Member governments face big jumps in pension contributions in 2019-21, will get preliminary numbers Dec. 1; board will set actual rates in September 2018

Officials and the public will get a preview of how much more Oregon state and local governments will pay in the next two-year budget cycle for contributions to the public-pension system.

No surprise: Rates will go up.PAMPLIN MEDIA GROUP: PETER WONG - Oregon Public Employees Retirement System headquarters in Tigard. The PERS board heard a preview of 2019-21 contribution rates for member governments at its Sept. 29 meeting.

Advisory contribution rates for 2019-21, based on 2016 data, will be furnished to about 925 member governments a few days ahead of a Dec. 1 meeting of the Public Employees Retirement System (PERS) governing board.

The board will set the actual contribution rates for the next two years, based on 2017 data, in September 2018.

But at a meeting Sept. 29, the board got some preliminary figures from Milliman, the firm that does the actuarial work for PERS.

Based on 2016 data, the projected average rate for member governments in the State and Local Government Retirement Pool will jump from the current 13.88 percent to 19.04 percent of payroll in 2019-21.

For school districts, the projected average rate will jump from 13.88 percent to 20.37 percent of payroll.

Overall, Oregon governments would have to boost pension contributions from the $2.9 billion in the current two-year cycle to a projected $4.3 billion in 2019-21, based on the preliminary 2016 data. In the 2015-17 cycle that ended June 30, the total contributions amounted to $2 billion.

That means more money will go into pension contributions — and less will be available for other employee benefits or public services.

"As you can see, the numbers are the numbers," PERS Board Chairman John Thomas said. "We are going to have to continue to look at these cost curves as they are presented each meeting."

Investment earnings from Oregon's public pension fund, which stood at just under $75 billion in August, account for about seven of every $10 paid out in pension benefits — but member governments contribute most of the rest. Earnings fall under the Oregon Investment Council, a separate group.

The projected rate jumps would be even greater. Because of a practice called "collaring," rate increases are limited in any two-year cycle — but part of the increases is deferred to future budget cycles.

No Oregon government pays the average rates stated above. School districts generally pay above their average; state and local governments below average.

Rates for individual governments are affected by the mix of employees in their workforces.

Rates are generally higher if governments have higher proportions of employees hired before August 2003, and if they have significant numbers of public safety workers. Both groups qualify for more generous pension benefits.

Rates also are higher if governments have not set aside money to cover part of their pension liabilities, money known as "side accounts."

School districts as a group also have a smaller payroll base than state and local governments to spread their pension costs.

At the end of 2016, far more public employees (107,262) are covered by the post-August 2003 pension program, which is less generous, than in pre-1996 (26,964) and 1996-2003 (38,257) programs.

However, the vast majority of PERS retirees (124,171) qualify for the more generous pre-1996 benefits known as Tier 1.

In related developments, the board will decide Dec. 1 what to do with $186.9 million not needed for contingencies.

The board has a staff recommendation to put that money into the main fund that pays out benefits to retired public workers. The board took similar action on April 3, when it put $345.8 million not needed for contingencies into that fund.

Chairman Thomas said that the projected total of $532.7 million, if the board follows suit Dec. 1, would account for about 10 percent of a goal of shaving the system's actuarial liability by $5 billion.

A PERS task force is scheduled to report to Gov. Kate Brown by Nov. 1 on other ways that $5 billion liability could be reduced.

The number was chosen because it is the amount of loss that resulted from a 2015 decision by the Oregon Supreme Court, which ruled that reduced cost-of-living adjustments approved by the Legislature in 2013 cannot be made retroactive to benefits earned before 2013.

Contact Peter Wong at 503- 580-0266 or This email address is being protected from spambots. You need JavaScript enabled to view it..

Contract Publishing

Go to top
Template by JoomlaShine