The plan – expected to save Oregon taxpayers $103 million in pension costs between 2005 and 2007 and $7 billion over 30 years – provides guaranteed monthly pensions for newly hired public servants, according to a Salem (Oregon) Statesman Journal story . Checks will be slimmer than those now provided by the deficit-riddled Public Employees Retirement System (PERS), but retired employees will also have access to 401(k)-style investment accounts to supplement their monthly pensions.
Workers won’t get guarantees that their pension accounts will grow each year or be matched by employers at retirement. The regular retirement age is boosted to 65, five years older than in a 1995 reform. Employees can retire earlier if they work 30 years in the public sector or are in police and firefighting jobs.
After 30 years, workers will get guaranteed pensions equal to 45% of their top salary. That will be supplemented with whatever their individual investment accounts produce. Combined with Social Security, workers can retire on incomes close to their salary while working
The plan came together over the opposition of conservative Republicans who wanted to scrap defined benefit pensions for new hires and substitute private-sector-style 401(k)s (See Oregon Lawmakers Struggle With Last Pension Reform Piece ). But Governor Ted Kulongoski insisted that he would sign a bill only if it retained a DB pension check to retirees. That forced lawmakers to compromise on a “hybrid” plan that combined elements of both approaches.
The new plan, contained in House Bill 2020, is the third major PERS reform enacted by the 2003 Legislature. The first forced PERS to use updated life expectancies when calculating retiree pensions (See OPERS Life Tables Bill Heads to State Senate ). The second dramatically scaled back pensions of current workers and eliminated some cost-of-living-adjustments for recent retirees (See PERS Board Implements Legislative Reform Changes ).
Both those laws have been challenged in court (See Oregon Pension Cuts Could Spark Protests, Suits ). Many pension attorneys predict that the laws will be watered down or struck down. So the new plan may be the only one of the three big reforms that survives the session.