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OPERS Pension Plan Changes and Health Care
Learning Objectives
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• OPERS History and Funding Challenges
• Pension Changes
• Health Care Changes
• Communicating Change
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Learning Objectives
• OPERS History and Funding Challenges
• Pension Changes
• Health Care Changes
• Communicating Change
Increased Life Expectancies Men and women are living approximately 10 years longer today compared to statistics from the 1950’s. Growth in Retirees 1967 – OPERS had almost 31,500 retirees. 2011 – OPERS had over 184,900 retirees. 2058 – Projections indicate we will have over 370,000. Return on Investments 2008 – Economic downturn
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Historical Change
The Impact on Funding
$4,329,981,866
$1,573,388,206
1965
19
70
1975
19
80
1985
19
90
1995
20
00
2005
2011
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Billions
$4.5
$4.0
$3.5
$3.0
$2.5
$2.0
$1.5
$1.0
$0.5
Total Pension Benefits Paid
Total Health Care Costs Paid
Pension Fund
Health Care Fund
Pension Benefit Payments
Investment Income
Investment Income
Health Care Coverage Payments
An Illustration of Funding
Member Contributions
Employer Contributions
30 year funding
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Recent Changes In Key Funding Measures
2007 2008 2009 2010 2011
Funded Ratio 96% 75% 75% 79% 77%
Amortization Years 14 30* 30* 29* 30*
Health Care Solvency
31 years
11 years
11 years
11 years
11 years
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*In order to stay within the statutory 30 year funding requirement, more of the employer contributions were directed to the pension fund decreasing the health care solvency period.
Learning Objectives
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• OPERS History and Funding Challenges
• Pension Changes
• Health Care Changes
• Communicating Change
May cause undue hardship on members
May create need for more drastic
changes later
Key to Achieving Balance Incremental Changes Over Time
Goal - Finding The Right Balance
More Than Needed Less Than Needed
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Major Components of Pension Redesign Effective January 7, 2013
• Age & Service Eligibility
• Age & Service Reduction Factors • Benefit Formula
• Final Average Salary (FAS)
• Cost of Living Adjustment (COLA)
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Approved Legislation - Group Concept
OPERS Transition Plan
Group A Must be eligible to retire within five years after the effective date of the legislation.
Group B Must be eligible to retire within 10 years after the effective date of the legislation or have attained 20 years of service credit prior to the effective date.
Group C All others and new hires after the effective date of the legislation.
To be counted toward determining group eligibility, all service purchase must be completed during the applicable transition period.
Transfers from another Ohio retirement system will also count if the service earned at the other system occurred before or during the applicable transition period. 11
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Group B Subject to:
• Age & Service Eligibility requirements • New Age & Service Reduction Factors • COLA will be based on annual change in CPI
Group A Subject to COLA transition
Group C Subject to all elements of the new plan design
OPERS Transition Plan
Approved Legislation - Group Impact
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Age & Service Eligibility
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Approved Legislation and Groups Impacted
Age & Service Reduction Factors B and C Impacted
Determined by actuary
Benefit Formula C Impacted
State/Local Division
Unreduced – 2.2% for all years of service up to 35, 2.5% thereafter
No change to benefit formula for Law Enforcement and Public Safety
Final Average Salary (FAS) C Impacted
5-year FAS
Cost of Living Adjustment A, B and C Impacted
Determined by CPI, 0% - 3%
COLA Transition
Current retirees 3% (no change) 3% (no change)
Members retiring with effective dates during
5 yr transition period
3% until end of 5 yr transition period
following legislation
Legislation removes vesting in 3% COLA
effective immediately
All COLAs after end of 5 yr transition period
equal to CPI not to exceed 3%
Members retiring after end of 5 yr transition period
N/A All COLAs equal to CPI not to exceed 3%
Beginning of 5 Year Transition 1/1/14
End of 5 Year Transition 12/31/18
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Legislation Effective 1/7/13
Approved Changes
Purchase of service credit actuarially neutral
Minimum Earnable Salary
Eliminate two alternative benefit calculations
Anti-spiking provision
Disability program changes
Intersystem transfers
Membership determinations
Limit retroactive retirement benefits to 90 days
Universal beneficiary designation
Other Approved Components
Not subject to the transition plan:
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Applies to All Groups
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OPERS can now update the following:
• Enhanced refunds
• Health care eligibility • Medicare B Reimbursement
• Combining service credit among the OPERS retirement plans
• Establishing the mitigating rate
Updatable Factors
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Progress Check
If a member retires two and a half years after the effective date of the legislation, will the member receive a fixed 3% Cost of Living Adjustment (COLA)?
Yes
No
Yes, for a limited period This member would receive a fixed 3% for three years, then transition to the CPI based model.
Learning Objectives
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• OPERS History and Funding Challenges
• Pension Changes
• Health Care Changes
• Communicating Change
Contribution Rate Allocation Changes To Retain 30-Year Funding
Pension Health Care Total
2009 8.5% 5.5% 14.0%
2010 9.0% 5.0% 14.0%
2011 10.0% 4.0% 14.0%
2012 10.0% 4.0% 14.0%
2013 10.0% TBD 14.0%
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With legislation, our goal is to maintain health care funding with a 4% employer contribution. Due to the length of time it took to get the pension bill passed, this may not occur immediately. Strengthening the pension fund is our primary responsibility.
• Our current health care program requires a 7.6% employer contribution which is not sustainable given our challenges
• Moving from a program that takes 7.6% still requires significant changes to the health care program
• With passage of pension legislation, our goal is to allocate consistent contributions to the health care fund and extend coverage for career members
• Final details are forthcoming…
With Health Care Contribution Changes, OPERS will Adopt a New Health Care Plan
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Health Care Changes – Start 1/1/2014
Will Impact Current and Future Retirees
• Changes will become effective January 1, 2014 for those retired before 1/1/14 (many items will phase in over a three year period)
• Eligibility requirements will be immediate for those who retire on or after 1/1/14.
• Allowance levels will transition into the new allowance over a three year period ending by 1/1/2017
• The OPERS Medicare Connector will be available in 2015
Will Impact Future Retirees
Member
• Age 60 with 20 years of service, or • Any age with 30 or more years of service (will increase to 32)
Health Care Changes – Member Eligibility
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Will Impact Current and Future Retirees
• Restructured allowance based on years of service and age – Current retirees at or above a 75 percent allowance will not
receive less than 75 percent
• More out of pocket costs for premiums and covered services
• Reduce and eliminate Medicare B reimbursement
• Dependent Children: access with allowance equal to 50% of retiree’s allowance if retiree has 20 years or more of service
Will Impact Future Retirees Only – Retired on of after 1/1/14
• Disability Recipients: access with allowance limited to first 5 years of disability retirement unless approved for federal program
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Health Care Changes – Allowances
Will Impact Current and Future Retirees
Non-Medicare Spouses
• Access to OPERS health care thru 2019 • No allowance – 3 year transition to 0% for current retirees starting
in 2015. Those retiring in 2014, 2015 and 2016 get the transition
Medicare Spouses
• Access to the OPERS Medicare Connector • No allowance – 3 year transition to 0% for current retirees starting
in 2015. Those retiring in 2014, 2015 and 2016 get the transition
Survivor Spouses
• Upon member’s death, no allowance or access to health care 25
Health Care Changes – Spousal Eligibility
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Health Care Changes – OPERS Medicare Connector
Will Impact Current and Future Retirees
Medicare Recipients
• Continues to use Medicare as your primary insurance
• Provides more choices through the individual market to supplement your Medicare with greater affordability
• Greater ability to budget for health care costs as you pick a plan that best suits your needs
• Allowance based on years of service and age
• May have funds left over from allowance to pay for Medicare Part B or spouse’s premium
• Spouses can use the services of the connector
Health Care Changes – OPERS Medicare Connector
Licensed Medicare Counselor
• Contracts with preferred plans and manages the retiree allowance account
• Supports the enrollment and decision process and assists in resolving claims disputes
• Regulated by the Centers for Medicare & Medicaid Services
Medicare Retiree
• Receives an allowance from OPERS based on years of service to purchase a health plan
• Elect coverage with help from Licensed Medicare Counselor
OPERS • Selects the best Medicare Connector and monitors their
performance, provides eligibility information to the connector and monthly allowance to eligible retirees
Plan Options Medigap or Medicare
Supplement Part D Rx
Medicare Advantage
HMO/PPO/PFFS
Dental & Vision
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Progress Check
If employers’ contributions are used to fund health care, there will be no change to coverage.
A.) True B.) False B.) False OPERS will still need to make significant reductions, but the goal is to maintain a meaningful health care plan.
Learning Objectives
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• OPERS History and Funding Challenges
• Pension Changes
• Health Care Changes
• Communicating Change
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Communicating Change
• Communicate pension redesign and approved health care changes to members
• Keep OPERS membership updated by: – www.opers.org – PERSpective (the OPERS blog), Facebook, Twitter – in-person presentations, web presentations and videos
• To stay informed, keep your contact information current and read your newsletters
Ohio PERS
277 E. Town Street Columbus, OH 43215
1-800-222-7377
www.opers.org
Available Media:
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Questions?
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Thank you for supporting OPERS!
Questions?