PERS glossary

Here are some terms you should be familiar with as you research PERS issues:

Cost of Living Adjustment (COLA) - An adjustment to a retiree’s benefit payment based on the annual increase in the cost-of-living in Oregon. It is capped at 2 percent.

Defined contribution plan (DC) - A type of retirement plan in which the amount of the employer's annual contribution is specified. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts (through employer contributions and, if applicable, employee contributions) plus any investment earnings on the money in the account. Only employer contributions to the account are guaranteed, not the future benefits. In defined contribution plans, future benefits fluctuate on the basis of investment earnings.

Defined benefit plan (DB) - A type of pension plan in which an employer promises a specified monthly benefit on retirement that is predetermined by a formula based on the employee's earnings history, tenure of service and age, rather than depending on investment returns.

Earnings - Income from investments.

Full formula - a method of calculating retirement benefits which multiplies three factors to compute a retirement benefit:

  • Final average salary (generally, the member’s highest three years)
  • Years and months of creditable service, and
  • A factor of 1.67 percent for general service employees and 2.0 percent for police and firefighters for Tier One and Tier Two members (reduced to 1.5 percent and 1.8 percent respectively for OPSRP members).

For example, a Tier One member with a final average salary of $6,000 per month who retired after 30 years in a general service position would receive a benefit of $3,000 per month (30 X 1.67 = 50%, 50% of $6,000 is $3,000).

Individual Account Program (IAP) - Account set up for employee contributions after 8/29/2003. It is the second part of an employee’s retirement plan. Six percent of salary (whether paid by the employee or the employer) goes into each employee’s IAP account. The account is credited with earnings (or losses) annually based on actual investment returns

Money match - a method of calculating retirement benefits where the member’s account balance is matched at retirement by an equal amount from their employers’ reserves. The monthly benefit is the combined amount annuitized over the member’s estimated remaining life expectancy.

Under a Money Match retirement calculation, monthly benefit amounts are driven by the size of the member’s account balance and their age at retirement. Large account balances for Tier One members accumulated over time, particularly when investment returns generated high earnings during the 1980s and 1990s, combined with the “8 percent guarantee” in the low earnings years. Money Match benefits are higher for members who retire at an older age because their account balance is annuitized over a shorter remaining life expectancy. The “8 percent guarantee” is only applicable to Tier One members

Oregon Public Service Retirement Plan (OPSRP) - The retirement system for public employees hired after August 29, 2003. It is designed to provide approximately 45 percent of an employee’s final average salary at retirement. Also known as Tier 3.

PERS - Public Employees Retirement System.

PERS Board - State agency with five board members appointed by the governor.

Pick-up - Every employee is required by PERS to contribute 6% of his/her salary into his/her Individual Account Program (IAP). When this contribution is actually paid by the employer rather than the employee it is called the PERS “pick-up” or the employee “pick-up”.

Rate collar - A method of stabilizing interest rates by combining an interest rate cap and an interest rate floor, creating a band within which interest rates can range. This allows interest rate increases to be spread out over multiple periods.

Rate of return - The gain or loss on an investment over a specified period, expressed as a percentage increase over the initial investment cost.

Regular account - Tier 1 account guaranteed to earn at least 8%. In the past, the PERS board credited higher earnings.

Tier 1 - Public employees hired into a qualifying position before January 1, 1996.

Tier 2 - Public employees hired into a qualifying position between January 1, 1996 and August 29, 2003

Unfunded Actuarial Liability (UAL) - The difference between what the pension plan is currently worth and what it is expected to pay to retirees.

Valuation/Actuarial Valuation - a mathematical calculation of the financial health of a pension plan

Variable account - Tier 1 account with no guaranteed return. Whatever the market earns or loses is applied to the account. 

PERS background information

PERS frequently asked questions

PERS information center

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