What is the 6% pick-up and how did it come to be?
Prior to 1979, state workers paid 6% of our wages towards PERS. In bargaining in 1979, we accepted the state’s proposal to pay the 6%, which increased member take-home pay even though wage rates remained the same because members no longer had to pay the 6% out of pocket.
What is the state’s proposal?
Rather than the state continuing to “pick up” the 6% by paying it directly into our PERS accounts, the state would increase member wages by 6% (plus payroll tax costs) and then each member would pay that 6% through payroll deduction into their PERS account. The cost to members would be zero; the cost to the State would be the additional cost of payroll taxes.
||State funds 6%
||Individual PERS accounts (IAP)
||State increases wages 6% + payroll taxes —–>
||6% deducted through payroll deduction into… —–>
||Individual PERS accounts (IAP)
What was our SEIU bargaining team’s response?
Our bargaining team told the management team that, given the complexity of the issue, we would be unable to respond before conducting significant member outreach. Secondly, we made clear that we would not accept this “buy out” as a substitute for cost-of-living adjustments (COLAs). We told the State that we wouldn’t even consider such a proposal unless it both fully buys out the 6% (including any tax liabilities) and it is paired with a fair economic package, including COLAs, steps, no furloughs, and holding the line on healthcare costs.
How would this benefit us?
There are a number of ways this would be in our best interests. First, as many have argued before, it would “get the target off our backs” in that our opponents could no longer agitate around the supposed unfairness of the 6% pick-up. It’s very likely — should we prevail in striking down the recently-passed PERS COLA cap in court — that future attempts to end the 6% pick up wouldn’t be a buy-out, but rather would entail some sort of pay cut (i.e. legislation allowing for negotiations over splitting the pick-up, or eliminating it altogether at our own expense).
Second, it would be an additional benefit for OPSRP members (those hired on or after August 29, 2003, also known at Tier 3) as it would translate into a higher average final salary (Tier 1 & 2 members already have the 6% pick-up counted toward their final average salary). Lastly, any pay or benefit based on your wage rate would increase; this includes overtime, out-of-class and lead differentials, vacation payouts, and Social Security.
How might this negatively impact us?
Anti-public-worker groups may try to spin this as a “big” pay increase when in truth this is a net zero change in total compensation with the exception of the small increase to cover payroll taxes. Similarly, others may misunderstand this as a take-away without fully seeing that it actually increases any pay and benefits based on wage rate, increases final average salary for OPSRP members (those hired on or after August 29, 2003), and strengthens our ability to protect our total compensation package.
As we told the state, we would need to make sure we’re held harmless; that they pay the cost of the 6% contribution and the associated payroll taxes. We would need to see this as part of a good economic package overall; this couldn’t just be in lieu of raises, for example, but would have to be in addition.
Is there a precedent for this concept? Who brought forward this idea? Why would we consider it now?
The idea of buying out the 6% has been discussed at bargaining tables and in the Legislature for years. Many unions, including our fellow members at Portland Public Schools and most firefighter bargaining units, have already agreed to a buy-out because they saw it as being in their best interests. This year the bargaining team feels that — given the potential benefits — it would be worth entertaining a proposal from the State but only if it were a complete buy-out and only if it were paired with a fair economic offer as described above. The team feels that now is the right time to consider this approach because, if we are successful in overturning the recently adopted PERS changes, we are concerned that future legislatures will see the 6% pick-up as an even more attractive place to cut.
Why would the Governor propose this?
“The governor has long been interested in getting the state out of the 6 percent pickup in a way that is fair to workers,” Kitzhaber’s spokesman Tim Raphael told The Oregonian on May 28. “OHSU recently was able to make this change in a way that was supported by 85 percent of those workers in collective bargaining.”
How would it work?
See chart above. If we were to agree to this framework, our bargaining team would need to negotiate the details, including effective date and implementation.
How would this impact my dues and other payroll deductions?
Just like overtime, wage-based differentials, or vacation pay-out, any deduction based on a percentage of your wages, like dues or Oregon Savings Growth Plan contributions, would also be impacted. If you currently earn $40,000 a year, your dues would go up approximately $4.42 per month based on an assumed increase of 7.8%—6% plus 1.8% to cover taxes. If you currently earn $30,000 a year, your dues would go up approximately $3.32.
Would I be able to pay that money into a 401k or use it otherwise?
No. The 6% must be paid either by the employer or the employee into the IAP.
If employees will be contributing the 6% into the IAP, can there be an option to contribute more than 6% or determine how the funds are invested?
No. Agreeing to buy-out the pick-up would not change any of the ways in which PERS operates. Currently we can’t add to the PERS account, which is why the Oregon Savings Growth program has been offered to employees. PERS is not set up to accept additional contributions and, unlike risky 401k’s, doesn’t allow participants to determine investments. The Oregon Investment Council is responsible for managing the PERS investment portfolio. None of this would be changed with a buy out of the 6% pick-up.
Would this impact my tax bracket?
If we were to agree to this, the bargaining team would negotiate that the contribution be made pre-tax, meaning it would not have an impact on your taxable income. It would not be included in the taxable income portion of your W-2.
Would this impact me if I get SNAP benefits or other public assistance?
Because most public assistance is based on household income and family size, the answer to this is unique for each individual. Fundamentally, this is a core reason why we should not consider the buy-out unless it is paired with a good economic package that improves wages for everyone, including those who qualify for public assistance.
How would this impact local governments or others who are PERS members?
This change would only directly impact state workers covered by this union contract. It is likely however that other employers and union members may want to follow suit, as was the case when the 6% pick-up was initially adopted. Some other union groups, including Portland Public Schools and most firefighter bargaining units, have already agreed to a buy-out of the 6%.
This FAQ will be updated as more information is available.
For more information, please contact your field office, Contract Action Team leader, or field organizer. You can also reach the bargaining team at email@example.com
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