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INTERIM STUDY REPORT Pension Oversight Committee Representative Randy McDaniel, Chairman Oklahoma House of Representatives Interim Study 11-042, Representative Randy McDaniel January 11, 2012 Pension Funding Issues and Sustainability Tom Spencer, Executive Director Oklahoma Public Employees Retirement System tspencer@opers.state.ok.us Between 95% and 99% of the financial improvement in the Oklahoma Public Employees Retirement System (OPERS) can be attributed to the passage of HB 2132. Oklahoma has a very long history of granting ad hoc cost-of-living-adjustments (COLAs). This practice was so consistent that beginning in the 1990s, OPERS began including a COLA assumption in the calculation of the pension liability. Last session the legislature passed HB 2132, which prohibits the state from granting COLAs unless the benefit is fully funded at the time of authorization. As a result of this measure, the COLA assumption was removed, the liabilities of the state pension plans decreased, and the funded ratios of the plans increased. The OPERS funded ratio increased from 66.0% to 80.7% between June 30, 2010 and June 30, 2011. The unfunded liability of the plan decreased from $3.2 billion to $1.5 billion over the same time period. If all plan assumptions are met and the system collects at least 19.38%, OPERS will be 100% funded by 2027. The system currently collects 20.0%. The funded ratio of the Uniform Retirement System for Justices and Judges (URSJJ) increased from 81.3% to 96.3% between June 30, 2010 and June 30, 2011. The unfunded liability of the plan decreased from $52.8 million to $9.2 million over the same time period. If all plan assumptions are met and the system collects at least 29.36%, URSJJ will be 100% funded by 2027. The system currently collects 19.5%. See OPPRS-URSJJ Handout (presentation a). Representative Randy McDaniel, Chairman Pension Oversight Committee randy.mcdaniel@okhouse.gov The editorial published in The Oklahoman outlines the forthcoming balanced budget amendment. Representative McDaniel discusses the relationship between balancing the state budget and having groups ask for significant benefit increases. Representative McDaniel notes that the pension plans seem to have been excluded from the balanced budget requirement, as groups continued to ask for and receive benefit increases. Actuarial reports provide a good gauge of the benefits promised and their associated costs. Although markets and benefit levels may change from year to year, the actuarial reports provide an assessment of what the state must do to pay for the pension systems. The theme of Representative McDaniel’s balanced budget amendment, as outlined in the editorial, is that the state must pay for things. With respect to the pension plans, the state must match what is provided and promised with what is put into the plans.
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Title | 11-042 report ocr 1 |
Full text | INTERIM STUDY REPORT Pension Oversight Committee Representative Randy McDaniel, Chairman Oklahoma House of Representatives Interim Study 11-042, Representative Randy McDaniel January 11, 2012 Pension Funding Issues and Sustainability Tom Spencer, Executive Director Oklahoma Public Employees Retirement System tspencer@opers.state.ok.us Between 95% and 99% of the financial improvement in the Oklahoma Public Employees Retirement System (OPERS) can be attributed to the passage of HB 2132. Oklahoma has a very long history of granting ad hoc cost-of-living-adjustments (COLAs). This practice was so consistent that beginning in the 1990s, OPERS began including a COLA assumption in the calculation of the pension liability. Last session the legislature passed HB 2132, which prohibits the state from granting COLAs unless the benefit is fully funded at the time of authorization. As a result of this measure, the COLA assumption was removed, the liabilities of the state pension plans decreased, and the funded ratios of the plans increased. The OPERS funded ratio increased from 66.0% to 80.7% between June 30, 2010 and June 30, 2011. The unfunded liability of the plan decreased from $3.2 billion to $1.5 billion over the same time period. If all plan assumptions are met and the system collects at least 19.38%, OPERS will be 100% funded by 2027. The system currently collects 20.0%. The funded ratio of the Uniform Retirement System for Justices and Judges (URSJJ) increased from 81.3% to 96.3% between June 30, 2010 and June 30, 2011. The unfunded liability of the plan decreased from $52.8 million to $9.2 million over the same time period. If all plan assumptions are met and the system collects at least 29.36%, URSJJ will be 100% funded by 2027. The system currently collects 19.5%. See OPPRS-URSJJ Handout (presentation a). Representative Randy McDaniel, Chairman Pension Oversight Committee randy.mcdaniel@okhouse.gov The editorial published in The Oklahoman outlines the forthcoming balanced budget amendment. Representative McDaniel discusses the relationship between balancing the state budget and having groups ask for significant benefit increases. Representative McDaniel notes that the pension plans seem to have been excluded from the balanced budget requirement, as groups continued to ask for and receive benefit increases. Actuarial reports provide a good gauge of the benefits promised and their associated costs. Although markets and benefit levels may change from year to year, the actuarial reports provide an assessment of what the state must do to pay for the pension systems. The theme of Representative McDaniel’s balanced budget amendment, as outlined in the editorial, is that the state must pay for things. With respect to the pension plans, the state must match what is provided and promised with what is put into the plans. |
Date created | 2012-03-13 |
Date modified | 2012-03-13 |