The Oregon Supreme Court ruled that the $47 billion Oregon Public Employees Retirement System, Salem, cannot suspend an 8% guaranteed return on investment for workers who joined before 1996. The suspension was part of the state Legislature's 2003 cost-cutting pension reforms. The system will have to credit employee accounts for the year the legislation was enacted, resulting in a one-time cost of $550 million to $580 million, said PERS Executive Director Paul Cleary. "We will also create some unfunded liability going forward but will have to wait to work with actuaries until we get an idea of that."
The reforms were aimed at lowering benefits, and, therefore, future system expenses. At the time, reforms were estimated to help trim a $17 billion shortfall. "Because of the good earnings and the board putting money into reserves, we're in a much different situation than in 2003," Mr. Cleary said. The system has $1 billion in reserves.
The court on Tuesday also supported the Legislature's right to divert employees' future pension contributions into an individual account program, which will not be subject to an employer match, instead of PERS accounts. It also directed the PERS board to resume making cost-of-living adjustments for more than 20,000 workers who retired between 2000 and 2004.
