[Vision2020] Good Economic News

Fri Dec 11 16:53:00 PST 2009

When we came here in 1987, PERSI (a defined benefit plan) was the only retirement plan for UI employees.  Sometime in the early 1990s (I don’t remember the exact date), all new UI salaried employees (faculty and non-faculty exempt) were put on ORP, which is a defined contribution plan.  Hourly employees remain on PERSI to this day.  Replacing defined benefit plans with defined contribution plans saves the employer money and protects them from future unfunded obligations.  It shifts more of the responsibility and all of the risk of saving for retirement onto the employee.

At the time the switch was made from PERSI to ORP, PERSI participants who had been here for 6 years or less could either stay with PERSI or switch to ORP, but if they switched to ORP they forfeited all their PERSI contributions—another subsidizing of PERSI by ORP.  It would be interesting to know what percentage of those newer employees switched to ORP.  

It’s complicated.  I think perhaps it makes sense for hourly employees to be on PERSI, since hourly employees tend to be the lower-paid employees at the UI and PERSI offers more retirement security.  However, I have never heard of any reason as to why ORP participants should be required subsidize PERSI in perpetuity.

Judy

From: Donovan Arnold [mailto:donovanjarnold2008 at yahoo.com] 
Sent: Friday, December 11, 2009 12:38 PM
To: vision2020 at moscow.com; JLBrown
Subject: Re: [Vision2020] Good Economic News

Judy,

Perhaps you can explain to us why people are on the ORP instead of PERSI?

Thanks,

Donovan Arnold

--- On Fri, 12/11/09, JLBrown <jlbrown at turbonet.com> wrote:

From: JLBrown <jlbrown at turbonet.com>
Subject: Re: [Vision2020] Good Economic News
To: vision2020 at moscow.com
Date: Friday, December 11, 2009, 6:36 PM

Visionaries,

This is good news for PERSI participants.  However, UI employees who are on the University’s Optional Retirement Program (ORP), which is subject to market fluctuations, have taken a hard hit as a result of this recession.  ORP participants have been required to subsidize PERSI since 1990.  Especially with PERSI doing so well, the time is ripe to end this subsidy.

Judy

Moscow-Pullman Daily News

Faculty Senate calls for end to retirement plan subsidy

Published on: November 4, 2009

University of Idaho Faculty Senators want the state’s university presidents, board of education members and faculty leadership to pressure the Idaho Legislature to drop a requirement that members of the UI’s Optional Retirement Plan subsidize the Public Employees Retirement System of Idaho.

Senators passed a resolution Tuesday afternoon strongly recommending the aforementioned parties ask the Legislature to end the subsidy and redirect the PERSI-bound money into accounts of ORP participants.

The resolution’s text states the Legislature in 1990 directed that a portion of the employer-paid contributions reserved for ORP members be paid to PERSI, even though ORP participants do not benefit from PERSI.  It also says ORP accounts are subject to market fluctuations, while PERSI members do not experience such a risk, leading to “unfair and unequal treatment of OPR participants.”

Senate Chairman Jack Miller said if the Legislature eventually does away with the subsidy, PERSI may need to seek additional funding in the form of a rate increase.  However, he said the subsidy’s elimination wouldn’t affect the benefits of current PERSI enrollees.

“All it would be doing, in my estimation, is taking away a subsidy that should never have been there in the first place,” he said.

-----Original Message-----
From: vision2020-bounces at moscow.com [mailto:vision2020-bounces at moscow.com] On Behalf Of Tom Trail
Sent: Friday, December 11, 2009 6:51 AM
To: vision2020 at trumpet.fsr.net
Subject: [Vision2020] Good Economic News

Visionaries:

One has to look hard for good economic news in Idaho these days.  I just

talked to Don Drum, the Executive Director of PERSI--Idaho Public Employees

Retirement Fund.  The information he shared with me is current as of today.

The PERSI Fund  stands at $10.5 billion which is ahead of the total when

the market dropped.  From July 1, 2009 the Fund has a return of $15.8%

which is the best return in PERSI history.

PERSI retirees will receive a 1% COLA which will be effective March 1st.

Employers have been expecting a contribution rate increase for the

coming year, but Don told me that the Fund is performing so well that

there will probably be no increase at all.

That's my one good glimmer of good news.

Rep. Tom Trail

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