Oregon Public Employees Retirement System

Public employees hired before January 1, 1996[2] receive the system's most generous pension benefit. Benefits under this program have been described as "expensive" and "overly generous," often entitling retired workers to lifetime monthly payments over 100% of their pre-retirement earnings. In 1979, the PERS governing board set as its goal that the system's benefits, when added to social security, shall replace 75-85% of pre-retirement earnings. Actual payments grew because of a program known as "money match,[3]" which guaranteed member account returns between 5% and 8%, without regard to greater market performance or the health of the economy. During the 1980s and 1990s, the governing board awarded account earnings in excess of 8%, placing little or no money in reserves for eventual market downturns in the 2000s. Member accounts saw appreciable and consistent growth during this time, but underlying pension assets did not grow to cover the increased benefit guarantee. Career public employees who worked from 1970 to 2000 often were entitled to retirement income replacement rates over 130% of their pre-retirement earnings.[4]

If hired between January 1, 1996 and August 28, 2003, a public employee is entitled to a somewhat reduced pension benefit as a result of changes passed by the Oregon Legislative Assembly in 1995.[5] Member account (money match) returns are not guaranteed for Tier Two employees, and the age to qualify for general service full retirement is increased from 58 to 60 years. Tier Two employees are also not eligible for an Oregon state tax remedy, whereby Tier One employees can have a certain portion of state income tax reimbursed as an incremental increase to their pension benefit.[2] Benefits paid under this program are still considered generous and above average, normally offering income replacement rates far in excess of the PERS board's stated goal.

Sometimes referred to as "Tier Three," OPSRP applies to employees hired after August 29, 2003. This further reduced pension sought to bring state actuarial liabilities in line with employer contributions by raising the retirement age and by vesting benefits more slowly.[6] Benefits under this program are considered in line with comparative government pension programs. OPSRP payouts more or less meet the replacement rate target set by the PERS board. Unlike Tier One/Tier Two public employees, OPSRP members' benefits may be calculated only on the basis of their final salary and employment length. Vesting occurs at 1.5% of final salary per year, capped at 30 years.

As of the end of 2016, the Oregon PERS defined benefit program expects its promised benefits to exceed current assets by US$19.9 billion.[9] By the end of 2018, the same UAL had grown to at least $26.6 billion.[10]