The PERS Pick Up was invented by Oregon legislators in 1979, eight years after the Oregon Attorney General withdrew an earlier opinion and ruled that they could join PERS. Once legislators could join PERS, they not only did so but they significantly enhanced PERS benefits. One of their greatest enhancements was the PERS Pick Up.
The PERS law has always required that the money to fund PERS must come from contributions made by the PERS employees, which funded a refundable annuity benefit, and from contributions from the employer of each PERS employee, which funded a non-refundable lifetime pension benefit. The employers of the PERS employees, of course, are the people of Oregon. From the beginning of PERS, in 1945 until 1979, that is exactly how PERS was funded.
But in 1979, the legislature passed the first PERS Pick Up law, which was to last for just two years. That law said that each public employer could agree to pay the employee PERS contributions for the employees, in addition to paying the employer’s own PERS contribution. If the employer decided to do that, the employer was “picking up” the employees contributions. The great thing about this procedure for the PERS employees was that each public employer was run by administrative employees who were also PERS members and it was those administrative employees who would decide if the employee contributions, including their own, were going to be picked up. Before the end of the PERS Pick Up law’s original two-year term, the PERS legislators decided that they liked it so much that they made it permanent.
While the PERS Pick Up is an incredible benefit for the PERS employees just by paying their employee PERS contributions for them, it does more than that. The PERS Pick Up law provides that the picked up amount is not considered to be compensation for any purpose except one. It will be considered compensation for the sole purpose of determining an employee’s final average salary, which is used to compute the employer funded lifetime annuity. That means that the employer contribution required to fund the lifetime pension benefit, which is based on the employee’s final average salary, will be higher for an employee whose contribution is picked up than it would be for an employee making the exact same salary but whose contribution is not picked up.
Currently, at least seventy percent of PERS employees have their contributions picked up. PERS has estimated that the cost of the PERS Pick Up to the people of Oregon from July 1, 2011 through June 30, 2013 will be $874,000,000. Of that amount, $750,000,000 will be for the actual contributions that the people are forced to pick up and $124,000,000 will be for the increased employer contributions. If the PERS employees paid their own employee contributions, as they were required to do before legislators were allowed to join PERS, that $874,000,000 would be available to provide services to all Oregonians.
The PERS Pick Up is the product of a benefit decision making system that is controlled exclusively by the people who are receiving the benefits. The PERS laws are made by PERS legislators who have controlled the legislature for the last forty years. During 2011, at least sixty-five of the ninety legislators were PERS members. The people who are forced to pay for PERS have no voice in determining what they will have to pay for.