Conversation with Denise Yunker 4 March 2004

The IFS ad hoc committe on ORP )chair M. Carson, P. Gilkey, L. Jones [absent], R.Turner) met with Denise Yunker and Lisa M. Zavala of OUS for approximately 90 minutes on Thursday 4 March 2004. What follows are some notes taken by P. Gilkey. They are not to be taken as normative. R. Turner (WOU) volunteered to organize a subsequent meeting on ORP during the week of 22-26 March at Western.

It is expected that the Old PERS rates will go down to zero as people exit the plan. This is not good for ORP participants as it means that at the end of their career, the employer contribution will go to zero. This problem is not subject to court challenges and is one of the things driving the need for a long term fix. I wrote to Denise about this requesting f urther clarification and she replied (email 7 March 2003)

The question about declining PERS contribution rates is illustrated in PERS' memo of February 2, 2004, that I shared with you. For an employer with a surplus, PERS expects the contribution rate to decline "potentially to zero" over time as the employees in "old PERS" retire and leave the retirement system. If you think about it conceptually, it makes sense that less employer funding will be needed as future retirements decline. Remember that an employer contribution today is based on funding retirement benefits in the future. PERS expects that it will take 2-3 months before this will be ready for further discussion, but the problem statement I shared with you is based on their own assessment of projected funding requirements. Until PERS has completed its work on the question, I'll be waiting to learn more too. As I said, I'll keep you in the loop as it progresses.

There is only one sentence in the statue if one works with the plain language. DOJ did not buy the "grants and contracts" argument. A new proposal has been submitted to DOJ (Department of Justice) on Wednesday. But we are not yet there with DOJ. Every single option has been dissected so DOJ could understand. There will be extensive peer review at DOJ and the Attorney General will be involved personally. It was explained that the use of plain language yields wierd results. There is a need to understand actuarial rules. There are firmly held positions in DOJ that need to be addressed. An approach is being tried based on the interpretation of the statue - not plain language. There is 1 sentence in ORS-223-800-9. Left open to broad interpretation. Specific statuatory guidance doesn't recognize the complexity involved. They have looked at the legislative history and the testimony and there is very little to go on. They expect DOJ to take a month to get back to OUS.

OPSRP. There is a 10 March deadline. It has been confirmed that the PERS board has no plans to change the rate before 5 July 2005 so the rate will be held at 8.04%. (See for details). Hopefully this buys time to get a legislative fix. Things to keep in mind.

Pers has never changed rates out of cycle.
It takes many months to arrange a new ammortization schedule. They don't have the time or reason to change the rates

Thus there is a great deal of comfort that the rates won't change before 5 July 2005. The OPSRP participants can have a reasonable assurance that the 8.04% rate won't change. The amortization and transfer problem won't hit OPSRP in the meantime.

On 23 February 2004 they started drafting concepts for a long term legislative fix to ORP. To have a good way to set the rates that is not tied to a "rolling and pitching ship". A technical discussion has been opened. Deals with normal cost versus actual payment -- associated desired output. The rate that applies to the population is not subjective -- there are 2300 employers.

Presentation by D. Yunker concerning ORP to the State Board of Higher Education on 5 February 2004.

Here are my notes concerning that presentation.

There was a 1996 authorizing statue linking Pers and ORP. Some factors affecting PERS created some problems for ORP participants.

Measure 29 rate buy down of $2,000,000,000 reduced the ORP rate. OUS is currently working with DOJ to find a way to make participants whole. There are no similar circumstances in any other states. It has gone on for 5 months. There is a 65% reduction in the employer contributio to ORP. The discussions with DOJ are continuing and it is not done yet.
Issue of PERS amotization. There is a clarification that could change the methodology and could impact all ORP participants. This is a new problem.
OUS staff want an adjustment to the statue in the next session.
Hope to have it ready to go for the April meeting of the State Board. Hope to have the DOJ agreement by April. Not certain this will happen.