Re-employment updates for Employers

  • The SSN Lookup feature in ECS, found under Online Reporting, has been updated. This feature allows an employer to determine if someone is receiving an OPERS benefit which is useful to determine if you, the employer, are responsible for submitting a Notice of Re-employment or Contract Services, Form SR-6. The updates to the feature include the ability to search by Social Security Number as well as by name and date of birth.
  • The Employer Certification of Termination of Employment of an OPERS Benefit Recipient, form TERM-MP was recently updated to be more descriptive of the requirements. This form should be completed by the employer when a re-employed OPERS benefit recipient, or an independent contractor, has terminated their public employment.  Failure to provide timely notification of the termination can result in delayed access to the Health Reimbursement Arrangement (HRA) or pension benefits.
  • We also created A Quick Reference Guide for Re-employment. This Guide was provided within an Employer Notice dated September 8, 2022 and can be found on www.opers.org. This guide is designed to assist employers by providing a list of re-employment scenarios and employer responsibilities to complete based on the different scenarios.

Reminders about Employer Pick-up Plans

Are your employees' earnings post-tax or pre-tax on their W-2? If you are deducting employee contributions and reporting to the IRS on a pre-tax basis, then you should have a pick-up plan on file with OPERS and your employer reporting code should end in an 8. For additional information please reference the Guide to Pick-up Plans for Employers.

Any changes to a pick-up plan are required to be updated and a copy submitted to OPERS Employer Outreach. Employers can submit a drafted resolution to OPERS Employer Outreach to be reviewed for compliance prior to submitting it for approval to their governing body. You can send your pick-up plans to employeroutreach@opers.org.

Reminders for Year-end Reporting

As we approach the end of 2022, timely reporting and responding to any outstanding large earning clarifications is important. Timely reporting allows OPERS to generate accurate 2022 annual statements for your employees. Please be certain that all 2022 earnings have been reported to OPERS. Your December 2022 Report of Retirement Contributions and corresponding payment for member and employer contributions is due to the System no later than February 2, 2023.

  • If you have any employees who meet the Internal Revenue Code (IRC) Section 401(a)(17) Limit for 2022 wages, please review the wages submitted to OPERS to ensure that you reported all wages up to the limit. If you reported wages for any employee that exceed the limits, and remitted contributions on the wages that exceed the limits, we will refund the difference in contributions back to you. The 2022 limit for individuals hired on or after January 1, 1994, is $305,000 and for anyone hired prior to 1994 the limit is $450,000.

    Each employer that has an employee(s) affected by the limit will receive a letter and a corresponding spreadsheet from Employer Services in December. This letter requests that you provide a breakdown per month of the wages not reported to OPERS in 2022. Please use the provided spreadsheet when submitting the information rather than a different format. The information should be submitted to OPERS no later than January 22, 2023.

  • All Non-Contributing lists for 2022 earnings are due to OPERS on or before January 31, 2023. 
  • 2023 Reporting Due Dates
    • January is due March 2
    • February is due March 31
    • March is due May 1
    • April is due May 31
    • May is due June 30
    • June is due July 31
    • July is due August 31
    • August is due October 2
    • September is due October 31
    • October is due November 30
    • November is due January 2, 2024
    • December is due January 31, 2024
  • Minimum earnable salary for 2023 will increase to $709.03. This is the amount a member will need to gross during each monthly reporting period to receive a full month of service credit. The new amount begins with the first earning period ending in January 2023. Anything less than this amount will result in the member receiving a pro-rated service credit amount.

Retirement Confirmation letters updated

When an OPERS member applies for retirement, we send that member’s employer a retirement confirmation letter notifying them of their employee’s official intent to retire. Beginning in January, the confirmation letter will be streamlined to provide employers with the necessary information for their records.

OPERS continues rating agency outreach

Moody’s Investors Service publishes new bond rating methodology for US cities and counties .

Current update

In November 2022, Moody's Investors Service published a new bond rating methodology for US cities and counties. Previously, cities and counties' bonds were rated according to the Moody's US Special Purpose District rating methodology. Moody's considers this new customized rating methodology for cities and counties to be an improvement in that they believe the new methodology more appropriately aligns with the specific financial structure of cities and counties. They also believe the change will not impact the majority of cities' and counties' bond ratings. In a recent webinar, they cited 345 cities and counties nationwide are on review for possible change: 252 for potential upgrade and 93 for potential downgrade (out of approx. 3,300 cities and counties).  

We are currently in discussions with Moody's regarding this change. Specific to pensions and retiree health care, or other post-employment benefits (OPEB), this rating methodology change has several implications, a couple are summarized below:

  • The old methodology allocated 10% of the Scorecard Framework specifically to pension obligations (OPEB was factored in as a "notching adjustment"). Debt other than pension and OPEB was separately allocated 10% of the Scorecard Framework. In total, this was 20% for all debt, including pension obligations.
  • The new methodology allocates 30% of the Scorecard Framework to the combination of pension, OPEB and other debt. OPEB is now explicitly included as a liability rather than a consideration as a notching adjustment. In aggregate (all debt), the Scorecard Framework allocates an additional 10% to debt (20% vs 30%). The new methodology splits the 30% allocation to aggregate debt into two subcategories and doesn't separately score pensions and OPEB from other debt: 1.) 20% allocation to the ratio of long-term liabilities to revenue and, 2.) 10% allocation to the ratio of fixed costs to revenue.

For additional information, please refer to Moody's publication on this new rating methodology and the attached Moody's webinar presentation that summarizes the publication.

OPERS continues outreach with rating agencies as we are in the best position to answer questions on our pension and health care plans and related actuarial valuations. Going forward, we encourage impacted employers to engage with us early in this process. This engagement should take place during initial discussions and review of proposed rating agency methodology changes. OPERS can help to answer questions, assist with comment letters and continue to advocate for Ohio employers.

Background

Bond ratings agencies assess the financial position of municipalities and other government entities, including how likely it is that they'll be able to meet their debt obligations. Three major agencies in the United States account for about 95 percent of all bond ratings: Fitch Ratings, Standard & Poor's Global Ratings (S&P Global Ratings) and Moody's Investors Service.

Because many of our employers are subject to this scrutiny, OPERS meets with the ratings agencies between quarterly and annually to share important pension industry insights and maintain transparency. We believe we are the only public pension system in the United States that sustains this type of open relationship with the ratings agencies.

This outreach is an ideal expression of OPERS' commitment to our core values of teamwork, partnerships and stakeholder advocacy, providing added value to our participating public employers and, by extension, Ohio taxpayers.

OPERS' annual meetings with these agencies relate to industry standards that began nearly a decade ago.

In 2012, the Governmental Accounting Standards Board (GASB) issued two new standards that changed accounting and financial reporting requirements for public pensions. They required each public employer to account for a portion of its pension plan's unfunded liabilities on its balance sheet.

GASB issued two additional standards in 2015 that changed the accounting and financial reporting requirements for other post-employment benefits, commonly referred to in our industry as OPEB, which include retiree health care.

GASB intended these standards to enhance the pension-related and OPEB-related information in the financial reports of participating employers by providing greater transparency and standardizing the valuation practices from entity to entity. However, the standards not only require separate accounting and financial reporting for pension systems like OPERS, but also call for employers to recognize a net pension asset/liability and net OPEB asset/liability on their financial statements.

While the new standards amounted only to an accounting change that didn't impact how the plans were funded, there could have been the perception that the employers could be negatively affected by the requirement to post their share of pension and health care liabilities.

OPERS staff worked closely with OPERS-reporting and contributing employers to ensure that they were well positioned to comply with the standards.

What prompted outreach to rating agencies?

Some employers that participate in OPERS (counties and municipalities, for example) issue bonds to finance some of their activities. With the implementation of these new government accounting standards and the accompanying financial reporting disclosures by employers, rating agencies increased their consideration of these liabilities and associated funding commitments, particularly for OPEB, in their bond rating assessments for local and state employers.

All else equal, an employer with higher employee benefit liabilities and, hence, higher expected future funding costs, is considered a higher risk when borrowing money via bond issuances. This added risk leads to higher borrowing costs by way of a higher yield rate.

After the standards were issued, some employers were concerned about receiving downgrades to the ratings assessing their ability to meet principal and interest payments on their bond issuances. In some cases, employee benefit liabilities were generally referenced as one of several factors that could lead to rating downgrades.

Moreover, if the bond rating agencies wanted to ask questions about future plans and other key questions about funding the debt, the employers would not have the knowledge to answer the questions. Therefore, we believed we were in the best position to help put these liabilities in perspective with the bond rating agencies and assist the various employers.

This prompted us to begin conversations in 2015 with representatives of Fitch Ratings, Moody's and S&P Global Ratings. Our goal is to provide insights related to underlying annual changes in key financial metrics so that the agencies fully understand the reported trends, any plans to address funding and upcoming events or studies, and to keep the rating agencies appraised of OPERS funding structure, policies and ongoing management initiatives that collectively mitigate OPERS' funding risks.

What do the rating agency calls cover?

During these annual calls, OPERS Analytics & Research staff elaborate on the system's pension and health care funding structure, safeguards, strategies and trends, offering context and insight into the current and future financial conditions of OPERS' plans, and, by extension, the financial conditions of participating employers.

In order to provide a complete picture of the system's financial health, we provide information beyond what is contained in published financial and actuarial valuation reports; management goals; desired changes to plan design and associated risks, such as the significant changes to the system's health care program that are presently occurring; and the recently concluded experience study to review the actuarial methods and assumptions used in the annual actuarial valuations.

Furthermore, we remind the rating agencies of the important distinctions between OPERS and other states' pension funds, particularly in OPERS' statutorily defined fixed contribution structure and the non-guaranteed nature of the system's health care benefits.

The calls also afford a valuable opportunity for staff to answer any questions the rating agencies might have and to ask the agency representatives about changes in their rating methodologies.

Is this outreach working?

The rating agencies have consistently expressed that the calls help them understand not only OPERS, but also public pension systems in general, since public pension plans share many common characteristics and risks. They've also proven to be beneficial in the bond rating process. By helping rating agencies better understand the system, its funded status and projected funding needs, OPERS facilitates their ability to determine a more accurate bond rating.

In working with the ratings agencies, OPERS is able to provide clarity to items that otherwise may be identified as potential concerns and negatively influence bond ratings. This communication affords government entities the opportunity not only to achieve lower interest rates on bond issuances, but also to bring attention to their strengths that outweigh any challenges associated with underfunded pension liabilities.

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It is your responsibility to be certain that OPERS has your current physical and e-mail address on file. If OPERS is not made aware of address changes, we cannot guarantee that you will receive important information pertaining to your OPERS account. This publication is written in plain language for use by public employers who are subject to coverage under the Ohio Public Employees Retirement System. It is not intended as a substitute for the federal or state law, namely the Ohio Revised Code, the Ohio Administrative Code, or the Internal Revenue Code, nor will its interpretation prevail should a conflict arise between it and the Ohio Revised Code, Ohio Administrative Code, or Internal Revenue Code. Rules governing the retirement system are subject to change periodically either by statute of the Ohio General Assembly, regulation of the Ohio Public Employees Retirement Board, or regulation of the Internal Revenue Code. If you have questions about this material, please contact our office or seek legal advice from your attorney. OPERS is not required to provide health care coverage to retirees or their dependents and will only do so at the discretion of the Board of Trustees.