A Look at DROP Plans, Disability, & Transparency Jonathan Small, CPA Fiscal Policy Director Oklahoma Council of Public Affairs, Inc.
Jonathan 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.
Mission “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.”
Sources Oklahoma Firefighters Pension and Retirement System Oklahoma Law Enforcement Retirement System Oklahoma Police Pension and Retirement System
Deferred Option Plan Source: OK House Legislative Appropriations
DROP 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% Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports
DROP “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 Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports
DROP “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 Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports
DROP OFPRS allows DROP elections for members receiving disability benefits OPPRS & OLERS prohibit DROP elections for members receiving disability benefits Source: OFPRS, OPPRS, & OLERS
DROP Challenges
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 Challenges
Disability
PoliceLaw EnforcementFire Retired Members Beneficiaries Disabled Members Disabled Members Share4.54%5.67%18.17% Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports
Transparency
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 and Retirement benefits paid individually to members can be acquired for the OTRS, OPERS, URSJJ, thus OFPRS, OPPRS & OLERS interpret confidentiality statutes to mean the individual amounts paid members can not be disclosed Transparency
Thank You! Q & A Jonathan Small, CPA (405)