Is My Oregon PERS Pension Secure?
You’re working hard, building your career in public service, and counting on your Oregon PERS pension to provide financial security in retirement. With so much uncertainty—economic shifts, policy changes, and media reports about pension shortfalls—it’s natural to wonder whether your retirement benefits are truly secure.
Having worked with Oregon PERS employees for nearly 15 years, I’ve helped many navigate these concerns, ensuring they understand their options and build resilient financial plans. In this blog, I’ll break down what we know about the financial health of Oregon PERS, address the challenges it faces, and share proactive steps you can take to safeguard your long-term financial future.
If you process information better audibly, here’s a 4-minute video summary of this blog:
Understanding the Structure of Oregon PERS
Oregon PERS is a defined benefit pension plan designed to provide lifetime income for retired public employees. Established in 1946, the program serves state employees, school districts, and local governments. Over time, the system has evolved, resulting in three distinct membership tiers:
- Tier One: For employees hired before January 1, 1996. These employees benefit from higher guaranteed earnings and a money match formula.
- Tier Two: For employees hired between January 1, 1996, and August 28, 2003. These members have a similar structure to Tier One but with some modifications.
- Oregon Public Service Retirement Plan (OPSRP): For employees hired on or after August 29, 2003. This plan provides a pension benefit that is less generous than Tier One and Tier Two but remains a defined benefit plan, ensuring a steady retirement income.
The diversity of these tiers affects how contributions are allocated and the overall funding of PERS. Understanding which tier you belong to can help you better plan for your financial future. If you’re new to Oregon PERS, you’re presumably an OPSRP member. Our blog, How PERS Works in Oregon: A Comprehensive Guide for New Members, is a helpful resource to get your bearings.
The Financial Health of Oregon PERS
The Strength of OPERF
The Oregon Public Employees Retirement Fund (OPERF) is responsible for managing PERS assets. OPERF holds approximately $97.7 billion in assets, making it one of the largest public pension funds in the country. “Due to its size, ongoing contributions, and continuous investment of funds, OPERF is unlikely to run out of money,” noted Heather Case, PERS Senior Policy Advisor in their December 2024 Perspectives newsletter to retirees.
PERS Funded Status
Like many public pension systems, Oregon PERS has an unfunded actuarial liability (UAL). This means that while there are substantial assets in the system, the projected liabilities—future pension payments—exceed current assets. The National Conference on Public Pension Systems 2024 Public Retirement Systems Study surveyed 157 state and local government pension funds in the United States, and the average funded level of all respondents was 75.4%.
“The Oregon PERS’ funded status, as of our 2023 actuarial valuation, is 72%. PERS’ funded status is around the average of other state and local government pension funds and does not need to be 100% funded to continue paying your retirement benefits,” Case added.
Legal Protections for PERS Members
A significant reassurance for Oregon PERS members is that their pension benefits are legally protected. The Oregon Supreme Court has ruled that PERS benefits represent a contractual agreement between employees and employers. “This ruling means that benefits promised to you and earned by you (through working) cannot be retroactively decreased or withdrawn,” said Case.
Federal-Level Uncertainty and Its Potential Impact on Oregon
In addition to these internal funding concerns, many PERS members are understandably worried about broader economic and policy changes at the federal level. With ongoing shifts in federal administration priorities, funding cuts to various programs, and potential adjustments to grants and state funding allocations, many are wondering how these uncertainties might trickle down to Oregon’s budget and, ultimately, public employee pensions.
State and local governments rely heavily on federal funding to support key programs, including education, infrastructure, and public safety. If federal contributions decline or shift in priority, Oregon may face budget constraints that could impact employer contributions to PERS. While pensions are long-term commitments and legally protected, indirect pressures from shifting federal funding could influence how future pension obligations are met and whether additional employer contributions are required.
The Growing Cost of PERS and Its Impact on Government Budgets
Rising Costs for Cities
PERS obligations have been increasing across the state, affecting local budgets.
“Salem will spend about $11 million more on pension obligations next year, including $6.6 million more in the general fund,” reported Chief Financial Officer Josh Eggleston in a December 2024 Salem Reporter article. The total pension costs for the city will rise to almost $40 million, impacting its ability to fund essential services like emergency response and public parks.²
Rising Costs for School Districts
The impact on education funding is even more substantial. Oregon school districts are projected to pay $670 million more to the state’s public employee pension program over the next two years, a cost increase that could wipe out proposed increases in school funding by Governor Tina Kotek. According to the Oregon School Boards Association, “Next year’s sharp jumps in PERS rates will take significant money away from classrooms without making life any better for current educators.”
Most school districts and community colleges will see a 1.5% increase in payroll contributions to PERS, but 22 districts face increases of 10% or more, particularly as side accounts meant to buffer PERS rate hikes are expiring. These side accounts, originally created to stabilize employer contributions, are now running out, leaving some districts to face drastic budget shortfalls.
For example, the Gladstone School District must now transition from paying 3% of its payroll toward PERS obligations for Tier 1 and Tier 2 employees to nearly 19%, an overwhelming financial shift. “Like most school districts in Oregon, Gladstone created a side account 21 years ago to guard against the impact of rate increases. There was no anticipation that during the final years of the account the costs would spike so wildly,” said Gladstone Superintendent Jeremiah Patterson in a November 2024 OPB article.
North Marion School District expects a $1.3 million increase in payroll costs due to PERS hikes, and Crook County School District faces a more than 20% hike for Tier 1 and Tier 2 employees, costing over $3 million per year. “I’m deeply concerned about the sudden and dramatic escalation of our PERS cost projections for the next biennium,” Patterson said. “It is challenging to imagine diverting critically needed funds away from student needs at a time like this.”³
The Role of Investment Returns
A significant portion of PERS funding comes from investment returns. However, when investment earnings fail to meet projected targets, public employers must increase their contributions to maintain the system’s solvency. “It is a pretty dynamic system. It doesn’t take much for a bad year of investment earnings for those rates to just go up quite a bit,” Eggleston explained.²
PERS investment returns were 10% lower in 2022 and 2023 than anticipated by the Oregon Investment Council, which oversees PERS’ financial portfolio. Historically, the fund’s heavy investments in private equities have yielded strong returns, but recent years have lagged behind expectations.
Legislative Changes to Keep an Eye On
PERS Bills
PERS has introduced several bills through the Governor’s Office for the Legislature to consider:
- HB 2200 – This bill directs the Oregon Investment Council and the State Treasurer to assess and report on the carbon intensity of PERS investments, aligning with broader sustainability goals. (Oregon Legislature)
- SB 681 – Proposes a five-year moratorium on new private equity investments by the State Treasurer in funds where managers have indicated an intention to invest in fossil fuels, subject to fiduciary duties. (Oregon Legislature)
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Other pension-related bills – Various proposals aim to adjust PERS calculations for specific employee groups, lower retirement ages for certain workers, and study potential changes to disability benefits.
The progress of these bills will be crucial in shaping how PERS investments and pension obligations evolve in the coming years. To stay informed, visit the Oregon State Legislature’s Bill Tracking Page or consult employer membership groups such as the League of Oregon Cities, Association of Oregon Counties, and Oregon School Boards Association.
Employer Initiatives to Strengthen PERS
To ensure long-term stability, PERS has implemented several initiatives:
Employee Pension Stability Account (EPSA)
Established under Senate Bill 1049 (2019), the EPSA redirects a portion of employees’ contributions when their salary exceeds a certain threshold ($3,777 for 2025). These redirected funds support future pension benefits and help reduce employer contribution rates over time. To learn more about EPSA, check out our blog: What is the Oregon PERS IAP (Individual Account Program)?
Employer Incentive Fund (EIF)
The EIF program is designed to help employers reduce their pension liability by offering a 25% match on lump-sum payments made into the system. This incentive encourages employers to contribute more upfront, reducing long-term costs and stabilizing contribution rates.
Building a Resilient Financial Plan
While Oregon PERS remains a strong system, individual financial planning is essential to ensure long-term security. Here are some key steps you can take:
1. Assess Your Cash Position
One of the best ways to feel financially secure is to ensure you have adequate cash reserves. Consider:
- Do you have enough emergency savings to cover unexpected expenses?
- Have you accounted for major planned expenses in the next few years?
- Would an increase in cash reserves provide greater peace of mind?
By securing your short-term financial needs, you can feel more confident about your long-term plan.
2. Diversify Your Retirement Income
Relying solely on PERS for retirement income may not be sufficient for some retirees. Consider:
- Maximizing contributions to your Oregon Savings Growth Plan (OSGP) or personal retirement accounts (IRAs, Roth IRAs, and 401(k)s).
- Exploring part-time work or consulting in retirement to supplement your income.
- Evaluating whether delaying Social Security benefits can enhance your overall financial picture.
3. Stay Informed and Flexible
Retirement planning requires adaptability. Keeping up with legislative changes, economic trends, and your own financial goals will help you make informed decisions. Meeting regularly with a financial advisor ensures you stay on track, even as circumstances evolve.
4. Reflect on Historical Resilience
History has shown that economic uncertainty is nothing new. From the Great Depression to the financial crisis and COVID-19, financial markets and government programs have adapted to changing circumstances. By focusing on the fundamentals—strong savings, smart investing, and flexible planning—you can weather financial storms with confidence.
Conclusion
Oregon PERS remains a solid pension system, backed by legal protections, substantial assets, and ongoing efforts to ensure long-term sustainability. However, external challenges mean that proactive financial planning is more important than ever.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. I am not an employee of Oregon PERS and am using publicly available information. For personalized guidance, consult with a certified financial advisor.
Sources:
- https://content.govdelivery.com/accounts/ORPERS/bulletins/3c33cb2
- https://www.salemreporter.com/2024/11/21/ballooning-retirement-costs-a-major-contribution-to-salems-budget-crisis/
- https://www.opb.org/article/2024/11/13/oregon-school-districts-employee-retirement-pension-system
