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OPERS Pension Plan Changes and Health Care

OPERS Pension Plan Changes and Health Care . Learning Objectives. OPERS History and Funding Challenges Pension Changes Health Care Changes Communicating Change. Learning Objectives. OPERS History and Funding Challenges Pension Changes Health Care Changes Communicating Change.

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OPERS Pension Plan Changes and Health Care

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  1. OPERS Pension Plan Changes and Health Care

  2. Learning Objectives • OPERS History and Funding Challenges • Pension Changes • Health Care Changes • Communicating Change

  3. Learning Objectives • OPERS History and Funding Challenges • Pension Changes • Health Care Changes • Communicating Change

  4. Historical 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

  5. The Impact on Funding $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $4,329,981,866 Total Pension Benefits Paid Billions $1,573,388,206 Total Health Care Costs Paid 1965 1970 1975 1980 1985 1990 1995 2000 2005 2011

  6. An Illustration of Funding Member Contributions Employer Contributions Investment Income Investment Income 30 year funding Health Care Fund Pension Fund Pension Benefit Payments Health Care Coverage Payments

  7. Recent Changes In Key Funding Measures *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.

  8. Learning Objectives • OPERS History and Funding Challenges • Pension Changes • Health Care Changes • Communicating Change

  9. Goal - Finding The Right Balance More Than Needed Less Than Needed May cause undue hardship on members May create need for more drastic changes later Key to Achieving Balance Incremental Changes Over Time

  10. 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)

  11. Approved Legislation - Group Concept 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. OPERS Transition Plan

  12. Approved Legislation - Group Impact OPERS Transition Plan Group A Subject to COLA transition Group B Subject to: • Age & Service Eligibility requirements • New Age & Service Reduction Factors • COLA will be based on annual change in CPI Group C Subject to all elements of the new plan design

  13. Age & Service Eligibility

  14. Approved Legislation and Groups Impacted

  15. COLA Transition Beginning of 5 Year Transition 1/1/14 Legislation Effective 1/7/13 End of 5 Year Transition 12/31/18

  16. Other Approved Components Not subject to the transition plan: Applies to All Groups

  17. Updatable Factors 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

  18. 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.

  19. Learning Objectives • OPERS History and Funding Challenges • Pension Changes • Health Care Changes • Communicating Change

  20. Contribution Rate Allocation Changes To Retain 30-Year Funding 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.

  21. With Health Care Contribution Changes, OPERS will Adopt a New Health Care Plan • 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…

  22. Health Care Changes – Start 1/1/2014

  23. Health Care Changes – Member Eligibility

  24. Health Care Changes – Allowances

  25. Health Care Changes – Spousal Eligibility

  26. Health Care Changes – OPERS Medicare Connector

  27. Health Care Changes – OPERS Medicare Connector

  28. Health Care Changes – OPERS Medicare Connector 28

  29. 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.

  30. Learning Objectives • OPERS History and Funding Challenges • Pension Changes • Health Care Changes • Communicating Change

  31. 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

  32. Ohio PERS 277 E. Town Street Columbus, OH 43215 1-800-222-7377 www.opers.org Available Media:

  33. Thank you for supporting OPERS! Questions? Questions?

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