The measure requires the Public Employees Retirement System (PERS) to replace life-expectancy tables by July 1 – a move that should save state and local government employers about $140 million per year, but cut some current workers’ pension payments, according to an Associated Press report.
On average, future monthly pension benefits will decline by stretching the payments over a longer period called for in the new life tables. Public employee unions argue the change would violate contract rights. The bill provides that any lawsuit would go directly to the state Supreme Court.
Under the bill, eligible workers could retire before the change without taking a hit on the amount of their pension benefits. The bill also includes a “look back” provision to make sure that pensions won’t fall below the level accrued by June 30, before the new tables take effect. When workers leave government service after that, PERS will “look back” to see if their June 30, 2003, accounts would have produced a better pension. Workers retire at whichever amount is higher.
The problem arose because w orkers are living about five years longer than they were when the current mortality tables were adopted. Taxpayers have had to make up the difference, adding to the pension system’s estimated $14.8 billion long-term shortfall. Officials estimate that using modern life-expectancy calculations will shrink the shortfall by $1.6 billion.