The ORP directs employer-contributed funds to accounts designated by the participant. These accounts are managed by one of four firms; Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF), Variable Annuity Life Insurance Company (VALIC), American Century Investments and Scudder Investor Services.

The employer-contributed retirement dollars are divided into two parts whether you are in PERS or ORP; (1) the "employee" contribution equal to 6 percent of the individual's salary (if you are in PERS, you see this plus/minus interest on your annual statement) and (2) a contribution equal to the amount that the employer is required to contribute to the "pool" (if you are in PERS, you don't see this until you retire - this is the source of your "money-match").

This "pool" is intended to cover the all current and projected payouts that result when State employees retire. The PERS Board sets the contribution rate, indexed to salary, that will maintain the size of the pool. As you can imagine, the pool must be very large to cover all State employees. When the stock markets were good, the required "pool" contribution was approximately 6 percent of an individual's salary. Since the ORP is indexed to PERS, ORP participants were receiving approximately 12 percent of their salary (6% + 6%) deposited into their chosen account(s).

When the markets turned down, the "pool" contributions had to go up to compensate. The pool contributions began rising very rapidly and were projected to exceed 20 percent of salary. PERS employees didn't see any more on their annual statement (still 6 percent plus/minus interest), but the employers were sending a great deal more to the pool. Prior to the recent change in ORP, the "pool" contribution was approximately 11.7% (Slightly different for Tier 2 employees) and the total amount directed to an ORP account was 18.7 percent(6 + 11.7).

As this problem became evident, the legislature (and others) became actively involved in trying to fix PERS. The State (as directed by the legislature?) reduced the amount of the "pool" contribution to PERS by buying $2 billion in bonds and sending it directing to PERS. This $2 billion effectively increased the size of the pool and therefore the amount that employers were required to contribute to the pool was reduced, apparently to 3.7% (again slightly different for Tier 2 employees). The State must repay the $2 billion in bonds, but I assume that the sum of the 3.7% of salary plus the bond repay amount is less than what was to be paid under the old system.

As far as I can tell, the logic behind the reduction in ORP contribution is based on the premise that only the actual payment to PERS (3.7% for the "pool" and 6% employee contribution) must be sent to ORP participants since that is all that the employers are required to send to PERS. This line of reasoning ignores the bond repayment expense.

Hope this helps. Let me know if you have questions/comments.

I will miss all of you. I have learned a great deal about the system, how it works (and doesn't) and have made good friends. Thanks to all.

Jim