House committee approves legislation establishing SERS benefit cap
The House Pensions Committee passed legislation sponsored by State Representative Adam Bird (R-New Richmond) establishing a School Employee Retirement System (SERS) contribution-based benefit cap.
Traditionally, the SERS benefit formula multiplies 2.2 percent of a member’s Final Average Salary (FAS) by years of service to determine a pension amount. The member’s FAS is the best three-year average of compensation.
When an individual has years in the FAS that are substantially higher than expected from traditional compensation increases, the individual monetary contributions are not proportional to their FAS. To support the retiree, other SERS contributors must cover the inflated benefit.
“I am proud to say that this legislation has no opponents. Simply put, House Bill 146 aims to align with the premise that a member’s contributions plus investment earnings over time should fund the member’s pension,” Bird said. “We want to ensure all retirees get the compensation they deserve.”
To prevent “spiking,” House Bill 146 would implement a Contribution Based Benefit Cap (CBBC) like the one OPERS has had in place for the last 10 years.
The CBBC benefit is calculated by determining the actuarial equivalent of the member’s employee contributions, then multiplying that amount by a factor determined by the Retirement Board. A member’s pension is capped at the lower of the formula benefit or the CBBC method.
The CBBC will not impact benefits that are a result of normal salary growth, promotions or job changes. It will only affect situations where there has been a disproportional salary increase throughout the tenure of a SERS contributor.
Proponents of the bill include Protect Ohio Pensions, SERS and the School Employee Retirees of Ohio (SERO).
House Bill 146 now moves to the House floor for additional consideration.
State Rep. Bird is currently serving his second term as State Representative for the 63rd Ohio house district, which includes northeastern and southeastern portions of Clermont County and the western portion of Brown County.