|
Office
of the Chancellor P.O. Box 3175 Eugene, OR
97403 http://www.ous.edu |
March 17, 2004
Dear
Optional Retirement Plan Participant:
The Oregon University System (OUS), working with the Office of the Attorney General, PERS, PERS’ consulting actuary, and independent counsel, have determined a series of steps to correct employer contribution reductions that affected ORP participants beginning in November 2003. In April 2004, the OUS will increase the current contribution to your Optional Retirement Plan employer contribution account. Additional contributions for the months of November 2003 though March 2004 will also be made to affected ORP participants’ accounts as a lump sum deposit in April 2004. Please read further to understand why your ORP employer contribution changed, and how it will be adjusted to a new, higher rate.
ORP Rate Change Reasons
In September 2003, Oregon voters passed Measure 29,
permitting the State of Oregon to issue general obligation bonds that reduced
the state’s PERS contributions by 6.60% of members’ salary. By law,
the state’s PERS employer rate determines ORP participants’
employer contributions. Accordingly, in November 2003, OUS reduced ORP
participants’ contributions to 3.71% and 4.27% for Tier One and Tier Two
ORP participants, respectively. Subsequent discussions with the Attorney
General’s office recently yielded revised advice that permits restoration
of the pre-Measure 29 rate to ORP participants’ employer contributions.
The OUS will retroactively adjust the current employer contribution by 6.60% of
salary in all of the months Tier One and Tier Two ORP participants’
contributions were reduced by the Measure 29 bond sale deposit to PERS.
Another change occurred in January, 2004, when PERS repealed
OAR 459-005-0320, which had required OUS to make contributions based on Tier
One and Tier Two benefit levels.
Since that rule’s repeal, the OUS may contribute a Tier One/Tier
Two aggregated rate. For the
months of January, February, and March 2004, Tier One and Tier Two
members’ contribution rates will be adjusted to the aggregated 4.71%
contribution rate.
In response to these changes, a revised ORP employer
contribution rate is effective April 2004, and adjusted contributions for
November 2003 through March 2004 will be added to ORP participants’
accounts.
ORP Contribution Change
Beginning April 2004
Beginning April 2004, the OUS will contribute 11.31% of
subject salary to Tier One and Tier Two ORP participants’ ORP employer
contribution accounts.
Adjusted Contributions for November 2003 through March 2004
Contributions amounts will be adjusted to correct for the Measure 29 rate reduction and to adopt the aggregated Tier One/Tier Two contribution rate. Three separate steps, outlined below, determine the amounts to be deposited to a participant’s ORP employer contribution account.
1. A lump sum dollar amount will be deposited to a participant’s ORP employer contribution account, equal to 6.60% of salary for each month (from November 2003 to March 2004) that a Tier One or Tier Two ORP participant received an under-contribution. The under-contributed amount will be deposited to each participant’s ORP employer contribution account in April 2004.
2. A lump sum dollar amount for each Tier One and Tier Two ORP participant, sufficient to adjust the employer contribution from the participant’s tiered contribution rate to the aggregated Tier One/Tier Two contribution rate, will be deposited for each month (from January 2004 to March 2004) the participant received an under-contribution related to the repeal of OAR 459-005-0320. The under-contributed amount will be deposited to each participant’s ORP employer contribution account in April 2004.
The contribution adjustments described in steps 1and 2 are illustrated as percent of salary.
Tier One and Tier Two Participant Contribution Adjustments
Applicable Month
|
11/03 |
12/03 |
01/04 |
2/04 |
3/04 |
Tier One
Measure 29 OAR Repeal
Under-Contribution Adjusted Employer Contribution
Rate |
6.60% 0.00 6.60% 10.31% |
6.60% 0.00 6.60% 10.31% |
6.60% 1.00 7.60% 11.31% |
6.60% 1.00 7.60% 11.31% |
6.60% 1.00 7.60% 11.31% |
Tier Two
Measure 29 OAR Repeal
Under-Contribution Adjusted Employer Contribution
Rate |
6.60% 0.00 6.60% 10.87% |
6.60% 0.00 6.60% 10.87% |
6.60% 0.44 7.04% 11.31% |
6.60% 0.44 7.04% 11.31% |
6.60% 0.44 7.04% 11.31% |
3. Earnings that would have been attributed to the under-contribution amounts deposited in April 2004, will be deposited to a participant’s ORP employer contribution account as a lump sum. Investment losses on under-contributions will be deducted following standard corrections rules for tax-qualified plans such as the ORP.
Investment earnings and losses on the under-contributed amounts will be attributed to ORP employer contribution accounts once the calculations for all ORP participants have been completed.
If You Leave OUS Before Your Contributions, Earnings,
or Losses Are Adjusted
The calculation of lost earnings and investment losses will be conducted by an independent consulting firm, and is expected to take a number of months to complete. If you leave OUS employment before your account balance is adjusted for the period of under-contributions, it will be important to leave your ORP account open and available for additional contributions or corrections. If you close your ORP account before all corrections are completed, a new ORP account must be established to receive your additional employer contributions.
Tax and Plan Effects of Delayed Employer Contributions
Although the corrected contribution amount for months in 2003 and 2004 will be deposited to a participant’s ORP employer contribution account in April 2004, the deposit is treated as if it had been made in the months that required adjustments. The amounts attributable for November and December 2003 are considered to have been made in those months for tax purposes and for calculation of annual additions limit on ORP contributions.
Working to correct the ORP under-contributions has been a long process involving many agencies and authorities. Your patience and your trust that this complicated matter would be resolved are very much appreciated.
If you have any questions about this process, please contact your campus benefits office. Many thanks.
Sincerely,
Denise Yunker, Retirement Committee Chair
c: Retirement Committee and Trustees
Chancellor Richard Jarvis
Sr. Vice Chancellor Thomas K. Anderes
Campus Presidents