1. www.ocpathink.org A Look at DROP Plans, Disability, & Transparency Jonathan Small, CPA Fiscal Policy Director Oklahoma Council of Public Affairs, Inc.

2. 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. www.ocpathink.org

3. 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.”

4. Sources Oklahoma Firefighters Pension and Retirement System Oklahoma Law Enforcement Retirement System Oklahoma Police Pension and Retirement System www.ocpathink.org

5. Deferred Option Plan www.ocpathink.org Source: OK House Legislative Appropriations

6. 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% www.ocpathink.org Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports

7. 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 www.ocpathink.org Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports

8. 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 www.ocpathink.org Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports

9. DROP OFPRS allows DROP elections for members receiving disability benefits OPPRS & OLERS prohibit DROP elections for members receiving disability benefits www.ocpathink.org Source: OFPRS, OPPRS, & OLERS

10. DROP Challenges www.ocpathink.org

11. 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 www.ocpathink.org

12. Disability

13. PoliceLaw EnforcementFire Retired Members22418865821 Beneficiaries6162611917 Disabled Members136691718 299312169456 Disabled Members Share4.54%5.67%18.17% Source: OFPRS, OPPRS, & OLERS FY-2010 Actuarial Reports

14. Transparency www.ocpathink.org

15. 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.govwww.accountabilityok.comhttp://data.ok.gov Retirement benefits paid individually to members can be acquired for the OTRS, OPERS, URSJJ, thus www.accountabilityok.comwww.accountabilityok.com OFPRS, OPPRS & OLERS interpret confidentiality statutes to mean the individual amounts paid members can not be disclosed Transparency www.ocpathink.org

16. Thank You! Q & A Jonathan Small, CPA jonathan@ocpathink.org (405) 602-1667