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Enacted 2003 PERS legislation

Nine major bill relating to PERS were passed;

TopicEffective date
HB 2001 Crediting Tier One AccountsJanuary 1, 2004
HB 2003 Amendments to HB 2001, 2004, and ORS 238July 1, 2004
HB 2004 Actuarial Equivalency FactorsMay 9, 2003
HB 2005 PERS BoardMay 9, 2003
HB 2020 Successor Plan; Conforming Amendments to ORS 238August 29, 2003
HB 2343 Judges Retirement Fund (Amends ORS 238.055May 24, 2003
HB 2401 Administrative FeesJanuary 1, 2004
HB 3020 Amendments to HB 2003 and ORS 238July 30, 2003
SB 258 150% RefundJanuary 1, 2004

These bills are summarized below. Please note that the provisions of some bills (especially BH 2001, 2003 and 2004) were amended by later bills (especially HB 2003, HB 2020 and HB 3020).

House Bill 2001

Governor Ted Kulongoski signed HB 2001 into law on February 18, 2003. (Read the bill.)
Applies to:Tier One members
Effective date:Crediting of earnings for calendar year 2003
Law modified:ORS 238.255

Under HB 2001, regular accounts will be credited with 8 percent earnings (no more, no less) until:

  1. The Tier One assumed rate deficit has been eliminated; and

  2. The Tier One assumed rate reserve account is fully funded in each of the last three years.
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House Bill 2003

Governor Ted Kulongoski signed HB 2003 into law on May 9, 2003. (Read the bill.)

Applies to:Varies by provision
Effective date:Varies by provision (some July 1, 2003, others January 1, 2004, or April 1, 2004)
Law modified:ORS 238, 243.800, 292.430; new laws added to ORS 238

Redirection of the Employee Contribution to the Transition Account [Sections 1-3,13]
Effective January 1, 2004, members may not contribute or transfer funds to the Variable Annuity Account. Those accounts will continue to gain or lose interest earnings as they have previously. Effective January 1, 2004, the six percent employee contribution (whether made by the employee or "picked up" by the employer) may not be made into the member´s PERS account. Instead, effective January 1, 2004, active members must make payments equaling six percent of salary to a "transition account" outside of PERS. Any employer may agree to pay this amount on behalf of the employee, and employers who currently "pick up" employee contributions must continue to make these payments to the transition account until December 31, 2005.The amount in a member´s transition account will be distributed to the member in a single lump sum within 90 days of retirement, refund or loss of membership.

Earnings Credited to Tier One Regular Accounts [Section 5]
No earnings may be credited to Tier One regular accounts in any year in which there is a deficit, and no earnings may be credited that would result in a deficit. This provision becomes effective with the crediting of earnings in calendar year 2003, but does not affect members who retire before April 1, 2004.

Minimum Account Balance [Section 8]
The regular account of a Tier One member who retires on or after April 1, 2004 may be no less at the time of retirement than what it would have been if it had been credited with the assumed rate every year it existed.

Cost-of-Living Adjustment to Retirement Allowances [Section 9-10]
For Tier One members who retire with an effective date on or after April 1, 2000 and before April 1, 2004, and receive a service retirement allowance under Money Match, PERS will perform the following two calculations:The "fixed service retirement allowance," which is the benefit amount the member is actually receiving on July 1, 2003.The "revised service retirement allowance," which is calculated with the member´s account balance adjusted as though 11.33 percent was credited for 1999 (instead of 20 percent), and includes an imputed annual cost-of-living adjustment.Members will receive the fixed allowance (with no additional COLA) until the revised allowance (with COLA) provides a higher benefit.

Employer Contribution Rates [Section 15]
The PERS Board must recalculate the contribution rates of all participating employers to reflect the provisions of HB 2003 and issue the new rates to employers by October 1, 2003. The new rates are effective July 1, 2003.

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House Bill 2004

Governor Ted Kulongoski signed HB 2004 into law on May 9, 2003. (Read the bill.)

Applies to:Any member or alternate payee with retirement date on or after July 1, 2003
Effective date:July 1, 2003
Law modified:ORS 238.630; new laws added to ORS 238

Adoption of Actuarial Equivalency Factors [Sections 1-3]
For effective retirement dates July 1, 2003, to January 1, 2005, PERS must use new actuarial equivalency factor tables. These tables will be based on the mortality assumptions adopted by the Board on September 10, 2002.Beginning January 1, 2005, the PERS Board must adopt actuarial equivalency factor tables every two calendar years, to be effective January 1 of each odd numbered year.

Look-Back Calculation [Section 4]
For any member with an effective retirement date on or after July 1, 2003, PERS will perform two calculations to determine the member´s retirement allowance. One calculation uses the member´s account balance, final average salary, years of service and the actuarial equivalency factors in effect as of the effective retirement date. The calculation is then adjusted for the retirement option selected by the member.The second calculation, the "look-back" calculation, begins with the result of the regular calculation, and recalculates it using the member´s account balance, final average salary, years of service, and the actuarial equivalency factors in effect as of June 30, 2003.The member will receive the higher of these two calculations, payable as of the effective date of retirement.

A Note About Purchases
Purchases have not been eliminated or modified in HB 2004 or any other enacted legislation. Members may therefore continue to make purchases prior to retirement under existing law. As this relates to HB 2004, purchases made after June 30, 2003 will be included in the regular calculation, but not the "look-back" calculation (because the "look back" uses the account balance on June 30, 2003).

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House Bill 2005

Governor Ted Kulongoski signed HB 2005 into law on May 9, 2003. (Read the bill.)

Applies to:PERS board members
Effective date:September 1, 2003
Law modified:ORS 238.630, 238.640, 293.706, 293.711

HB 2005 makes various changes to the PERS Board. It reduces the number of Board members from 12 to 5, requires the Governor to appoint the chairperson, specifies requirements for membership on the Board, and staggers the terms of the Board members.

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House Bill 2020

Governor Ted Kulongoski signed HB 2020 into law on August 29, 2003. (Read the bill.)

Applies to:Public employees hired on or after August 29, 2003, and some current employees
Effective date:August 29, 2003
Law modified:Numerous

HB 2020 establishes a successor retirement plan, the Oregon Public Service Retirement Plan (OPSRP). The new plan is administered by the PERS Board and consists of a defined benefit program (the Pension Program) and a defined contribution portion (the Individual Account Program or IAP).

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House Bill 2343

Governor Ted Kulongoski signed HB 2343 into law on May 24, 2003. (Read the bill.)

Applies to:Certain individuals who served as a judge before August 1, 1991
Effective date:May 24, 2003
Law modified:ORS 238.055

HB 2343 allows refunds to individuals who have an inactive Judges Retirement Fund account and are not eligible to draw a retirement benefit.

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House Bill 2401

Governor Ted Kulongoski signed HB 2401 into law on May 27, 2003. (Read the bill.)

Applies to:Certain current and former members
Effective date:January 1, 2004
Law modified:ORS 238.095, 238.157, 238.162, 238.175, 238.610, and 238.715

HB 2401 gives the PERS Board authority to charge fees for certain administrative expenses.

Costs Incurred in Locating a Former Member [Section 1]
ORS 238.095 is amended to allow PERS to deduct from a former member´s account all reasonable costs incurred by PERS in locating the former member.

Administrative Expenses Included in Full Cost Purchases [Sections 2-4]
Three statutes relating to full cost purchases - ORS 238.157 (military time), 238.162 (teaching time in another state), and 238.175 (non-duty disability time) - are amended to include administrative costs in the "full cost" amount the member must pay.

Authority to Charge Fees for Estimates [Section 5]
HB 2401 adds the following provision to ORS 238.610:

"The Public Employees Retirement Board by rule may establish procedures for recovering administrative costs from members for services provided in estimating retirement benefit amounts and processing payments if the board determines that the services requested by an individual member result in extraordinary costs to the system."

Note: The PERS Board has not yet adopted any rules under this new provision.

Interest Charged on Certain Overpayments to Members [Section 6]
ORS 238.715(5) is amended to provide that if a member has received an overpayment that "was not caused by the system or by a participating public employer," PERS may charge interest on the overpayment until fully recovered.

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House Bill 3020

Governor Ted Kulongoski signed HB 3020 into law on July 30, 2003. (Read the bill.)

Applies to:Certain current and former members and participating employers
Effective date:July 30, 2003
Law modified:HB 2003, HB 2004, SB 258, ORS 238

HB 3020 makes miscellaneous changes to PERS law and recent legislation.

Distribution of Death Benefits [Sections 1-7]
Amends ORS 238.390, 238.458, 238.395 and 238.565, relating to death benefits and beneficiaries. Provisions apply to members who die on or after July 30, 2003.

  • If a member or beneficiary dies without designating a beneficiary, payments must now be made to a personal representative or claiming successor.
  • Death benefits not claimed within one year of the member´s death are forfeited to the PERS Fund rather than escheating to the state.
  • The minimum death benefit payable as a monthly amount is raised from $30 to $200.

Employer Lump Sums [Section 8]

  • Directs that all earnings on employer lump sum payment accounts must be credited back to those accounts. Specifies expenses the Board may charge for administration of these accounts.

Employer Rates [Section 8a]

  • Allows non-pooled participating employers whose June 30, 2003 rates would be higher than their February 11 rates to elect to pay the February rates. The election must be in writing within 90 days from July 30, 2003.

Elimination of Employee Contributions [Section 9]
Amends HB 2003´s amendments to ORS 238.200.

  • The prohibition on employee contributions applies to service performed on or after January 1, 2004.
  • The prohibition on employee contributions does not apply to purchases.

Crediting of Tier One Accounts [Section 10]
Amends HB 2003´s amendments to ORS 238.255.

  • Losses to the Fund that are attributable to Tier One regular accounts will be charged against the Tier One reserve account.
  • 238.255(2) does not apply to persons who were judge members on June 30, 2003.

Crediting of Lump Sum Installment Payments [Section 11]

  • For those who retire after July 30, 2003, and before April 1, 2004, and elect to receive their lump sum payment in installments, actual earnings or losses will be credited.

Minimum Account Balance for Tier One Members [Section 12]

  • Makes technical changes to the minimum account balance provided for in Section 8 of HB 2003 by including alternate payees and specifying that any amounts needed to fund up to the minimum balance shall be charged against the ORS 238.255 reserve.

Suspension of Cost-of-Living Adjustment [Section 13]
Amends section 10 of HB 2003.

  • Provisions apply to entire retirement allowance, including that attributable to variable annuity;
  • Provisions apply to alternate payees and beneficiaries of affected members; and
  • The revised service retirement allowance includes adjustments due to HB 2004, and any other adjustments, if applicable.

Transition Account [Section 14]
Amends section 13 of HB 2003.

  • Members may withdraw their transition account at any time after separation from PERS-covered employment.
  • Amounts in the transition account of a member who dies shall be distributed to the personal representative of the member´s estate or a claiming successor.
  • A member may not make contributions to the transition account while required to make contributions under ORS 238.200.
  • Provisions do not apply to judge members.

Actuarial Equivalency Factors [Sections 16]

  • Provides for the "best of six" rather than "best of three" look-back calculation. Makes special provisions for factors to be used in calculating judge member´s allowances.

Judicial Review [Sections 17-18]

  • Amends the judicial review portions of HB 2003 and HB 2004.

Judge Members in the Variable [Section 19]

  • Allows judge members to continue in the Variable Account Program.

Creditable Service" [Section 20]

  • Amends the definition of "creditable service" to mean time for which benefits are "funded by employer contributions and earnings on the fund."

Military Service Credit [Section 21]

  • Amends ORS 238.156(3) to require payment of 6% of salary (instead of contributions that would have been made during military service) for retirement credit.

Retirement Calculation [Section 22]

  • Defines "years of membership" under ORS 238.300 to equate to creditable service time.

150% Refund [Section 23]

  • Amends SB 258 to allow alternate payees to receive the 150% refund option.
  • Oregon Investment Council [Sections 24-28]
  • Changes the OIC statutes to conform with the new PERS board composition.

Oregon Investment Council [Sections 24-28]

  • Changes the OIC statutes to conform with the new PERS board composition.

Judge´s Retirements [Section 32]

  • Reverses the repeal of judge´s health benefits that was enacted as part of chapter 823, Oregon Laws 2001.

Equal-To-or-Better-Than Test [Section 33]

  • Requires the PERS Board to re-test exempted plans for ETOB every two years.

Reemployed Retired Members [Section 33a-35a]

  • Amends ORS 238.078 to specify it only applies to returning to work for PERS-participating employers, with caveats on control group and early retirements.
  • Expands the exceptions for those who can exceed the 1039 hour limit of ORS 238.082 to include certain sheriff, police and correctional employees, people hired to replace those called up for national guard or active military duty, or road assessment district employees. These exceptions apply to all employed retired members, regardless of when the employment started.
  • Adds exception for certain elected officials to continue to receive benefits while in office.

Variable Transfer [Section 36]

  • Removes the test for one-time variable transfer and directs that, instead, the member´s retirement allowance be calculated based on the difference in value at the time of transfer.
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Senate Bill 258

Governor Ted Kulongoski signed SB 258 into law on June 10, 2003. (Read the bill.)

Applies to:Inactive members
Effective date:January 1, 2004
Law modified:New law added to ORS 238

Under SB 258, an inactive member who withdraws his or her account between July 1, 2004 and June 30, 2006, receives an additional 50 percent of his or her account balance if:

  1. The member was inactive on January 1, 2000 and remains inactive to the date of withdrawal; and
  2. The member made contributions to the fund during each of at least five calendar years, and the account balance is attributable to those contributions.
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