The Oregon Supreme Court’s ruling that it was unconstitutional to apply cuts to pension cost-of-living adjustments (COLAs) to those who were state employees and retirees before the 2013 law was enacted will do more than restore those funds.
Due to the ruling, for those who were state employees and retirees before it was enacted the COLA will be raised back to 2% from the 1.5% the law set, Fitch reports. A 0.5% change seems innocuous, but is it?
That one-half of 1% change will pose challenges for the Oregon Public Employees’ Retirement System (OPERS). According to Chief Investment Officer, this will include higher liabilities for the plan — since the ruling means that the $5 billion that was going to disappear from the OPERS liabilities will not.
As a result, information in “PERS: By the Numbers,” a report OPERS issued in just weeks before the state Supreme Court’s April 30 ruling, is not as good news as it may have been. The report said that as of Dec. 31, 2014, OPERS was 96% funded, and there was a funding shortfall of $2.75 billion. But that was premised on the $5 billion of savings, which now is gone.
But the news may not be as bad it sounds. Fitch reports that OPERS has around $600 million in contingency funds that could help offset replacement of the reduced COLAs; in addition, the state expects that personal income tax revenue will grow, which could help control the growth in pension plan liabilities.
Due to the ruling, for those who were state employees and retirees before it was enacted the COLA will be raised back to 2% from the 1.5% the law set, Fitch reports. A 0.5% change seems innocuous, but is it?
That one-half of 1% change will pose challenges for the Oregon Public Employees’ Retirement System (OPERS). According to Chief Investment Officer, this will include higher liabilities for the plan — since the ruling means that the $5 billion that was going to disappear from the OPERS liabilities will not.
As a result, information in “PERS: By the Numbers,” a report OPERS issued in just weeks before the state Supreme Court’s April 30 ruling, is not as good news as it may have been. The report said that as of Dec. 31, 2014, OPERS was 96% funded, and there was a funding shortfall of $2.75 billion. But that was premised on the $5 billion of savings, which now is gone.
But the news may not be as bad it sounds. Fitch reports that OPERS has around $600 million in contingency funds that could help offset replacement of the reduced COLAs; in addition, the state expects that personal income tax revenue will grow, which could help control the growth in pension plan liabilities.
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