There are multiple bills that have been introduced during the 2017 legislative session that deal with public employee retirement programs. Below is a description of two of those bills (SB 559 and SB 560) that, if passed, will have a major impact on your retirement benefits.
You are encouraged to research PERS legislation and contact your senators and representatives to express your views about these bills. SB 559 and SB 560 and other anti-PERS amendments are now in the Workforce Committee and due out of that committee no later than July of this year (however, they hope to wrap up work on these by April 18—so time is of the essence!).
Senate Bill 559 changes calculation of final average salary for purposes of Public Employees Retirement System to use five years of salary instead of three years on and after January 1, 2018. The idea is that a five-year average will lower the salary amount used in the formula and lower benefits.
Senate Bill 560 eliminates new memberships in individual account program (IAP) under the Public Employees Retirement System (PERS). Establishes new account for each active PERS member. Redirects employee contributions of six percent of the member’s salary from member’s IAP account to new account. Applies amounts in new account to costs of member’s pension or other retirement benefits that accrue on or after January 1, 2018. Also, the bill would for years beginning in 2018, caps at $100,000 annual salary used to calculate final average salary.
Senate Bill 560 also contains a number of amendments including:
SB 560-2 – For Tier 1 and 2 employees, decreases pension multiplier from the present 1.67 percent to 1.00 percent of final average salary per year of service. This would amount to a 40% decrease in a retiree’s monthly benefit.
SB 560-3 – For Tier 1 employees, establishes assumed interest rate of 3.5 percent to convert account balances to monthly lifetime annuities, decreasing Public Employees Retirement Boards (PERB)’s current long-term investment return assumption of 7.5 percent. Clarifies that 3.5 percent assumed interest rate is independent of PERB’s long-term investment return assumption. In essence, this would amount to a 53% decrease in a retiree’s monthly benefit.
SB 560-4 – For Tier 1 and 2 employees, prohibits Public Employees Retirement Board from considering accumulated unused sick leave and/or vacation leave on and after January 1, 2018. The effect of this amendment is that it would decrease the amount of final average salary in the calculation used to determine the employee’s monthly benefit.
SB 560-5 – For OPSRP employees, increases normal retirement age to 67 years of age, and early retirement age to 57 years of age, regardless of number of active service years.
SB 560-6 – A public employer that employs a retired member under this section shall contribute to the Public Employees Retirement Board, the percentage of the retired member’s salary that would have been contributed to the board if the retired member were an active member.
SB 560-8 – 12 month waiting period for an employee to become a PERS member rather than the current 6 months.
SB 560-9 – For an eligible employee who establishes membership in the system on or after the effective date of this 2017 Act, one or more jobs with one or more participating public employers in which the eligible employee performs 1,000 or more hours of service in a calendar year (currently 600).
The above bills and amendments could go into effect upon passage, which could be as early as May or as late as July.
Again, you are encouraged to research PERS legislation and contact your legislators to express your views about these bills. If passed, they will have a detrimental effect on your retirement.