72nd OREGON LEGISLATIVE ASSEMBLY--2003 Regular Session
Enrolled
House Bill 2004
Sponsored by COMMITTEE ON PUBLIC EMPLOYEES RETIREMENT SYSTEM
CHAPTER ................
AN ACT
Relating to actuarial equivalency factor tables; creating new
provisions; amending ORS 238.630; limiting expenditures; and
declaring an emergency.
Whereas the Public Employees Retirement Board has long-standing
authority under ORS 238.630 (3)(g) to establish actuarial
equivalency factors from time to time, and those factors as
established constitute part of the Public Employees Retirement
System; and
Whereas actuarial equivalency factors are based on assumptions
and conditions that vary over time as the demographics of a
system's constituent population and the expected performance of
investments of the Public Employees Retirement Fund change, so
that the most reasonable expectation is that such factors, by
their very nature, must vary over time to reflect those
demographic and performance shifts; and
Whereas the long-term stability and viability of the Public
Employees Retirement Fund depends on the ability of public
employers and taxpayers to pay the costs of the system; and
Whereas the board is charged with giving equal consideration to
the interests of the public employer and the public employee to
the extent consistent with the board's fiduciary duties; and
Whereas adjustments to actuarial equivalency factors must be
made as assumptions and conditions change to ensure that the
public employer's actual costs fairly match the actual
demographic and performance characteristics that then exist and
as reasonably anticipated with the system's fund and membership;
and
Whereas based on the review by the Legislative Assembly of the
Public Employees Retirement System's plan as a whole, the
Legislative Assembly has concluded that the Public Employees
Retirement Board's administration of its authority to establish
actuarial equivalency factors from time to time does not (a)
ensure that the system is run on a sound actuarial basis, (b)
conform to the Legislative Assembly's intent that benefits paid
represent actuarial equivalencies, (c) sufficiently conform to
the Legislative Assembly's direction to balance the interests of
the public employer and the public employee and (d) constitute
the best process available that is consistent with the board's
fiduciary duties; and
Whereas this 2003 Act is intended to redirect the board's
future administration of its authority to establish actuarial
equivalency factors, define the process by which actuarial
equivalency factors are to be reviewed and changed over time, and
set a benchmark for when and how those changes are to occur to
Enrolled House Bill 2004 (HB 2004-C) Page 1
ensure that the system operates using accurate factors that fully
comply with the statutory requirements and, in addition, to
ensure that these factors continue to reflect future changes in
the fund and the system; now, therefore,
Be It Enacted by the People of the State of Oregon:
SECTION 1. { + Sections 2, 3 and 4 of this 2003 Act are added
to and made a part of ORS chapter 238. + }
SECTION 2. { + (1) Once every two calendar years, the Public
Employees Retirement Board shall adopt actuarial equivalency
factor tables for the purpose of computing the payments to be
made to members and their beneficiaries, alternate payees and
judge members and their spouses and beneficiaries. The tables may
be adopted in conjunction with the system evaluation required by
ORS 238.605. Tables adopted under this section must use the best
actuarial information on mortality available at the time the
board adopts the tables, as provided by the actuary engaged by
the board. Actuarial equivalency factor tables adopted under this
section become effective on January 1 of the calendar year
following adoption of the tables by the board. All computations
of payments must use the actuarial equivalency factor tables that
are in effect on:
(a) The effective date of retirement for any member, judge
member or alternate payee;
(b) The date that the first payment is due for any death
beneficiary; or
(c) The date that the first payment is due for any
recalculation of payments that is not attributable to error,
including but not limited to recalculations under ORS 238.465
(2).
(2) The board may not defer or delay implementation of the
actuarial equivalency factor tables adopted under this
section. + }
SECTION 3. { + The Public Employees Retirement Board shall
first adopt actuarial equivalency factor tables under section 2
of this 2003 Act to become effective January 1, 2005. + }
SECTION 4. { + (1) Subject to subsections (2) and (3) of this
section, for the purpose of computing the retirement allowance of
members and alternate payees with effective dates of retirement
on or after July 1, 2003, and before January 1, 2005, the Public
Employees Retirement Board shall use actuarial equivalency factor
tables that are based on the mortality assumptions adopted by the
board on September 10, 2002.
(2) The retirement allowance of any member or alternate payee
who has an effective date of retirement on or after July 1, 2003,
shall be the higher of the following amounts:
(a) The amount calculated for the retirement allowance selected
by the member under ORS 238.300, 238.305, 238.320 or 238.325
determined as of the member's or alternate payee's effective date
of retirement using actuarial equivalency factor tables in effect
on the effective date of retirement for the purpose of all
calculations using actuarial equivalency factor tables; or
(b) The amount calculated under subsection (3) of this section.
(3) For each member or alternate payee described in subsection
(2) of this section, the board shall establish an account balance
as of June 30, 2003. The account balance shall include all
employee contributions made by or on behalf of the member as of
June 30, 2003, and earnings on those contributions as of June 30,
2003, credited in the manner provided by board rules in effect on
Enrolled House Bill 2004 (HB 2004-C) Page 2
the effective date of this 2003 Act governing crediting of
earnings upon retirement of a member. The board shall then
calculate the retirement allowance selected by the member under
ORS 238.300, 238.305, 238.320 or 238.325, except that:
(a) The board shall use the actuarial equivalency factor tables
in effect on June 30, 2003, for the purpose of all calculations
using actuarial equivalency factor tables; and
(b) The board shall use the account balance established by the
board under this subsection for the member as of June 30, 2003.
(4) The board need not perform the calculations described in
subsections (2) and (3) of this section for a member if the board
actuarially determines that one of the calculations described in
subsection (2) or (3) of this section necessarily provides the
highest amount.
(5) Any monthly payments to be made to a death beneficiary
under ORS 238.390, 238.395 or 238.405 for a member who dies on or
after the effective date of this 2003 Act shall be calculated
using the actuarial equivalency factor tables that are in effect
on the date that the first payment is due to the death
beneficiary. + }
SECTION 5. { + (1) Exclusive jurisdiction is conferred on the
Supreme Court to determine in the manner provided by this section
whether the implementation of actuarial equivalency factor tables
under section 2 or 4 of this 2003 Act breaches any contract
between members of the Public Employees Retirement System and
their employers, or violates any constitutional provision,
including but not limited to impairment of contract rights of
members of the Public Employees Retirement System under section
21, Article I of the Oregon Constitution, or clause 1, section
10, Article I of the United States Constitution.
(2) Under the jurisdiction conferred in subsection (1) of this
section, any person aggrieved by the implementation of actuarial
equivalency factor tables under section 2 or 4 of this 2003 Act
may petition the Supreme Court for relief. The petition must
state the facts showing how the petitioner is aggrieved and the
grounds upon which the petition is based. The Supreme Court shall
give priority on its docket to a petition for relief filed under
this section and shall expedite a decision on the petition. Any
and all petitions filed under this section alleging a similar
basis or bases of challenge may be consolidated by the Supreme
Court upon its own motion.
(3) A person petitioning for relief under this section is not
required to exhaust administrative remedies or file in any other
court.
(4) A petition for relief under this section must be filed
before August 15, 2003.
(5) A petition for relief under this section must present a
justiciable controversy. The petitioner must serve a copy of the
petition on the Attorney General.
(6) Any public employer participating in the Public Employees
Retirement System may intervene in any proceeding commenced under
this section.
(7) If the Supreme Court determines that factual determinations
are necessary for resolution of a proceeding commenced under this
section, the Supreme Court may appoint a special master to hear
evidence and prepare proposed findings of fact. If the Supreme
Court appoints a special master, the court shall allow the
parties to conduct discovery under ORCP 36 to 46.
(8) A petition under this section is the exclusive means of
determining whether the implementation of actuarial equivalency
Enrolled House Bill 2004 (HB 2004-C) Page 3
factor tables under section 2 or 4 of this 2003 Act breaches any
contract between members of the Public Employees Retirement
System and their employers, or violates any constitutional
provision, including but not limited to impairment of contract
rights of members of the Public Employees Retirement System under
section 21, Article I of the Oregon Constitution, or clause 1,
section 10, Article I of the United States Constitution. + }
SECTION 6. { + Section 7 of this 2003 Act is added to and made
a part of ORS chapter 238. + }
SECTION 7. { + (1) The Public Employees Retirement Board shall
conduct a study of the life expectancy of members of the Public
Employees Retirement System in the categories described in
subsection (2) of this section. If the board determines that
members in the categories described in subsection (2) of this
section have a life expectancy that is substantially shorter than
the life expectancy of members of the system generally, the board
shall adopt and use separate actuarial equivalency factor tables
under section 2 of this 2003 Act for the purpose of computing the
payments to be made to members in the categories described in
subsection (2) of this section and to the beneficiaries and
alternate payees of those members. Any actuarial equivalency
factor tables adopted under this section shall first become
effective January 1, 2005.
(2) The provisions of this section apply to members of the
system who are defined as firefighters under ORS 238.005 (9) or
as police officers under ORS 238.005 (16)(a), (b), (d), (e), (f),
(L), (n), (o) or (p). + }
SECTION 8. ORS 238.630 is amended to read:
238.630. (1) The governing authority of the system shall be a
board known as the Public Employees Retirement Board and
consisting of 12 members appointed by the Governor subject to
confirmation by the Senate in the manner provided in ORS 171.562
and 171.565. Except as otherwise provided in ORS 238.640, the
term of each member shall be three years.
(2) The board shall have:
(a) The powers and privileges of a corporation, including the
right to sue and be sued in its own name as such board; and
(b) The power and duty, subject to the limitations of this
chapter, of managing the system.
(3) The board:
(a) Shall, at its first meeting each year, designate one of its
members to serve as chair of the board for the remainder of the
year and until a successor is designated and takes that office;
(b) Shall arrange for actuarial service for the system;
(c) Shall employ a director;
(d) Shall create such other positions as it deems necessary to
sound and economical administration of the system, which
positions the director shall fill by appointment;
(e) Shall, with the approval of the Director of the Oregon
Department of Administrative Services, and as otherwise provided
by law, fix the salaries of all persons employed for purposes of
administering the system;
(f) Shall publish and distribute to all employer and employee
members of the system an annual report including a summary of
investments of moneys in the fund, investment earnings,
significant legislative or administrative changes in the system
and other pertinent information on the operation of the system
for the preceding year;
(g) Shall determine the actuarial equivalency of optional forms
of retirement allowances and { - establish from time to
Enrolled House Bill 2004 (HB 2004-C) Page 4
time - } { + adopt + } for that purpose the necessary
{ - actuarial factors - } { + actuarial equivalency factor
tables in the manner provided by section 2 of this 2003 Act + },
which shall constitute a part of the system; and
(h) Shall adopt rules and take all actions necessary to
maintain qualification of the Public Employees Retirement System
and the Public Employees Retirement Fund as a qualified
governmental retirement plan and trust under the Internal Revenue
Code and under regulations adopted pursuant to the Internal
Revenue Code. Rules under this paragraph may impose limits on
contributions to the system, limits on benefits payable from the
system and other limitations or procedures required or imposed
under federal law or regulation for the purpose of qualification
of the Public Employees Retirement System and Public Employees
Retirement Fund under the Internal Revenue Code as a governmental
retirement plan and trust.
(4) The board established by this section shall succeed to all
the duties and prerogatives of the Public Employees Retirement
Board created by chapter 401, Oregon Laws 1945, in relation to
the Public Employees Retirement Fund, and in addition shall
perform all duties required of it by ORS 237.950 to 237.980, in
regard to moneys payable to or from such fund.
(5) The board shall identify by rule those records that must be
maintained by participating public employers for the purposes of
subsection (3)(h) of this section. A participating public
employer shall maintain records for all employees who are members
of the system as required by board rules, and shall provide that
information to the board upon request.
SECTION 9. { + Notwithstanding any other law, the amount of
$5,098,863 is established for the biennium beginning July 1,
2003, as the maximum limit for payment of expenses from fees,
moneys or other revenues, including Miscellaneous Receipts, but
excluding lottery funds and federal funds, collected or received
by the Public Employees Retirement System, for purposes of
implementing the provisions of this 2003 Act. + }
SECTION 10. { + The Public Employees Retirement Board shall
recalculate the contribution rates of all public employers that
participate in the Public Employees Retirement System to reflect
changes in those rates attributable to this 2003 Act and
attributable to any other law enacted by the Seventy-second
Legislative Assembly that affects contribution rates of
participating public employers. The board shall issue revised
contribution rate orders to participating public employers within
90 days after the regular session of the Seventy-second
Legislative Assembly adjourns sine die. Revised rate orders
issued under this section are effective July 1, 2003. + }
SECTION 11. { + This 2003 Act being necessary for the
immediate preservation of the public peace, health and safety, an
emergency is declared to exist, and this 2003 Act takes effect on
its passage. + }
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Enrolled House Bill 2004 (HB 2004-C) Page 5
Passed by House February 27, 2003
Repassed by House May 6, 2003
...........................................................
Chief Clerk of House
...........................................................
Speaker of House
Passed by Senate May 2, 2003
...........................................................
President of Senate
Enrolled House Bill 2004 (HB 2004-C) Page 6
Received by Governor:
......M.,............., 2003
Approved:
......M.,............., 2003
...........................................................
Governor
Filed in Office of Secretary of State:
......M.,............., 2003
...........................................................
Secretary of State
Enrolled House Bill 2004 (HB 2004-C) Page 7