Oregon PERS Changes Investment Strategy

The Oregon Investment Council has decided to change the investment strategy of the individual account program (IAP) for members of the Oregon Public Employees Retirement System (OPERS).

As of the close of business on Dec. 29, the balance in member IAP accounts will be transferred to a custom IAP target-date fund that corresponds with participants’ birth year, and an approximate retirement age of 65.

The IAP is an account balance-based benefit for all active Oregon PERS members, and is in addition to their pension benefit. Currently, 6% of their salary, whether contributed by the participant or paid by their employer, goes into their IAP.

On Jan. 2, 2018, Oregon PERS members will be invested in the new IAP Target-Date Funds. Oregon PERS said the main objective of the IAP program is to achieve the highest total returns, while incurring an appropriate level of risk, in addition to recognizing that risk levels should vary based on age. The change will be automatic, and no action is required by participants.

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Since the inception of the IAP in 2004, the money in each IAP account had been invested the same way for every person, regardless of their age. That meant that people nearing retirement age would have had the same investment risk profile as younger workers.

Money in members’ IAP will be shifted to a target-date fund that is chosen based on their year of birth. For example, a participant born between 1973 and 1977 would be in the IAP 2040 Target-Date Fund. Investments in each fund will adjust over time to reduce investment risk, and potential losses in market downturns. Younger members’ IAPs will be invested in stocks, private equity, real estate, and other alternatives that emphasize earnings and growth potential. As members get closer to retirement, the investments in their funds gradually become more conservative to help protect against market fluctuations.

When a participant retires, he or she can receive his or her IAP account balance as a lump-sum payment, or in installment payments over a five-, 10-, 15-, or 20-year period. Those who choose to receive the entire IAP account balance as a lump-sum payment, may opt for a cash distribution, or roll it into a traditional or Roth IRA, an eligible employer plan, a 457 deferred compensation plan, the Oregon Savings Growth Plan, or another qualified plan.

If a retired member dies before all installment payments are completed, their beneficiary is entitled to receive the remaining installment payments, and may choose to receive the remaining balance in a lump-sum payment.

Tags: Individual Account Program, Oregon Investment Council, Oregon Public Employees Retirement System (PERS), Pension

Voters in Switzerland have rejected a plan to reform the country’s pension system that would have increased taxes and raised the retirement age for women.

The “Pensions 2020” reform package was opposed by 52.7% of voters, while 47.3% voted in favor of the measure. The plan had been developed with the aim of addressing the challenges facing social security retirement and pension provision due to demographic changes and a low interest-rate environment.

The pension overhaul would have raised the retirement age for women to 65 from 64, which would be equal to that of Swiss men. However, it would have increased flexibility of retirement between the ages of 62 and 70, with the earliest retirement age rising from age 58 to 62. Employees would have had the option to work past age 65 to accrue greater retirement benefits. The changes also included lowering the minimum conversion rate under the mandatory employer provision to 6.0% from 6.8%.

Additionally, the implementation of the reforms would have required amending the Swiss constitution, as it also included a proposed increase in the value-added tax (VAT).

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Despite the defeat, Interior Minister Alain Berset, who is the head of the Swiss government’s social security and pension issues, said the country’s pension systems had significant problems that still need to be addressed.

“The funding and stabilization of the pension system remains a major challenge for our society,” he told a news conference, according to SWI swissinfo.ch, the international service of the Swiss Broadcasting Corporation.

Switzerland’s left-leaning and centrist parties supported the reform package, while the conservative Swiss People’s Party (SVP), and the pro-business Free Democratic Party (FDP), opposed the proposed changes, arguing that they were not enough to protect the Swiss pension system for future retirees.

ASIP, Switzerland’s occupational pensions association, which backed the reform package, said a “restart” on pension reform is necessary, and that the “no” vote should not be seen as a rejection of fundamental reform of pension provision.

“A reform that solves the most urgent problems is now needed,” said ASIP in a statement.

“The ASIP continues to apply for realistic benchmarks in occupational pension plans, in order to ensure that the employees’ performance promises can also be adhered to.”

Tags: Pension, Pension 2020, Pension Reform, Switzerland

Swiss Voters Reject Pension Reform Plan