| What is Strunk / Eugene? |
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What is the Strunk case?
The Strunk case was a challenge to various provision of the 2003 PERS Reform legislation. The Oregon Supreme Court ruled that the cost-of-living-adjustment (COLA) freeze enacted by the 2003 legislature to recover overpayments from earnings crediting in 1999 was invalid. As a result of 2003 legislation, PERS temporarily suspended the COLA for all Tier One members who retired with an effective date on or after April 1, 2000, and before April 1, 2004, under the Money Match calculation.
The court also determined that PERS must annually credit the assumed rate, currently 8 percent, to Tier One member regular accounts. PERS credited 0 (zero) percent to Tier One regular accounts in 2003 based on legislation passed that year.
For Tier One members who retired from April 1, 2000 through March 1, 2004, the frozen cost-of-living adjustments (COLAs) will be restored as part of Strunk/Eugene implementation and will help offset any overpayment received by the benefit recipient as a result of the Eugene case.
What is the Eugene case?
Several employers and members sued to challenge PERS policies on actuarial factors, variable match, and earnings crediting. Marion County Circuit Court Judge Paul Lipscomb remanded the PERS Board’s orders allocating 1999 earnings and setting employer rates for the petitioning employers. The Board was directed to reissue these orders in light of the judge’s final 2003 ruling on many PERS practices, such as actuarial factors, variable account calculations, and reserving.
The Oregon Supreme Court issued its decision in the City of Eugene vs. PERS case August 11, 2005. The Court ruled that the Settlement Agreement and 2003 PERS Reform legislation resolved the issues in the case. The PERS Board and the original plaintiffs in the case entered into the Settlement Agreement.
The Settlement Agreement requires PERS to reallocate 1999 earnings to Tier One benefit recipient accounts at 11.33 percent instead of 20 percent.
Combined application of the Strunk/Eugene decisions
The following benefit recipients who were Tier One members will generally be affected in the manner described based on the effective retirement dates:
1. April 1, 2000 through March 1, 2004 retirements: these benefit recipients have received all payable earnings for 2003 and 2004 but will have their 1999 regular account earnings corrected using 11.33 percent instead of 20 percent. Many in this group were subject to the COLA freeze that was effective July 1, 2003.
2. April 1, 2004 through December 1, 2004 retirements: these benefit recipients need to be credited with 8 percent earnings for 2003 and a prorate of 8 percent for 2004 to the date of retirement. These retirees were not subject to the COLA freeze but will have their 1999 regular account earnings corrected using 11.33 percent instead of 20 percent.
3. January 1, 2005 through March 1, 2005 retirements: these benefit recipients received the mid-year earnings crediting which credited 8 percent for 2004 and a prorate of 8 percent for 2005 to the retirement date. These retirees will also be credited with 8 percent earnings for 2003 but will have their 1999 regular account earnings corrected using 11.33 percent instead of 20 percent. Most of these retirees are receiving estimated payments. The lookback calculation, which has not yet been applied, will be used to determine the correct benefit.
4. April 1, 2005 and after retirements: most of these benefits were calculated reflecting the Strunk/Eugene changes so few of these retirements will require adjustment. These retirees are receiving estimated payments and their retirement benefit will now be considered final. They will receive a Notice of Entitlement as part of the Strunk/Eugene implementation.
5. Variable account participants: There is no impact on variable account earnings crediting.
Miscellaneous recipients: Everyone with a Tier One regular account that received a 20 percent earnings allocation for 1999 (e.g., a member who retired prior to April 1, 2000 with a partial lump sum payable in installments beyond 1999, withdrawals occurring after April 1, 2000, etc.) will have their account corrected to reflect the 11.33 percent earnings crediting.
Other Strunk/Eugene links
Board Order
Letter accompanying Board Order
Settlement Agreements in Eugene case
General timeline for recalculation
Recalculation examples
FAQs
Strunk Supreme Court Decision
Eugene Supreme Court Decision
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