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OPERS tells committee House Bill 73 would add cost and risk; calls DROP for OPERS law-enforcement members an unsound approach
Summary
OPERS executive director Karen Caraher testified in opposition to House Bill 73, which would create a deferred retirement option plan (DROP) for law-enforcement members covered by OPERS, saying it would impose significant implementation costs, add actuarial and administrative complexity, and benefit relatively few members.
Karen Caraher, executive director of the Ohio Public Employees Retirement System (OPERS), testified in opposition to House Bill 73, which would establish a DROP for OPERS law-enforcement members.
Caraher said the DROP design in the bill is materially richer than law-enforcement DROP programs in other Ohio systems and that OPERS lacks the contribution-rate structure and population to support it without added financial risk. She listed five reasons for opposition: the bill creates liability risk through a rich benefit design; it attempts to address an employment problem via retirement legislation; implementation cost and complexity are high; OPERS already offers a partial lump-sum option plan (PLOP) that can achieve similar outcomes; and the proposed DROP is not actuarially neutral as drafted.
Caraher estimated reprogramming and implementation costs at about $10,000,000 and said those IT and operational priorities would compete with other OPERS modernization efforts. She told the committee OPERS has roughly 9,000 active law-enforcement members (8,037 active, 1,686 inactive, about 6,000 retired for a total near 15,000 law-enforcement members across categories) and that any new statutory program should provide funding and not shift costs to the system.
Members pressed Caraher on the $10 million figure, whether DROP would be actuarially neutral, how many members would select the program, and whether a DROP would aid recruitment. Caraher said OPERS’ existing PLOP often yields equal or better outcomes for members and argued against embedding a fixed statutory program that could not be adjusted as actuarial experience changed. "It is a waste of money to put this in," she said, adding that PLOP and money-purchase options already provide members with neutral, flexible choices.
The committee heard extensive questioning about implementation timing, actuarial impacts, recruitment implications and whether a DROP should be broadened or limited; OPERS representatives recommended actuarial study and stakeholder consultation before moving forward. The hearing concluded with no committee vote recorded.
