Comparing ORP and PERS
There are many differences between ORP and PERS due to the fact that ORP is a defined contribution plan and PERS is a defined benefit plan. In making your retirement decision, you should carefully consider the advantages and disadvantages of each type plan, then select the one that is best for you.
ORP
If you choose to enroll in the Optional Retirement Plan, your account will be credited with employee contributions equal to 9.00% of earned compensation up to the employee compensation limit set pursuant to Section 401(a)(17) of the Internal Revenue Code for the calendar year in which the fiscal years begins. The total employer contribution on your behalf is 12.93%, of which 10.3257% will be credited to your account and 2.6043% will go to PERS to offset the unfunded accrued liability and the cost of administering ORP.
If you elect to participate in ORP, your retirement benefits will be determined solely based on the value of your investment account at the time of retirement. In ORP, there are three different annuity providers, offering a host of funds from which to build your portfolio. Since ORP is a defined contribution plan, you will be responsible for deciding how to invest your funds.
Portability is an important feature of this plan. Under ORP, your account is 100% vested on day one. If you relocate to another state with a similar plan, you may be eligible to transfer your account balance to your new employer's plan. If you terminate employment, you can apply for and receive your ORP account balance, subject to applicable penalties for early withdrawal.
PERS
As a member of PERS you also will contribute 9.00% of earned compensation up to the employee compensation limit set pursuant to Section 401(a)(17) of the Internal Revenue Code for the calendar year in which the fiscal year begins. As with ORP, the total employer contribution on your behalf is 12.93%. However, because PERS is a defined benefit plan, your benefits are not based on the value of your individual investments, but instead are determined by a formula that utilizes years of service and the average of your four highest years of compensation. The benefit formula is (2.0% x average compensation x years of service up to 25 years), plus (2.5% x average compensation x years of service in excess of 25 years).
If you choose to join PERS, benefits are payable upon termination of employment if: (1) you are age 60 or older and vested in the plan (i.e. you entered covered service before July 1, 2007 and were a contributing member of PERS for at least four years; or you enter covered service on or after July 1, 2007 and are a contributing member of PERS for at least eight years), or (2) you have accumulated at least 25 years of service credit, regardless of age. PERS, unlike ORP, has limited portability. If you terminate membership in PERS before you are eligible for retirement, you can elect to receive a refund of your employee contributions with interest; or you can leave your contributions with PERS in anticipation of returning to covered employment and/or later qualifying for a retirement allowance.
Additional benefits, as a vested member of PERS, include provisions which allow for: (1) disability income; (2) survivor/dependent child income protection; (3) service credit for unused personal and major medical leave; and (4) military service credit. PERS also provides death or disability benefits in the line of duty without vesting requirements. PERS retirees also receive an annual cost of living adjustment once they have been retired one full fiscal year.
