Principles for PERS Reform

Keep the promise for all benefits earned to date – for public employees who are retired and for those still in the workforce.
This is both a legal requirement and a commitment to fairness.

Maintain the basic retirement benefits of the PERS pension plans for those in the current system.
These basic benefits are based on years-of-service formulas that provide 45-50% of an employee’s “final average salary” after 30 years of employment. With Social Security providing an additional 20-40% of final salary, these benefits meet the test of adequate, even generous, retirement benefits.

Recognize that there are excesses in the current system that can and should be corrected on a going forward basis.
These excesses, like the Money Match program for pre-2003 employees, continue to produce pension payouts far above the system’s years-of-service formulas. Ditto for the use of unused sick leave and retirement to boost benefits for older employees. These add-on features can and should be changed prospectively without reducing the basic benefits of the system’s pension plans.

Ensure that employees share in the cost of supporting their retirement benefits, consistent with standard practices in both public and private sector plans.
This used to be the case for the PERS pension plan until 2003, when employee contributions were shifted to a separate retirement savings plan. Employee support for the pension plan is needed to re-establish fairness for taxpayers and consistency with benefit practices in the public and private sectors.

Work with current compensation plans and bargaining agreements so that reforms do not reduce employee paychecks.
Employer “pick-ups” of employee contributions are a legitimate form of compensation when negotiated in lieu of salary.

Give employees choices to tailor their retirement benefits to their career plans.
Many employees will be better served with 401(k)-style defined contribution plans. Others who expect to spend their careers in public service may prefer a traditional pension plan.

Control the liabilities of the system going forward.
If current and future employees are to continue to have the option of a pension plan, employers should be expected to manage their compensation systems so as not to boost future payouts and shift costs to future generations of employees and taxpayers. Also, the system’s managers should be required to establish feasible investment targets so as not to understate the true costs of the promised pension benefits.

Commit that all cost savings stay in public budgets to expand and improve public services and attract a new generation of public employees.
The purpose of reform is not to back money out of public budgets but to free up funds that would otherwise be diverted to chasing the rising liabilities of the PERS pension plans. With or without new revenues, these funds will be needed to add school days and reduce class sizes in our schools and to maintain competitive salaries and benefits for a new generation of public employees.