In May, Senate Bill (SB) 347 was introduced to establish a contribution-based benefit cap in calculating a School Employees Retirement System (SERS) member’s retirement benefit. The bill was referred to the Senate Insurance Committee on May 31, prior to the Ohio General Assembly breaking for the summer. See bill language and Legislative Service Commission (LSC) Analysis here. The SERS contribution-based benefit cap (CBBC) proposal is modeled after the one adopted by the Ohio Public Employees Retirement System (OPERS) under ORC 145.333.
SB 347 is intended to mitigate benefit inflation (anti-spiking) that is otherwise subsidized by the rest of the members of the retirement system. For example, if an employee receives salary increases beyond what is normally expected in the years before retirement or over the course of their career, their monthly retirement benefit at retirement may exceed what their contributions would be expected to fund.
The intent of the anti-spiking, CBBC limit in SB 347 is to protect the retirement system for current and future SERS retirees. Under the bill, the SERS Board would be required to establish the “contribution-based benefit cap” (CBBC), a limit on the retirement allowance a member may receive. The SERS Board would calculate a member’s CBBC based on the member’s contributions converted to an annuity and multiplied by the CBBC factor designated by the SERS Board. The CBBC method then compares a member’s traditional formula benefit to the member’s CBBC benefit calculation. A member’s pension would be the lower of the formula benefit or the CBBC benefit.
We will continue to keep members updated on the status of this legislation when the General Assembly returns in the fall.