www.ocpathink.org a look at drop plans, disability, & transparency jonathan small, cpa fiscal...

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A Look at DROP Plans, A Look at DROP Plans, Disability, & TransparencyDisability, & Transparency

Jonathan Small, CPA

Fiscal Policy Director

Oklahoma Council of Public Affairs, Inc.

Jonathan Small, CPAJonathan Small, CPA

• Certified Public Accountant• Bachelor’s Degree in Accounting• Budget Analyst – Office of State Finance• Fiscal Analyst – House of Representatives• Auditor – BKD, LLP• Research Analyst – House of Representatives• Dir. of Government Affairs – Insurance Dep.

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www.ocpathink.org

MissionMission

“OCPA's mission is to accumulate, evaluate, and

disseminate public policy ideas and information for

Oklahoma consistent with the principles of free

enterprise, limited government, and individual initiative.”

SourcesSources

• Oklahoma Firefighters Pension and Retirement System

• Oklahoma Law Enforcement Retirement System

• Oklahoma Police Pension and Retirement System

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Deferred Option PlanDeferred Option Plan

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Source: OK House Legislative Appropriations

DROPDROP• Allows members eligible for a normal retirement to defer the

receipt of retirement benefits while continuing employment

• Participation limited to 5 years

• DROP accounts are credited with interest at a rate of 2.0% less than the total fund growth, or

• DROP accounts are guaranteed a minimum interest rate equal to the valuation interest of 7.5%

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Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports

DROPDROP

• “Forward” DROP elections are made at the beginning of the 5 year period

• “Back” DROP elections are made at the end of the 5 year period

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Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports

DROPDROP

• “Forward” DROP accounts accumulate the retirement benefit amount prior to DROP election, plus half of the employers contribution

• “Back” DROP accounts accumulate the retirement benefit amount prior to DROP election, plus half of the employers contribution, plus the contribution of the employee

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Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports

DROPDROP

• OFPRS allows DROP elections for members receiving disability benefits

• OPPRS & OLERS prohibit DROP elections for members receiving disability benefits

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Source: OFPRS, OPPRS, & OLERS

DROP ChallengesDROP Challenges

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• Significantly increasing in share of system total assets

• Overly generous benefit, considering all pension/market risk being born by tax payers

• Leads to barrier to new public safety participants entering workforce

DROP ChallengesDROP Challenges

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Disability Disability

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Police Law Enforcement Fire

Retired Members 2241 886 5821

Beneficiaries 616 261 1917

Disabled Members 136 69 1718

2993 1216 9456

Disabled Members Share 4.54% 5.67% 18.17%

Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports

Transparency Transparency

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• Only reasonable for the public to know the amounts paid to entities and particularly the amounts of salaries or benefits paid individually to public employees

• This principle is reasonably applied to public employee salaries, thus www.accountabilityok.com and http://data.ok.gov

• Retirement benefits paid individually to members can be acquired for the OTRS, OPERS, URSJJ , thus www.accountabilityok.com

• OFPRS, OPPRS & OLERS interpret confidentiality statutes to mean the individual amounts paid members can not be disclosed

TransparencyTransparency

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www.ocpathink.org

Thank You!

Q & AJonathan Small, CPA

jonathan@ocpathink.org

(405) 602-1667