Money ($508,350,000) for Education and Social Services in Oregon

Reducing the One Billion Dollar Budget Shortfall – The State of Oregon can potentially save $500 Million annually by allowing retirement eligible PERS members to utilize the Double Lump-Sum Option and return to work as Non-PERS members. These savings can fund Education, Social Services and many other important areas without reducing existing salaries, services or programs and without raising taxes. Currently, ORS 238.082 forces PERS members into giving up their life savings if member chooses to return to work. Members are coerced into receiving their service retirement allowance and regular earned income from employment at the same time (Double-Dip). PERS preferred method of Double-Dipping artificially keeps Employer’s and the State of Oregon’s payroll and benefit costs high.

 Goals:

• Allow all PERS members to make informed decisions based on their individual circumstances.
• Retain Oregon’s most experienced and knowledgeable employees.
• Decrease employer overhead while maintaining current employee salary levels.
• Realize as much value from each payroll dollar spent as possible.
• Allow Retirement Eligible PERS members to protect their life savings.
• Allow Retirement Eligible PERS members to Return-to-Work after retirement without restrictions or limitations to Employers or Employees. (Eliminate pressure and cost to Double-Dip.)
• Open all PERS retirement options to members choosing to return to work after retirement. (As previously allowed.)
• Remove unproductive, outdated and expensive PERS regulations.
• Apply all PERS rules and regulations equally and evenly to all PERS members.

• Improve access to information.

Background:

153,723 Active PERS Members (as of 2003 Census)  

Breakdown as follows:       

47,085 State members
60,897 School members
45,559 Local members
182 Judiciary members

2003 Average Employer Rate @ 18.89%, plus match @ 6%, plus planned increase in rates of 9% equals 33.89%

(Not including Billions in new Bond Debt or Interest Payments or Unfunded Actuarial Liabilities or Recent Supreme Court Decision or Liabilities from Pending Lawsuits).

• Average PERS cost as a percentage of payroll @ 33.89%
• Average salary for retirement eligible members @ $50,000 / yr each
• Average annual payroll cost per member @ $16,945 ($50,000 x 33.89%)
• At least 30,000 active members eligible to retire this year and return to work as non-PERS members.

 Annual Savings to the State of Oregon: $508,350,000 (30,000 x $16,945)

Amount of annual savings increases each year as additional active members reach retirement eligibility.

If only a small number of active members eligible to retire choose to retire and return to work as non-PERS members, the State of Oregon would realize annual savings of:

5,000 active members eligible equals $84,725,000 in annual savings.

Oregon’s Cost to Maintain the Status Quo at PERS 

 1. Maintain Status Quo: Estimated Annual Cost $508,350,000.00

1. Do Nothing - Continue current employment - PERS costs stay artificially high.

   I.  New contributions go to IAP since January 1, 2004.

   II.  IAP has no “match” or “assumed rate” guarantee.

   III.  Tier One Members' retirement benefits grow at reduced rate.

   IV.  Tier One plan open to changes going forward.

   V.  Updated Life Expectancy tables.
    

2. Retire, Give Life Savings to State of Oregon for monthly benefit, Return to Work (Double-Dip) – PERS costs stay artificially high.

   I.  PERS obligated to unsustainable payout rates.

   II.  Employer rates kept artificially high.

   III.  Member forced to give up Life Savings.

   IV.  Member forced to take Income Option.

   V.  Members' Taxes go up and Social Security may be subject to penalty.  

2. Return-To-Work (RTW) without PERS Costs or Limitations: Annual Savings up to $508,350,000.00

1. Retire, Choose Total Lump Sum Option, Return to Work as Non-PERS member - PERS associated payroll costs drop dramatically (amend current restrictions).

I.  Member gains control of and protects Life Savings.

II.  PERS no longer obligated to sustain high payout rates.

III.  Employer Rates and Payroll costs drop (Contribution of 6% of   Salary could be diverted to member’s IRA/403b/TSA rather than IAP).

IV.  Member maintains Salary, Seniority, Health Benefits, Sick/Vacation Time, etc.

V.  Employer maintains Experienced & Knowledgeable Employees.

3. Retire, Give Life Savings to State of Oregon for monthly benefit, Choose Not to Return-to-Work in a PERS covered position, Hire New Inexperienced Person, Add PERS. Costs: Expensive, Everyone loses.

1. PERS costs stay high due to unsustainable payout rates.
    
2. Member has given up all future access to Life Savings.
    
3. Employer and State lose Knowledge and Experience Base.
    
4. Employer still has PERS costs and limitations. Must now pay all costs associated with new hires. No guarantee of retention or control of turnover, new hire must learn systems & procedures.

If retirement eligible PERS members are allowed to retire and return to work as Non-PERS members, the State of Oregon, Employers and Employees realize tremendous benefits immediately.

Benefits to Employer:

• Reduce payroll overhead without lowering salaries
• Maintain current number of personnel
• Avoid cutting programs, classes or school days
• No Costs incurred to retain knowledge base
• No PERS contributions for Retirees that are hired back
• Retention of experienced personnel
• Avoid costs and expenses of losing valuable and experienced people
• Improve morale
• Utilize existing PERS regulations
• Utilize existing Oregon Revised Statutes
• Reduce PERS costs, without reducing benefits
• Extend life of PERS for the benefit of everyone

Benefits to Employee: 

• Protect Life Savings from further reductions
• Continue to contribute to community and workplace
• Maintain employment
• Maintain current income
• Improve morale
• Retirement assets begin to grow again
• Control risk of retirement assets
• Limit and control tax exposure
• Create income as needed
• Maintain liquidity
• Maintain flexibility
• Maximize Social Security benefits
• Increase longevity of PERS for others
• Reduce PERS costs, while maintaining benefits

Under the current system, costs are kept high and life savings are eroding. The legislators’ goal in reforming PERS was to save money. By following the intent of the legislative reforms of PERS, rather than the re-interpretation by the PERS board, the State of Oregon and all PERS members realize dramatic benefits.

PERS Help © 2004 All rights reserved.
 Last Revised: May 14, 2006