The practice of a small number of members who are able to achieve high salaries to increase their final pension benefits has been a concern to the Ohio General Assembly and the Ohio Public Employees Retirement System for many years. That’s because the lifetime contributions of those few members who are able to “spike” their salaries are not sufficient to support their higher pension benefits.
OPERS has proposed a unique method to cap the benefits of members whose salaries spike far higher than their career contributions. The Contribution Based Benefit Cap formula was included in Senate Bill 343, and we hope to secure its passage into law this year.
When we told you about the cap in March, many of you had questions about how it would work and whether it would affect your pension benefit. Therefore, we have created a benefit cap calculator. It is not designed to provide exact pension benefit amounts. Rather, it is best used to help you test whether the cap might apply to you. Members may request individualized benefit estimates from OPERS after our systems are updated to include the cap, which would happen after the bill’s effective date.
The proposed cap is not designed to impact members who receive typical salary increases and promotions throughout their careers. It’s a new approach to address spiking because it focuses not on final average salary but on accumulated contributions by the member. It is meant to cap the pension benefits of only those members who have a formula benefit out of proportion with their contributions.
It also is important to note that OPERS’ recommended anti-spiking measure as currently proposed would not be applied retroactively. It would apply only to members who retire after pension legislation becomes law.
For more information, you may refer to two previous blogs we have written about the cap. Click on the links below to read them: