72nd OREGON LEGISLATIVE ASSEMBLY--2003 Regular Session
HA to HB 2003
LC 2553/HB 2003-6
HOUSE AMENDMENTS TO
HOUSE BILL 2003
By COMMITTEE ON PUBLIC EMPLOYEES RETIREMENT SYSTEM
April 29
On page 1 of the printed bill, line 3, delete '238.072, ' and
delete '238.105, 238.115,'.
In line 4, delete '238.395,'.
In line 5, delete '238.580, 238.630, 238.640, 238.670,'.
Delete lines 7 through 29 and insert:
' Whereas it is the policy of the State of Oregon to provide
career public employees adequate and secure retirement benefits
at a reasonable, affordable and stable cost to taxpayers; and
' Whereas since 1995 the cost to taxpayers of funding the
Public Employees Retirement System (PERS) has increased
dramatically, with the cost of PERS increasing when PERS
investment income was good and the cost of PERS continuing to
increase when PERS investment income was poor; and
' Whereas PERS now has an unfunded actuarial liability of
$16.41 billion, and the burden of eliminating that deficit will
fall on the taxpayers unless the causes of that unfunded
liability are remedied; and
' Whereas as a result of errors by the Public Employees
Retirement Board, some retirees are receiving benefits that
exceed the benefits provided by law, and the cost of paying for
those benefits continues to increase; and
' Whereas unless steps are taken to reform and stabilize PERS,
the costs of paying for retirement benefits will continue to
grow; and
' Whereas escalating costs threaten the stability of the Public
Employees Retirement Fund and the security of benefits intended
for members who have not yet retired; and
' Whereas in the City of Eugene et al. v. State of Oregon, Case
Nos. 99C-12794, 00C-16173, 99C-12838 and 99C-20235, the Marion
County Circuit Court found that the Public Employees Retirement
Board paid benefits in excess of those authorized by law by: (a)
Unlawfully using outdated mortality tables to calculate retirees'
monthly benefits; (b) Unlawfully requiring employers to match
earnings in the employees' variable accounts when those
employees' pensions are calculated under the 'money match
formula'; and (c) Unlawfully abusing its discretion in failing to
set aside adequate statutorily mandated reserves out of
investment income while crediting imprudently large amounts of
investment income to member accounts; and
' Whereas the Public Employees Retirement Board calculated
benefits, credited earnings and failed to fund reserve accounts
for many years prior to 1998 using substantially the same methods
as those found to be improper by the circuit court in City of
Eugene et al. v. State of Oregon, and the effects of those
actions have been magnified by the board's allocation of earnings
in subsequent years, but the jurisdiction of the court in City of
Eugene et al. v. State of Oregon was limited to board actions
beginning in 1998; and
' Whereas the intent of the Legislative Assembly in providing
that member accounts would receive earnings at the assumed
interest rate was to ensure that at the time of retirement,
member accounts would be credited with no less than cumulative
earnings at the assumed interest rate for each year that the
member account existed; and
' Whereas unless immediate steps are taken to reform and
stabilize PERS, escalating pension costs will undermine the
financial security of PERS, force massive cutbacks in essential
government services, eliminate the jobs of many public employees
and destroy the public's confidence and trust in the governmental
institutions of the state; and
' Whereas this 2003 Act is intended to reform and stabilize
PERS, remedy the effects of prior actions, ensure that future
PERS benefits will be consistent with the goals and intent of the
Legislative Assembly and protect the accrued benefits earned by
current PERS members; and
' Whereas unless the statutes governing PERS are amended, it
will not be possible to make the system conform to the original
intentions of the Legislative Assembly; and
' Whereas the amendments to ORS chapter 238 are intended to
make only those changes necessary to restore PERS to a more
stable, sustainable condition, without reducing any current
member's benefit to a level below the level intended by the
Legislative Assembly; and
' Whereas this 2003 Act shall be known as the PERS Reform and
Stabilization Act of 2003; now, therefore,'.
On page 2, delete lines 1 through 16.
Delete lines 18 through 45 and delete pages 3 through 15 and
insert:
'
{ + ELIMINATION OF EMPLOYEE CONTRIBUTIONS + }
' { + SECTION 1. + } ORS 238.200 is amended to read:
' 238.200. (1)(a) An active member of the { + Public Employees
Retirement + }System shall contribute to the { + Public
Employees Retirement + } Fund and there shall be withheld from
salary of the member six percent of that salary { + as an
employee contribution + }.
' (b) Notwithstanding paragraph (a) of this subsection, an
employee who is an active member of the system on August 21,
1981, shall contribute to the fund and there shall be withheld
from salary of the member, as long as the employee continues to
be an active member of the system, four percent of that salary if
the salary for a month is less than $500, or five percent of that
salary if the salary for a month is $500 or more and less than
$1,000. Notwithstanding subsection (2) of this section, for the
purpose of computing the percentage of salary to be withheld
under this paragraph from a member who is an employee of a school
district or of the State Board of Higher Education whose salary
is based on an annual agreement, the agreed annual salary of the
member shall be divided into 12 equal installments, and each
installment shall be considered as earned and paid in separate,
consecutive months, commencing with the first month that payment
is actually made under the terms of the salary agreement.
' (2) The contributions of each member as provided in
subsection (1) of this section shall be deducted by the employer
from each payroll and transmitted by the employer to the
{ + Public Employees Retirement + } Board, which shall cause
them to be credited to the member account of the member. Salary
shall be considered earned in the month in which it is paid. The
date inscribed on the paycheck or warrant shall be considered as
the pay date, regardless of when the salary is actually delivered
to the member.
' (3) An active member who is concurrently employed by more
than one participating public employer, and who is a member of or
entitled to membership in the system, shall make contributions to
the fund on the basis of salary paid by each employer.
' { + (4) Notwithstanding subsections (1) to (3) of this
section, a member of the system, or a participating employer
acting on behalf of the member pursuant to ORS 238.205, is not
permitted or required to make employee contributions to the fund
on or after July 1, 2003. + }
' { + SECTION 2. + } ORS 238.205 is amended to read:
' 238.205. Notwithstanding any other provision of this chapter,
and subject to the provisions of this section, a public employer
participating in the system may agree, by a written employment
policy or agreement in effect on or after July 1, 1979, to
'pick-up,' assume or pay the full amount of { + employee + }
contributions { - to the fund required of - } { + required or
permitted by ORS 238.200 for + } all or less than all active
members of the system employed by the employer { + to the extent
employee contributions are required or permitted by ORS
238.200 + }. If a public employer so agrees:
' (1) The rate of contribution of each active member of the
system employed by the employer who is covered by such policy or
agreement shall uniformly be six percent of salary regardless of
the amount of monthly salary.
' (2) The full amount of required employee contributions
assumed or paid by the employer on behalf of its employees shall
be considered 'salary,' as defined in ORS 238.005, only for the
purpose of computing a member's 'final average salary,' as
defined in ORS 238.005, and shall not constitute additional
'salary' or ' other advantages,' as defined in ORS 238.005, for
any other purpose.
' (3) The full amount of required employee contributions '
picked-up' by the employer on behalf of its employees shall be
considered 'salary,' as defined in ORS 238.005, for the purpose
of calculating the amount of the contribution, for the purpose of
computing a member's 'final average salary,' as defined in ORS
238.005, and for all other purposes.
' (4) The full amount of required employee contributions '
picked-up,' assumed or paid by the employer on behalf of its
employees shall be added to the member accounts of the members
for their annuities and shall be considered employee
contributions for all other purposes of this chapter.
' (5) For the purposes of this section:
' (a) Employee contributions are 'picked-up' if the written
employment policy or agreement described in subsection (1) of
this section provides that employee compensation will be reduced
to generate the funds needed to make the employee contributions;
and
' (b) Employee contributions are 'assumed or paid' by an
employer if the written employment policy or agreement described
in subsection (1) of this section provides that additional
amounts shall be paid by the employer for the purpose of making
the employee contributions, and employee compensation will not be
reduced for the purpose of generating the funds needed to make
the employee contributions.
' (6) A participating public employer must give written notice
to the Public Employees Retirement Board at the time that a
written employment policy or agreement described in subsection
(1) of this section is adopted or changed. The notice must
indicate whether the employer will 'pick-up' or 'assume or pay'
the employee contributions as described in subsection (5) of this
section. Any change in the manner in which employee contributions
are to be paid applies only to employee contributions made on and
after the date the notice is received by the board.
' { + SECTION 3. + } ORS 238.260 is amended to read:
' 238.260. (1) The purpose of this section is to establish a
well balanced, broadly diversified investment program for certain
contributions and portions of the member accounts so as to
provide retirement benefits for members of the system that will
fluctuate as the value and earnings of the investments vary in
relation to changes in the general economy. It is anticipated
that investment of those contributions and portions of the member
accounts in equities will result in the accumulation of larger
deposit reserves for those members during their working years,
tend to preserve the purchasing power of those reserves and the
retirement benefits provided thereby and afford better protection
in periods of economic inflation.
' (2) There is established in the Public Employees Retirement
Fund an account, separate and distinct from the General Fund, to
be known as the Variable Annuity Account. Interest earned by the
account shall be credited to the account.
' (3) { + (a) + } A member { + who is making contributions to
the fund + } may elect at any time to have 25, 50 or 75 percent
of contributions by the member to the fund on and after the
effective date of the election paid into the Variable Annuity
Account, credited to a variable account, and reserved for the
purchase of a variable annuity. A member who has elected to have
a percentage of contributions so paid, credited and reserved may
elect at any time thereafter to have an additional 25 or 50
percent of contributions by the member, but not to exceed a
maximum of 75 percent, so paid, credited and reserved. An
election shall be in writing on a form furnished by the board and
be filed with the board. An election shall be effective on
January 1 following the filing thereof.
' { + (b) Notwithstanding any other provision of this
section, a member may not contribute to the Variable Annuity
Account after June 30, 2003. + }
' (4) A member who has elected to have contributions paid into
the Variable Annuity Account under subsection (3) of this section
may thereafter cause the contributions to cease being paid into
the member's variable account by filing a request in writing on a
form furnished by the board and filed with the board. The
contributions shall cease being paid into the member's variable
account after December 31 following the filing of the request.
Contributions paid into the member's variable account before the
effective date of the request for cessation shall remain in the
member's variable account.
' (5)(a) An employee who is a member of the system on January
1, 1968, and who thereafter { - files an election under
subsection (3) of this section - } { + made contributions to
the Variable Annuity Account + }, may elect at any time to have
an amount equal to 10 percent per year, for not more than five
years, of the balance of the regular account of the member in the
fund on the effective date of an election filed under subsection
(3) of this section, transferred from the regular account of the
member to the Variable Annuity Account, credited to the member's
variable account, and reserved for the purchase of a variable
annuity. An election shall be in writing on a form furnished by
the board and be filed with the board. An election is final and
irrevocable upon the filing thereof. The first transfer pursuant
to an election shall be made on July 1 following the filing of
the election, but may be made, in the discretion of the board, on
an earlier date.
' (b) If the transfers elected by a member under this
subsection have not been completed at the time of retirement, a
transfer equal to one annual transfer shall be made pursuant to
an election by the member made and filed as provided in this
subsection.
' (c) No transfer shall be made under this subsection after the
first payment of the service retirement allowance of the member
becomes normally due.
' { + (d) Notwithstanding paragraphs (a) to (c) of this
subsection, a member may not elect to transfer funds under this
subsection after June 30, 2003. + }
' (6) Moneys in the Variable Annuity Account may be invested in
investments authorized by law for investment of moneys in the
Public Employees Retirement Fund; but, notwithstanding any other
general or specific law, moneys in the account shall be invested
primarily in equities, including common stock, securities
convertible into common stock, real property and other recognized
forms of equities, whether or not subject to indebtedness. Not
more than five percent of the amortized value of all the
investments of the Variable Annuity Account and of moneys in the
account immediately available for investment may be invested in
the obligations of or equities in a single, primary obligor or
issuer. A pro rata share of the administrative expenses of the
system shall be paid from interest earned by the Variable Annuity
Account.
' (7)(a) Except as provided in subsection (8) of this section,
the policy-making investment authority for the Public Employees
Retirement Fund shall enter into contracts with one or more
persons whom the authority determines to be qualified, whereby
the persons undertake to invest and reinvest moneys in the
Variable Annuity Account available for investment and acquire,
retain, manage and dispose of investments of the account in
accordance with subsections (1) and (6) of this section and to
the extent provided in the contracts.
' (b) Performance of functions under contracts so entered into
shall be paid for out of the gross interest or other income of
the investments with respect to which the functions are
performed, and the net interest or other income of the
investments after that payment shall be considered income of the
Variable Annuity Account.
' (c) The policy-making investment authority may require a
person contracted with to give to the state a fidelity bond in a
penal sum as may be fixed by law or, if not so fixed, as may be
fixed by the authority, with corporate surety authorized to do
business in this state.
' (d) Contracts so entered into and functions performed
thereunder are not subject to the State Personnel Relations Law
or ORS 279.545 to 279.746.
' (e) A person contracted with shall report to the
policy-making investment authority as often as the authority may
require, but at least annually, the earnings of the moneys
invested during the period covered by the report, the capital
gains and losses of the Variable Annuity Account during the
period, the changes in the market value of the investments of the
account during the period and such other information as the
authority may require.
' (8) The policy-making investment authority for the Public
Employees Retirement Fund, for and on behalf of the Public
Employees Retirement System and Public Employees Retirement
Board, may enter into group annuity contracts with one or more
insurance companies authorized to do business in this state. In
lieu of any investment of moneys in the Variable Annuity Account
as provided in subsections (6) and (7) of this section, the
authority may pay, from time to time under contracts so entered
into, any moneys in that account available for investment
purposes. Contracts so entered into:
' (a) May provide that annuities purchased thereunder be
payable in variable dollar amounts, but if that provision is
made, provision also shall be made that a member of the system
who has a variable account, upon retiring from service and before
the first payment of retirement allowance becomes normally due,
may elect an option to have the annuities payable to the member
or the beneficiary of the member in fixed or variable dollar
amounts or both.
' (b) May provide that payment of annuities purchased
thereunder may be made by the insurance company directly to
persons entitled thereto or to the Variable Annuity Account for
payment therefrom to those persons.
' (c) Are not subject to ORS 279.545 to 279.746.
' (9) Upon retiring from service but within 60 days after the
date of the first benefit payment, a member of the system who has
a variable account may elect to transfer the balance in the
variable account to the regular account of the member, and by
that transfer the annuity shall be based on the amount in the
regular account of the member as otherwise provided in this
chapter and the member shall not receive a variable annuity as
provided in this section.
' (10) When an annuity is payable under this chapter to a
member of the system who has a variable account, or is payable to
a beneficiary of that person, the portion of the annuity payable
from the Variable Annuity Account shall be proportionately
increased or decreased for a calendar year when, as of October 31
of the preceding calendar year, the balance of the member's
variable account exceeds or is less than the current value of the
annuity, determined in accordance with the rate of interest and
approved actuarial tables then in effect.
' (11) Notwithstanding subsection (10) of this section, the
board, in the event of extraordinary fluctuation in the market
value of investments of the Variable Annuity Account and in order
to avoid substantial inequities, may increase or decrease the
portions of annuities paid from the account for periods less than
a calendar year and determined as of dates other than October 31.
' (12) Notwithstanding any other provision of this chapter, the
retirement allowance to which a member of the system who has a
variable account or who made contributions on salary in excess of
$4,800 per year during the period January 1, 1956, through
December 31, 1967, and whose effective date of retirement is
January 1, 1982, or later, is otherwise entitled under this
chapter shall be subject to the following adjustment:
' (a) The board shall determine the difference between the
member account of the member and what the member account of the
member would have been had the member not participated in the
variable annuity program on or after January 1, 1982, plus the
contributions made on salary in excess of $4,800 per year during
the period January 1, 1956, through December 31, 1967.
' (b) If the member account of the member due to participation
in the variable annuity program or due to the contributions made
on salary in excess of $4,800 per year is greater, the monthly
retirement allowance of the member shall be increased by the
value of the difference, using the annuity tables applicable to
the plan selected by the member.
' (c) If the member account of the member due to participation
in the variable annuity program or due to the contributions made
on salary in excess of $4,800 per year is lesser, the monthly
retirement allowance of the member shall be decreased by the
value of the difference, using the annuity tables applicable to
the plan selected by the member.
' (13) Except as otherwise specifically provided in this
section, the rights and benefits under this chapter of an active
or retired member of the system or of a beneficiary of the member
are not affected by this section and the provisions of this
chapter applicable to regular accounts of active and retired
members of the system in the fund are also applicable to variable
accounts.
' (14)(a) In addition to the transfer provided for in
subsection (9) of this section, a member of the system who has a
variable account may at any time prior to retirement elect to
transfer the balance in that account to the regular account of
the member in the fund if:
' (A) The member is other than a police officer or firefighter
and has attained the age of 50;
' (B) The member is a police officer or firefighter and has
attained the age of 45; or
' (C) The member has a combined total of 25 years or more of
creditable service in the system and prior service credit.
' (b) An election under paragraph (a) of this subsection is
irrevocable, and a member who has so elected may not thereafter
elect to make contributions to the Variable Annuity Account under
subsection (3) of this section.
' (c) An election under paragraph (a) of this subsection shall
be in writing and shall be filed with the board. The board by
rule shall prescribe a form for the purposes of application. An
election so made shall be effective on January 1 of the year
following the year in which the election is made, except that an
election shall have no effect whatsoever unless the member
account of the member as of the effective date of the election is
greater than what the member account of the member would have
been had the member not participated in the variable annuity
program on or after January 1, 1982, not including the
contributions made on salary in excess of $4,800 per year during
the period January 1, 1956, through December 31, 1967.
' (d) As of the effective date of an election under this
subsection, the board shall credit all earnings to the member's
variable account based on the actual calendar year variable
earnings rate for the year in which the election is made. This
account balance shall:
' (A) Be used by the board in determining whether the member's
election is effective under paragraph (c) of this subsection; and
' (B) Be the account balance credited by the board to the
regular account of the member in the fund if the election is
determined to be effective.
' (e) The annuity of a member who makes an effective transfer
under this subsection shall be based on the amount in the regular
account of the member in the fund as otherwise provided in this
chapter, and the member shall not receive a variable annuity as
provided in this section.
' { + SECTION 4. + } ORS 238.300 is amended to read:
' 238.300. Upon retiring from service at normal retirement age
or thereafter, a member of the system shall receive a service
retirement allowance which shall consist of the following annuity
and pensions:
' (1) A refund annuity which shall be the actuarial equivalent
of accumulated contributions { + , if any, + } by the member and
interest thereon credited at the time of retirement, which
annuity shall provide an allowance payable during the life of the
member and at death a lump sum equal in amount to the difference
between accumulated contributions at the time of retirement and
the sum of the annuity payments actually made to the member
during life shall be paid to such person, if any, as the member
nominates by written designation duly acknowledged and filed with
the board or shall otherwise be paid according to the provisions
of this chapter for disposal of an amount credited to the member
account of a member at the time of death in the event the member
designates no beneficiary to receive the amount or no such
beneficiary is able to receive the amount. If death of the member
occurs before the first payment is due, the member account of the
member shall be treated as though death had occurred before
retirement.
' (2)(a) A life pension (nonrefund) for current service
provided by the contributions of employers, which pension,
subject to paragraph (b) of this subsection, shall be an amount
which, when added to the sum of the annuity { + , if any, + }
under subsection (1) of this section and the annuity, if any,
provided on the same basis and payable from the Variable Annuity
Account, both annuities considered on a refund basis, results in
a total of:
' (A) For service as a police officer or firefighter, two
percent of final average salary multiplied by the number of years
of membership in the system as a police officer or firefighter
before the effective date of retirement.
' (B) For service as a member of the Legislative Assembly, two
percent of final average salary multiplied by the number of years
of membership in the system as a member of the Legislative
Assembly before the effective date of retirement.
' (C) For service as other than a police officer, firefighter
or member of the Legislative Assembly, 1.67 percent of final
average salary multiplied by the number of years of membership in
the system as other than a police officer, firefighter or member
of the Legislative Assembly before the effective date of
retirement.
' (b) A pension under this subsection shall be at least:
' (A) { + For a member who first establishes membership in the
system before the effective date of this 2003 Act, + } the
actuarial equivalent of the annuity provided by the accumulated
contributions of the member. { + A person establishes membership
in the system before the effective date of this 2003 Act for the
purposes of this subparagraph if:
' (i) The person is a member of the system, or a judge member
of the system, on the day immediately before the effective date
of this 2003 Act; or
' (ii) The person performed any period of service for a
participating public employer before the effective date of this
2003 Act that is credited to the six-month period of employment
required of an employee under ORS 238.015 before an employee may
become a member of the system. + }
' (B) For a member who made contributions before August 21,
1981, the equivalent of a pension computed pursuant to this
subsection as it existed immediately before that date.
' (c) As used in this subsection, 'number of years of
membership' means the number of full years plus any remaining
fraction of a year for which salary was paid and contributions to
the Public Employees Retirement System made. Except as otherwise
provided in this paragraph, in determining a remaining fraction a
full month shall be considered as one-twelfth of a year and a
major fraction of a month shall be considered as a full month.
Membership of a school district employee, an employee of the
State Board of Higher Education engaged in teaching or other
school activity at an institution of higher education or an
employee of the Department of Human Services, the Oregon Youth
Authority, the Department of Corrections or the State Board of
Education engaged in teaching or other school activity at an
institution supervised by the authority, board or department, for
all portions of a school year in a calendar year in which the
district school, institution of higher education or school
activity at an institution so supervised in which the member is
employed is normally in session shall be considered as a full
one-half year of membership. The number of years of membership of
a member who received a refund of contributions as provided in
ORS 237.976 (2) is limited to the number of years after the day
before the date on which the refund was received. The number of
years of membership of a member who is separated, for any reason
other than death or disability, from all service entitling the
member to membership in the system, who withdraws the amount
credited to the member account of the member in the fund during
absence from such service and who thereafter reenters the service
of an employer participating in the system but does not repay the
amount so withdrawn as provided in this chapter, is limited to
the number of years after the day before the date of so
reentering.
' (3) An additional life pension (nonrefund) for prior service
credit, including military service, credited to the member at the
time of first becoming a member of the system, as elsewhere
provided in this chapter, which pension shall be provided by the
contributions of the employer.
'
{ + CREDITING OF TIER ONE ACCOUNTS + }
' { + SECTION 5. + } ORS 238.255, as amended by section 1,
chapter 3, Oregon Laws 2003 (Enrolled House Bill 2001), is
amended to read:
' 238.255. (1) The regular account for an active or inactive
member of the system { + , if any, + } shall be examined each
year. If the regular account is credited with earnings for the
previous year in an amount less than the earnings that would have
been credited pursuant to the assumed interest rate for that year
determined by the Public Employees Retirement Board, the amount
of the difference shall be credited to the regular account and
charged to a reserve account in the fund established for the
purpose. { - A reserve account so established may not be
maintained on a deficit basis for a period of more than five
years. - } Earnings in excess of the assumed interest rate for
years following the year for which a charge is made to the
reserve account shall first be applied to reduce or eliminate the
amount of a deficit.
' { + (2) Notwithstanding subsection (1) of this section, the
board may not credit any earnings to the regular accounts of
members who established membership in the system before January
1, 1996, as described in ORS 238.430, in any year in which there
is a deficit in the reserve account established under subsection
(1) of this section, or credit any earnings to the regular
accounts of those members that would result in a deficit in that
reserve account. + }
' { - (2) - } { + (3) + } The regular account for an active
or inactive member who established membership in the system
before January 1, 1996, as described in ORS 238.430, may not be
credited with earnings in excess of the assumed interest rate
until:
' { - (a) The reserve account established under subsection (1)
of this section no longer has a deficit; - }
' { - (b) - } { + (a) + } The reserve account established
under subsection (1) of this section is fully funded with amounts
determined by the board, after consultation with the actuary
employed by the board, to be necessary to ensure a zero balance
in the account when all members who established membership in the
system before January 1, 1996, as described in ORS 238.430, have
retired; and
' { - (c) - } { + (b) + } The reserve account established
under subsection (1) of this section has been fully funded as
described in paragraph { - (b) - } { + (a) + } of this
subsection in each of the three immediately preceding calendar
years.
' { + SECTION 6. + } { + The amendments to ORS 238.255 by
section 5 of this 2003 Act apply only to the crediting of
earnings under ORS 238.255 for calendar years 2003 and
thereafter. + }
'
{ + MINIMUM ACCOUNT BALANCE + }
' { + SECTION 7. + } { + Section 8 of this 2003 Act is added
to and made a part of ORS chapter 238. + }
' { + SECTION 8. + } { + (1) Notwithstanding any other
provision of this chapter, the regular account balance of a
member described in subsection (3) of this section may not be
less than the amount provided for under subsection (2) of this
section for the purpose of computing retirement allowances, death
benefits and amounts to be paid to a withdrawing member under ORS
238.265 and for other computations under the provisions of this
chapter that are based on a member's regular account balance.
' (2) The minimum regular account balance for a member
described in subsection (3) of this section is the amount that
the regular account of a member would have contained if the
regular account had been credited with earnings at the assumed
interest rate in every year in which the regular account was in
existence.
' (3) The provisions of this section apply only to a member who
establishes membership in the system before January 1, 1996, as
described in ORS 238.430, and who retires on or after February 1,
2004. + }
'
{ + RETIRED MEMBERS + }
' { + SECTION 9. + } { + Section 10 of this 2003 Act is
added to and made a part of ORS chapter 238. + }
' { + SECTION 10. + } { + (1) Notwithstanding ORS 238.360,
cost of living increases for the service retirement allowances
payable to or on account of members described in subsection (5)
of this section may be made only as provided by this section.
' (2) The Public Employees Retirement Board shall calculate a
revised service retirement allowance for members described in
subsection (5) of this section. The revised service retirement
allowance shall be calculated as follows:
' (a) The board shall establish a member account balance for
the member as of the member's effective date of retirement,
determined as though the member account for the member had been
credited with 11.33 percent earnings in calendar year 1999.
' (b) The board shall calculate a service retirement allowance
for the member under ORS 238.300 as of the member's effective
date of retirement, using the member account balance established
under paragraph (a) of this subsection.
' (c) If the member elected an optional service retirement
allowance calculation under ORS 238.305, the board shall convert
the service retirement allowance calculated under paragraph (b)
of this subsection to the optional calculation elected by the
member.
' (d) The board shall adjust the revised service retirement
allowance calculated under paragraph (b) or (c) of this
subsection for each calendar year after the member's effective
date of retirement based on the cost of living adjustment
provided for in ORS 238.360.
' (3) The Public Employees Retirement Board shall calculate a
fixed service retirement allowance for members described in
subsection (5) of this section. The fixed service retirement
allowance shall be the amount payable to or on account of the
member on the effective date of this 2003 Act. The fixed service
retirement allowance may not be adjusted under ORS 238.360.
' (4) The service retirement allowance payable to or on account
of members described in subsection (5) of this section shall be
the greater of the revised service retirement allowance
calculated under subsection (2) of this section or the fixed
service retirement allowance calculated under subsection (3) of
this section.
' (5) The provisions of this section apply to members who:
' (a) Established membership in the Public Employees Retirement
System before January 1, 1996, as described in ORS 238.430;
' (b) Receive a service retirement allowance calculated under
ORS 238.300 (2)(b)(A); and
' (c) Retire after February 1, 2000, and before February 1,
2004. + }
'
{ + INACTIVE VESTED MEMBERS + }
' { + SECTION 11. + } ORS 238.265 is amended to read:
' 238.265. (1) Except as otherwise provided in this section, a
member of the Public Employees Retirement System may withdraw
from the Public Employees Retirement Fund the amount credited to
the member account { + , if any, + } for the member if:
' (a) The member is separated from all service with
participating public employers;
' (b) The member is separated from all service with employers
who are treated as part of a participating public employer's
controlled group under the federal laws and rules governing the
status of the system and the fund as a qualified governmental
retirement plan and trust;
' (c) The member has not attained earliest service retirement
age; and
' (d) The separation from service is not by reason of death or
disability.
' (2) If a member wishes to withdraw the member account { + ,
if any, + } of the member under this section, the member must
transmit to the Public Employees Retirement Board a withdrawal
request. The board shall deny the withdrawal, or shall take all
reasonable steps to recover withdrawn amounts, if:
' (a) The board determines that the separation is not a bona
fide separation; or
' (b) The member fails to remain absent from the service of all
employers described in subsection (1) of this section for at
least one calendar month following the month in which the member
separates from service.
' (3) If a member has contributed to the fund in each of five
calendar years and has separated from all service in the manner
described in subsection (1) of this section before reaching
earliest service retirement age, the member may elect to withdraw
the member account of the member under this section at any time
before reaching earliest service retirement age. If the inactive
member does not make an election to withdraw under this section,
the member shall be paid the benefits or retirement allowances
described in ORS 238.425.
' (4) Withdrawal of a member account under this section cancels
all membership rights in the system, including the right to claim
credit for any employment before withdrawal.
' { + SECTION 12. + } ORS 238.425 is amended to read:
' 238.425. In the event that an employee who is a
{ + vested + } member of the system { - , who has made
contributions to the fund during each of five calendar years as
established by this chapter, - } and who has not attained
earliest service retirement age { - , - } is separated, for any
reason other than death or disability, from all service entitling
the employee to membership in the system, the member
account { + , if any, + } of the member shall remain to the
member's credit in the fund unless the member elects to withdraw
it and there shall be paid such death benefits as this chapter
provides; or a disability retirement allowance or, after
attaining earliest service retirement age, a service retirement
allowance, either of which shall consist of { + the allowance
provided in ORS 238.300, but actuarially reduced and computed on
the member's then attained age. + } { - : - }
' { - (1) An annuity which shall be the actuarial equivalent
of the member's accumulated contributions and interest thereon
credited to the member; - }
' { - (2) A pension provided by the contributions of employers
as provided in ORS 238.300 (2), but actuarially reduced and
computed on the member's then attained age; and - }
' { - (3) An additional life pension (nonrefund) for prior
service credit, including military service, credited to the
member at the time the member first becomes a member of the
system, as elsewhere provided in this chapter, which pension
shall be provided by the contributions of the employer. - }
'
{ + TRANSITION ACCOUNTS + }
' { + SECTION 13. + } { + (1) An active member of the Public
Employees Retirement System, as defined by ORS 238.005, shall
make payments to a transition account established for the member
under the provisions of this section. Payments must be in the
amount of six percent of the salary, as defined by ORS 238.005,
of the employee.
' (2) A public employer, as defined by ORS 238.005, that
participates in the system may agree to make all or part of the
transition payments on behalf of employees of the public employer
who are active members of the system. An agreement may be made by
a collective bargaining agreement or by policy of the employer.
' (3) A public employer, as defined by ORS 238.005, that
participates in the system and that is paying employee
contributions on behalf of employees of the public employer under
the provisions of ORS 238.205 on June 30, 2003, whether by reason
of having agreed to 'pick-up' or by reason of having agreed to
assume or pay those contributions, must make the employee
payments required by subsection (1) of this section until June
30, 2005.
' (4) Payments to a transition account under this section may
not be considered employee contributions to the system for any
purpose.
' (5) The Public Employees Retirement Board shall establish a
transition account program for payments made under this section.
Transition accounts must be kept separate from the Public
Employees Retirement Fund and the General Fund. Except as
provided in subsection (9) of this section, all earnings and
losses on a transition account shall be credited by the board to
the transition account. If the membership of the employee in the
system is terminated under the provisions of ORS 238.095, the
board shall cease investment of the amounts in the transition
account and, after the effective date of the termination, shall
no longer credit earnings and losses to the transition account.
' (6) Amounts held in a transition account under this section
must be distributed to the member within 90 days after the
member's effective date of retirement under ORS chapter 238, or
within 90 days after termination of the person's membership in
the system under ORS 238.095.
' (7) Distribution from a member's transition account shall be
made in a single lump sum payment.
' (8) The board shall adopt rules and establish procedures for
transition payments and accounts.
' (9) The board shall by rule establish a maintenance fee for
transition accounts established under this section. The fee may
be collected out of earnings on transition accounts or, if there
are no earnings, from the principal amounts paid into the
transition accounts. The fee shall be in an amount determined by
the board to be adequate to pay the full cost to the system of
maintaining transition accounts under this section.
' (10) The board shall take all actions necessary to seek
qualification of the transition account program as a
tax-qualified governmental retirement plan and trust under the
Internal Revenue Code.
' (11) Nothing in this section creates a contract between
members of the Public Employees Retirement System and
participating public employers. + }
'
{ + BOARD COUNSEL + }
' { + SECTION 14. + } { + Section 14a of this 2003 Act is
added to and made a part of ORS chapter 238. + }
' { + SECTION 14a. + } { + The Attorney General shall
consult with the Governor on appointment of separate counsel
pursuant to ORS 180.235 to represent the Public Employees
Retirement Board in any matter or in any class of matters in
which the benefits payable under the Public Employees Retirement
System are at issue, including but not limited to defending the
provisions of this 2003 Act in any proceeding commenced under
section 37 of this 2003 Act. + }
'
{ + REMEDY IN CITY OF EUGENE V. STATE OF OREGON + }
' { + SECTION 14b. + } { + (1) If the Public Employees
Retirement Board is required to correct one or more of the
erroneous benefit calculation methods identified in City of
Eugene et al. v. State of Oregon, Case Nos. 99C-12794, 00C-16173,
99C-12838 and 99C-20235, the board shall recover the cost of
benefits erroneously paid to retired members as a result of those
erroneous benefit calculations by one or both of the following
methods:
' (a) The board may withhold cost of living increases under ORS
238.360 from a retired member whose benefit is greater than the
correctly calculated benefit of the member until such time as the
member's benefit is equal to the correctly calculated benefit.
' (b) The board may treat all or part of the present value of
the benefits erroneously paid and payable to retired members as a
result of the erroneous benefit calculations as an administrative
expense of the Public Employees Retirement System, to be paid
exclusively from future income of the Public Employees Retirement
Fund, and to be amortized over an actuarially reasonably period
not to exceed 15 years.
' (2) In no event may the cost of erroneous benefit calculation
methods identified in City of Eugene et al. v. State of Oregon be
considered an employer liability or charged to employers through
employer contributions. + }
'
{ + EMPLOYER CONTRIBUTION RATES + }
' { + SECTION 15. + } { + The Public Employees Retirement
Board shall recalculate the contribution rates of all
participating public employers, pursuant to ORS 238.225, to
reflect the provisions of this 2003 Act and shall issue corrected
contribution rate orders to participating public employers within
90 days after the effective date of this 2003 Act. The corrected
rates are effective July 1, 2003. + } ' .
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' { + NOTE: + } Section 21 was deleted by amendment.
Subsequent sections were not renumbered.'.
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' { + NOTE: + } Sections 26 through 28 were deleted by
amendment. Subsequent sections were not renumbered.'.
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' { + NOTE: + } Section 33 was deleted by amendment.
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'
{ + SEVERABILITY + }
' { + SECTION 36. + } { + It is the intent of the
Legislative Assembly that all parts of this 2003 Act are
independent and that if any part of this 2003 Act be held
unconstitutional, all remaining parts shall remain in force. + }
' .
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