Gov. Kate Brown has released a proposal on how to tackle the $74.5 billion Oregon Public Employees Retirement Fund's roughly $16.7 billion in unfunded liabilities, with a plan including employee contributions of 1.5% or 3% — depending on when the employee was hired.
Employee contributions kick in after the first $20,000 of salary.
Currently, state employees who started work after Jan. 1, 2004, contribute 6% of pay into an individual account program that can be rolled over to an IRA or taken as payments over various time periods. The new employee contribution will be deducted from the individual account program, Ms. Brown's proposal states.
"Since our funded status is at 80%, the PERS rates that public employers — like school districts — pay is increasing," Ms. Brown said. "And those rates are projected to increase significantly in order to keep the system adequately funded."
Employees' contributions would end when the pension plan is fully funded or after 14 years, whichever comes first.
After that, if at any point in the future the funded status again falls below 90%, employee contributions would restart at 3% systemwide.
Some 72% of the pension plan's unfunded liabilities is due to employees who have already retired or are no longer working for OPERS employer. Twenty-two percent of the unfunded liability is from currently employed workers hired before 2003. Only 6% is due to current employees hired after 2003, when the state created a cash balance plan for new employees.
To cover the cost of the unfunded liability from retirees, Ms. Brown is proposing the creation of a new vehicle called a School PERS Offset Account to cover these increased school retirement plan costs.
"To be successful, we must seed it with a minimum of $800 million and dedicate additional future revenues to ensure there will be adequate funds available," she said in the written statement.
James Sinks, spokesman for the Oregon Investment Council, which runs the pension fund, declined comment.
The Oregon Education Association, a teachers' union, equates the proposed employee contribution to a pay cut.
"We are shocked to hear of Gov. Kate Brown's proposal to cut salaries for educators," said John Larson, a teacher and president of the Oregon Education Association in a written statement. "Educators around the state helped elect Gov. Brown just five months ago. ... She said over and over on the campaign trail, she understood the importance of retaining educator salaries and retirements. ... It's clear she's changed her mind."