Opinion ID: 835784
Heading Depth: 3
Heading Rank: 2

Heading: Membership in and Funding of PERS

Text: Public employees of participating employers become PERS members upon completing six months of uninterrupted service. [13] Every PERS member has a regular account in PERS. The member's regular account consists of the member's contributions to the system and earnings that PERB has credited to those contributions. In addition, in 1967, the legislature enacted an optional variable annuity account program for members who are willing to have their contributions and benefits fluctuate with the equity markets. A member who participates in the variable annuity account program has two member accounts: a regular account and a variable account. Members' contributions to their variable accounts are paid into the Variable Annuity Account and are invested solely in the Oregon Equity Fund. [14] For purposes of this litigation, there are two categories of PERS members. Tier One members are public employees who joined PERS before January 1, 1996. Tier One members are entitled to a guaranteed minimum rate of return on their regular accounts based on the assumed earnings rate. To ensure that sufficient assets exist to pay guaranteed benefits to Tier One members at the assumed earnings rate, PERS maintains a gain-loss reserve. In years when fund earnings exceed the assumed earnings rate, PERB deposits a portion of those excess earnings into the gain-loss reserve. In years when fund earnings are less than the assumed earnings rate, PERB uses funds from the reserve to make up the difference. PERS members who joined the system on or after January 1, 1996, are known as Tier Two members. Unlike Tier One members, Tier Two members have no earnings guarantee on their regular accounts and, correspondingly, do not benefit from the fund's gain-loss reserve. [15] Crediting of member accounts occurs annually as of December 31 of each calender year. At the beginning of each calendar year, PERB reviews changes in the value of the fund since the beginning of the previous year. PERB staff determines the fund's value using standard accounting methods. Based on the fund's annual growth, PERB allocates earnings to various accounts within the fund on an equal crediting basis; that is, every dollar within the fund receives the same percentage share of earnings regardless of the account to which that dollar is designated. [16] The PERS actuary also recommends the adoption of employer contribution rates in an Actuarial Valuation that usually issues as of December 31 in odd-numbered years. Employers begin paying newly established contribution rates on July 1 of the following year. Employer contribution rates consist of two components: the employer's normal cost toward payment of members' service retirement allowances and the amount necessary to amortize any unfunded actuarial liability (UAL). The normal cost component of the employer contribution rate is based on the PERS actuary's best estimate of the amount needed to pay service retirement allowances to current members in the future. The adjustment of the employer contribution rate either for UAL or actuarial surplus is based on the difference between an employer's account balance and the projected future service retirement allowances payable to its employee members. If an actuarial surplus exists, then the employer pays less than the normal cost rate. If the employer has a UAL, then PERB adds an additional, amortized charge to the employer's normal cost rate. [17]