever is earlier. Note that in either case, the statute still requires the member to return to employment to receive credit for the period of disability. This ensures that a member who continues receiving partial workers’ compensation payments after returning to work can still accrue retirement credit for the period in which they were out of work due to a compensable injury. And, that the member whose workers compensation benefits end before they return to work will receive credit only for the period they received the workers compensation benefits.
The Chapter 238 Tier One/Tier Two rule, Oregon Administrative Rule (OAR) 459-015-0045, contains additional minor edits to update the phrase “PERS covered employment” with more specific language as to whether the rule requires employment in a qualifying position. The OPSRP rule contains an additional provision to specify that members cannot accrue retirement credit beyond normal retirement age, as provided in ORS 238A.155.
Employer reporting rules
Oregon Revised Statutes (ORS) 238.705 requires all participating public employers to timely remit contributions and furnish reports to PERS. Details on employer reporting and remittance of contributions were originally provided in OAR 459-009-0100. However, in 2003, with the inception of the Oregon Public Service Retirement Plan (OPSRP), the rules were moved to Division 70.
Current Oregon Administrative Rule (OAR) 459-009-0100 redirects readers to OAR 459-070-0100 and 459-070-0110, stating that “employers shall transmit reports and contributions to PERS in accordance with OAR 459-070-0100 and 459-070-0110.” The Division 70 rules direct employers to submit required information and contributions to PERS and specify penalties for incomplete or late reporting of data or contributions. The organization of the rules in Division 70, which applies to OPSRP, created confusion as to whether the rules apply to employers with employees who are Tier One and Tier Two members.
These housekeeping rule amendments restore the employer reporting and remittance rules back to Division 9, which applies to all public employers, in an effort to simplify the rules. It also removes references to waivers for reports due on or after January 1, 2011, and before January 1, 2012, because such waivers are now obsolete.
Oregon Savings Growth Plan (OSGP) trading restrictions
As provided under Oregon Revised Statue (ORS) 243.421, the Oregon Investment Council established a program for investment of moneys in the OSGP. This program offers OSGP members a set of investment options called core investment options. The core investment options include target date funds, Active Fixed Income Option, Stable Value Option, and various large and small cap stock options. Additionally, OSGP also offers a Self-Directed Brokerage Option (SDBO) that provides members who want to take a more active role in the management of their money the ability to trade in individual stocks, bonds, and other publicly traded investment funds outside of the core investment options. An SDBO account cannot be funded through a direct tax deferred contribution. Instead, a member with an SDBO account must fund it by transferring funds from one of the core investment options into the SDBO account.
Currently, the trading restrictions rule does not allow transfers from the Stable Value Option to the SDBO. The reason for this restriction was that the SDBO was viewed as a competing fund with the Stable Value Option by Galliard Capital Management, LLC (Galliard), the provider of the wrap contract on the Stable Value Option.
Earlier this year, Galliard informed OSGP staff that the wrap contracts held by the Stable Value Option have been amended to remove the SDBO as a competing fund. This means that any trading restrictions on transfers from the Stable Value Option to an SDBO account under the existing OAR can be removed. VOYA has confirmed that they have made the appropriate changes to their system to lift the trading restriction between the Stable Value Option and an SDBO account. Therefore, staff recommends this edit to the rule to remove the trading restriction.
IAP optional employer account contributions
Oregon Revised Statute (ORS) 238A.340 allows participating employers to contribute an additional one to six percent of an employee's salary to an employer account within the IAP for some or all of its employees. This optional contribution is provided by employer agreement, which may be by policy or collective bargaining. OAR 459-080-0050 covers specific issues related to the establishment and maintenance of these accounts. In order to distinguish the employer contributions to this optional account from contributions made to the IAP by an employer on behalf of its employees, staff has edited the rule by adding the word “optional" to the rule title and in the rule text, which will clarify that the rule only applies to employer contributions to the optional employer account in the IAP.
Delegation of signing authority
Oregon Revised Statute (ORS) 183.411 allows the PERS Board to delegate the authority to enter a final order. This delegation can be made for a proceeding or class of proceedings, and to an officer or employee, or class of officers or employees. In March 2008, via motion and unanimous vote, the board delegated to the executive director the authority to enter final orders only in cases when the board is adopting the Administrative Law Judge’s (ALJ’s) proposed order, with technical corrections as necessary. The board delegation also requires that staff send proposed orders and any other pertinent material to the board for its review, prior to the director taking action to enter a final order, with the board reserving the right to move the case to a future board meeting. However, this delegation of authority was never reflected in PERS’ administrative rules.
The amendment to the rule officially incorporates the board’s delegation of this authority. While editing the rule, staff further recognized that no contingency exists for situations when the director may not be available. Staff recommended the board consider further delegating its authority for issuing the final order in the situations noted above to the deputy director.
Lastly, the rule had previously indicated that the board “deliberates and decides on final orders during regularly scheduled board meetings,” which is not the current practice. Prior to 2008, the ALJs’ proposed orders were presented to the PERS Board at public board meetings for consideration. Currently, in accordance with the delegation of entering a final order to the director, staff sends the draft final order to all board members electronically for review. If the board wishes to discuss the case, the board notifies staff, and the case is presented at a future board meeting. The edit to the rule supports current practice and covers both the electronic review of the draft final orders and allows for review and discussion at a public meeting, if requested.
Employer Incentive Fund
The rule modifications extend the Employer Incentive Fund (EIF) employer lump-sum payment deadline for employers on the waitlist, allowing these employers to make lump-sum contributions and receive matching funds that would be available from the EIF.
Death benefits
The amendments to Oregon Administrative Rule (OAR) 459-014-0050, the rule pertaining to the designation of beneficiaries at retirement, provide additional transparency and clarification to members, alternate payees, and their beneficiaries regarding how outstanding invoices are handled with respect to death benefits. This rule affects only Tier One and Tier Two members.
Rules to implement Senate Bill 112
Senate Bill (SB) 112 became effective on June 1, 2021. It is a PERS-sponsored bill to establish that common-law employees are included within the definition of “employee” under Oregon Revised Statute (ORS) 238.005(8) and “eligible employee” under ORS 238A.005(4). As promised during legislative committee hearings, PERS convened a workgroup of interested employee and employer stakeholders to address the agency’s implementation of SB 112 and associated rulemaking.
The adopted rule seeks to accomplish three things. First, PERS currently has two administrative rules regarding determination of employee or independent contractor status. The existing rules, Oregon Administrative Rule (OAR) 459-010-0030 and 459-010-0032, are part of Division 10, which is generally applicable to the Chapter 238 Programs, and therefore does not explicitly apply to Oregon Public Service Retirement Plan (OPSRP) members. The adopted rulemaking repeals these existing rules and combines them into one new rule in Division 5 (Administration), which covers all programs. The combining of the rules is appropriate because a single legal standard applies to determining whether a person is an employee or independent contractor.
Second, in determining whether an individual is an employee for PERS purposes, PERS uses the current IRS standard for analyzing employment status under common law, but the current rules contain an outdated description of the IRS standard used. The adopted rule updates the categories and factors to be considered in this analysis to align with current IRS standards.
Third, the rule establishes standards for presuming employment status based on public employer tax reporting and establishes a framework for how PERS will review claims of employment misclassification.
Oregon Savings Growth Plan (OSGP)
It has been several years since staff performed a comprehensive review of the OSGP administrative rules. Modifications to the administrative rules were made to better reflect existing administrative practices.
Most of the modifications are housekeeping, such as deleting defined terms that are not used in the administrative rules, removing processes that no longer exist, removing a reference to an investment option that no longer exists, updating form submission processes to reflect electronic form and submission options, reflecting that lump sum distributions may be made by direct deposit, and updating requirements for participation in catch up programs.
Other modifications are small alterations to administrative practices, such as increasing the loan fee from $50 to $75, removing the prohibition on participation for six months after receipt of an allowable distribution while employed with a participating employer, and increasing the distribution increments from $5 to $200.
Salary and contribution limits
The Internal Revenue Service revises various dollar limits annually based on cost-of-living adjustments. These revisions are used throughout the PERS plan's statutes and rules, but revisions to the limits must be adopted by the legislature or PERS Board to be effective.
The rule modifications to Oregon Administrative Rule (OAR) 459-005-0545 and 459-080-0500 incorporate these federal adjustments for calendar year 2022 and are necessary to ensure compliance with the federal limits on the amount of contributions. In addition, the modifications to OAR 459-017-0060 adopt the 2022 Social Security earnings limitations.
Also, under ORS 238.005, 238A.005 and 238A.330, as amended by SB 1049 (2019), on January 1 of each year, the PERS Board shall adjust the overall salary limit, and the salary threshold for Employee Pension Stability Account (EPSA) contributions to reflect cost of living increases from the previous year, based on the Consumer Price Index (CPI) for All Urban Consumers, West Region (All Items), as published by the Bureau of Labor Statistics of the United States Department of Labor. As of December 2021, this CPI was 6.4%. The amendments to OAR 459-005-0525 update the 2022 calendar year salary limit to $210,582.
For the monthly threshold for contributions to the EPSA, House Bill (HB) 2906 (2021) provides that, if the monthly salary of an IAP member does not exceed $3,333, the PERS Board shall credit all employee contributions made by the member to the employee account and credit no employee contributions made by the member to the EPSA. The amendments to OAR 459-080-0400 update the monthly threshold for contributions to the EPSA to $3,333 for calendar year 2022. This amount will be adjusted annually by the same CPI as the annual salary limit.
Document submission requirements
Oregon Administrative Rule (OAR) 459-001-0010 provides guidance on how filing papers such as petitions, written requests, or other documents related to the appeal of a staff or board action may be submitted to PERS. The rule has not been updated since 2000, and does not allow the submission of appeals documents by fax or email, even though PERS current practice does allow for such methods of transmittal. The repeal of OAR 459-001-0010 and amendments to 459-005-0210 align the rules with PERS current practice.
OAR 459-005-0210 provides guidance on the acceptable methods of transmitting information, reports, and documents. The rule amendments clarify that filing papers related to an appeal of a staff or board action under OAR 459-001-0030, 459-001-0032, or 459-001-0035 are included as “documents" covered under the rule. However, subpoenas, garnishments, summons, and other legal documents that require service on PERS continue to be excluded as “documents" under the rule. Service of such documents remains subject to applicable law.
The amendments also address staff concerns related to the submission of unsolicited emails to PERS that could contain confidential information. PERS discourages email submissions that contain confidential information, and the rule provides information on protected disclosures and warns members of potential risks from email transmissions and inadvertent public record disclosures.
OAR 459-001-0010 was repealed because it becomes redundant with the amendments to OAR 459-005-0210.
Rules to implement 2021 legislation
For the purpose of rulemaking, staff have compiled all the amendments to administrative rules necessary to implement several PERS-related bills enacted during the 2021 Oregon Legislative session.
House Bill (HB) 2457 became effective September 25, 2021. The bill makes amendments to various chapters of Oregon Revised Statutes (ORS) to update connection dates in conformity with the Internal Revenue Code. It also aligns PERS statutes with the federal SECURE Act of 2019’s required minimum distribution (RMD) provisions.
House Bill (HB) 2875 became effective September 25, 2021. The bill amends three separate areas of PERS’ statutes. First, the bill amended the definition of “firefighter” in ORS Chapters 238 and 238A to include certain State Fire Marshal employees. Second, the bill amended certain effective dates regarding tax remedy payments. Third, the bill amended loss of membership (LOM) criteria for calendar year 2020 due to the COVID-19 pandemic. Only the tax remedy provisions of the bill require rulemaking.
Senate Bill (SB) 111 is effective January 1, 2022. This is a PERS-sponsored bill that presents revisions to certain provisions of Senate Bill (SB) 1049 (2019) identified by staff through implementation of that bill and amends the definition of salary for OPSRP members. In addition, the enacted bill includes amendments addressing the OPSRP salary definition, specifically for Oregon Health and Science University (OHSU) and charter schools, and expands the pre-retirement death benefit option for surviving spouses.
Senate Bill (SB) 113 became effective on June 1, 2021. This is a PERS-sponsored bill that amends ORS 238A.330, 238A.335 and 238A.340 to provide PERS with statutory authority to charge employer earnings on late contributions into the IAP.
Benefits-in-Force earnings crediting
The Benefits-in-Force (BIF) Reserve is the reserve established under Oregon Revised Statue (ORS)238.670(2) and is the reserve from which all Tier One and Tier Two benefits are paid. When a Tier One/Two member retires, staff determines the amount actuarially required to fund the benefit for the member’s (and the member’s beneficiary, if the member elects a survivorship option) anticipated life expectancy and that amount is transferred to the BIF from the member account and the employer reserves. The current Oregon Administrative Rule (OAR) 459-007-0005(16) limits the amount of earnings that can be applied to the BIF to no more than the assumed rate in any given calendar year. This limitation is not required by statute and does not align with our actual earnings crediting practice.
ORS 238.670(2) states that “at the close of each calendar year, the board shall set aside, out of interest and other income received during the calendar year, after deducting the amounts provided by law and to the extent that such income is available, a sufficient amount to credit to the reserves for pension accounts and annuities varying percentage amounts adopted by the board as a result of periodic actuarial investigations.” While the statute provides the board with discretion regarding earnings crediting to the BIF, staff was unable to uncover the origin or purpose of placing a cap on crediting earnings to the BIF.
In order to bring the OAR in line with our practice, the proposed amendment to the rule deletes the words “up to the assumed rate” from the rule to clarify that the application of earnings to the BIF in a calendar year is not limited by the assumed rate.