Or. Admin. Code § 459-009-0090 - Surplus Lump-Sum Payments by Employers
Purpose. The purpose of this rule is to establish procedures and requirements for the adjustment of employer contribution rates when an individual public employer that does not have an existing unfunded actuarial liability (UAL) makes a lump-sum payment. An employer with an existing unfunded actuarial liability must first submit a lump-sum payment for the full amount of that unfunded actuarial liability under OAR 459-009-0084 or 459-009-0085, as applicable, before the employer may make a payment under this rule.
(1) Definitions. For the purposes of this
rule:
(a) "Actuarial surplus" means the
excess of the actuarial value of an employer's assets over the employer's
actuarial liability.
(b) "Allocated
actuarial liability" means the actuarial liability calculated using the fair
market value of assets.
(c)
"Amortized amount" means the amount of a side account used to offset
contributions due from the employer.
(d) "IAP" means the Individual Account
Program of the Oregon Public Service Retirement Plan.
(e) "Pension program contribution" means the
total calculated employer contribution due in any reporting period for both the
Chapter 238 and OPSRP pension programs, excluding any IAP or retiree health
insurance program contribution due.
(f) "Side account" means an account in the
Public Employees Retirement Fund into which a UAL lump-sum payment is
deposited.
(g) "Surplus lump-sum
payment" means any employer payment that is:
(A) Not regularly scheduled;
(B) Not paid as a percentage of
salary;
(C) Made for the express
purpose of creating an actuarial surplus or increasing an existing actuarial
surplus; and
(D) Paid at the
employer's election instead of at the PERS Board's direction.
(h) "UAL" or "Unfunded actuarial
liability" means the excess of the actuarial liability over the actuarial value
of assets.
(i) "UAL lump-sum
payment" means any employer payment:
(A) That
is not regularly scheduled;
(B)
That is not paid as a percentage of salary;
(C) That is made for the express purpose of
reducing the employer's unfunded actuarial liability; and
(D) Where the employer has control over the
timing or whether to make the payment.
(2) For employers with an existing UAL that
wish to make a payment in excess of the existing UAL, the surplus lump-sum
payment must be made after and separately from the UAL lump-sum payment. The
provisions of this rule apply only to the surplus lump-sum payment.
(3) Limitation on surplus lump-sum payments.
An employer may make only one payment per every three calendar years under the
provisions of this rule.
(4)
Minimum surplus lump-sum payment amount. If an individual employer elects to
make a surplus lump-sum payment under this rule, the payment must result in a
50 basis point reduction in the employer's pension program contribution rate
based on the individual employer's reported payroll in the most recent
actuarial valuation.
(5) Maximum
surplus lump-sum payment amount. If an individual employer elects to make a
surplus lump-sum payment under this rule, the payment may not be greater than
the amount required to bring the employer's lowest pension program contribution
rate to zero based upon the individual employer's reported payroll in the most
recent actuarial valuation.
(6)
Requirements. In order to make a surplus lump-sum payment, an employer must
comply with the process described in sections (7) through (15) of this
rule.
(7) Initiating surplus
lump-sum payment process. At least 45 calendar days before the date the
employer intends to make a surplus lump-sum payment, the employer must notify
PERS Actuarial Services in writing that it intends to make a surplus lump-sum
payment. The notification must specify:
(a)
Whether the intended payment shall be for the maximum payment amount as
provided in section (5) of this rule, or, if other than the maximum amount, the
percent of payroll reduction in the individual employer's rate or dollar amount
of the intended payment; and
(b) No
more than two potential dates for the payment.
(8) PERS staff must notify the employer
within five business days of receipt of the notification if the notification is
incomplete or the process cannot be completed by the earliest intended date of
the surplus lump-sum payment.
(9)
Payment to the actuary. The PERS consulting actuary must provide an invoice
charging the employer for the cost of the rate reduction calculation requested
by the employer. At least 30 calendar days before the date the employer intends
to make a surplus lump-sum payment, the employer must remit payment for the
cost of the rate reduction calculation directly to the PERS consulting actuary
according to the instructions on the invoice. Failure to remit payment
according to the terms of this section may result in the PERS consulting
actuary not completing the employer's rate reduction calculation by the
proposed surplus lump-sum payment date.
(10) Calculation of the individual employer's
actuarial liability. Upon receipt of notification that the employer has
submitted payment in full to the PERS actuary for the requested UAL
calculation, PERS staff shall request that the PERS consulting actuary
calculate:
(a) The minimum amount of the
surplus lump-sum payment under section (4) of this rule;
(b) The maximum amount of the surplus
lump-sum payment under section (5) of this rule;
(c) The alternative percentage or dollar
amount specified by the employer in its notification under section (7) of this
rule; and
(d) The effect of each
of the amounts calculated in subsections (a) to (d) of this section on the
individual employer's contribution rate using the potential date(s) for payment
specified by the employer in its notification.
(11) The calculations described in section
(10) of this rule must be:
(a) Based on the
individual employer's PERS Chapter 238 and OPSRP Pension program contribution
rates from the most recent rate setting actuarial valuation;
(b) Based on the covered salary, for the
individual employer or as a proportion of the actuarial pool in which the
employer participates, as applicable, reported by the employer for the year of
the most recent actuarial valuation; and
(c) Adjusted to reflect the effect of time
from the most recent actuarial valuation to the intended date(s) of payment,
using generally recognized and accepted actuarial principles and
practices.
(12)
Notification of calculation. PERS staff must notify the employer in writing of
the results of the individual employer's calculation under section (10). In
addition, PERS must send the employer a notification describing risks and
uncertainties associated with making a lump-sum payment.
(13) Notification of payment. The employer
must notify PERS Actuarial Services in writing at least five business days
before making a surplus lump-sum payment. This notification must be in addition
to the notification in section (7) of this rule and must specify the dollar
amount of the payment and the date the employer intends to make the
payment.
(14) Method of payment. A
surplus lump-sum payment must be made by either wire transfer or check payable
to the Public Employees Retirement System.
(15) Receipt of payment. In order to adjust
the employer contribution rate to that reported by PERS in section (12) of this
rule, PERS must receive the correct funds no later than five business days
after the corresponding intended date of the surplus lump-sum payment specified
in the notification described in section (13) of this rule.
(a) If the surplus lump-sum payment is
received by PERS on or before the intended date specified in the notification
described in section (13) of this rule or within the five business days
following the intended date, the new employer contribution rate shall be
effective for payrolls dated on or after the first of the month following
receipt of the payment by PERS.
(b) If the surplus lump-sum payment is
received by PERS more than five business days after the intended payment date,
the employer's contribution rate shall be adjusted based on the next actuarial
valuation after the date of receipt of the payment and will be effective on
July 1 of the year following publication of the actuarial valuation.
(c) Except as provided in subsection (15)(d),
if the surplus lump-sum payment received by PERS is other than any amount
specified in the notification under section (13) of this rule, the employer's
contribution rate shall be adjusted to the rate the payment amount fully funds
using the actuarial calculation in section (10) of this rule.
(d) If the surplus lump-sum payment received
by PERS is less than the minimum amount described in section (4) of this rule,
or greater than the maximum amount described in section (5) of this rule, the
payment shall be returned to the employer and no adjustment shall be made to
the employer contribution rate.
(e)
Nothing in this rule shall be construed to prevent the Board from:
(A) Adjusting employer contribution rates
based upon the date of receipt of funds or errors in the notification described
in section (12) of this rule; or
(B) Taking action pursuant to ORS
238.225.
(16) Actuarial treatment of the
payment. For actuarial purposes, the surplus lump-sum payment made by the
employer shall be treated as pre-funded contributions and additional assets for
the payment of obligations of the employer under ORS Chapters 238 or 238A,
rather than as a reduction of those obligations.
(17) Side account. The surplus lump-sum
payment shall be held in a side account for the benefit of the employer making
the surplus lump-sum payment. The amortized amount for each payroll reporting
period shall be applied from the side account to the employer
reserve.
(18) Crediting earnings or
losses. Side accounts shall be credited with earnings and losses in accordance
with OAR 459-007-0530.
(19) Nothing in this rule shall be construed
to convey to an employer making a surplus lump-sum payment any proprietary
interest in the Public Employees Retirement Fund or in the surplus lump-sum
payment made to the fund by the employer.
Notes
Statutory/Other Authority: ORS 238.650
Statutes/Other Implemented: ORS 238.225 - 238.229
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