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Mitigating Rate


Current law provides that a full-time employee (100% FTE) of a public institution of higher education may elect to participate in an Alternative Retirement Plan (ARP) rather than the state retirement systems to which their service would normally be covered.

An ARP participant is required to contribute the same amount under the ARP as they would to the retirement system to which they would otherwise be covered: 14% for STRS and 10% for OPERS. In addition, the employer is required to contribute the same amount they would otherwise contribute to the retirement system, currently 14%.

In the ARP, a portion of the employer contribution is diverted to the retirement system to “mitigate” any negative financial impact for both past and current obligations for the members participating in the pension plans with the state system. For STRS, this is 4.47% and for OPERS, this is 2.44%.


Background

When the ARP began in 1999, part of the Ohio Revised Code specified that the ARP could not take away from the sustainability of the pension plans through the state systems.

Only the Ohio General Assembly has the ability to reduce the impact of the mitigating rate on plan participants.

To “mitigate” the negative financial impact of the unfunded liability, the Ohio General Assembly authorized the systems to collect a portion of the employer contribution rate for those employees that elected to participate in an ARP. That portion is known as the mitigating rate.

When the ARP began in 1999, the mitigating rate was at 6% and was reduced in 2001 and again in 2002.

In addition, when the state systems implemented their own defined contribution options, they were given the authority to establish and collect a mitigating rate from the employer contribution made on behalf of members who elect their defined contribution or combined plan.

 

  

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