Oklahoma Teachers' Retirement System

The Board of Trustees has three standing committees, the Investment Committee, the Audit Committee, and the Governance Committee. These panels focus on their respective topics and conduct work on the areas of focus that are more detailed than appropriate for full Board consideration. No actions of the committees are final and binding unless approved by the full Board.

The Board meets 10 times a year, typically on the fourth Wednesday of the month. The Investment Committee usually meets every month on the Tuesday afternoon before the regularly scheduled Board meeting.

To be vested in OTRS and subsequently eligible to receive a monthly retirement benefit, a client must accumulate at least five years of eligible service in Oklahoma public schools. A vested client is eligible to begin receiving monthly benefits at age 62, or age 65, depending on which combination they fall under.[5]

There are three thresholds for eligibility to retire with benefits. Those who joined OTRS prior to July 1, 1992, can retire when his or her age and years of creditable service total 80 points, or they have reached 62 years of age. People who joined the system after that date can retire when their age and years of creditable service total 90 points, or they have reached 62 years of age. Anyone joining the system after November 1, 2011, can retire at sixty, as long as they have accumulated 90 points, or at age 65.[5]

Reduced benefits are available for clients who have not reached full retirement eligibility under regular retirement. To meet this criteria, the OTRS member either must complete at least 30 years of state service, but be younger than age 50, or the person in question must have at least five years of vested service, and be between the ages of 55 and 61 under the rule of 80, or rule of 90. It the client falls under rule of 90/65, they will be eligible for reduced benefits between the ages of 60 and 64.[5]

OTRS calculates its benefits using the following formula:[5]

2 percent x (service years) x (final average salary [base salary or actual W2 earnings for the year?]) ÷ 12 = monthly benefit.

Depending on the number of service years and the final average salary, a person's retirement benefit can vary, but each person, regardless, will receive 2 percent. Additionally, for service earned prior to June 30, 1995, contributions into the system only paid on either the first $25,000 of $40,000 of annual income. Because the contributions for these years of service were capped, the retirement benefits are also capped. This results in a two-tiered retirement benefit calculation with the first tier being those years on which contributions were capped and the uncapped years in the second tier, which results in a retirement benefit that is smaller than would be expected based solely on the formula above.[5]

There are two traditional categories of OTRS clients: a Rule of 80 (or age 62) and Rule of 90 (or age 62) retirement eligibility. Those who joined the system prior to July 1, 1992, are under the Rule of 80 and those who joined on or after that date are under the Rule of 90. The benefit formula is the same for both; only the retirement eligibility is different. A legislative change enacted in 2011 created a third tier for those who join OTRS after Nov. 1, 2011. These clients will have the same benefit calculation, but their retirement eligibility will be the Rule of 90 with a minimum age of 60 (or age 65).[5]

The Education Employees Service Incentive Plan (EESIP) provides an incentive to continue service beyond regular retirement eligibility.[6][7] To participate, a client must be on the high base cap at $40,000. EESIP provides an opportunity to wear away the salary cap by moving two years of service from the $40,000 salary cap tier to the uncapped salary cap tier for each year worked beyond July 1 of the school year in which retirement eligibility is met. Years moved on the two-for-one EESIP plan increases the number of uncapped years used in the calculation of the final average salary.

In order to qualify for the EESIP,[5] an employee must be an active contributor, employed within a qualified employer such as an elementary or secondary school, career tech center, two-year college, or state education agency. The employee must work an additional year after the regular retirement age, and meet an uncapped average salary tier exceeding $40,000. Their contributions prior to July 1, 1995, were remitted on maximum compensation level and they must pay the contribution deficit on years between 1987-1988 and 1994-1995 where the salary exceeded $40,000.

In 2011, Oklahoma lawmakers passed Senate Bill 377 and House Bill 2132, which immediately reduced the unfunded liability of the Teachers’ Retirement System by $2.9 billion of debt.[13][14] The significant changes in SB 377 and HB 2132 include: raising the retirement age for new members coming into the system (current members will be unaffected) and preventing the legislature from granting cost of living adjustments (COLAs) to retirees unless funding is provided. The Oklahoma Legislature still has the ability to grant COLAs but only when it provides the funds to pay for them. This change alone reduces the OTRS' unfunded liability to $7.5 billion.[15]

The Oklahoma Teacher Retirement System experienced significant investment volatility as a result of the COVID-19 pandemic. As of June 2020, the UAAL had increased to $8.641 billion and the funded ratio had decreased slightly, to 71.5%. Although a marked decline in comparison to pre-pandemic levels, this nevertheless represented an improvement in performance over the previous year. According to the OTRS Board of Trustees, "[t]he primary cause of the increase was strong investment returns for the year."[18]