PERS pick-up buyout FAQ

Posted by bakkenj on **Updated November 30, 2016**

What is the 6 percent pickup and how did it come to be?

Prior to 1979, state workers paid 6 percent of our wages towards PERS. In 1979, during bargaining, we accepted a proposal from the State to pay the 6 percent into our PERS accounts, which increased member take-home pay even though wage rates remained the same because members no longer had to pay the 6 percent out-of-pocket.

What did we reach a tentative agreement on?

Rather than the state continuing to “pick up” the 6 percent by paying it directly into our PERS accounts, beginning Nov1, 2016, these funds will be transferred back to the employee’s pay and then transferred, as a pre-tax deduction, into the employee’s PERS account. Any additional payroll tax, and increased PERS contribution, incurred as a result of the “buy back” will be covered by an additional .95 percent paid by the state into the employee’s pay. While this will increase employee’s base wages by 6.95 percent, the intent of the buyout is to be zero cost to employees.

PERScomparison

How would this benefit us?

There are a number of ways this would be in our best interests. First, it would be an additional benefit for OPSRP members (those hired on or after August 29, 2003, also known as Tier 3), as it would translate into a higher average final salary. Currently, Tier 1 and 2 members already have the 6 percent pick-up counted toward their final average salary, but OPSRP members do not.

In addition, pay and benefits that are based on your wage rate would increase; this includes IAP contributions, overtime, out-of-class and lead differentials, vacation payouts, and Social Security calculations. For example, if you work overtime or have a pay differential, this could put more money in your pocket.

Previous attempts to end the 6 percent pick-up would have resulted in an equivalent pay cut for all PERS members; this issue was a central cause of the 1995 strike by state and higher education workers in Oregon. Because we prevailed in striking down the recently passed PERS COLA cap in court, there have already been proposals to end the 6 percent pick up in a way that would not hold us harmless, but would instead entail some sort of pay cut (i.e. legislation allowing for negotiations over splitting the pick-up, or eliminating it altogether at our own expense).

Will this affect my take-home pay?

If you receive a shift or other differential, work overtime, or made other changes to your deductions you may be seeing an increase in take home pay.

It’s also possible that you’ll see a slight decrease in take-home pay if you participate in voluntary payroll deductions that are based on overall gross pay, which will increase. Examples of these voluntary, percentage-based contributions include the Oregon Savings Growth Plan, Long Term Disability, and Short Term Disability. If you participate in these types of programs, you are likely to see an increase in these deductions and ultimately the relevant benefits. In some instances, you can adjust the deduction to increase your take home pay. (This question was updated 11/30/2016)

If this doesn’t put more money in my pocket, why do it?

Besides the fact that the current system suppresses retirement income for OPSRP members, the Bargaining Team is making this proposal as a defensive measure aimed at protecting member retirement for the future.

Would the PERS buy back impact my ability to qualify for public assistance or increase garnishments or other payments I am required to make?

It’s not possible to speak to all circumstances. If you are impacted by an income-based benefit or payment plan, you’ll need to consult with whoever oversees your benefits or payments. Be sure to tell them this is a “pre-tax retirement benefit.”

Is this a new idea?

No. The idea of buying out the 6 percent has been discussed at bargaining tables and in the legislature for years. Many unions, including our fellow members at Portland Public Schools and most firefighter and law enforcement bargaining units, have already adopted a buyout because they saw it as being in their best interests. Our bargaining team believes this is the best way to secure our retirement.

Why now?

This concept is a carry-forward from previous bargaining sessions and the current Bargaining Team recognized the time was right for winning this proposal. At the Bargaining Conference held on Sunday, January 25, this proposal was brought forward to the assembled delegates. The delegates in attendance understood the importance and supported moving this forward. Maintaining a secure retirement has remained a high priority when our members fill out bargaining surveys.

Timing is critical as we face huge attacks on Unions and public workers. These attacks are focused on collection of dues, the right to collectively bargain and the ability to have a secure retirement.

How would it work?

See chart above. In our tentative agreement, we start picking up the additional 6.95% on Nov. 1, 2016.

How would this impact my dues and other payroll deductions?

Any deduction based on a percentage of your wages would be impacted. On the income side, overtime, wage-based differentials, and vacation payouts would benefit. For example, if you make $40,000 a year and received a 5% pay differential, your differential would be calculated off of a 6.95% higher base wage resulting in an $11.58/month increase before taxes. Under the same $40,000 a year scenario, every hour of overtime would increase by $2.01 before taxes. Similarly, dues would go up a small amount: for every additional $100/month you earn, your dues would go up $1.70. For example, if you make $40,000 a year, your dues would go up $3.94 per month.

Would I be able to pay that money into a 401k of my choice or use it otherwise?

No. By law, the 6 percent must be paid into your IAP account either by the employee or the employer.

How will this impact my income taxes?

While the funds are part of your income, they are not reported in Gross Income for tax purposes. The deduction is handled on a “pre-tax” basis just as your portion of your insurance premium is handled; therefore, it will have a negligible impact on your income taxes.

For information on PERS, there is a wealth of information on the PERS website, including the following benefit comparison chart:

http://apps.pers.state.or.us/pers238/a-z_project_chapter_238.htm

This FAQ was updated November 30, 2016, and will continue to be updated as more information is available.


PERS video

A short animated clip explaining the past and the future of PERS:

https://www.youtube.com/watch?v=cyafWjdor1Q

 

 


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