UPDATE — June 12, 2013: At the PERB meeting on July 26 the Board will consider a change in the assumed earnings rate for the system. The most likely change is to a new rate of 7.75 percent. If the Board makes a change the new rate will go into effect on January 1, 2014 for the purpose of calculating the money match benefit. It is currently unclear when the potential new rate will be used for the purpose of calculating 2013 guaranteed earning for Tier I members. Immediate retirement is neither necessary nor wise for most members. At best immediate retirement might preserve a very small difference in the amount of Tier I earnings for 2013. However immediate retirement also eliminates the potential for additional earnings in 2013 prior to retirement. The significant change to the calculation of the money match benefit will not occur until retirements on or after 1/1/14. As always I would tell members that if they have done all their financial planning and are ready to retire then they should do so. If they are not ready to retire then there is ample time for them to evaluate their situation and make a retirement decision prior to the implementation of any new earnings assumption on 1/1/14.
2013 Legislative Session
During the 2013 session over 40 bills were introduced by the Legislature related to PERS Reform. While 39 bills have not moved, one bill, Senate Bill 822 has passed both the Senate and the House Chambers and was immediately signed into law on May 6, 2013.
Senate Bill 822 is based on the Co-Chairs of the Joint Ways and Means' budget proposal released earlier in the session. The bill impacts all public employees – retired and active. Senate Bill 822 does the following:
1. Creates a Graduated Cost of Living Adjustment (COLA).
- In other words, retirees will receive the normal 2% COLA on the first $20,000 of their retirement benefit, however, as the benefit increases, the COLA percent will decrease. (Ex: for the next $20,001 - $40,000 in benefits members will only received a 1.5% COLA).
- In order to give the PERS agency enough time to implement this new formula, for the first year of the coming biennium the COLA rate will drop from 2% to 1.5% for all retirement income.
2. Eliminates the tax reimbursement retirees living out of state currently receive.
3. Directs the PERS Board to collar 1.9% of employer rate increase. Collaring is a common practice for pension systems to help smooth out the ups and downs of the investment market
Read more about what will happen next on our Retirement Security page.
OEA, in partnership with members of the PERS Coalition, is moving forward with an appeal to the Supreme Court to test the legality of Senate Bill 822. If you are interested in participating in the legal challenge or believe your will be adversely impacted by the bill, please contact OEA Public Affairs Department.
If the Supreme Court rules that Senate Bill 822 is a breach of PERS members' contract rights, retirees impacted by the bill and who lost funds will have the benefits returned out of the PERS Contingency Fund. The employer contribution rates for 2013/2015 will not change. The financial impact of any Supreme Court decision will be felt by school employees, school districts and the state in 2015-2017 biennium.