The Oklahoma Public Employees Retirement System approved the plan’s actuarial report for 2011 at the OPERS Board of Trustees meeting October 27.
According to the report, the system’s funded ratio improved from 66 percent to 80.7 percent, and the unfunded liability decreased from $3.3 billion to $1.6 billion.
The change in the funding status was due primarily to the passage of HB 2132, which removed the assumption for a cost-of-living adjustment (COLA) from the funding calculation. The legislation requires that COLAs from all the state’s retirement systems be funded by legislative appropriation.
“While this does help the funding status of the system, the average OPERS retiree receives only $15,000, the lowest of any retirement system in the state,” said OPEA Policy and Communication Director Trish Frazier. “The cost of health insurance has increased for retirees since the last COLA in 2008 and other costs continue to climb.”
“OPEA believes retirees should receive a COLA from the assets of the OPERS system, as long as the system would remain at least 80 percent funded after the COLA is granted,” continued Frazier. “If a retirement system can remain fiscally sound, retirees should receive occasional COLAs to maintain the value of their benefit.”
According to Jean-Pierre Aubry of the Center for Retirement Research at Boston College, 80 percent is a benchmark used by state and local pension practitioners. A plan that is 80 percent funded has no short term solvency issues and is able to pay benefits for years to come even under trying financial times.
The OPERS system also has benefited from two straight years of double-digit return on investment, earning 13.8 percent in FY 2010 and 21.2 percent in FY 2011.
“The retirees in the OPERS system should benefit from the returns earned by their investment over the years,” said Frazier. “Deposits to OPERS were part of retirees’ compensation for years of dedicated service. Now that the investment are once again making returns in double digits, retirees should receive some of the benefit.”
OPEA will be introducing legislation this session to allow that COLAs be granted, as long as the system is 80 percent funded. Several legislators have voiced their support for this legislation.
“This will not allow retirees in all the systems to receive COLAs from the assets of their system,” concluded Frazier. “But, if the OPERS system can afford to provide a COLA, they should not be penalized because the other systems are not as securely funded.
OPEA members, both active and retired, should visit with their lawmakers about this important legislation to help retirees.
