Oregon PERS Scrambles for Ideas to Bolster Public Pension Plan

Oregon’s top business officials are pushing lawmakers to put $2 billion into the state’s schools to help its expanding pension deficit.

The state’s $76.7 billion public retirement system, Oregon PERS, at 73% funded, is in better shape than many other states’ public-worker plans. But it is still suffering a $22.3 billion shortfall, according to the fund’s most recent update.

That shortfall is expected to balloon to $26 billion should the fund finish the year with its current 1.5% return on investments, according to the Oregonian, a local news outlet, which hosts monthly PERS-related Q&A segments.

The pension system’s current annual rate of return is 7.2%.

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The newly reelected governor, Kate Brown, a Democrat, has issued a budget proposal for policymakers to find the $2 billion in funding for the state’s educational facilities.

At Monday’s annual Oregon Leadership Summit, the state’s business community proposed creating a rainy day fund for the education system, funded by personal income tax money in excess of initial revenue estimates. Now that money is refunded to taxpayers, but the business group called for channeling it into the rainy day fund instead. An expected $724 million is expected to be refunded.

The money however, would only go toward the retirement system, according to Tim Nesbitt, a consultant for the Oregon Business Council, who was chief of staff to former Gov. Ted Kulongoski, a Democrat.

A debate has sparked several ideas on how to bolster Oregon’s pension system. One is moving members into a 401(k)-style plan. This is tricky for several reasons. One is that the state’s Supreme Court dissolved previous PERS measures in 2015 while also ruling that existing benefits were untouchable. Another is that Oregon has the only public defined benefit plan in the country without an employee contribution requirement.

At the summit, Nesbitt said that lack of reform would give the retirement system “dibs on all new revenue” as about 12% of schools and other public employers payroll goes toward the plan’s pension costs. Unchecked, he said the payroll coverage could eventually go above 30%.

He said the changes could slash between $5 billion and $6 billion of the Oregon PERS’s pension liabilities and relieve some of the burdens schools and other employers are facing.

Also discussed was a new value-added tax for companies. Being touted as the “Business Activity Tax,” business would be taxed based on their total revenues minus materials purchased from other businesses.

Nesbitt said that although simultaneous tax and pension reform “may be more than twice as hard,” he said this is where the Beaver state currently lies.

The state legislature has not decided what sort of tax changes it will settle on. Senate President Peter Courtney, a Democrat, is looking at either a value-added tax, similar to what is being proposed in the Oregon Business Plan, or a gross receipts tax.

State Rep. Julia Fahey, a Democrat, said she is not sure if the $2 billion education sum is “enough to meet all the needs that exist.”

Fellow Rep. Carl Wilson, a Republican, also didn’t agree with that figure, but said the rural community would argue that it’s too high of a risk.

“Our constituents may be a long way from Portland, but they understand some things,” Wilson said. “They know how big $2 billion is. If that comes in the form of another tax, that certainly is going to grab the attention of red Oregon.”

Tags: Governor Kate Brown, Oregon Public Employees Retirement System (PERS), Pension, Reform, Tax

The CEO of UK-based packaging company Discovery Flexibles, who was also the chair of trustees for the company’s pension, has been convicted of refusing to give information to The Pensions Regulator (TPR), which had launched an investigation into the plan after receiving a tip from a whistleblower.

TPR said Thomas Christopher Wrigley repeatedly refused to comply with the regulator’s requests for information in connection with an investigation into how the plan was being run. A whistleblower had told TPR that Wrigley was considering investing more than £1.2 million ($1.5 million) of the pension’s funds into Discovery Flexibles.

According to UK law, most occupational pension plans are not allowed to invest more than 5% of assets into their sponsoring employer or employer-related investments. They are also limited by type of investment they can make in their employer; for example, they cannot be in the form of loans to the company. TPR’s investigation sought to find out whether these restrictions had been, or were likely to have been, breached.

A letter was sent to Wrigley from TPR in January 2017 asking for documentation relating to the proposed investment, as well as related issues. However, TPR said he refused to provide the documentation despite repeated requests and warnings that he would be committing a criminal offense if he continued to refuse to comply.

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TPR said that Wrigley not only refused to provide TRP with information but accused him of threatening one of the regulator’s case manager when he said, “If you cross me again, I will come after you, personally, with my legal team.”

According to TPR’s Determinations Panel, “there was, over a relatively short period, an evolution of Mr. Wrigley’s conduct, from the initiation of a proposal which, as a trustee, he should never have made or pursued, to an obdurate and aggressive attitude of non-cooperation with the regulator, all of which demonstrated that he was not a fit and proper person to be a trustee.”

TPR referred Wrigley’s refusal to provide information to the Crown Office and Procurator Fiscal Service (COPFS), which is responsible for prosecutions in Scotland, where the alleged offenses occurred. After the COPFS launched a prosecution against him, Wrigley pleaded guilty at Dundee Sheriff Court to a charge of failing or refusing to provide information to TPR without good excuse and was fined £400 ($511).

Wrigley has also been banned from acting as a pension plan trustee, and TPR appointed an independent trustee to take over the company’s plan.

“Wrigley earned himself a criminal record by refusing to give us the information he was legally required to,” Nicola Parish, TPR’s executive director of frontline regulation, said in a release. “His behavior towards TPR staff doing their job was intolerable so I welcome the fact that the Determination Panel took this into consideration when it decided to prohibit him.”

Tags: Discovery Flexibles, Pension, The Pensions Regulator, Thomas Christopher Wrigley, UK