Or. Admin. Code § 459-009-0070

Current through Register Vol. 63, No. 12, December 1, 2024

Section 459-009-0070 - Actuarial Pooling of Employer Liability

(1) Definitions. Definitions as used in this rule:

(a) "Actuarial Surplus" means the excess of the fair market actuarial value of assets over the actuarial liabilities.

(b) "Consolidation" means the uniting or joining of two or more political subdivisions into a single new successor political subdivision.

(c) "Liability" or "Liabilities" means any costs assigned by the Board to a specific employer or to a pool of employers to provide PERS benefits.

(d) "Local government" shall have the same meaning as in subsection (f) of this section.

(e) "Merger" means the extinguishment, termination and cessation of the existence of one or more political subdivisions by uniting with and being absorbed into another political subdivision.

(f) "Political subdivision" means any city, county, municipal or public corporation, any other political subdivision as provided in Oregon Law, or any instrumentality thereof, or an agency created by one or more political subdivisions to provide themselves governmental service. Political subdivision does not mean a school district or a community college.

(g) "Pooled" or "pooling" means the combining or grouping of public employers participating in PERS for the purposes of determining employer liability for retirement or other benefits under ORS Chapter 238.

(h) "School district" means a common school district, a union high school district, or an education service district, including chartered schools authorized under Oregon law.

(i) "Transition Unfunded Actuarial Liabilities or Surplus" means the unfunded actuarial liability or actuarial surplus, attributed to an individual employer for the period of time the employer was not participating in a pool, prior to entry into the Local Government Rate Pool or the State and Local Government Rate Pool.

(j) "Unfunded Actuarial Liabilities" or "UAL" means the excess of the actuarial liabilities over the fair market actuarial value of assets.

(2) Two employer pools. In accordance with ORS 238.225 and only for the purposes of determining the amounts that are actuarially necessary to adequately fund the benefits provided by the contributions of PERS participating employers, employers will be pooled as a single employer as follows:

(a) The State and Local Government Rate Pool, which consists of the following employers:

(A) The State of Oregon, excluding the state judiciary under ORS 238.500;

(B) All community colleges; and

(C) All political subdivisions which elect to join the pool; or

(b) The School District Pool, which consists of all school districts of the state.

(3) The Local Government Rate Pool established as of January 1, 2000, and certified by the Board on June 12, 2001, for political subdivisions was dissolved as of December 31, 2001.

(4) Political subdivision participation. Political subdivisions may elect to participate in the State and Local Government Rate Pool by the adoption of a resolution or ordinance by the governing body of the political subdivision and submitting a copy of the resolution or ordinance to the Board. The effective date of the election is established as follows:

(a) If the election is received, in accordance with OAR 459-005-0220, by December 31, 2001, the political subdivision will join the pool effective January 1, 2002. Its liability as a member of the pool, from the effective date of entering the pool, will be based on the actuarial valuation period beginning on January 1, 2002; or

(b) If the election is received, in accordance with OAR 459-005-0220, on or after January 1, 2002, the political subdivision will join the pool effective the first day of the next actuarial valuation period following the date of receipt of the election.

(c) Prior to entering the pool, any unfunded actuarial liabilities or surplus of such employers will be actuarially accounted for as provided in section (10) of this rule.

(d) Participation in the pool, as provided in this section, is irrevocable by the employer.

(e) Political subdivisions that do not elect to participate in the State and Local Government Rate Pool, as provided in this section, shall be regarded as individual employers for actuarial purposes.

(5) Employer rates. The basis for any actuarial computation required under ORS 238.225 or this rule will be the actuarial report on PERS prepared in accordance with ORS 238.605.

(6) In determining the amounts to be paid to PERS by a public employer pooled as provided in section (2) of this rule, the PERS consulting actuary will express those amounts as a rate or percentage of PERS covered payroll.

(7) In determining the amounts to be paid to PERS by employer participants in the Local Government Rate Pool, the State and Local Government Rate Pool, and the School District Pool, the PERS Board will issue rate(s) representing the amount necessary to provide benefits as provided in ORS 238.225, for all members of that pooled group. The rates, at a minimum, shall include:

(a) Rates representing the amount necessary to provide benefits as provided in ORS 238.225, for all Tier One and Tier Two police officer and firefighter members of that pooled group.

(b) Rates representing the amount necessary to provide benefits as provided in ORS 238.225, for all Tier One and Tier Two general service members of that pooled group.

(c) In addition to the rate(s) in this section, the State of Oregon will be charged the additional amount necessary to fund the Retiree Health Insurance Premium Account as provided in ORS 238.415(5).

(8) A public employer employing a retired member shall apply the employer's contribution rate for its covered payroll to the wages paid to the retired member based upon the employee's pension program membership at the time of the member's retirement and the job classification of the position in which the retired member is employed. Such employer shall make a payment to the Public Employees Retirement Fund. This payment is in addition to the employer's contribution required under ORS 238.225 or 238A.220.

(a) Retired member wages will not be included in covered payroll for purposes of determining the employer's contribution rate.

(b) The additional payment will be applied to the employer's rate pool's liabilities, including pension benefit costs and retiree medical benefit costs.

(c) If the employer has a side account established under ORS 238.229, or any other individual surplus or liability that applies to the employer's contribution rate for its active members, that surplus or liability will be applied to the employer's contribution rate for its retired members.

(9) For each participant in the State and Local Government Rate Pool:

(a) Each employer's police officer and firefighter payroll as reported for the actuarial valuation will be multiplied times the rate described in subsection (7)(a) of this rule;

(b) Each employer's general service payroll as reported for the actuarial valuation will be multiplied times the rate described in subsection (7)(b) of this rule.

(c) By dividing the sum of the amounts in subsections (a) and (b) of this section by the employer's total payroll as reported for the actuarial valuation, a composite employer contribution rate is derived, which will be the basis for the employer contributions.

(10) Unfunded actuarial liabilities or surplus.

(a) If a political subdivision elected to join the Local Government Rate Pool described in section (3) of this rule, any transition unfunded actuarial liabilities or surplus as of December 31, 1999, will remain part of the actuarial calculation of employer costs for the individual political subdivision, until fully amortized, and will not be pooled with other public employers. However, the political subdivision will continue to be pooled for the purpose of funding the resulting unfunded actuarial liabilities associated with the Local Government Rate Pool from January 1, 2000 to December 31, 2001.

(b) If a political subdivision elects to join the State and Local Government Rate Pool as provided in section (4) of this rule, any transition unfunded actuarial liabilities or surplus as of the day immediately preceding the effective date of entering the pool will remain part of the actuarial calculation of employer costs for each individual political subdivision, until fully amortized, and will not be pooled with other public employers in the State and Local Government Rate Pool.

(c) The pooled unfunded actuarial liability or surplus for the community colleges and the State of Oregon as of December 31, 2001, will remain part of the actuarial calculation of employer costs for community colleges and the State of Oregon combined until fully amortized, and will not be pooled with any political subdivision.

(d) Any unfunded actuarial liability or surplus for the State and Local Government Rate Pool that accrues during a valuation period occurring after December 31, 2001, will become part of the actuarial calculation of employer costs for only those employers who participated in the pool during that valuation period.

(e) Any unfunded actuarial liabilities or surplus of individual employers being amortized as provided for in subsection (a), (b), or (c) of this section, will be amortized based on the Board's adopted assumed earnings rate and amortization period. If at the end of the amortization period a surplus remains, the surplus will continue to be amortized as determined by the Board.

(f) If the PERS Board should change the assumed earnings rate, as it applies to ORS 238.255, in effect at the time of the amortization provided for in subsection (a), (b), or (c) of this section, the actuary will recalculate the remaining liability or surplus being amortized using the new assumed earnings rate. The amortization period provided in subsection (e) of this section will not change due to this recalculation.

(11) Employer UAL lump-sum payment. If an employer elects to make a UAL lump-sum payment to offset the unfunded actuarial liabilities under subsection (10)(a), (b), (c), or (d) of this rule, or as provided under ORS 238.225(8), the payment shall be made in accordance with ORS 238.225 and OAR 459-009-0084.

(12) New employers and integrations. Political subdivisions entering PERS, as provided in ORS 238.015(3), 238.035, or 238.680, will be pooled upon election to join the State and Local Government Rate Pool as follows:

(a) To join the pool upon entering PERS, the election as well as the methods and effective date of entry, must be included in the coverage agreement or contract of integration. If the election is made after the effective date of joining PERS, the political subdivision will join the pool effective the first day of the next actuarial valuation period following the date of receipt of the election.

(b) An election completed by an integrating employer or a partially integrated employer will apply to all current and future groups of employees who are integrated into PERS by the employer. Upon entering the respective pool, any unfunded actuarial liabilities or surplus of such employers will be actuarially accounted for as provided in section (10) of this rule.

(13) Dissolution of an employer or non-participating employer. In the event a public employer is dissolved, no longer has PERS eligible employees, or is no longer eligible to participate in PERS, the employer or its successor will be required to make the contributions necessary to fund any remaining unfunded actuarial liability, as provided for in subsection (10)(a), (b), or (c) of this rule, for PERS benefits. The Board will determine the method and amount of funding this unfunded actuarial liability or the return of any surplus, as well as the determination of the employer's successor.

(14) Consolidation of political subdivisions. In the event a political subdivision consolidates with another political subdivision, the succeeding employer will determine the status in the pool by election into the pool.

(a) If the succeeding employer has not elected to join the pool as of the effective date of the consolidation, the following will occur:

(A) The pooled and non-pooled assets, liabilities, and employees of the former employers will continue as they were prior to the consolidation;

(B) Any unfunded actuarial liability or surplus of the former employers as of the effective date of the consolidation will be combined and assumed by the succeeding employer;

(C) New hires will not be pooled; and

(D) If the succeeding employer consists of pooled and non-pooled employees, separate payrolls must be maintained for each and reported to PERS.

(E) At any time after the consolidation, the succeeding employer may elect to join the pool and the effective date will be the first day of the next actuarial valuation period following the date of receipt of an election.

(b) If the succeeding employer elects to join the pool as of the effective date of the consolidation, the following will occur:

(A) Any non-pooled assets, liabilities, and employees of the former employers will be added to the pool;

(B) Any unfunded actuarial liability or surplus of the former employers as of the effective date of the consolidation will be combined and assumed by the succeeding employer and provided for as in subsection (10)(a) or (b) of this rule; and

(C) New hires will be pooled.

(c) The succeeding employer must join the pool as of the effective date of the consolidation if it consists of only pooled employers. Any unfunded actuarial liability or surplus of the former employers as of the effective date of the consolidation will be combined and assumed by the succeeding employer.

(15) Merger of political subdivisions. In the event a political subdivision merges with another political subdivision, the status of the surviving employer in the pool depends on its status prior to the merger.

(a) If the surviving employer was not in the pool and has not elected to join the pool as of the effective date of the merger, the following will occur:

(A) The pooled and non-pooled assets, liabilities, and employees of the former employers will continue as they were prior to the merger;

(B) Any unfunded actuarial liability or surplus of the former employers as of the date of the merger will be transferred to the surviving employer;

(C) New hires will not be pooled; and

(D) If the surviving employer consists of pooled and non-pooled employees, separate payrolls must be maintained for each and reported to PERS.

(E) At any time after the merger, the surviving employer may elect to join the pool and the effective date will be the first day of the next actuarial valuation period following the date of receipt of an election.

(b) If the surviving employer was in the pool as of the effective date of the merger, the following will occur:

(A) Any non-pooled assets, liabilities, and employees of the former employers will be added to the pool as of the effective date of the merger;

(B) Any unfunded actuarial liability or surplus of the former employers as of the effective date of the merger will be transferred to the surviving employer and provided for in subsection (10)(a) or (b) of this rule; and

(C) New hires will be pooled.

(16) In the event of any legal mandates or changes adopted by the Board:

(a) If the change provides for an increased or decreased benefit to police officer and firefighter members, but is not applicable to general service members, the PERS Board will direct the actuary to attribute the cost or savings of the change to the rate indicated in subsection (7)(a) of this rule.

(b) If the change provides for an increased or decreased benefit to general service members, but is not applicable to police officer or firefighter members, the PERS Board will direct the actuary to attribute the cost or savings of the change to the rate indicated in subsection (7)(b) of this rule.

(17) Section (8) of this rule is repealed effective January 2, 2025.

Or. Admin. Code § 459-009-0070

PERS 1-2001, f. & cert. ef. 2-21-01; PERS 3-2001(Temp), f. & cert. ef. 4-19-01 thru 9-30-01; PERS 5-2001 f. & cert. ef. 9-21-01; PERS 6-2001(Temp), f. & cert. ef. 9-24-01 thru 12-31-01; PERS 8-2001, f. & cert. ef. 12-14-01; PERS 10-2002, f. & cert. ef. 7-15-02; PERS 20-2005, f. 11-1-05, cert. ef. 11-4-05; PERS 1-2020, amend filed 01/31/2020, effective 1/31/2020; PERS 3-2021, amend filed 02/01/2021, effective 2/1/2021

Statutory/Other Authority: ORS 238.650

Statutes/Other Implemented: 2005 OL, Ch. 808, Sec. 12, 13 & 14, ORS 238.225, ORS 238.605 & 2019 OL, Ch. 355, Sec. 35 & 37