Oregon Supreme Court Turns Away PERS Ruling Challenge

August 12, 2005 (PLANSPONSOR.com) - The Oregon Supreme Court has dismissed appeals to a lower court's ruling that will decrease public retirees' benefits by some $1.6 million and require some to repay benefits received, The Oregonian reports on its OregonLive.com site.

In the  opinion , Justice Paul De Muniz, found all claims in the appeal moot saying, “…PERB (Public Employees’ Retirement Board) and employers’ decision to follow the terms of the settlement agreement has resulted in PERB’s issuance of new orders that have superseded the orders at issue in these appeals. Thus, even if this court concluded that the trial court erred and issued a judgment granting intervenors the relief that they seek, that judgment would not affect the new orders that PERB has issued pursuant to the settlement agreement.”

The 5-2 ruling means a 2002 decision by Marion County Circuit Judge Paul Lipscomb that the PERS board improperly paid out billions of dollars to employee accounts for 1999 earnings that it should have held in reserve still stands.   The Statesman Journal reports that Lipscomb ruled that PERB should have put the maximum into reserves from its 1999 earnings, leaving 11.3% for veteran worker accounts instead of 20%.

About 75,000 current employees who joined the Public Employees’ Retirement System (PERS) before 1996 and around 36,000 who have retired since 2000 will see decreases in their monthly benefit checks.   Those who have retired since 2000 may also receive invoices of between $400 and $8,000 to repay the excess 1999 earnings that have been paid out, according to The Oregonian.

Pension reforms from 2003 met with six challenges from PERS members (See  Oregon Lawmakers OK Reformed Public Pension Plan ).   In March, the state’s high court agreed with the petitioners and threw out two of the reforms, a minimum earnings guarantee and a block on cost-of-living adjustments (See  Oregon High Court Issues Mixed Ruling on PERS Reforms ).   The court upheld PERB’s shift of some employee contributions to defined contribution type accounts and directed PERB to update life expectancy tables used in calculating benefits.

Actuarial estimates projected the cost of the March ruling to PERS to be around $2.1 billion (See  Price Tag of Oregon Pension Reform Ruling: $2.1B ).   The paybacks will offset the reduction in benefits to the 75,000 current PERS members.

PERS will begin recalculating pensions and plans to send account statements to members before the end of the year, according to The Statesman Journal.

But, an attorney for the coalition of public employee unions said the current decision still means benefits are uncertain because unions can now proceed with another pending lawsuit challenging the 2003 reforms.

Members of   Oregon’s PERS had claimed that PERB lacked the authority to make decisions issued in its orders.   Justice Robert Durham, one of the dissentors in the 5-2 ruling, said that if the employees are correct, then the appeals should not have been dismissed.