Pension Sustainability: Oregon

Retaining Effective Teachers Policy


The state should ensure that excessive resources are not committed to funding teachers' pension systems.

Meets goal in part
Suggested Citation:
National Council on Teacher Quality. (2011). Pension Sustainability: Oregon results. State Teacher Policy Database. [Data set].
Retrieved from:

Analysis of Oregon's policies

As of December 31, 2009, the most recent date for which an actuarial valuation is available, Oregon's teacher hybrid pension plan is 83.2 percent funded and has an amortization period of 16 years. This means that if the plan earns its assumed rate of return and maintains current contribution rates, it would take the state 16 years to pay off its unfunded liabilities. Both levels are better than regulatory recommendations, and Oregon's system is financially sustainable according to actuarial benchmarks.

However, Oregon commits excessive resources toward its teachers' retirement system. These rates are set by the Public Employees' Retirement System Board based on actuarial calculations. The current employer contribution rate of 13.92 percent is too high, in light of the fact that local districts must also contribute 6.2 percent to Social Security. While this rate allows the state to pay off its liabilities within regulatory limits, it does so at great cost, precluding Oregon from spending those funds on other, more immediate means to retain talented teachers. Employers are allowed to make lump sum contributions that adjust their contribution rates; the average adjustment from these lump sum payments decreases district pension payroll contributions to a more reasonable 8.39 percent. The mandatory employee contribution rate of 6 percent is reasonable. 

The employer contribution rate for teachers participating in the now closed defined benefit system (those hired before August 29, 2003) is even more excessive. The current rate is 18.81; the rate is actuarially recommended to be 23.05 percent; however, the PERS Board's actuarial method places a "collar" on maximum increases allowed on employer contribution rates.


Recommendations for Oregon

Avoid committing excessive resources to the pension system.
Although the state is commended for having a system that is financially sustainable, Oregon should consider decreasing employer contributions to allow local districts to spend those funds on more immediate recruitment and retention strategies. In addition, while the state is commended for closing its financially unsustainable defined benefit system, the remaining members and unfunded liability still place a burden on the local districts.

State response to our analysis

Oregon was helpful in providing NCTQ with facts that enhanced this analysis.

Research rationale

NCTQ's analysis of the financial sustainability of state pension system is based on actuarial benchmarks promulgated by government and private accounting standards boards. For more information see U.S. Government Accountability Office, 2007, 30 and Government Accounting Standards Board Statement No. 25.

For an overview of the current state of teacher pensions, the various incentives they create, and suggested solutions, see Robert Costrell and Michael Podgursky. "Reforming K-12 Educator Pensions: A Labor Market Perspective." TIAA-CREF Institute (2011).

For evidence that retirement incentives do have a statistically significant effect on retirement decisions, see Joshua Furgeson, Robert P. Strauss, and William B. Vogt. "The Effects of Defined Benefit Pension Incentives and Working Conditions on Teacher Retirement Decisions", Education Finance and Policy (Summer, 2006).

For examples of how teacher pension systems inhibit teacher mobility, see Robert Costrell and Michael Podgursky, "Golden Handcuffs," Education Next, (Winter, 2010).

For additional information on state pension systems, see Susanna Loeb, and Luke Miller. "State Teacher Policies: What Are They, What Are Their Effects, and What Are Their Implications for School Finance?" Stanford University: Institute for Research on Education Policy and Practice (2006); and Janet Hansen, "Teacher Pensions: A Background Paper", published through the Committee for Economic Development (May, 2008).

For further evidence supporting NCTQ's teacher pension standards, see "Public Employees' Retirement System of the State of Nevada: Analysis and Comparison of Defined Benefit and Defined Contribution Retirement Plans." The Segal Group (2010).