Oregon Public Employees Retirement System Needs Reform

Oregon House of Representatives

900 Court Street NE

Salem, Oregon 97301

Dear Legislator:

As you know, in the very near future the Oregon House of Representatives will vote on HB 2020 and an amendment to the bill that would reform the Oregon Public Employees Retirement System (PERS). On behalf of the 11,000 members of Oregon Citizens for a Sound Economy (OR CSE), I urge you to support the bill and the “Fair Retirement Plan” amendment.

The necessary debate surrounding PERS reform has exposed the retirement system’s critical flaws and unfunded liability. It is a welcome sign that legislators have taken the initiative to reform the program in light of the system’s $16 billion unfunded deficit. By taking the appropriate measures now, the legislature can alleviate the growing fiscal burden that taxpayers and the state face.

The “Fair Retirement Plan” amendment will go a long way to ensure that Oregon’s public employees retain a solid program that they can rely on for their retirement security. Essentially, the amendment would replace the current PERS with a defined contribution plan similar to private sector 401(k) accounts for all new Oregon public employees hired on or after July 1, 2003. All individuals participating in the plan prior to July 1, have the option to roll over their current PERS accounts into a defined contribution program or stay with the status quo.

The defined contribution plan will provide participants with nine different investment options. Participants may opt for a conservative or aggressive investment portfolio. Importantly, the participants have the benefit of choosing which portfolio they feel most comfortable with. All public employees will be eligible for the programs and may start making contributions six months following their hire date. In addition, general service employees will receive an employer match of 6 percent of the employee’s salary; police and fire department employees will receive a 7.15 percent match. This employer match will be fully vested after 5 years, while the employee’s contribution is vested immediately.

Like a traditional 401(k) defined contribution system, the investments will be professionally managed, employees may tap into their retirement portfolio to borrow up to 50 percent for purchases such as a home, and, if a death were to occur to the participant, the fully vested benefits can be passed to heirs.

The “Fair Retirement Plan” amendment is a win-win situation for Oregonians: Oregon state employees retain retirement security and Oregon’s state finance’s are placed on better footing. Without meaningful reform, Oregon will need to take drastic measures to cover the unfunded PERS liability, such as massive cuts to government programs and/or enormous tax increases.

OR CSE urges all legislators to support the “Fair Retirement Plan” amendment to H.B. 2020. This is a prudent, and necessary step toward reforming PERS.

Sincerely,

Russ Walker

NW Regional Director

Citizens for a Sound Economy