SB 6165 would provide a one-time 1.5% cost-of-living adjustment (COLA), capped at a maximum increase of $22 per month, for members of the Public Employees’ Retirement System (PERS) Plan 1 who are not receiving a minimum benefit.

Public employers are concerned that the additional benefits provided in SB 6165 would come directly from state and local government budgets through what is called the supplementary contribution—an additional contribution rate that public employers pay on top of PERS Plan 2 contributions. A similar bill introduced in 2019, HB 1390, included a 3% COLA that would raise local governments’ PERS Plan 1 unfunded liabilities by $47.2 million over the next two biennia.

While we do not know for certain that the increase in SB 6165 would be paid for with a supplemental rate increase, based on the fiscal note for HB 1390, we can assume that if there were an increase it would be about 0.04%. We will have more information on the potential fiscal impact once a fiscal note has been prepared for the bill.

Here is some background on how the supplemental contribution rate impacts local government employers. PERS Plan 1 is underfunded, meaning that its assets are considered insufficient to meet the expected obligations. As a result, employers are paying a higher rate to make up the difference.  Retirees within PERS Plan 1 do not have any additional fiscal costs to make up this difference.

2019 PERS Plan 2 rates

• PERS Plan 2 employees paid 7.9% of reportable compensation; and
• PERS Plan 2 employers paid 12.86% of reportable compensation:
  • 7.9% of reportable compensation;
  • 0.18% for DRS administrative costs; and
  • 4.76% to pay for PERS Plan1 supplementary contributions (unfunded liabilities).

Dates to remember

SB 6165 is being heard in the Senate Ways & Means Committee on January 15 at 3:30 pm. AWC will testify with concerns about the possible fiscal impacts to cities.