For Tier One, Tier Two & OPSRP members Welcome! PERS Update and Overview of Police & Fire Benefits For Tier One, Tier Two & OPSRP members Updated: 01/11/2016

Agenda PERS Programs Retirement Eligibility Benefit Calculations Benefit Estimates Additional Benefits Resources

Disclaimer Information in this presentation is subject to change as the result of administrative, legislative, or judicial decisions.

PERS Programs Tier One: hired before January 1, 1996 Tier Two: hired January 1, 1996 through August 28, 2003 OPSRP: hired on or after August 29, 2003 IAP: all active members since January 1, 2004

Retirement Eligibility Tier One/Tier Two 30 years total PERS creditable service time (any age) OR Normal retirement age 58 – Tier One 60 – Tier Two 55 or 50 + 25 years total service–police & firefighter members (P & F) Early retirement age 55 50 – P & F

Retirement Eligibility OPSRP Normal retirement age 65 58 with 30 years of retirement credit 60 or 53 + 25 years of retirement credit- police & firefighter members (P & F) Early retirement age 55 50 – P & F Age 50, if the five prior years were as P & F member Age 55, if less than five years of P & F service time

Calculation Methods Tier One/Tier Two Full Formula Service time & final average monthly salary & a factor of .0167 (P & F .0200) Money Match Age factor & account balance x 2 Formula + Annuity (8/21/81) Service time & final average monthly salary & a factor of .01 (P & F .0135) + Age factor & account balance

P & F Split Service (if Relevant) Applies to formula calculations if a member has both P & F and General Service time Benefit calculated for general service time, and added to benefit calculated for P & F time

Calculation OPSRP General Service Final average monthly salary & years of retirement credit x 1.5 P & F Final average monthly salary & years of retirement credit x 1.8

Benefit Estimates: Written estimate Must be eligible to retire within two years Provided for retirement dates that are within the next 24 months Submit an Estimate Request Form Tier One and Tier Two only Waiting time and forfeited time purchase information is provided (if eligible) Can request unit account information on the estimate request form, section G

Benefit Estimates: Online Member Services Access and view activities related to your account Produce unlimited estimates Link directly to the PERS website to view handouts, FAQs, forms, and other information After retirement use to: View benefit payments, view and request tax information Print paystubs and benefit confirmation letters Change address http://Oregon.gov/PERS

Active Member Benefits Disability benefit Death benefit Tier One and Tier Two only Units Surviving Spouse Benefit

Disability benefits Disability eligibility and benefits are the same for both P & F and non-P & F members Non-Duty disability: must have 10 years of service Duty disability: no minimum service time required

Death Benefits Tier One/Tier Two OPSRP Money Match calculation to chosen beneficiary OPSRP Paid if member vested at time of death Lifetime benefit paid to spouse Benefit shall be actuarial equivalent of 50 percent of pension member would have received

P & F Units – Tier One/Tier Two only No COLA increases Unit payment start date can be at or after PERS retirement date Any amount in excess of $4000 is paid in a lump sum when unit payments begin

P & F Units – Tier One/Tier Two Purchase (8 Units) Employee cost = $4,000 Employer match = $4,000 Benefits $80 per month from member account and $80 per month from Employer. For a total monthly benefit of $160 per month for 60 months (8 Units) Less if taken out in more than 60 months Unit account must be depleted by age 65 Employer payment capped at $80 per month

Surviving Spouse Benefit - Tier One/Tier Two 25% of Refund Annuity benefit OR 25% of Option 1 benefit (Lump Sum options) Beneficiary Surviving spouse’s lifetime Dependent children until age 18 (if no surviving spouse)

2006 Federal Pension Protection Act Allows eligible retired Public Safety officers to exclude from their income up to $3,000 of retirement benefits that are paid directly from their retirement plan to their insurance provider for Health and Long Term Care insurance premiums. Members should discuss their eligibility for this deduction with their tax professional. Information is also available on the IRS website at www.irs.gov

Member Resources PERS website http://oregon.gov/PERS includes Online Member Services which uses data provided by PERS employers and an IAP disbursement forecaster to estimate IAP payments PERS Member Services: customer-service.pers@state.or.us 888-320-7377 IAP account: https://iap.voyaplans.com PERS Health Insurance: http://pershealth.com 800-768-7377 or 503-224-7377

Member Resources Attend additional PERS presentations Tier One/Tier Two Retirement Readiness ~ retiring in less than three years Introduction to PERS Retirement ~ retiring in more than three years OSPRP All About OPSRP ~ OPSRP members in any stage of career Register through PERS website www.oregon.gov/PERS Pre-Retirement Guide Retirement Application Assistance Session (RAAS) Within the 90 days prior to retirement

Steven Patrick Rodeman Executive Director PERS Update A presentation to Oregon Firefighters Steven Patrick Rodeman Executive Director January 11, 2016 oregon.gov/pers

Governor Earl Snell signed PERS into law on March 26, 1945 PERS: Historical Perspective Governor Earl Snell signed PERS into law on March 26, 1945 Early 1940s: Public employers could not compete with private industry’s higher wages and the promise of retirement benefits in a wartime economy At that time, less than 8% of public employees in Oregon were covered by a retirement system compared to 46% of public employees in other states PERS was created in 1945 to attract qualified people to public service and provide fair retirement benefits for their service to Oregonians SL-1

Who is PERS? Membership Tier One: 49,687 Tier Two: 57,945 STATE 57,654 Membership Tier One: 49,687 Tier Two: 57,945 OPSRP: 98,612 (INCLUDES UNIVERSITIES ) RETIRED MEMBERS 132,950 LOCAL GOV’Ts 52,696 (CITIES, COUNTIES, COMMUNITY COL-LEGES, ETC. WHO ELECTED TO JOIN SLGRP) SCHOOL DISTRICTS 80,104 INDEPENDENTS 15,799 As of 12-31-14

PERS Membership, Retirements, and Benefits ~7,300 retired in 2015; nearly 70,000 members are eligible to retire Average age at retirement: 61 Average years of service at retirement: 22 Average annual benefit for all current retirees: $27,722 Average annual benefit for 2014 retirees: $28,168 (44% average replacement rate of final salary) Average annual benefit for 2014 retirees with 30 years service: $44,964 (66% average replacement rate of final salary; majority with 30 years of service are Money Match) SL1

The PERS Funding Equation At the end of each calendar year, the PERS actuaries calculate the system’s funded status using the following basic equation: EARNINGS future returns on invested funds B = C + E BENEFITS present value of earned benefits CONTRIBUTIONS employer funds to pay pension benefits = + Set by: Oregon Legislature Set by: PERS Board Managed by: Oregon Investment Council Every two years, the PERS Board adjusts contributions so that, over time, those contributions will be sufficient to fund the benefits earned, if earnings follow assumptions. SL1

Solving the Equation . . . When setting employer contribution rates, the PERS Board has the following objectives: Transparent process and inputs Predictable and stable employer contribution rates Protect funded status to secure future benefit payments Equitable across generations of taxpayers funding the system Actuarially sound – fully fund the system if assumptions are met GASB compliant Some of the objectives can conflict, particularly in periods with significant volatility in investment return or projected benefit levels. Overall system funding policies should seek an appropriate balance between conflicting objectives. 26

Dollars shown in billions Problem: the “B” and “C+E” Don’t Align TOTAL LIABILITY $81.0 ACCRUED LIABILITY $73.5 (Excludes Side Accounts, Contingency Reserve, and Tier One Rate Guarantee Reserve) ASSETS $55.5 Dollars shown in billions As of 12-31-14

Sources of 2014 UAL Increase System Funded Status and UAL ($ in billions) 12/31/2013 12/31/2014 Actuarial liability $62.6 $73.5 Assets (excluding side accounts) $54.1 $55.5 UAL (excluding side accounts) $ 8.5 $18.0 Funded status (excluding side accounts) 86% 76% Side account assets $ 5.9 UAL (including side accounts) $ 2.6 $12.1 Funded status (including side accounts) 96% 84% Sources of 2014 UAL Increase UAL Increase Expected UAL increase during 2014 $0.2 B 2014 actual investment performance below assumption Moro adjustment to projected benefits $5.1 B Decrease in assumed return to 7.50% $1.7 B Update to mortality assumption $1.8 B All other assumption changes and actual experience $0.5 B Total $9.5B Milliman presentation; September 25, 2015 Board meeting

Projected Benefit Payments Tier One/Tier Two expected benefit payments by status as of 12/31/2014 Milliman presentation; September 25, 2015 Board meeting

System-Wide Pension Rates Excludes Retiree Health Care, IAP Contributions, Side Accounts 12/31/2013 2015 - 2017 Final 12/31/2014 2017 - 2019 Advisory Payroll Tier 1/ Tier 2 OPSRP Weighted Average1 Tier 1/ Tier 2 Normal Cost 13.18% 7.79% 10.94% 15.41% 8.63% 12.30% Tier 1/Tier 2 UAL 6.63% 13.68% OPSRP UAL 0.61% 1.01% Uncollared Rate 20.42% 15.03% 18.18% 30.10% 23.32% 26.99% Increase 9.68% 8.29% 8.81% Collar Limitation (0.72%) (6.25%) Collared Base Rate 4.15% 2.76% 3.28% 1 Weighting based on the pool’s payroll levels (Tier 1/Tier 2, OPSRP) as of the valuation date. Milliman presentation; September 25, 2015 Board meeting

2017-19 Contribution Increase Estimates ($ millions) Projected 2015-17 Payroll* (A) Projected 2015-17 Contribution Projected 2017-19 Payroll* (B) Projected 2017-19 Contribution (B) - (A) Projected Contribution Increase State Agencies $5,580 $575 $5,980 $800 $225 School Districts $5,950 $560 $6,370 $850 $290 All Others $7,350 $870 $7,870 $1,155 $285 Total $18,880 $2,005 $20,220 $2,805 * Assumes payroll grows at 3.50% annually based on 12/31/2014 active member census, reflecting proportional payroll composition (Tier 1/Tier 2 vs. OPSRP) as of 12/31/2014 Projected 2017-19 contributions are determined by applying collared net advisory rates calculated in the 12/31/2014 valuation Projections do not reflect the effects of actual 2015 investment returns Milliman presentation; September 25, 2015 Board meeting

Collared System Average Base Contribution Rates “Base” rates are system average Tier One/Tier Two/OPSRP contribution rates excluding IAP contributions, the effect of side accounts & pension obligation bond debt service, and contributions to the retiree healthcare programs Rates for 2019-2021 are based on the modeled returns for the three-year period ending 12/31/2017 Biennium 2013-2015 2015-2017 2017-2019 2019-2021 2021-2023 2023-2025 2025-2027 2027-2029 2029-2031 2031-2033 2033-2035 5th   16.4% 17.5% 21.4% 30.7% 43.6% 49.9% 51.9% 53.5% 55.2% 56.5% 57.2% 10th 20.9% 30.5% 42.4% 46.5% 48.4% 49.5% 50.7% 51.3% 52.0% 25th 29.3% 37.2% 40.0% 40.9% 41.7% 42.0% 42.6% 50th 20.8% 25.4% 30.9% 31.1% 30.4% 30.1% 29.5% 28.5% 75th 24.8% 22.9% 21.7% 19.9% 17.6% 15.5% 13.0% 9.9% 90th 20.7% 19.4% 13.7% 10.6% 6.6% 1.4% 0.0% 95th 16.0% 14.2% 10.5% 5.6% Milliman presentation; November 20, 2015 Board meeting SL1

Steady Return Model Projections If actual investment results are near assumption, employer contribution rate increases to begin to amortize unfunded liability are spread over three biennia At assumed return, the rate eventually drifts downward due to new hire OPSRP members replacing retiring Tier One/Tier Two members The steady rate model illustrates impact of consistently achieving the assumed 7.50% return and three alternative returns Milliman presentation; November 20, 2015 Board meeting SL1

Steady Return Model Projections Differences between the two sets of model results caused by reflecting Moro decision, assumption changes, and investment underperformance during 2015 Current year: reflects Moro decision, 12/31/2014 valuation, and investment results through October 2015 Prior year: pre-Moro, 12/31/2013 valuation, and investment results through October 2014 Milliman presentation; November 20, 2015 Board meeting SL1

Steady Return Model Projections Funded status reaches 100% in 2033 when actual investment returns equal 7.50% At 7.50% actual return, funded status declines in initial years, then stabilizes and ultimately improves as contribution rate increases take effect Shows projected funded status under steady return projections Milliman presentation; November 20, 2015 Board meeting SL1

DRAFT PERS Employer Profile by County in 2014 Total PERS Benefit Payments by County in 2014 DRAFT

Total PERS Benefit Payments by County in 2014 PERS benefits paid to Oregonians in 2014: $3.3 billion Total increase in Oregon economic output: $3.9 billion in 2014 (compared to employer contributions of approximately $2 billion) Oregon jobs supported: 35,999 Wages of Oregon jobs supported: $1.1 billion Estimated state income taxes paid by PERS retirees in Oregon: $171.7 million