1. ORP Contribution Concepts IFS-Sponsored Presentation Denise Yunker, Benefits Director Human Resources Division, OUS denise_yunker@ous.edu

2. Goals for ORP Rates Competitive – including total compensation Stable - reduced rate volatility Sustainable – responsive to budget and funding limits

3. ORS 243.800 (9) The State Board of Higher Education shall –contribute monthly to the optional retirement plan … the percentage of salary of each employee –… equal to the percentage of salary that would otherwise have been contributed as an employer contribution on behalf of the employee –to the Public Employees Retirement System –if the employee had not elected to participate in the optional retirement plan.

4. Measure 29 Bond Sale and Payment to PERS November 2003 – March 2004 Why Measure 29 reduced ORP contributions Measure 29 Correction –How much –When What’s Next?

5. 2003 PERS “Reform” Created two pension plans and the IAP –PERS pension – hired before 8/29/04 –OPSRP pension - hired on or after 8/29/04 –IAP – all PERS members Legal challenges to benefit changes pending Set employer rate at 11.31% Directed employee 6% to IAP

6. Reason to Amend ORS 243.800(9) PERS and ORP are “apples and oranges” –Employer contribution rate changes do not affect PERS benefits, but significantly change ORP participants’ retirement account growth New PERS/OPSRP plan funding could decrease employer contribution rate; market returns could increase it Frequent contribution rate changes undermine dollar cost averaging and retirement planning for ORP participants

7. Employer ORP Rate Options Revise portions of the statutory language and retain PERS Total Employer Cost Rate Adopt PERS Normal Cost Rate Adopt a Fixed Rate Set a “floor” rate in combination with any of the above

8. Employer Total Cost Rate Made up of: –Normal cost –Accrued actuarial liability –Asset valuation –Actuarial gains and losses Affected by investment performance; asset smoothing that delays recognition of gains and losses; Employee entry age changes, turnover, wage changes

9. Employer Normal Cost Rate Normal Cost Rate – Annual cost associated with service accrued during the current year Oregon PERS – uses Entry Age Normal method Normal cost is average level percentage of payroll from entry age to retirement age Can increase or decrease over time due to changes in: –Actuarial funding method –Actuarial assumptions –Plan benefits –Employee demographics

10. “Fixed” Employer Rates Options: Actuarially determined rates based on projected retirement account goals “Market” based to be competitive Recognition of total compensation effects

11. Goals for ORP Rates Competitive – including total compensation Stable - reduced rate volatility Sustainable – responsive to budget and funding limits