Employer side accounts

On its journey to its end date on December 31, 2027, a side account can go through three statuses (which are explained in detail in this section):
 

• If an account runs out of funds early, it is in amortized status. If this happens, the offset stops on the first day of the following month. The employer is invoiced for any negative balance in June 2027.
• On the June 30, 2027, expiration date, a 2027 expiring side account reaches expired status.
  Offsets stop. If the account has a small positive balance that is being credited to the employer, that credit takes place.
• On December 31, a 2027 expiring side account reaches closed status.
  There is no more activity on the account past this date other than final reconciliation. If the account has a large positive balance that is being transferred to another side account, that transfer takes place.

Details of each status are below.  

Amortized account

This is an account that has run out of funds before its expiration date. If an account reaches amortized status before it expires, it will remain open but inactive, as described in this section. This usually causes a negative balance because the balance is unlikely to hit exactly $0.  

Here are the rules for an account that has reached amortized status. 

End date: An amortized account retains its original end date of December 31, 2027.  

Preventing a negative balance: Actuarial Services cannot stop amortizations before your account goes negative. Only a zero or negative balance before the expiration date can stop amortizations (aka rate offsets).  

Receiving annual earnings: All side accounts receive a proportionate share of earnings crediting at year-end.  

Explanation: Side accounts are subject to earnings or losses at the end of the year, whether their balance is positive or negative. All side account funds are invested in the Oregon Public Employees Retirement Fund (OPERF), and earnings are applied as a whole to every reserve in the fund. This is per Oregon Administrative Rule (OAR) 459-007-0530, Crediting Earnings to Employer Lump-Sum Payments.  

Stopping the rate offset: When the account hits $0 or less, the offset stops on the first day of the next calendar month.  

Reconciliation of amortized account: In April 2027, Actuarial Services reconciles or "trues up" accounts that amortized in 2026.  

If you have a 2026 amortized account, in June 2027, you are invoiced for any negative balance through your EDX statement. The charge appears on your invoice as "PERS Prior Yr Undr-Remitted Cntrb" in the Invoices subsection of the Pension section of your statement. There is no penalty or extra charge for overdrawing funds. Learn more about finding this section of your statement in employer guide 26, Understanding Your Statement  

Paying the side account admin fee: A side account that provides an offset for at least one calendar month of the calendar year is charged the $500 admin fee for that year. The fee is charged at the end of the year and comes out of annual earnings.  

Expired account

Side accounts expire on June 30 of their expiration year, which is usually 20 years after the account was opened. As of that date, the account is expired. The rate offset stops the next day.  

Here are the rules for an expired account. 

Stopping the rate offset: The rate offset stops on July 1 of the expiration year (six months before the December 31 end date).  

Retroactive pay dates: After the expiration date, if you report pay for a date before the expiration date, you do receive an offset on that payroll. For example, on August 1, if you report payroll from May 1, you will receive offset on that payroll.  

Handling nonzero balance: Upon the account's expiration, any projected outstanding negative or positive balance is handled as explained below. Accounts that amortized in 2026 are included in the negative category.  

NEGATIVE: for accounts that have a negative 06/30/2027 projected balance.  

On the expiration date of June 30, 2027, the account reaches expired status. The rate offset stops the next day.  

POSITIVE: for accounts that have a positive 06/30/2027 projected balance.  

The employer will receive the balance. How and when you receive it depends on the size of the balance.  

• Balance of up to 34.99% of payroll receives CREDIT. If the account's June 30, 2027, projected balance is less than 35% of the payroll reported in your most recently published valuation report, the employer will receive a credit of the balance by the end of June 2027. (Valuation reports are available on the Actuarial Valuations webpage.)
• Balance of 35% of payroll or more receives OPTION FOR TRANSER TO ANOTHER SIDE ACCOUNT. If the account's June 30, 2027, projected balance is 35% or more of the payroll in its most recently published valuation report, the employer can choose between receiving a credit or rolling over the balance to a new or existing side account.

The fine print

• 1. Employers must inform Actuarial Services of their choice by May 31, 2027.
• 2a. If you choose to deposit funds into a new side account, be aware that, in accordance with OAR-459-009-0086, the minimum lump-sum payment required to establish a new side account is the lesser of:
  • 25% of the individual employer's unfunded actuarial liability (UAL).
    
  • $250,000.
• 2b. If you choose to deposit funds into an existing side account, be aware of the following:
  • You may not make more than two additional deposits into a side account in a calendar year.
  • Adding funds to an existing side account does not affect the amortization period of the account (i.e., its original end date remains the same).
  • Any change to your contribution rates caused by the deposit will be effective on July 1 of the calendar year following completion of the actuarial valuation for the year in which the additional deposit is made.

Closed account

In the year an account expires, it is considered 'closed' on the last business day of the calendar year. Once an account is closed, no side account transactions are processed regardless of the payment date. After the side account closes, final reconciliation activities bring the account to zero. Once that is completed, the account closing is finalized.  

Closing date for 2027 expirations: For accounts that expire in 2027, the closing date is December 31, 2027.  

Reconcile or "true up" the account: In June 2028, PERS Financial Reporting Section does final account reconciliation. You are invoiced for any negative balance, earnings, or applicable administrative fees remaining from the account(s) that closed in the preceding calendar year.  

In April — PERS Actuarial Services reconciles any side accounts that amortized in 2026. Employers are billed for any negative balance in June.  

In May — PERS Actuarial Services performs two calculations on side accounts that have not yet amortized:  

1. Actual balance as of 12/31/2026.

2. Projected 06/30/2027 balance: What the balance is projected to be on June 30, 2027 (the expiration date). See April 2027 under "Side Account Expiration Process and Schedule" for details about this calculation.  

   If projected balance is less than 35% of the valuation payroll from their latest actuarial valuation report, they will have the balance of their side account credited to them on June 30.  

   If the projected balance is 35% or more of the valuation payroll from their latest actuarial valuation report, they will have two options for receiving the balance of their side account: it can be credited to them or rolled over into another side account — either an existing side account or a new side account — at the end of the year.  

May 31 — Deadline for employers with 35%+ accounts to inform Actuarial Services of their choice between credit or transfer to new/existing side account.  

In June — Funds transfer out of accounts that are being credited to the employer. Funds remain in accounts that will be transferred to a new or existing side account on December 31. Employers with amortized accounts are billed for any negative balance.  

July 1 — New rates for 2027-29 biennium go into effect for all employers. Rate offsets cease for all 2027 expiring side accounts.  

November 1 — Milliman completes new side account calculations for employers who are opening new side accounts.  

December 31 — Remaining balances roll over into new or existing side accounts. All original 2027 expiring accounts close. New side accounts will open the next day.  

1. Click the image below to open, download, and/or print the four-page 2027 Side Account Expiration Schedule diagram (PDF).
2. Scroll down to “Schedule” to read a description of all side account events occurring in 2026, 2027, and 2028.

2027 Side Account Expiration Schedule diagram

Click the image or paste https://www.oregon.gov/pers/emp/Documents/Misc-Documents/2027_side_account_expiration_process.pdf into your browser.

Schedule

This section details what will take place as side accounts approach their end date. For a graphic layout of this schedule that you can download and print, open the 2027 Side Account Expiration Process Diagram.

2026

Every month: PERS Actuarial Services tracks side account balances.

August 25: Actuarial Services holds an online information session to explain the side account expiration process and allow employers to ask questions. (Invitations and links coming by News Bite emails.)

September 25: Milliman presents the new 2025-27 employer contribution rates to the PERS Board for approval. (Information about the meeting will be on the PERS Board webpage.) After rates are approved, the system-wide valuation report and list of new net contribution rates for all employers are published to the Actuarial Valuations webpage and Contribution Rates webpage, respectively.

September 29: Actuarial Services holds a second online information session to explain the side account expiration process and allow employers to ask questions. (Invitations and links coming by News Bite emails.)

October: Employer 2025 rate-setting valuations are published on the PERS Actuarial Valuations webpage. Valuation reports include system-wide and individual employer 2027-29 contribution rates and the data used to calculate them.

2027

April:

1. All side accounts receive 2026 earnings or losses.
2. Actuarial Services reconciles all amortized side accounts. Employers are invoiced for negative balances in June.

3. Financial Reporting performs two calculations on expiring side accounts that are not projected to be amortized before June 30, 2027:

   a) Actual 12/31/2026 balance.

   b) Projected 06/30/2027 balance.

   Below is an example of how the projected balance is calculated.

May: Employers are notified of their side account projected balance and options.

• Smaller balances will receive a credit: If the projected balance is less than 35% of the valuation payroll reported in the employer’s most recently published actuarial valuation report, the employer will receive a credit on the expiration date.
• Larger balances can choose credit or rollover to another side account: If the projected balance is 35% or more of the valuation payroll reported in the employer’s most recently published actuarial valuation report, the employer can choose between credit or transfer to a new or existing side account.

May 31: Deadline for employers with larger balances to inform Actuarial Services of their selection of credit or transfer to another side account.

June: 

1. Employers who are receiving their positive side account balance as a credit receive their credit by the end of the month.
2. Employers who have a side account that amortized in 2026 are billed for any negative balance on the EDX invoice. The charge appears on your invoice as “PERS Prior Yr Undr-Remitted Cntrb” in the Invoices subsection of the Pension section of your statement.
3. Employers who are receiving their positive side account balance as a transfer to another side account do not receive the balance until the end of the year.

July 1: New 2027-29 employer contribution rates go into effect.

Rate offsets cease for all 2027 expiring side accounts.

• Accounts that had their balance credited: These accounts remain in expired status until they close at the end of the year.
• Accounts that will have their balance transferred to another side account: Actuarial Services calculates the accounts’ actual balances as of 6/30/27 and shares with employers. Accounts are expired; balances remain in accounts until they are transferred to another account at year-end.

September 30: Deadline for employers who are opening a new side account to request a new side account calculation from Milliman.

November 1: Milliman completes all calculations and provides information to Actuarial Services.

November 10: Deadline for Actuarial Services to notify new/existing side account employers of their new 2028 offset rates.

December 31: Positive balances transferred to new and existing side accounts. All 2027 expiring side accounts close.

2028

January 1: New offsets begin for new side accounts.

April: All closed side accounts are reconciled.

June: Following earnings crediting for calendar year 2027, any applicable resulting invoices or credits are processed.

Side accounts increase an employer's actuarial assets, reducing the gap between actuarial assets and actuarial liabilities. When liabilities exceed assets, this becomes a UAL. (To learn more about UAL, read “Guide to Understanding UAL.”)  

Establishing a side account reduces your pension obligation, which reduces your employer contributions and rates over time.  

If you are interested in establishing a side account or have additional questions, please email PERS Actuarial Services.  

Employers have two options for establishing a side account:  

1. Request an actuarial calculation.

   • Requesting an actuarial calculation allows for an immediate rate offset. Employers can select the first of any month within a rolling 12-month period for their rate to begin.  

   • An actuarial calculation costs $1,000 for one date and one payment amount. Each additional date, payment amount, or amortization schedule (if applicable) is an additional $250.00.  

2. Receive the rate offset effective July 1, following the publication of the actuarial valuation of that year.

   • This is no cost to the employer.  

   • The employer will not know the exact offset prior to the publication of the valuation.  

   • For example: If an employer makes a payment in June 2022, the rate offset will be calculated in the December 31, 2022, valuation. The 2022 valuation will be published in late 2023 and the rate will be effective July 1, 2024.
      

The side account rate offset is recalculated during each biennial rate-setting actuarial valuation. The new side account amount is determined by deducting the money that was transferred to the employer's reserves to reduce their monthly statement (along with the annual maintenance fee). The gains or losses are added to the total side account amount. This information is available in your actuarial valuation.  

Example from an actuarial valuation.  

Once the new side account amount is established, the PERS consulting actuaries use the formula below to calculate the new side account rate offset:  

Total lump sum ÷ combined valuation payroll ÷ amortization factor =  

Side account rate offset

Example from an actuarial valuation.  

To estimate the effect of a side account, please use the Employer Rate Projection Tool.  

Side accounts are charged an annual fee for their administration. The fee is $1,500 in the first year and $500 each subsequent year. The fee is automatically taken out of your side account when earnings are applied.  

An actuarial calculation costs $1,000 for one date and one payment amount. Each additional date, payment amount, or amortization schedule (if applicable) is an additional $250.00.  

Side accounts are typically amortized over 20 years. However, as established with Senate Bill 1566 (2018) and Senate Bill 1049 (2019), employers making a lump-sum payment of at least $10 million can elect an amortization period of 6 years, 10 years, 16 years, or 20 years. They can also choose to defer their rate offset date beyond the standard rolling 12 months. These amortization options require an actuarial calculation.  

Although employer rates are set at a pool level, employers have the option to establish a side account to differentiate their individual rate.  

For State and Local Government Rate Pool (SLGRP) employers: The supplemental payment is first applied toward your transitional liability, if you have any, and the rest is placed in a side account.  

For School District Pool members: Once you create a side account, you start to receive your own valuation, which contains full details on how the side account rate is calculated and the amount in the side account. Additionally, the valuation contains information that is specific to you, the employer, including combined valuation payroll and the UAL allocated to the employer from the pool.  

As shown in the table below, 232 employers have established side accounts.  

*State agencies share a single side account. In addition to this side account, four state agencies have established individual side accounts.  

There are no restrictions on the number of side accounts an employer may have.  

As of December 31, 2024,90employers have more than one side account; 24 employers have three or more side accounts  

Side account assets totals, by type of employer.  

*Includes individual side accounts for OSU, SAIF, U of O, and the State Bar Professional Liability Fund  

2024 summary  

2023 summary  

2022 summary  

2021 summary  

2020 summary  

2019 summary  

2018 summary  

2017 summary  

Side accounts are invested in the PERS Fund and receive the fund's actual earnings or losses. These earnings or losses are posted to side accounts at the end of each year.  

Note: These rates are calculated based on the total side accounts balance less administrative fees.  

Before issuing a bond  

Senate Bill 1049 (2019) expanded the guidelines for employers funding side accounts with pension obligation bonds. Before issuing a POB, an employer must obtain and submit an assessment as follows:  

1. You must obtain a statistically based assessment from an independent economic or financial consulting firm to assess the likelihood that the investment returns on bond proceeds will exceed the interest cost of the bonds under various conditions.  

2. You must give the assessment to the state treasurer at least 30 days before issuing the bonds.  

3. You must make a report available to the public that describes the results of that assessment and discloses whether you retained the services of an independent SEC-registered advisor.
    

After issuing a bond  

Employers are required to report the following to the state treasurer by December 1 every year.  

• The actual rate of return on the bond proceeds over the fiscal year.  

• The cumulative rate of return on the bond proceeds.  

Other considerations  

• POBs are not eligible for reduced amortization periods.  

• POBs are not eligible for the Employer Incentive Fund.  

Pension obligation bond rates of return  

To assist employers with this required reporting, PERS is providing the average rate of return for side accounts in the previous year and the cumulative rate of return as of the current year.
 

If you're interested in establishing a side account or have additional questions, please email PERS Actuarial Services.