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