PERI Announces a Change of Position on OPERS Proposed Two Year COLA Freeze

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PERI Announces a Change of Position on OPERS Proposed Two Year COLA Freeze

(May 5, 2021) At its Board meeting on April 27th, Trustees voted unanimously to change the association’s position on the two-year COLA freeze, first proposed in 2019.  At that time, OPERS said the freeze was necessary to help lower the unfunded liability of $24 billion.  Part of their plan to achieve this was to make plan design changes primarily for retirees and future hires (those not already employed and a member of OPERS).  Central among the proposed changes was a freeze on all retirees’ COLAs for two years, beginning in January 2022 and running through December 2023.  This was estimated to save OPERS approximately $3.4 billion over the two-year period.

While PERI supported OPERS plan in 2019, circumstances have changed since then causing PERI to alter its position.  OPERS has enjoyed two excellent years of investments helping to reduce the amortization period to its current 18 years through the end of 2020.  Any figure below 30 years is considered good.  Additionally, the funded status of the Defined Benefit Fund is at 83% which is also very good.  There are several other important considerations that PERI’s trustees took into account before making the change. You can view them in the letter that was sent to OPERS Board of Trustees yesterday. https://operi.org/wp-content/uploads/2021/05/PERI-Official-Position-on-COLA-Freeze-as-of-May-2020.pdf

PERI expects there will be some updates on the status of the issue and will keep you informed through the PERI website, PERI Perspectives newsletter, and email when appropriate.

6 Comments

  1. Jerry M. says:

    Thank you PERI for the change of position pertaining to the two year C.O.L.A. freeze. Over the last two years, Opers have seen great market gains. The situation is quite different from two years ago. We all should stand together to protect the C.O.L.A. I hope PERI will contact the legislature to share the change of position. Thanks.

  2. Lee Adams says:

    I am happy to see that PERI finally is taking the reality of of the investment markets of the past several years into account. OPERS has tried to ‘scare’ retirees with doom and gloom information for the past several years in order to try to ‘rationalize’ its decisions to cut retiree benefits. The reality is that OPERS investments over the past several years, especially since after the ‘Great Recession’ have been excellent. That is just like the investments that many of us have. Now, PERI needs to ‘rattle the cages’ of the state legislature to make sure it considers ‘reality’!
    However, I do want to comment about some misleading comments made by Mr. Gilchrist in the latest Legislative Comments section. He commented about fairness. He said it would not be ‘fair’ for current employees to bear the ‘burden’ of an increase in deductions from their paychecks that go to the OPERS retirement fund. First, while I was still employed by ODRC our contribution rate was raised from I believe 8% to 10%! After we thought about that for a while we realized, or we thought, that these higher contributions were going to assure us that we would receive the benefits both pension and healthcare that we had been told for years we would receive. What is not ‘fair’ is that those of us who ‘played by the rules’ in place at the time and have been retired for years are facing large cuts to our benefits! THAT IS WHAT IS NOT FAIR! OPERS and PERI need to consider the hardship these reductions have and will place on current retirees. The ulterior motive of OPERS I believe is to allow the retirement program to devolve from a defined benefit program into a defined contribution program. That must not be allowed to happen. Unfortunately, I am afraid that with the current composition of the OPERS leadership and the current composition of the state legislature this could occur over time.
    PERI should AT LEAST make a determined push to at least see to it that the planned 2 year COLA freeze is not instituted.

  3. DM says:

    I agree with everything Lee Adams wrote. And I also take issue with what Mr. Gilchrist said about fairness. It is not fair that retirees were promised one thing and then threatened to have it taken away when we cannot return to the jobs we retired from and earn additional service credit.

    Another thing I thought of is that people who have been retired 10, 20 years or longer had much lower salaries than those who are working today. And since the 3% simple interest COLA isn’t really 3% (only the first year), many people are receiving COLA’s that are in actuality a fraction of that number. To take away or freeze that amount for people who are the most vulnerable is unconscionable.

    Thank you PERI for reversing your decision and for advocating for retirees!

    • Joe Matasy says:

      I also agree with Lee A. and DM, and I join with them in thanking PERI for this new and common sense position on the COLA freeze. I have already contacted my Senator and Representative and asked them to resist introducing/supporting any legislation that would allow for a COLA freeze. My second concern is the reduction in our HRA allowances. I’m aware that any resistance to this OPERS action is futile because the reduction this does NOT, unfortunately, require legislative approval. In my case, the HRA reduction is to the tune of $80 monthly, this is REAL money ($960/yr!) that will have to come from somewhere else within my meager budget. OPERS claims the reduction is justified because many retirees show a positive balance in their HRA accounts. What they DON’T say is that just ONE hospitalization (most Medicare insurance plans have deductibles of approx. $4000/yearly) can easily wipe out any balance. Retirees just keep losing ground, it seems.

  4. Patrick MacKenzie says:

    I have heard about the possible changes that may take place in the current “budget bill” now being considered in the General Assembly. In particular, I am concerned about OPERS getting a state senator or representative to add an amendment freezing our COLA for two years beginning in 2022 and eliminating the State Legislature from having any future role in what happens to an OPERS retiree’s COLA or other benefits.

    For the past few years, OPERS retirees have been making sacrifices as they continue to see more and more of their benefits taken away. Since 2012 we have seen our spousal allowance and Medicare Part B premium allowance eliminated while our health care premiums go up. In 2022, the Pre-Medicare retiree’s health care program is going to change drastically. Medicare retirees will see their insurance reimbursement accounts reduced by approximately 25% or as much as $100 per month.

    Reports published by the OPERS board of directors indicate they had positive investment returns for 2019 and 2020, averaging 14%, well above their 7.2% assumed rate of return. For the past five years, OPERS has averaged a 10% return. The latest figures show that OPERS is 83% funded with 18 years of amortization, well within what is required by state law. OPERS is well enough off financially that the call for a freeze on retirees’ COLAs is not warranted at this time.

    The General Assembly should explore options to force a delay of OPERS from making any changes to our healthcare given the challenges of the Global Pandemic and how it has severely affected almost all Ohioans. A delay of 2-3 years would benefit all public employee retirees who are struggling and will face more healthcare challenges soon.

    Finally, it is my understanding that OPERS is also requesting that the State Legislature oversight be eliminated from approving any future changes to OPERS retirees’ COLA and possibly other benefits. I believe that removing the Ohio Retirement Study Council and the State Legislature from this process is not justified. Any changes affecting the purchasing power for the nearly 215,000 public employee-retirees are best left to you and the entire Ohio General Assembly.

    With many of our retirees on fixed incomes and increasing inflationary pressures on the economy, the Windfall Elimination Provision and the Government Pension Offset, I hope that OPERS retirees will request that your state senators and representatives be vigilant and take action so that there are no changes to our current COLA and that the State Legislature continues its vital role in any future changes impacting OPERS retirees. The budget process will end around June 30th so immediate action is required.

  5. Ignacio says:

    Yes! Thanks for the changing your position. All OPERS retires who have entered into, the OPERS retirement system need their COL monies. Its, important to note, many of us, are not unable to work and therefor, we are, unable to work for “extra cash”. We were once able to work for, extra money by doing overtime but do to our ages and having disabilities, our hardships have increased in many ways. The cost of medical care along has increased. All of us, “depended on” , the “extra cash” we are earning now. We are not asking for more money but we are asking, to give us, what is due to us, under the terms of ; “OPERS agreement”, when we first entered into public service in order to serve our fellow Ohioans.
    Those officials , who voted to, ” place a hold on the COL” should resign from their positions or be “voted” out of their office. In my opinion, they went against the wishes of OUR membership.
    Each of our members are entitled to,” Dignity of LIFE”.
    I am,
    Ignacio Delgado

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