The TRUTH About the PERS Pick Up – Part 1

Part 1 of this topic reviews the history of the PERS Pick Up.  Part 2 will look at how the PERS Pick Up decision is made and the economic impact of that decision on the people of
Oregon.

The PERS Pick Up became part of the PERS law in 1979, thirty-forty years after PERS was created. It fundamentally changed the way PERS retirement benefits are paid for.  Originally, both public employers and public employees were required to contribute to PERS.  There were no exceptions to that rule.

Under the PERS law the public employer contributions are used to fund a lifetime annuity for the retired PERS members.  The annuity amount is based on three factors:  final average salary, a percentage established by the legislature, and years of service.  The higher each factor is, the higher the lifetime annuity payment will be.  If the PERS employee terminates service prior to qualifying for retirement benefits, the employer contributions made for that employee’s annuity are forfeited.

The employee contributions go into a separate account that will also be used to fund the employee retirement benefits.  If the employee terminates service before becoming eligible for retirement, however, the employee receives the money in his or her separate employee contribution account.

Then, in 1979, Oregon negotiated a new contract with its employees.   Under that contract, the State was permitted to agree to pay the employee PERS contributions for its employees, if the legislature changed the law to permit the State to do so.  The legislators,
many of whom were PERS members, did change the law.  That change gave most Oregon public employers the right for two years only, from July 1, 1979 to June 30, 1981, to pay
employee PERS contributions for their employees.  It is that payment of employee PERS
contributions by the employer that is referred to as the PERS Pick Up.  PERS states that today the employee contributions for at least 70% of all PERS members are being picked up and that includes the employee contribution for each legislator who is a PERS
member.

For PERS reporting purposes all employee contributions, whether paid for by the employee or are picked up by the employer, are treated as if they were actually paid for by the employee.  PERS also projects that $750,000,000 will be picked up during the 2011 – 2013 bienniun.  See Analysis of PERS Cost Allocation, Benefit Modification, and System
Financing Concepts December 1, 2010 on the PERS website: http://www.oregon.gov/PERS/docs/cost_allocation_12-1-10.pdf, pages 3 and 4.

The PERS Pick Up law also provided that the amount picked up would not be treated as salary to the PERS employees for any purpose other than determining the employees’ final average salary.

The Pick Up proved so popular with public employees, including the PERS legislators who created it, that two years later the law was changed to eliminated the June 30, 1981 sunset date and the PERS Pick Up became a permanent part of Oregon law.

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About Dan Re

I am an attorney who has lived in Bend and practiced law since 1981. In educating myself about the Oregon Public Employees Retirement System (PERS), I was shocked at how the PERS laws were changed by the legislature, once legislators were allowed to join PERS in 1971, 26 years after PERS was first created. Those changes personally benefitted the legislators who made them at the direct financial expense of the people they were elected to represent. That is wrong and I intend to change it. In 2009, I started a non-profit 501(c)(4) corporation, In RE The People, Inc., for the purpose of informing concerned citizens of what happened regarding PERS and other issues of social and civic importance. I then created this blog to further that objective.
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