Chapter 317 Oregon Laws 1999

Session Law

AN ACT

SB 361

Relating to public employee retirement; creating new provisions; amending ORS 236.620, 238.005, 238.095, 238.145, 238.265, 238.305, 238.325, 238.410, 238.415, 238.420, 238.440, 238.535, 238.545, 238.565, 238.580, 238.600, 238.650, 238.660 and 526.052; repealing ORS 238.620 and 238.625; appropriating money; and declaring an emergency.

WRITTEN PLAN DOCUMENT REQUIREMENT

Be It Enacted by the People of the State of Oregon:

SECTION 1. ORS 238.650 is amended to read:

238.650. (1) Subject to the limitations of this chapter, the [board] Public Employees Retirement Board shall, from time to time, establish rules for transacting its business and administering the system in accordance with the requirements of ORS 183.310 to 183.550.

(2) All rules adopted by the board become part of the written plan document of the Public Employees Retirement System for the purpose of the status of the 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.

EXCLUSION OF EMPLOYER OR EMPLOYEE FROM SYSTEM

SECTION 2. Section 3 of this 1999 Act is added to and made a part of ORS chapter 238.

SECTION 3. Notwithstanding any other provision of law, the Public Employees Retirement Board may deny or terminate participation by an employer in the Public Employees Retirement System, and may deny or terminate membership in the system for any employee, if the board determines that allowing participation by the employer or membership for the employee would cause the system or the Public Employees Retirement Fund to lose qualification as a qualified governmental retirement plan and trust under the Internal Revenue Code and under regulations adopted pursuant to the Internal Revenue Code.

SECTION 4. ORS 236.620 is amended to read:

236.620. (1) A public employer who receives a transferred employee under ORS 236.610 (1), including an employee whose transfer is provided for by an agreement under ORS 190.010, shall place that employee on its employee roster, subject to the following:

[(1)] (a) If the employee was serving a probationary period with the employer at the time of transfer, the past service of the employee on probation shall apply on the regular probation requirements of the receiving employer.

[(2)] (b) Notwithstanding any other provision of law applicable to a retirement system for employees of the prior employer or of the receiving employer, but subject to subsection (2) of this section, the employee at the option of the employee may elect to continue for 12 months under any retirement system in which the employee was participating prior to transfer or, if the employee meets the qualifications therefor, the employee may elect to participate in the retirement system available to employees of the receiving employer. The employee's election shall be in writing and made within 30 days after the date of transfer. If the employee elects to continue under the retirement system in which the employee was participating prior to transfer, the employee shall retain all rights and be entitled to all benefits under that system, the employee shall continue to make contributions to that system and the receiving employer shall make contributions on behalf of the employee to that system as required of employers participating in that system, as if the transfer had not occurred.

[(3)] (c) The employee shall retain the seniority the employee accrued under prior employment, but no regular employee of the receiving employer shall be demoted or laid off by reason of that seniority at the time the transfer occurs. Thereafter, the employee's seniority from the transferring employer shall be regarded as seniority acquired under the receiving employer.

[(4)] (d) The employee otherwise shall enjoy the same privileges, including benefits, hours and conditions of employment, and be subject to the same regulations as other employees of the receiving employer.

(2) The Public Employees Retirement Board may terminate membership in the Public Employees Retirement System for any transferred employee if the board determines that allowing membership for the employee would cause the system or the Public Employees Retirement Fund to lose qualification as a qualified governmental retirement plan and trust under the Internal Revenue Code and under regulations adopted pursuant to the Internal Revenue Code.

PROHIBITION ON

IN-SERVICE DISTRIBUTIONS

SECTION 5. ORS 238.265 is amended to read:

238.265. [In the event that an employee who is a member of the system and 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 employee may withdraw from the fund the amount credited to the employee's account; provided that the notice of separation, withdrawal request, and notice of employment, if applicable, shall be transmitted forthwith to the Public Employees Retirement System by the employer or employee, and the Public Employees Retirement System may deny or shall recover such withdrawal in favor of the employee unless the employee continues to remain absent from the payroll of any participating employer for a calendar month following the month in which the employee separates from service. Such withdrawal shall cancel all membership rights in the Public Employees Retirement System, including the right to claim credit for any employments prior to withdrawal. If such employee has contributed to the fund in each of five calendar years and terminates before reaching earliest service retirement age, the employee may, before reaching earliest service retirement age, elect to withdraw the employee's account balance in the fund. Failing to make such election, there shall be paid the benefits or retirement allowances described in ORS 238.425.]

(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 employee account 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 employee account balance 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 employee account balance 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 the employee account balance under this section cancels all membership rights in the system, including the right to claim credit for any employment before withdrawal.

SECTION 5a. ORS 238.440 is amended to read:

238.440. (1) A police officer or firefighter who is a member of the system may elect to make additional contributions to the fund to purchase increased benefits between the date of retirement and age 65. The rate of additional contribution shall be determined by the actuary, dependent upon the age of the police officer or firefighter at the date of election, so as to provide monthly payments on the basis of $10 per unit of benefits purchased. No police officer or firefighter may elect to purchase more than eight units. For each $10 unit purchased by the police officer or firefighter, the employer shall purchase an equal $10 unit. A police officer or firefighter who is retained until age 65 shall receive a lump sum refund of the additional contributions made toward units purchased, plus interest thereon, but shall receive no benefits from the additional contributions by the employer for such units. If a police officer or firefighter retires after age 60 but prior to age 65, the units purchased by additional contributions shall provide increased monthly benefits based on life expectancy, but the matching units purchased by the employer shall not, regardless of age, exceed $10 per month per unit purchased by the police officer or firefighter. If a police officer or firefighter is absent from the employment of a participating employer for any reason and because of such absence is unable to make monthly additional contributions, the benefits provided under this section shall be actuarially reduced upon the retirement of the police officer or firefighter.

(2) Notwithstanding subsection (1) of this section, a police officer or firefighter who retires prior to age 60 may apply for and receive an actuarially reduced unit income commencing at any date between the date of early retirement and age 60, with monthly benefits payable for at least 60 months or any other monthly formula in excess of 60 months but always terminating by age 65. Such a police officer or firefighter may elect to pay in a lump sum within the 60 days immediately preceding early retirement the contribution that the police officer or firefighter would have made to the unit income account had the police officer or firefighter worked to age 60.

(3) Any police officer or firefighter who elects to make additional contributions to purchase increased benefits may elect at any time before termination to cancel such election[, and upon such cancellation shall withdraw all additional contributions made]. Having once canceled such election, no police officer or firefighter shall be again permitted to make additional contributions.

(4) The additional contributions made by the police officer or firefighter under this section shall be refunded to the police officer or firefighter only when:

(a) The member is separated from all service with participating public employers; and

[(4)] (5) A police officer or firefighter who has elected to make additional contributions under this section and who transfers to employment in which not entitled to make such additional contributions may retain the account established under subsection (1) of this section for five years immediately following such transfer by not requesting a withdrawal. If, at the end of the five-year period, the police officer or firefighter has not reached age 50, or has not returned to employment in which entitled to make additional contributions under this section, the election shall be canceled and the amount of the account established under subsection (1) of this section shall be refunded to the police officer or firefighter.

[(5)] (6) Any election to make additional contributions under this section and any cancellation of such election shall be submitted to the employer and to the board in writing.

SECTION 6. ORS 238.545 is amended to read:

238.545. [(1) A judge member who has made contributions to the Public Employees Retirement Fund during each of five calendar years, who has not attained the age of 60 years and who is separated, for any reason other than death or disability, from service as a judge may elect to withdraw the amount credited to the account of the judge member in the fund. Withdrawal cancels all membership rights in the system, including the right to claim credit for service as a judge or otherwise prior to withdrawal. ORS 238.105 and 238.115 (1) apply to a former judge member who has withdrawn.]

(1) Except as otherwise provided in this section, a judge member may withdraw from the Public Employees Retirement Fund the amount credited to the employee account for the judge member if:

(a) The judge member has made contributions to the Public Employees Retirement System during each of five calendar years;

(b) The judge member is separated from all service with participating public employers;

(c) The judge 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 Public Employees Retirement System and the Public Employees Retirement Fund as a qualified governmental retirement plan and trust;

(d) The judge member has not attained 60 years of age; and

(e) The separation from service is not by reason of death or disability.

(2) If a judge member wishes to withdraw the employee account balance under this section, the judge 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 judge 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 judge member separates from service.

[(2)] (3) If a judge member who is eligible to withdraw as provided in subsection (1) of this section does not elect to withdraw, the account of the judge member in the fund shall remain to the credit of the judge member, and the judge member is entitled to such death benefits and disability retirement allowance as ORS 238.500 to 238.585 provide. Before attaining 60 years of age, a judge member who is eligible to withdraw as provided in subsection (1) of this section but who does not withdraw must elect in writing to retire under either ORS 238.535 (1)(a) or (b). The election is irrevocable after the judge member attains 60 years of age. Any inactive judge member who fails to make the election provided for in this subsection prior to attaining 60 years of age shall be retired under the provisions of ORS 238.535 (1)(a). The service retirement allowance of an inactive judge member who retires under ORS 238.535 (1)(a) shall be a reduced service retirement allowance that is the actuarial equivalent of the service retirement allowance provided for in ORS 238.535 (1)(a). An inactive judge member who elects to retire under ORS 238.535 (1)(b) must meet all other requirements imposed by ORS 238.535 for retirement under ORS 238.535 (1)(b).

[(3)] (4) If approved by the Chief Justice of the Supreme Court, an inactive judge member who elects to retire under ORS 238.535 (1)(b) pursuant to the provisions of subsection [(2)] (3) of this section may commence to serve the pro tem service obligation imposed by ORS 238.535 before the judge member's date of retirement. If the Chief Justice determines, at any time after the judge member commences performing the pro tem service obligation, that the judge member has failed to perform the pro tem services in the manner required by ORS 238.535 (1)(c), and the judge member has not been relieved of the obligation to perform those services in the manner provided by ORS 238.535 (1)(c), the Chief Justice shall notify the Public Employees Retirement Board. If the judge member has not yet retired, the board shall calculate the service retirement allowance of the noncomplying judge member at the time of retirement in the manner provided by ORS 238.535 (1)(a). If the judge member has retired, the board shall recalculate the service retirement allowance of the noncomplying judge member in the manner provided by ORS 238.535 (1)(a), and the noncomplying judge member shall receive only that recalculated amount thereafter. An inactive judge member may be relieved of the pro tem service obligation imposed by ORS 238.535 (1)(c) in the same manner as provided in ORS 238.535 for retired judge members.

(5) Withdrawal of the employee account balance under this section cancels all membership rights in the system, including the right to claim credit for any employment before withdrawal.

(6) ORS 238.105 and 238.115 (1) apply to a former judge member who has withdrawn the employee account balance under this section.

SECTION 7. ORS 238.095 is amended to read:

238.095. (1) An employee shall cease to be a member of the Public Employees Retirement System[:] if the employee withdraws the employee account balance in the manner provided by ORS 238.265.

[(1) In the event that during any absence from such service the employee withdraws the amount credited to the account of the employee in the fund; or]

(2) [In the event that] Except as provided in subsection (3) of this section, an employee shall cease to be a member of the system if the employee is absent from the service of all employers participating in the system for a total of more than five consecutive years after the employee becomes a member of the system[, except that any school district employee who completes a school year, who is then absent the next five school years but returns to school employment at the beginning of the sixth school year, or reaches earliest service retirement age prior to the beginning of the sixth school year, is deemed to have retained membership in the system. This subsection shall be deemed to have been in effect since the inception of the system].

(3) A school district employee shall not cease to be a member of the system under subsection (2) of this section if:

(a) After completing a school year, the member is absent from the service of all employers participating in the system for the next following five school years; and

(b) The member either returns to school employment at the beginning of the sixth school year, or reaches earliest service retirement age before the beginning of the sixth school year.

(4) Interest shall not accrue on the amount in the employee account of the former member from the date that membership is terminated under subsection (2) of this section. The Public Employees Retirement Board shall pay the amount in an employee account for a former member upon the termination of the membership of the former member under subsection (2) of this section if 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.

DIVERSION OF TRUST FUNDS PROHIBITED

SECTION 8. ORS 238.660 is amended to read:

238.660. (1) The Public Employees Retirement Fund is declared to be a trust fund, separate and distinct from the General Fund, for the uses and purposes set forth in this chapter and ORS 237.950 to 237.980, and for no other use or purpose, except that this provision shall not be deemed to amend or impair the force or effect of any law of this state specifically authorizing the investment of moneys from the fund. Interest earned by the fund shall be credited to the fund. Except as otherwise specifically provided by law, the Public Employees Retirement Board established by ORS 238.630 is declared to be the trustee of the fund.

(2) Until all liabilities to members and their beneficiaries are satisfied, assets of the fund may not be diverted or otherwise put to any use that is not for the exclusive benefit of members and their beneficiaries. This subsection does not limit return of employer contributions for health benefits in the manner provided by ORS 238.410, 238.415 and 238.420 upon satisfaction of all liabilities for health benefits under those sections.

[(2)] (3) The State of Oregon and other public employers that make contributions to the fund have no proprietary interest in the fund or in the contributions made to the fund by them. The state and other public employers disclaim any right to reclaim those contributions and waive any right of reclamation they may have in the fund. This subsection does not prohibit alteration or refund of employer contributions if the alteration or refund is authorized under this chapter and is due to erroneous payment or decreased liability for employer contributions under the system.

[(3)] (4) The board may accept gifts of money or other property from any source, given for the uses and purposes of the system. Money so received shall be paid into the fund. Money or other property so received shall be used for the purposes for which received. Unless otherwise prescribed by the source from which the money or other property is received, the money shall be considered as income of the fund and the other property shall be retained, managed and disposed of as are investments of the fund.

[(4)] (5) All moneys paid into the fund shall be deposited with the State Treasurer, who shall be custodian of the fund and pay all warrants drawn on it in compliance with law. No such warrant shall be paid until the claim for which it is drawn is first approved by the director or designee and otherwise audited and verified as required by law. Monthly, each beneficiary's gross benefit shall be calculated; applicable deductions made for taxes, insurance and other withholdings; and the net amount paid to the beneficiary, by check or by electronic funds transfer (EFT) to the beneficiary's bank. A deduction summary shall be made, by type, and a check issued for the aggregate of each type for transmittal to the appropriate taxing jurisdiction, vendor or institution. A voucher shall be prepared and transmitted to the Oregon Department of Administrative Services for reimbursement of the checking account, and the department shall draw a warrant on the State Treasurer, payable to the Public Employees Retirement System, for the amount thereof.

[(5)] (6) Any warrant, check or order for the payment of benefits or refunds under the system out of the fund issued by the board which is canceled, declared void or otherwise made unpayable pursuant to law because it is outstanding and unpaid for a period of more than two years, may be reissued by the board without bond if the payee is located after such warrant, check or order is canceled, declared void or otherwise made unpayable pursuant to law.

[(6)] (7) The board shall provide for an annual audit of the retirement fund and for an annual report to the Legislative Assembly and to all members of, retirees of, and all employers participating in, the system. The annual report must contain financial statements prepared in accordance with generally accepted accounting principles. The financial statements must include the report of any independent auditor.

RIGHTS OF MEMBERS

UPON TERMINATION OF SYSTEM

SECTION 9. ORS 238.600 is amended to read:

238.600. (1) A system of retirement and of benefits at retirement or death for employees of public employers hereby is established and shall be known as the Public Employees Retirement System. Any similar system being operated by a public employer on April 8, 1953, may be integrated into this system as hereinafter provided.

(2) If the Public Employees Retirement System is terminated, or if contributions may no longer be made to the system, each member of the system has a nonforfeitable right to the benefits that the member has accrued as of the date of the termination, or as of the date that contributions may no longer be made to the system, to the extent that those benefits are funded.

MINIMUM REQUIRED DISTRIBUTIONS

SECTION 10. ORS 238.305 is amended to read:

238.305. (1) At any time after establishing membership, but within 60 days after the date of the first benefit payment, a person who is a member of the system may elect to convert the allowance described by ORS 238.300 as payable after retirement into a service retirement annuity of equivalent actuarial value of one of the optional forms named below. The election of Option 2, 2A, 3 or 3A shall be effective immediately upon the member's retirement.

Option 1. (a) A life annuity (nonrefund) payable during the member's life only, which shall be the actuarial equivalent of accumulated contributions by the member and interest thereon credited at the time of retirement (if death occurs before the first payment is due, the account shall be treated as though death had occurred before retirement); (b) a life pension (nonrefund) provided by the contributions of employers as provided in ORS 238.300 (2); (c) an additional nonrefund pension for prior service, 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 prior service contributions of the employer or, in case the member is an employee of a school district, by a uniform rate of contribution by all school districts; or

Option 2. A reduced service retirement allowance payable during the member's life, with the provision that it continue after death for the life of the beneficiary the member nominates by written designation duly acknowledged and filed with the Public Employees Retirement Board at the time of election, should the beneficiary survive the member; or

Option 2A. A reduced service retirement allowance payable during the member's life which, unless modified under subsection (5) of this section, continues after death for the life of the beneficiary the member nominates by written designation duly acknowledged and filed with the board at the time of election, should the beneficiary survive the member; or

Option 3. A reduced service retirement allowance payable during the member's life, with the provision that it continue after death at one-half the rate paid to the member and be paid for the life of the beneficiary the member nominates by written designation duly acknowledged and filed with the board at the time of election, should the beneficiary survive the member; or

Option 3A. A reduced service retirement allowance payable during the member's life which, unless modified under subsection (5) of this section, continues after death at one-half the rate paid to the member and is paid for the life of the beneficiary the member nominates by written designation duly acknowledged and filed with the board at the time of election, should the beneficiary survive the member; or

Option 4. A reduced service retirement allowance payable during the member's life, with the provisions that if the member dies before a total of 180 monthly payments is made, the remainder of the 180 monthly payments shall be paid monthly to the beneficiary the member nominates by written designation duly acknowledged and filed with the board at any time before the member's death; and that if the member designates no beneficiary to receive the monthly payments or no such beneficiary is able to receive the monthly payments, an amount equal to the actuarial value, on the date of the member's death, of the total of the monthly payments not made to the member shall be paid according to ORS 238.390 for disposal of an amount credited to the account of a member at the time of death; and that if the beneficiary receiving monthly payments dies before the total number of monthly payments to which the beneficiary is entitled is made, an amount equal to the actuarial value, on the date of the beneficiary's death, of the total of the monthly payments not made to the member and beneficiary shall be paid according to ORS 238.390 for disposal of an amount credited to the account of a member at the time of death and as if the beneficiary had been a member.

(2) At any time after establishing membership, but within 60 days after the date of the first benefit payment, a person who is a member of the system may elect, in lieu of the allowance described by ORS 238.300 as payable after retirement, a service retirement benefit consisting of:

(a) A refund of accumulated contributions by the member and interest thereon credited at the time of refund; and

(b) A life pension (nonrefund) provided by the contributions of employers as provided in ORS 237.147 (2) (1979 Replacement Part), and an additional life pension (nonrefund) for prior service as provided in ORS 238.300 (3). At the same time as making the election under this subsection, the member may elect to convert the pensions described by this paragraph into a service retirement annuity of equivalent actuarial value of one of the optional forms named as Option 2, 2A, 3 or 3A under subsection (1) of this section.

(3) If the member elects to receive the service retirement benefit described in subsection (2) of this section, the member shall elect at the same time to receive the refund described in subsection (2)(a) of this section in one lump sum payment or in more than one but not more than five installment payments. If the member elects installment payments:

(a) The installment payments shall be paid once each year for the number of consecutive years equal to the number of installment payments elected.

(b) The amount of each installment payment shall be designated by the member at the time of making the election, but the last installment payment shall be the unrefunded balance remaining in the individual account of the member in the Public Employees Retirement Fund.

(c) The individual account of the member in the fund shall be maintained until the last installment payment is paid. The board shall establish procedures for computing and crediting interest annually on the unrefunded balance of the account.

(d) A yearly installment payment shall be paid on the anniversary of the date of the first installment payment.

(e) The member is considered to have elected to transfer any balance in the account of the member in the Variable Annuity Account to the individual account of the member in the fund.

(f) If the member dies before payment of all installment payments, the unrefunded balance in the individual account of the member in the fund plus interest to date of disbursement is payable as provided in ORS 238.390 (5).

(4) The designation of a beneficiary, the election of an option or any other election or designation under subsection (1), (2) or (3) of this section may be changed by the member within 60 days after the date of the first benefit payment, except that the designation of a beneficiary under Option 4 may be changed by the member at any time before the member's death.

(5) If a retired member has elected to receive a service retirement allowance under Option 2A or Option 3A as provided in subsection (1) of this section, and if the beneficiary under that option dies after the expiration of the time within which the member could change the election of an option or if the beneficiary is the spouse of the member and the marriage relationship is terminated as provided by law after the expiration of the time within which the member could change the election of an option, the member may elect to receive, in lieu of the optional form of allowance previously elected, the allowance that the member would have received on the effective date of retirement under Option 1 as provided in subsection (1) of this section and adjusted by the actual amount of any cost of living or other post-retirement adjustments made to the original allowance since the effective date of retirement. Notice of election under this subsection shall be in a form approved by the board. Payment under Option 1 shall be effective for months beginning on or after the date the board receives the election.

(6) Notwithstanding any other provision of this section, any member of the system who retired before October 3, 1989, and elected to receive a service retirement allowance under either Option 2 or 3 as provided in subsection (1) of this section shall be entitled to receive a service retirement allowance equal to that which the member would have received on the effective date of retirement under Option 1 as provided in subsection (1) of this section and adjusted by the actual amount of any cost of living or other post-retirement adjustments made to the original allowance since the effective date of retirement if:

(a) The member has attained 80 years of age;

(b) The person designated by the member as the member's beneficiary has predeceased the member; and

(7) Notwithstanding any other provision of this section, any member of the system who retired before October 3, 1989, who elected to receive a refund of accumulated employee contributions and a life pension or pensions under subsection (2) of this section, and who elected to convert the life pension or pensions provided for in subsection (2) of this section into a service retirement annuity under Option 2 or 3 under subsection (1) of this section, shall be entitled to receive a life pension or pensions equal to that which the member would have received on the effective date of retirement under subsection (2) of this section and adjusted by the actual amount of any cost of living or other post-retirement adjustments made to the original life pension or pensions since the effective date of retirement if:

(a) The member has attained 80 years of age;

(b) The person designated by the member as the member's beneficiary has predeceased the member; and

(8) The service retirement allowance provided in subsection (6) or (7) of this section shall be applicable to the first full month after the death of the member's beneficiary, or the first full month after the member attains 80 years of age, whichever is later.

(9) The board may deny an election to convert a service retirement allowance under this section, a change of beneficiary under this section or a change in benefit options under this section if that denial is required to maintain the status of the 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.

SECTION 11. ORS 238.325 is amended to read:

238.325. (1) At any time after establishing membership, but before the expiration of 90 days after the board makes its finding that the employee is disabled, an employee who is a member of the system may elect to convert the disability retirement allowance otherwise payable on the account of the employee into a disability retirement annuity of equivalent actuarial value, by selecting one of the optional forms named below. The election of Option 2, 2A, 3 or 3A shall be effective immediately upon the effective date of the member's disability, and in the event of death within the first 90-day period of incapacity, payment to the beneficiary of the member shall be made in accordance with the option selected.

Option 1. (a) A life annuity (nonrefund) payable during the member's life only, which shall be the actuarial equivalent of the accumulated contributions and interest thereon credited to the member at the time the member retires (if death occurs before the first payment is due, the account shall be treated as though death had occurred before retirement); (b) a life pension (nonrefund) provided by the contributions of employers as provided in ORS 238.320 (1)(b); (c) an additional nonrefund pension for prior service, 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 prior service contributions of the employer or, in case the member is an employee of a school district, by a uniform rate of contribution by all school districts; or

Option 2. A reduced disability retirement allowance payable during the period of incapacity, with the provision that after death, if death shall occur after the effective date of the disability and during the period of incapacity, it shall continue for the life of the beneficiary whom the member has designated in writing duly acknowledged and filed with the Public Employees Retirement Board at the time of election, should the beneficiary survive the member; or

Option 2A. A reduced disability retirement allowance payable during the period of incapacity which, unless modified under subsection (3) of this section, continues after death, if death shall occur after the effective date of the disability and during the period of incapacity, for the life of the beneficiary whom the member nominates by written designation duly acknowledged and filed with the board at the time of election, should the beneficiary survive the member; or

Option 3. A reduced disability retirement allowance payable during the period of incapacity, with the provision that after death, if death shall occur after the effective date of the disability and during the period of incapacity, such allowance shall continue at one-half the rate paid to the member and be paid for the life of the beneficiary whom the member has designated in writing duly acknowledged and filed with the board at the time of election, should the beneficiary survive the member; or

Option 3A. A reduced disability retirement allowance payable during the period of incapacity which, unless modified under subsection (3) of this section, continues after death, if death shall occur after the effective date of the disability and during the period of incapacity, at one-half the rate paid to the member and is paid for the life of the beneficiary whom the member nominates by written designation duly acknowledged and filed with the board at the time of election, should the beneficiary survive the member; or

Option 4. A reduced disability retirement allowance payable during the period of incapacity, with the provisions that if the member dies during the period of incapacity and before a total of 180 monthly payments is made, the remainder of the 180 monthly payments shall be paid monthly to the beneficiary the member nominates by written designation duly acknowledged and filed with the board at any time before the member's death; and that if the member designates no beneficiary to receive the monthly payments or no such beneficiary is able to receive the monthly payments, an amount equal to the actuarial value, on the date of the member's death, of the total of the monthly payments not made to the member shall be paid according to ORS 238.390 for disposal of an amount credited to the account of a member at the time of death; and that if the beneficiary receiving monthly payments dies before the total number of monthly payments to which the beneficiary is entitled is made, an amount equal to the actuarial value, on the date of the beneficiary's death, of the total of the monthly payments not made to the member and beneficiary shall be paid according to ORS 238.390 for disposal of an amount credited to the account of a member at the time of death and as if the beneficiary had been a member.

(2) The beneficiary designated by a member to receive any benefit under this section shall be the same as designated under ORS 238.390 (1). The designation of a beneficiary or the election of an option may be changed by a member within 60 days after the date of the first benefit payment, except that the designation of a beneficiary under Option 4 may be changed by the member at any time before the member's death.

(3) If a retired member has elected to receive a service retirement allowance under Option 2A or Option 3A as provided in subsection (1) of this section, and if the beneficiary under that option dies after the expiration of the time within which the member could change the election of an option or if the beneficiary is the spouse of the member and the marriage relationship is terminated as provided by law after the expiration of the time within which the member could change the election of an option, the member may elect to receive, in lieu of the optional form of allowance previously elected, the allowance that the member would have received on the effective date of retirement under Option 1 as provided in subsection (1) of this section and adjusted by the actual amount of any cost of living or other post-retirement adjustments made to the original allowance since the effective date of retirement. Notice of election under this subsection shall be in a form approved by the board. Payment under Option 1 shall be effective for months beginning on or after the date the board receives the election.

(4) The cost to the retirement system of a disability retirement allowance in any optional form shall not exceed the cost to the retirement system of a nonrefund disability retirement allowance payable to, and on account of, the member making such election.

(5) The obligation for payment of any benefit in force prior to April 8, 1953, shall not be altered by subsections (1) to (4) of this section. However, the beneficiary of a retired member who prior to July 1, 1953, elected an option but died prior to the effective date of such election, shall have a right to repay, before December 31, 1953, the amount of the lump sum refund made in lieu of the monthly life benefit elected and receive payment of such benefit, computed as of the date of the member's death and payable from such date.

(6) If a member who would have qualified for disability benefits makes preliminary application for such benefits but dies prior to being found by the board to be disabled or prior to electing a plan of benefit payments, and the records of the board indicate that the member had designated the surviving spouse as beneficiary under ORS 238.390 (1), such surviving spouse may, not more than 90 days after the board makes its finding that the member would have qualified for disability benefits if living:

(a) Elect to receive the amount referred to in ORS 238.395 if such benefit would have been available if the member had not applied for disability benefits; or

(b) If not eligible for benefits under ORS 238.395, elect to receive benefits under ORS 238.390 (1); or

(c) Elect Option 2 or 3 under subsection (1) of this section and designate the surviving spouse as beneficiary thereunder with the same force and effect as if the election and designation had been properly made by the deceased member.

(7) The board may deny an election to convert a disability retirement allowance under this section, a change of beneficiary under this section or a change in benefit options under this section if that denial is required to maintain the status of the 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.

LIMITATIONS ON OPTIONAL RETIREMENT CREDIT PURCHASES

SECTION 12. ORS 238.145 is amended to read:

238.145. (1) A member of the system employed as a police officer or firefighter shall be entitled to receive retirement credit as provided in subsection [(2)] (3) of this section if:

(a) The member was employed by a public employer as a police officer or firefighter prior to becoming a member of the system;

(b) The public employer that had previously employed the member was not a participant in the system at the time the member was in the service of that public employer; and

(2) In addition to the requirements of subsection (1) of this section, if the member first becomes a member of the system on or after January 1, 2000, as described in subsection (5) of this section, the member must have been a member of the system for at least 60 calendar months at the time the purchase is made.

[(2)] (3) Except as provided in subsection (4) of this section, a member of the system employed as a police officer or firefighter who meets the requirements of [subsection (1) of] this section shall be entitled to receive retirement credit for the period of employment with a previous public employer as described in subsection (1) of this section up to a maximum of 10 years' retirement credit if the member:

(a) Applies in writing to the Public Employees Retirement Board for such retirement credit; and

(b) Pays to the board, in a lump sum, an amount representing the contributions the member and the member's employer would have made for the years for which the member seeks retirement credit calculated as though the member had received a salary for each of those years equal to the salary received by the member in the first full calendar year of employment as a police officer or firefighter within the system. In addition, the member shall pay the interest that would have accrued had the contributions been paid in the years for which the member seeks retirement credit, compounded annually. The interest shall be computed at the annual rate of eight percent. Payment of the lump sum shall be made on or before the effective date of retirement for the member. The amounts representing the contributions the member would have made and the interest on those amounts shall be credited to the account of the employee in the fund. The amounts representing the contributions the employer would have made and the interest on those amounts shall be credits to the account of the member's current participating employer.

(4) If a person first becomes a member of the system on or after January 1, 2000, as described in subsection (5) of this section, the person may not acquire more than five years of credit under this section in combination with any credit acquired under ORS 526.052 for periods of service with another employer that entitle the employee to retirement credit under a retirement plan offered by the other employer. If a person subject to limitation imposed by this subsection also is eligible for credit under under ORS 526.052, the total years of credit that may be acquired under this subsection and ORS 526.052 may not exceed five years.

(5) A person becomes a member of the system before January 1, 2000, for the purposes of this section if:

(a) The person is a member of the system on January 1, 2000; or

(b) The person was a member of the system before January 1, 2000, ceased to be a member of the system under the provisions of ORS 238.095, 238.265 or 238.545 before January 1, 2000, but restores part or all of the forfeited creditable service from before January 1, 2000, under the provisions of ORS 238.105 or 238.115 after January 1, 2000.

SECTION 13. ORS 526.052 is amended to read:

526.052. (1) For purposes of this section, "forest protective association" or "association" has the meaning for that term provided in ORS 477.001.

(2) Subject to subsection (3) of this section, a person employed by a forest protective association at a time when the association was under contract or cooperative agreement with the forester or State Board of Forestry by authority of ORS chapter 477 and this chapter, with specific reference to ORS 477.406 to 477.412, or predecessor statutes, shall receive the following credits when transferring directly from association employment to employment by the State Forestry Department:

(a) Sick leave accrual earned during employment as an association employee.

(b) Rate of accumulating annual leave based on years of service as an association employee.

(c) Credit for current service under the Public Employees Retirement System equal to periods of service as an association employee as determined by the Public Employees Retirement Board, if the person, before the effective date of retirement of the person as an employee member of the system, applies in writing to the retirement board for that credit or any part thereof and pays to the retirement board in a lump sum for credit to the account of the person in the Public Employees Retirement Fund an amount determined by the retirement board to be equal to the total amount of employee and employer contributions with interest that would have accumulated had the person been a member of the system as an employee of the State Forestry Department in a position equivalent to that held by the person for the periods of service or part thereof as an association employee.

(3) The credits granted by subsection (2) of this section shall be granted if the employee makes an immediate transfer from association employment to state employment, and if the person earned employment credits as an association employee under standards comparable to laws and rules of the State of Oregon governing similar credits in state employment.

(4) Unless the employee transferring to employment with the State Forestry Department first becomes a member of the Public Employees Retirement System before January 1, 2000, as described in subsection (6) of this section:

(a) The employee may acquire credit under subsection (2)(c) of this section only after the employee has been a member of the Public Employees Retirement System for at least 60 calendar months; and

(b) The maximum number of years of retirement credit that a person may acquire under subsection (2)(c) of this section is five years.

(5) If a person subject to the limitation imposed by subsection (4)(b) of this section is also eligible for credit under ORS 238.145, and the person is subject to the limitation imposed by ORS 238.145 (4), the total years of credit that the person may acquire under this section and under the provisions of ORS 238.145 may not exceed five years.

(6) A person becomes a member of the Public Employees Retirement System before January 1, 2000, for the purposes of this section if:

(a) The person is a member of the system on January 1, 2000; or

SECTION 14. ORS 238.620 and 238.625 are repealed.

SECTION 15. The repeal of ORS 238.620 and 238.625 by section 14 of this 1999 Act becomes operative on January 1, 2000.

HEALTH BENEFIT PROVISIONS

SECTION 16. ORS 238.410 is amended to read:

238.410. (1) As used in this section:

(a) "Carrier" means an insurance company or health care service contractor holding a valid certificate of authority from the Director of the Department of Consumer and Business Services, or two or more of those companies or contractors acting together pursuant to a joint venture, partnership or other joint means of operation.

(b) "Eligible person" means:

(A) A member of the Public Employees Retirement System who is retired for service or disability and is receiving a retirement allowance or benefit under the system, and a spouse or dependent of that member;

(B) A person who is a surviving spouse or dependent of a deceased retired member of the system or the surviving spouse or dependent of a member of the system who had not retired but who had reached earliest retirement age at the time of death;

(C) A person who is receiving retirement pay or a pension calculated under ORS 1.314 to 1.380 (1989 Edition), and a spouse or dependent of that person; or

(D) A surviving spouse or dependent of a deceased retired member of the system or of a person who was receiving retirement pay or a pension calculated under ORS 1.314 to 1.380 (1989 Edition) if the surviving spouse or dependent was covered at the time of the decedent's death by a health care insurance plan contracted for under this section.

(c) "Health care" means medical, surgical, hospital or any other remedial care recognized by state law and related services and supplies and includes comparable benefits for persons who rely on spiritual means of healing.

(2) The Public Employees Retirement Board shall conduct a continuing study and investigation of all matters connected with the providing of health care insurance protection to eligible persons. The board shall design benefits, devise specifications, invite proposals, analyze carrier responses to advertisements for proposals and do acts necessary to award contracts to provide health care insurance, including insurance that provides coverage supplemental to federal Medicare coverage, with emphasis on features based on health care cost containment principles, for eligible persons. The board is not subject to the provisions of ORS 279.005 to 279.111 in awarding contracts under the provisions of this section. The board shall establish procedures for inviting proposals and awarding contracts under this section.

(3) The board shall enter into a contract with a carrier to provide health care insurance for eligible persons for a one or two-year period. The board may enter into more than one contract with one or more carriers, contracting jointly or severally, if in the opinion of the board it is necessary to do so to obtain maximum coverage at minimum cost and consistent with the health care insurance needs of eligible persons. The board periodically shall review a current contract or contracts and make suitable study and investigation for the purpose of determining whether a different contract or contracts can and should, in the best interest of eligible persons, be entered into. If it would be advantageous to eligible persons to do so, the board shall enter into a different contract or contracts. Contracts shall be signed by the chairperson on behalf of the board.

(4) Except as provided in ORS 238.415 and 238.420, the board may deduct monthly from the retirement allowance or benefit, retirement pay or pension payable to an eligible person who elects to participate in a health care insurance plan the monthly cost of the coverage for the person under a health care insurance contract entered into under this section and the administrative costs incurred by the board under this section, and shall pay [the amount due to the carrier providing the coverage] those amounts into the Standard Retiree Health Insurance Account established under subsection (7) of this section. The board by rule may establish other procedures for collecting the monthly cost of the coverage and the administrative costs incurred by the board under this section if the board does not deduct those costs from the retirement allowance or benefit, retirement pay or pension payable to an eligible person.

(5) Subject to applicable provisions of ORS 183.310 to 183.550, the board may make rules not inconsistent with this section to determine the terms and conditions of eligible person participation and coverage and otherwise to implement and carry out the purposes and provisions of this section and ORS 238.420.

(6) The board may retain consultants, brokers or other advisory personnel, organizations specializing in health care cost containment or other administrative services when it determines the necessity and, subject to the State Personnel Relations Law, shall employ such personnel as are required to assist in performing the functions of the board under this section.

(7) The Standard Retiree Health Insurance Account is established within the Public Employees Retirement Fund, separate and distinct from the General Fund. All payments made by eligible persons for health insurance coverage provided under this section shall be held in the account. Interest earned by the account shall be credited to the account. All moneys in the account are continuously appropriated to the Public Employees Retirement Board and may be used by the board only to pay the cost of health insurance coverage under this section and to pay the administrative costs incurred by the board under this section.

(8) The sum of all amounts paid by eligible persons into the Standard Retiree Health Insurance Account, by participating public employers into the Retiree Health Insurance Premium Account under ORS 238.415, and by participating public employers into the Retirement Health Insurance Account under ORS 238.420, may not exceed 25 percent of the aggregate contributions made by participating public employers to the Public Employees Retirement Fund on or after July 11, 1987, not including contributions made by participating public employers to fund prior service credits.

(9) Until all liabilities for health benefits under the system are satisfied, contributions and earnings in the Standard Retiree Health Insurance Account, the Retiree Health Insurance Premium Account under ORS 238.415 and the Retirement Health Insurance Account under ORS 238.420 may not be diverted or otherwise put to any use other than providing health benefits and payment of reasonable costs incurred in administering this section and ORS 238.415 and 238.420. Upon satisfaction of all liabilities for providing health benefits under this section, any amount remaining in the Standard Retiree Health Insurance Account shall be returned to the participating public employers who have made contributions to the account. The distribution shall be made in such equitable manner as the board determines appropriate.

SECTION 17. ORS 238.415 is amended to read:

238.415. (1)(a) As used in this section, "eligible retired state employee" means:

(A) A retired member of the Public Employees Retirement System who was a state employee at the time of retirement, is retired for service or disability, is receiving a retirement allowance or benefit under the system, had eight years or more of qualifying service in the system at the time of retirement or is receiving a disability retirement allowance including a pension computed as if the member had eight years or more of creditable service in the system at the time of retirement, and has attained earliest service retirement age but is not eligible for federal Medicare coverage; or

(B) A person who is a surviving spouse or dependent of a deceased eligible retired state employee as provided in subparagraph (A) of this paragraph at the time of death, who:

(i) Is receiving a retirement allowance or benefit under the system; or

(ii) Was covered at the time of the eligible retired state employee's death by the retired employee's health insurance contracted for under ORS 238.410, and the employee retired on or after September 29, 1991.

(b) For purposes of this section, "qualifying service" means creditable service in the system and any periods of employment with an employer participating in the system required of the employee before becoming a member of the system.

(2) Of the monthly cost of coverage for an eligible retired state employee under a health care insurance contract entered into under ORS 238.410, an amount as determined under subsection (3) of this section shall be paid from the Retiree Health Insurance Premium Account established by subsection (4) of this section, and any monthly cost in excess of the amount so determined shall be paid by the eligible retired state employee in the manner provided in ORS 238.410 (4). Any amount paid under this subsection shall be exempt from all state, county and municipal taxes imposed on the eligible retired member.

(3) On or before January 1 of each year, the Public Employees Retirement Board shall calculate the average difference between the health insurance premiums paid by retired state employees under contracts entered into by the board under ORS 238.410 and the health insurance premiums paid by state employees who are not retired under contracts entered into by the Public Employees' Benefit Board. For the purposes of subsection (2) of this section, an eligible retired state employee shall be entitled to receive toward the monthly cost of coverage under a health insurance contract entered into under ORS 238.410:

(a) For an eligible retired state employee with eight years or more of qualifying service in the system, but less than 10 years of qualifying service in the system, 50 percent of the amount calculated by the board under this subsection.

(b) For an eligible retired state employee with 10 years or more of qualifying service in the system, but less than 15 years of qualifying service in the system, 60 percent of the amount calculated by the board under this subsection.

(c) For an eligible retired state employee with 15 years or more of qualifying service in the system, but less than 20 years of qualifying service in the system, 70 percent of the amount calculated by the board under this subsection.

(d) For an eligible retired state employee with 20 years or more of qualifying service in the system, but less than 25 years of qualifying service in the system, 80 percent of the amount calculated by the board under this subsection.

(e) For an eligible retired state employee with 25 years or more of qualifying service in the system, but less than 30 years of qualifying service in the system, 90 percent of the amount calculated by the board under this subsection.

(f) For an eligible retired state employee with 30 years or more of qualifying service in the system, 100 percent of the amount calculated by the board under this subsection.

(4) The Retiree Health Insurance Premium Account is established within the Public Employees Retirement Fund, separate and distinct from the General Fund. Interest earned by the account shall be credited to the account. [The account shall] All moneys in the account are continuously appropriated to the Public Employees Retirement Board and may be used only to pay costs of health care insurance contract coverage under subsection (2) of this section, paying the administrative costs incurred by the board under this section and investment of moneys in the account under any law of this state specifically authorizing that investment.

(5) The Retiree Health Insurance Premium Account shall be funded by employer contributions. The state shall transmit to the board amounts as the board determines to be actuarially necessary to fund the liabilities of the account. The level of employer contributions shall be established by the board using the same actuarial assumptions it uses to determine employer contribution rates to the Public Employees Retirement Fund. The amounts shall be transmitted at the same time and in the same manner as contributions for pension benefits are transmitted under ORS 238.225 (1). [The amounts, when added to any life insurance protection provided under ORS chapter 238, shall not exceed 25 percent of the aggregate contributions by employers to the fund, other than contributions to fund prior service credits, made after July 11, 1987.]

[(6) If the board determines that the moneys in the Retiree Health Insurance Premium Account are not sufficient to pay the current liabilities of the account, the board may borrow from any account created by the board to hold employer contributions any reserves of employer contributions made by the state for pensions, sufficient funds to meet those liabilities. Any amounts borrowed from an account of employer contributions reserved for pensions shall be repaid on a schedule established by the board with interest at the same rate as earned by the reserve and shall be secured by future contributions to the account.]

[(7)] (6) The Public Employees Retirement Board shall, by rule, establish a procedure for calculating the average difference between the health insurance premiums paid by retired state employees under contracts entered into by the board under ORS 238.410 and the health insurance premiums paid by state employees who are not retired under contracts entered into by the Public Employees' Benefit Board.

[(8)] (7) As provided in section 401(h)(5) of the Internal Revenue Code of 1986, upon satisfaction of all liabilities for providing benefits described in subsection (2) of this section, any amount remaining in the Retiree Health Insurance Premium Account shall be returned to the state.

[(9)] (8) No member of the system shall have an interest in the Retiree Health Insurance Premium Account or in the benefits provided under this section.

[(10)] (9) For the purposes of this section:

(a) "Board" means the Public Employees Retirement Board.

(b) "System" means the Public Employees Retirement System.

SECTION 18. ORS 238.420 is amended to read:

238.420. (1) As used in this section, "eligible retired member" means:

(a) A retired member of the Public Employees Retirement System who is retired for service or disability, is receiving a retirement allowance or benefit under the system, had eight years or more of qualifying service in the system at the time of retirement or is receiving a disability retirement allowance including a pension computed as if the member had eight years or more of creditable service in the system at the time of retirement, and is eligible for federal Medicare coverage; or

(b) A person who is a surviving spouse or dependent of a deceased eligible retired member as provided in paragraph (a) of this subsection at the time of death, who is eligible for federal Medicare coverage and who:

(A) Is receiving a retirement allowance or benefit under the system; or

(B) Was covered at the time of the retired member's death by the retired member's health insurance contracted for under ORS 238.410, and the member retired before May 1, 1991.

(2) For purposes of subsection (1)(a) of this section, "qualifying service" means creditable service in the system and any periods of employment with an employer participating in the system required of the employee before becoming a member of the system.

(3) Of the monthly cost of coverage for an eligible retired member under a health care insurance contract that provides coverage supplemental to federal Medicare coverage entered into under ORS 238.410, an amount equal to $60 or the total monthly cost of that coverage, whichever is less, shall be paid from the Retirement Health Insurance Account established by subsection (4) of this section, and any monthly cost in excess of $60 shall be paid by the eligible retired member in the manner provided in ORS 238.410 (4). Any amount paid under this subsection shall be exempt from all state, county and municipal taxes imposed on the eligible retired member.

(4) The Retirement Health Insurance Account is established within the Public Employees Retirement Fund, separate and distinct from the General Fund. Interest earned by the account shall be credited to the account. [The account shall] All moneys in the account are continuously appropriated to the Public Employees Retirement Board and may be used only to pay costs of health care insurance contract coverage under subsection (3) of this section, paying the administrative costs incurred by the board under this section and investment of moneys in the account under any law of this state specifically authorizing that investment.

(5) The Retirement Health Insurance Account shall be funded by employer contributions. Each public employer that is a member of the system shall transmit to the board such amounts as the board determines to be actuarially necessary to fund the liabilities of the account. The level of employer contributions shall be established by the board using the same actuarial assumptions it uses to determine employer contribution rates to the Public Employees Retirement Fund. The amounts shall be transmitted at the same time and in the same manner as contributions for pension benefits are transmitted under ORS 237.081 (1). [Such amounts, when added to any life insurance protection provided under this chapter, shall not exceed 25 percent of the aggregate contributions by employers to the fund, other than contributions to fund prior service credits, made after July 11, 1987.]

[(6) If the board determines that the moneys in the Retirement Health Insurance Account are not sufficient to pay the current liabilities of the account, the board may borrow from any account created by the board to hold employer contributions any reserves of employer contributions for pensions, sufficient funds to meet those liabilities. Any amounts borrowed from an account of employer contributions reserved for pensions shall be repaid on a schedule established by the board with interest at the same rate as earned by the reserve and shall be secured by future contributions to the account.]

[(7)] (6) As provided in section 401(h)(5) of the Internal Revenue Code of 1986, upon satisfaction of all liabilities for providing benefits described in subsection (1) of this section, any amount remaining in the Retirement Health Insurance Account shall be returned to the employers participating in the retirement system on an equitable basis as determined by the board.

[(8)] (7) No member of the system shall have an interest in the Retirement Health Insurance Account.

UNCLAIMED BENEFITS

SECTION 19. Section 20 of this 1999 Act is added to and made a part of ORS chapter 238.

SECTION 20. A benefit that is owed to a member or beneficiary of a member under the Public Employees Retirement System shall be forfeited at the end of the system's plan year in which the benefit becomes due if the Public Employees Retirement Board is unable to locate the member or beneficiary. If the member, beneficiary or any other person thereafter establishes a right to the forfeited benefit, the board shall reinstate the benefit. If the benefit is a periodic payment, the board shall make a retroactive payment to the member, beneficiary or other person in a lump sum for all amounts that would have been paid before reinstatement of the benefit. No interest shall be paid on the benefit for the period commencing when the benefit became due and the date of the retroactive payment.

CONFORMING AMENDMENTS

SECTION 21. ORS 238.535 is amended to read:

238.535. (1) Prior to attaining 60 years of age, all judge members shall elect in writing to retire under either paragraph (a) or (b) of this subsection. The election shall be irrevocable after the judge member attains 60 years of age. Any judge member who fails to make the election provided for in this subsection prior to attaining 60 years of age shall be retired under the provisions of paragraph (a) of this subsection.

(a) Upon retiring from service as a judge at the age of 65 years or thereafter a judge member who has made contributions to the Public Employees Retirement Fund during each of five calendar years shall receive as a service retirement allowance, payable monthly, a life pension (nonrefund) provided by the contributions of the judge member and the state in an annual amount equal to 2.8125 percent of final average annual salary multiplied by the number of years of service as a judge not exceeding 16 years of service as a judge and 1.67 percent of final average salary multiplied by the number of years of service as a judge exceeding 16 years of service as a judge, but the annual amount shall not exceed 65 percent of final average salary.

(b) Upon retiring from service as a judge at the age of 60 years or thereafter, a judge member who has made contributions to the Public Employees Retirement Fund during each of five calendar years shall receive as a service retirement allowance, payable monthly, a life pension (nonrefund) provided by the contributions of the judge member and the state in an annual amount equal to 3.75 percent of final average salary multiplied by the number of years of service as a judge not exceeding 16 years of service as a judge and two percent of final average salary multiplied by the number of years of service as a judge exceeding 16 years of service as a judge, but the annual amount shall not exceed 75 percent of final average salary.

(c) Any judge member electing to retire under paragraph (b) of this subsection shall serve as a pro tem judge, without compensation, for 35 days per year for a period of five years. A judge who serves more than 35 days per year may carry over the additional days to fulfill the pro tem service obligation in future years. The five-year period shall commence on the judge member's date of retirement or the date on which the judge member commences pro tem service under ORS 238.545 [(3)] (4), whichever is earlier. Judge members may be reimbursed for expenses incurred in providing pro tem services under this paragraph. Upon certification from the Chief Justice that any judge member who retired under paragraph (b) of this subsection has failed to perform the pro tem services required under this paragraph, and has not been relieved of the obligations to perform those services in the manner provided by this paragraph, the Public Employees Retirement Board shall recalculate the service retirement allowance of the noncomplying judge member as though the judge member elected to retire under paragraph (a) of this subsection, and the noncomplying judge member shall receive only that recalculated amount thereafter. A judge may be relieved of the pro tem service obligation imposed by this paragraph if the judge fails for good cause to complete the obligation. A retired judge member who is relieved of the obligation to serve as a pro tem judge shall continue to receive the retirement allowance provided in paragraph (b) of this subsection.

(d) For the purpose of paragraph (c) of this subsection:

(A) "Good cause" includes, but is not limited to:

(i) Physical or mental incapacitation of a judge that prevents the judge from discharging the duties of judicial office;

(ii) Failure of the appointing authority to assign a judge to the requisite amount of pro tem service, whether because of insufficient need for pro tem judges, a determination by the appointing authority that the skills of a judge do not match the needs of the courts, clerical mistake, or otherwise; or

(iii) Death of a judge.

(B) "Good cause" does not include:

(i) A judge's refusal, without good cause, to accept pro tem assignments sufficient to meet the required amount; or

(ii) A judge's affirmative voluntary act that makes the judge unqualified to serve as a judge of this state including, but not limited to, failure to maintain active membership in the Oregon State Bar, acceptance of a position in another branch of state government, or acceptance of a position in the Government of the United States or of another state or nation.

(e) The Chief Justice may make rules for the implementation of this subsection.

(2) As used in subsection (1) of this section, "final average salary" means whichever of the following is greater:

(a) The average salary per calendar year paid to a judge member in three of the calendar years of service as a judge before the judge member retires, in which three years the judge member was paid the highest salary.

(b) One-third of the total salary paid to a judge member in the last 36 calendar months of service as a judge before the judge member retires.

(3) As used in subsection (1) of this section, "number of years of service" means the number of full years plus any remaining fraction of a year. 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.

(4) For a judge who elects to become a judge member as provided in ORS 237.215 (3) (1989 Edition), the service retirement allowance under subsection (1) of this section on retirement at the age of 70 years and either 12 years of service or two full six-year terms as a judge shall be at least the equivalent of the retirement pay the judge would have received had the judge retired under ORS 1.314 to 1.390 (1989 Edition).

(5) A judge member who has made contributions to the Public Employees Retirement Fund during each of five calendar years and who attains the age of 60 years shall be retired upon written application by the judge member to the board on a reduced service retirement allowance which shall be the actuarial equivalent of the service retirement allowance provided for in subsection (1)(a) of this section.

(6) For the purposes of this section, a judge who elects to become a judge member as provided in ORS 237.215 (3) (1989 Edition) shall be considered to have made contributions to the Public Employees Retirement Fund during one calendar year for each calendar year during which the judge made contributions to the Judges' Retirement Fund.

(7)(a) Notwithstanding subsection (1)(a) of this section, the maximum percentage used in calculating the annual amount of the life pension (nonrefund) for a judge who is a judge member on September 27, 1987, or who elected to become a judge member in the manner provided by ORS 237.215 (3)(b) or (4)(b) (1989 Edition), shall be the percentage specified by paragraph (b) of this subsection if either:

(A) On September 27, 1987, the judge had more than 28 years of service that were creditable either under the system; or

(B) On September 27, 1987, the judge had more than 28 years of service that were creditable under the Judges' Retirement Fund established pursuant to ORS 1.314 to 1.390 (1989 Edition) and the judge became a member of the system under the provisions of ORS 237.215 (3)(b) (1989 Edition).

(b) The maximum percentage used in calculating the annual amount of the life pension (nonrefund) of a judge member who meets the requirements of paragraph (a) of this subsection shall not exceed 45 percent plus 1.67 percent multiplied by the number of years of service as a judge that exceed 16 years and that were served on or before September 27, 1987.

(c) In computing the annual amount of the life pension of a judge who meets the requirements of paragraph (a) of this subsection, the board shall use the percentage specified by paragraph (b) of this subsection and the final average salary of the judge computed on the date of retirement, not the final average salary of the judge computed as of September 27, 1987. In making the computation under this subsection, the board shall use the definition of "final average salary" provided by ORS 238.535 as amended by section 2, chapter 625, Oregon Laws 1987.

SECTION 22. ORS 238.565 is amended to read:

238.565. (1) For the purposes of this section, the beneficiary of the judge member shall be any person, or the personal representative of the estate of the judge member, or a trustee named by the judge member to execute an express trust, whom the judge member designates as a beneficiary by written designation duly acknowledged and filed with the board before the death of the judge member.

(2)(a) If a judge member who has six or more years of service as a judge dies before retiring, and the judge member is not an inactive judge member who is performing a pro tem service obligation under the provisions of ORS 238.545 [(3)] (4), the surviving spouse of the judge member shall receive a life pension, payable monthly, equal to two-thirds of the service retirement allowance the judge member would have received under ORS 238.535 (1)(a) had the judge member retired on the date of death.

(b) If a judge member who has six or more years of service as a judge dies before retiring, and the judge member is an inactive member who is performing a pro tem service obligation under the provisions of ORS 238.545 [(3)] (4), the surviving spouse of the judge member shall receive a life pension, payable monthly, equal to two-thirds of the service retirement allowance the judge member would have received under ORS 238.535 (1)(b) had the judge member retired on the date of death.

(c) If a surviving spouse receiving a pension under paragraph (a) or (b) of this subsection dies and the total amount received as pension by the surviving spouse is less than the amount credited to the account of the judge member in the fund on the date of death of the judge member, the beneficiary shall receive a lump sum amount equal to the difference between the total amount received by the surviving spouse and the amount so credited to the account of the judge member.

(d) If a judge member who has six or more years of service as a judge dies before retiring and has no surviving spouse, the beneficiary shall receive a lump sum amount equal to the amount credited to the account of the judge member in the fund on the date of death of the judge member.

(e) If the surviving spouse of a judge member who dies before retiring is not entitled to a pension under paragraph (a) or (b) of this subsection, the surviving spouse shall receive a lump sum amount equal to the amount credited to the account of the judge member in the fund on the date of death of the judge member.

(3)(a) If a judge member dies after retiring, the surviving spouse of the judge member shall receive a life pension, payable monthly, equal to two-thirds of the retirement allowance the judge member is receiving or is entitled to receive on the date of death.

(b) If a surviving spouse receiving a pension under paragraph (a) or (b) of this subsection dies and the total amount received as retirement allowance by the retired judge member and as pension by the surviving spouse is less than the amount credited to the account of the judge member on the date of retirement of the judge member, the beneficiary shall receive a lump sum amount equal to the difference between the total amount received as retirement allowance and pension and the amount so credited to the account of the judge member.

(c) If a judge member dies after retiring and has no surviving spouse, and the total amount received as retirement allowance by the retired judge member is less than the amount credited to the account of the judge member on the date of retirement of the judge member, the beneficiary shall receive a lump sum amount equal to the difference between the total amount received as retirement allowance and the amount so credited to the account of the judge member.

(4) At any time after becoming a judge member, but not later than the date on which the first payment on account of retirement is due, a judge member may elect to provide an addition to the pension of the surviving spouse of the judge member under subsection (3)(a) of this section by selecting a reduced retirement allowance for the judge member. The additional pension to the surviving spouse shall be the actuarial equivalent of the reduction in the retirement allowance of the judge member and, in no event, when added to the pension under subsection (3)(a) of this section, shall it exceed the reduced retirement allowance elected by the judge member.

(5) Any accrued retirement allowance due a retired judge member that is unpaid at the time of death of the judge member shall be paid to the surviving spouse of the judge member; or if there is no surviving spouse, to the beneficiary of the judge member; or if there is no surviving spouse or beneficiary, to the personal representative of the estate of the judge member; or if there is no surviving spouse or beneficiary and the estate of the judge member will not be probated, for the purposes and in the manner provided in ORS 238.390 (4).

(6) Notwithstanding any other provision of this section, a judge member shall be considered to have died with no surviving spouse if:

(a) The judge member has entered into a prenuptial or antenuptial agreement with the spouse of the judge that provides that the spouse shall have no right or claim to a surviving spouse's pension; and

(b) The judge member has filed a copy of the prenuptial or antenuptial agreement with the board before the death of the judge member.

(7) The board shall not be liable for any payment made to a beneficiary by reason of a prenuptial or antenuptial agreement filed with the board under subsection (6) of this section unless the board has actual knowledge that the agreement has been revoked.

SECTION 23. ORS 238.580 is amended to read:

238.580. (1) ORS 238.005 (2) and (11), 238.025, 238.078, 238.082, 238.092, 238.115 (1), 238.250, 238.255, 238.260, 238.350, 238.380, 238.410, 238.415, 238.420, 238.445, 238.460, 238.465, 238.475, 238.600, 238.605, 238.610, [238.620,] 238.630, 238.635, 238.645, 238.650, 238.655, 238.660, 238.665, 238.670 and 238.705 and sections 3 and 20 of this 1999 Act and the increases provided by ORS 238.385 for members of the system who are serving as other than police officers or firefighters apply in respect to service as a judge member.

(2) This chapter applies in respect to persons described in ORS 238.505 (1) and in respect to service as a judge member only as specifically provided in ORS 238.500 to 238.585.

DEFINITION OF SALARY

SECTION 24. ORS 238.005 is amended to read:

238.005. For purposes of this chapter:

(1) The term "annuity" means payments for life derived from contributions made by a member as provided in this chapter.

(2) The term "calendar year" means 12 calendar months commencing on January 1 and ending on December 31 following.

(3) The term "continuous service" means service not interrupted for more than five years, except that such continuous service shall be computed without regard to interruptions in the case of:

(a) An employee who had returned to the service of the employer as of January 1, 1945, and who remained in that employment until having established membership in the Public Employees Retirement System.

(b) An employee who was in the armed services on January 1, 1945, and returned to the service of the employer within one year of the date of being otherwise than dishonorably discharged and remained in that employment until having established membership in the Public Employees Retirement System.

(4) The term "creditable service" means any period of time during which an active member is being paid a salary by a participating public employer and contributions are being made to the system either by or on behalf of the member. For purposes of computing years of "creditable service," full months and major fractions of a month shall be considered to be one-twelfth of a year and shall be added to all full years. "Creditable service" includes all retirement credit received by a member.

(5) The term "employee" includes, in addition to employees, public officers, but does not include:

(a) Persons engaged as independent contractors.

(b) Seasonal, emergency or casual workers whose periods of employment with any public employer or public employers do not total 600 hours in any calendar year.

(c) Persons, other than workers in the Oregon Industries for the Blind under ORS 346.190, provided sheltered employment or made-work by a public employer in an employment or industries program maintained for the benefit of such persons.

(d) Persons employed and paid from federal funds received under the Emergency Job and Unemployment Assistance Act of 1974 (Public Law 93-567) or any other federal program intended primarily to alleviate unemployment. However, any such person shall be considered an "employee" if not otherwise excluded by paragraphs (a) to (c) of this subsection and the public employer elects to have the person so considered by an irrevocable written notice to the board.

(e) Persons who are employees of a railroad, as defined in ORS 824.020, and who, as such employees, are included in a retirement plan under federal railroad retirement statutes. This paragraph shall be deemed to have been in effect since the inception of the system.

(6) The term "fiscal year" means 12 calendar months commencing on July 1 and ending on June 30 following.

(7)(a) The term "member" means a person who has established membership in the system and whose membership has not been terminated as described in ORS 238.095. "Member" includes active, inactive and retired members.

(b) "Active member" means a member who is presently employed by a participating public employer in a position that meets the requirements of ORS 238.015 (4), and who has completed the six-month period of service required by ORS 238.015.

(c) "Inactive member" means a member who is absent from the service of all employers participating in the system, whose membership has not been terminated in the manner described by ORS 238.095, and who is not retired for service or disability. "Inactive member" includes a member who would be an active member except that the person's only employment with a participating public employer is in a position that does not meet the requirements of ORS 238.015 (4).

(d) "Retired member" means a member who is retired for service or disability.

(8) The term "pension" means annual payments for life derived from contributions by one or more public employers.

(9) The term "public employer" means the state, one of its agencies, any city, county, municipal or public corporation, any political subdivision of the state or any instrumentality thereof, or an agency created by two or more such political subdivisions to provide themselves governmental services. For purposes of this chapter, such agency created by two or more political subdivisions is a governmental instrumentality and a legal entity with power to enter into contracts, hold property and sue and be sued.

(10) The term "retirement credit" means a period of time that is treated as creditable service for the purposes of this chapter.

(11)(a) The term "salary" means the remuneration paid an employee in cash out of the funds of a public employer in return for services to the employer, plus the monetary value, as determined by the Public Employees Retirement Board, of whatever living quarters, board, lodging, fuel, laundry and other advantages the employer furnishes the employee in return for services.

(b) "Salary" includes but is not limited to:

(A) Payments of employee and employer money into a deferred compensation plan, which are deemed salary paid in each month of deferral;

(B) The amount of participation in a tax-sheltered or deferred annuity, which is deemed salary paid in each month of participation; and

(C) Retroactive payments made to an employee to correct a clerical error or pursuant to an award by a court or by order of or a conciliation agreement with an administration agency charged with enforcing federal or state law protecting the employee's rights to employment or wages, which shall be allocated to and deemed paid in the periods in which the work was done or in which it would have been done.

(A) Travel or any other expenses incidental to employer's business which is reimbursed by the employer;

(B) Payments for insurance coverage by an employer on behalf of employee or employee and dependents, for which the employee has no cash option;

(D) Any lump sum payment for accumulated unused sick leave;

(E) Any accelerated payment of an employment contract for a future period or an advance against future wages;

(F) Any retirement incentive, retirement severance pay, retirement bonus or retirement gratuitous payment;

(G) Payments for periods of leave of absence after the date the employer and employee have agreed that no future services qualifying pursuant to ORS 238.015 (3) will be performed, except for sick leave and vacation; [or]

(H) Payments for instructional services rendered to institutions of the Department of Higher Education or the Oregon Health Sciences University when such services are in excess of full-time employment subject to this chapter. A person employed under a contract for less than 12 months is subject to this subparagraph only for the months to which the contract pertains; or

(I) Payments made by an employer for insurance coverage provided to a domestic partner of an employee.

(12) The term "volunteer firefighter" means a firefighter whose position normally requires less than 600 hours of service per year.

(13) The term "school year" means the period beginning July 1 and ending June 30 next following.

(14) The term "police officer" includes:

(a) Employees of institutions defined in ORS 421.005 as Department of Corrections institutions, whose duties, as assigned by the director, include the custody of persons committed to the custody of or transferred to the Department of Corrections and any other employee of the Department of Corrections who was classified as a police officer on or before July 27, 1989, whether or not such classification was authorized by law.

(b) Employees of the Department of State Police who are classified as police officers by the Superintendent of State Police.

(c) Employees of the Oregon Liquor Control Commission who are classified as enforcement officers by the administrator of the commission.

(d) Sheriffs and those deputy sheriffs or other employees of a sheriff whose duties, as classified by the sheriff, are the regular duties of police officers or corrections officers.

(e) Police chiefs and police personnel of a city who are classified as police officers by the council or other governing body of the city.

(f) Parole and probation officers employed by the Department of Corrections and parole and probation officers who are transferred to county employment under ORS 423.549.

(g) Police officers appointed under ORS 276.021 or 276.023.

(h) Employees of the Port of Portland who are classified as airport police by the Board of Commissioners of the Port of Portland.

(i) Employees of the State Department of Agriculture who are classified as livestock police officers by the Director of Agriculture.

(j) Employees of the Department of Public Safety Standards and Training who are classified by the department as other than secretarial or clerical personnel.

(k) Investigators of the Criminal Justice Division of the Department of Justice.

(L) Corrections officers as defined in ORS 181.610.

(m) Employees of the Oregon State Lottery Commission who are classified by the Director of the Oregon State Lottery as enforcement agents pursuant to ORS 461.110.

(n) The Director of the Department of Corrections.

(o) An employee who for seven consecutive years has been classified as a police officer as defined by this section, and who is employed or transferred by the Department of Corrections to fill a position designated by the director as being eligible for police officer status.

(p) An employee of the Department of Corrections classified as a police officer on or prior to July 27, 1989, whether or not that classification was authorized by law, so long as the employee remains in the position held on July 27, 1989. The initial classification of an employee under a system implemented pursuant to ORS 240.190 will not affect police officer status.

(q) Employees of a school district who are appointed and duly sworn members of a law enforcement agency of the district as provided in ORS 332.531 or otherwise employed full time as police officers commissioned by the district.

(r) Employees at the MacLaren School, Hillcrest School of Oregon and other youth correction facilities and juvenile detention facilities under ORS 419A.050, 419A.052 and 420.005 to 420.915, who are required to hold valid Oregon teaching licenses and who have supervisory, control or teaching responsibilities over juveniles committed to the custody of the Department of Corrections or the Oregon Youth Authority.

(s) Employees at youth correction facilities as defined in ORS 420.005 whose primary job description involves the custody, control, treatment, investigation or supervision of juveniles placed in such facilities.

(t) Employees of the Oregon Youth Authority who are classified as juvenile parole and probation officers.

(15) The term "final average salary" means whichever of the following is greater:

(a) The average salary per calendar year paid by a public employer to an employee who is an active member of the system in three of the calendar years of membership before the effective date of retirement of the employee, in which three years the employee was paid the highest salary; or if the number of calendar years of active membership before the effective date of retirement of the employee is three or less, in all of those years.

(b) One-third of the total salary paid by a public employer to an employee who is an active member of the system in the last 36 calendar months of active membership before the effective date of retirement of the employee.

(16) The term "firefighter" does not include a volunteer firefighter as defined in subsection (12) of this section, but does include the State Fire Marshal, the chief deputy fire marshal and deputy state fire marshals.

(17) "Earliest service retirement age" means the age attained by a member when the member could first make application for retirement under the provisions of ORS 238.280.

(18) The term "normal retirement age" means:

(a) For a person who establishes membership in the system before January 1, 1996, as described in ORS 238.430, 55 years of age if the employee retires at that age as a police officer or firefighter or 58 years of age if the employee retires at that age as other than a police officer or firefighter.

(b) For a person who establishes membership in the system on or after January 1, 1996, as described in ORS 238.430, 55 years of age if the employee retires at that age as a police officer or firefighter or 60 years of age if the employee retires at that age as other than a police officer or firefighter.

MISCELLANEOUS

SECTION 25. The unit captions used in this 1999 Act are provided only for convenience in locating provisions of this 1999 Act and do not become part of the statutory law of this state or express any legislative intent in the enactment of this 1999 Act.

SECTION 26. This 1999 Act being necessary for the immediate preservation of the public peace, health and safety, an emergency is declared to exist, and this 1999 Act takes effect on its passage.

Approved by the Governor June 23, 1999

Filed in the office of Secretary of State June 24, 1999

Effective date June 23, 1999

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