Enacted 2005 PERS legislation

Introduction

The legislature approved nine major bills relating to PERS in the 2005 legislative session.

HB 2060

Community College Optional Plan
Allows community colleges to offer optional retirement plan in lieu of PERS to president or dean of college.

Text of HB 2060

Bill awaits the governor's signature.

HB 2104

Higher Education Optional Plan
Signed by the Governor on July 22, 2005, effective on July 22, 2005.

Modifies provisions governing the State Board of Higher Education Optional Retirement Plan. No direct impact on PERS.

(1) Requires the State Board of Higher Education to establish and administer an "Optional Retirement Plan" (ORP) for administrative and academic employees. The employee has six months from hire date to elect PERS or the ORP and the election is irrevocable. No matter when in the six months the election is received, it is effective on the first day of the month following six full months of employment. If no election is made, the employee defaults into PERS 238 or 238A membership.

Non-vested PERS members who have creditable service under the PERS ORS 238 Program that elect to participate in the ORP program are to become a terminated member in PERS and have their member account transferred to the Optional Retirement Plan "as of the effective date of the election."

Vested PERS members become inactive members if they elect to participate in the ORP. A member may make a written request to have his or her PERS member account transferred to the ORP. The request for transfer of funds must occur at the same time the member elects to participate in the ORP.

A vested member of the OPSRP Pension Program shall become an inactive member for any employee who elects the ORP. If the member's pension actuarial equivalent is $5,000 or less, the member may make a written request for the funds to be transferred into the ORP. The request must be made at the same time as the election to participate in the ORP.

A PERS or OPSRP member who is vested in the Individual Account Program (IAP) shall be considered an inactive member once the member elects to participate in the ORP. The employee may make a written request to have the IAP vested funds transferred to the ORP if the request is made at the same time the member elects to participate in the ORP.

Regardless of any change to an inactive status for either the PERS ORS 238 Program or the OPSRP Pension or IAP programs will not be administered for the purpose of the member receiving any benefit (such as a withdrawal of the PERS member account) that requires the employee to be separated from all service. PERS must adhere to all federal laws and rules that govern the system. The member will not be eligible to receive any funds.

The employer must contribute to the ORP any member and employer contributions that would have been due to PERS before any offset for the breaks in service that are listed in ORS 238.225(9).

(2) ORS 243.800 (12) applies to all breaks in service that occur before, on, or after August 29, 2003.

Text of HB 2104

HB 2189

PERS Omnibus Bill #1
This bill contains only those provisions agreed to by both employer and member representatives at the start of the 2005 session. Bill was signed by the governor on June 29, 2005, effective June 29, 2005.

Wages owed a deceased member are salary.

(1) Provides that the wages paid to the surviving spouse or dependent children (under ORS 652.190) on behalf of a deceased member of the PERS Chapter 238 Program to be considered PERS covered salary. Therefore, the IAP is due the 6% member contribution and the PERS Chapter 238 Program is due employer contributions from these payments made after a member dies.

(2) Provides that the wages paid to the surviving spouse or dependent children (under ORS 652.190) on behalf of a deceased member of the OPSRP Program to be considered PERS covered salary. Therefore the IAP is due the 6% member contribution and the OPSRP Pension Plan is due employer contributions from these payments made after a member dies.

(3) Makes Sections 1 and 2 applicable to members who die on or after the effective date of this act, which is June 29, 2005 (the date signed by the Governor).

OHSU academics receive prorated retirement credit in the manner of other Oregon teachers.

(4) Adds OHSU to the list of employers that have "school employees" under the OPSRP plan.

(5) The addition of OHSU becomes effective to service as an OHSU employee on or after August 29, 2003 so there may be retroactive corrections.

No "break in service" due to PERS-approved disability or due to seasonal nature of employment.

(6) Exempts members from "Break in Service" and allows them to return to the PERS Chapter 238 Program if they were absent from employment due to disability and received a disability allowance under ORS 238.320 or if they were absent because of the seasonal nature of their job as long as they return within 12 full calendar months.

(7) The changes in Section 6 apply retroactively to any period of leave time before (disability only), on, or after (both disability and seasonal) August 29, 2003. There may be members who were put into the OPSRP Program due to returning from such leaves that should not have incurred a "Break in Service" due to this change. It would also apply to PERS Chapter 238 Program members who return from such leaves in the future.

Allows members inactive on August 29, 2003 to return to employment under certain circumstances, before January 1, 2006 to avoid a "break in service."

(8) Subsection (1) adds the appropriate dates and statute references to Section 2a, chapter 733, Oregon Laws 2003 that follows ORS 238A.025 in the 2003 ORS 238 edition. It removes references to sections of the 2003 Act. Subsection (2) allows an inactive member who returns to qualifying employment (with the same participating public employer that had formerly employed the member at the time they became inactive) to have PERS Chapter 238 Program coverage. The member must return to such employment before January 1, 2006 and have been an inactive member on August 28, 2003. Subsection (3) is a renumber only.

Counts retirement credit under ORS 238A towards eligibility purposes of ORS 238, and vice versa.

(9) Adds Section 10 to ORS Chapter 238 (The PERS Chapter 238 Program).

(10) Provides that a PERS Chapter 238 Program member who incurs a "Break in Service" and is eligible to receive retirement benefits under both the PERS Chapter 238 Program and the OPSRP Pension Program may use their OPSRP Pension Program retirement credit for PERS Chapter 238 Program benefits that require a specified period of service in order to be eligible for benefits, such as: non-duty disability, "30 and out", vesting, eligibility for health insurance subsidies, etc.

(11) Adds Section 12 to ORS Chapter 238A (The OPSRP Plan)

(12) Provides that a PERS Chapter 238 Program member who incurs a "Break in Service" and is eligible to receive retirement benefits under both the PERS Chapter 238 Program and the OPSRP Pension Program, may use their PERS Chapter 238 Program creditable service for OPSRP Pension Program benefits that require a specified period of service in order to be eligible for benefits, such as: non-duty disability, P&F retirement eligibility, etc.

Earliest retirement age for ORS 238 purposes shall be considered same for ORS 238A purposes.

(13) Provides that a member who is entitled to retire under both the PERS Chapter 238 Program and the OPSRP Pension Program, due to a break in service, may retire from the OPSRP Pension Program at the earliest retirement age they would be entitled to retire under the PERS Chapter 238 Program (ORS 238.280).

Allows ORS 238A beneficiary to choose to receive benefit upon date of death.

(14) Adds "pop-up" survivor options to the OPSRP Pension Program. The member's 100% continuation benefit or 50% continuation benefit would be recalculated to the Single Life Option if the beneficiary dies or the marriage "or other relationship"* is terminated after the member retires. (*The other relationship is the "Constitutional Spouse" that does not currently exist). The increased benefits are effective the first of the month following the date the event occurs, regardless of when PERS is notified.

(15) Provides that the death benefit of a vested member in the ORS 238A OPSRP Pension Program who dies before retirement will be paid the first day of the month following the date of the member's death unless the surviving spouse or beneficiary elects to delay it, but subject to RMD mandatory payout requirements.

Allows DAS to set overtime rates by geographic region.

(16) Allows DAS to identify classes of employees by geographic area for establishing unique overtime averages per class. DAS must do this by rule (OAR).

Directs for IAP purposes that ORS 238 salary definition be used for Tier 1 and Tier 2 members.

(17) Provides that the definition of salary under the PERS Chapter 238 Program is to be used as the definition of salary for contribution purposes into the IAP for PERS Chapter 238 Program members (Tier 1 and Tier 2). Salary as defined in ORS Chapter 238A (OPSRP) is to be used for contributions purposes for PERS Chapter 238 Program members who have incurred a "Break in Service" and became OPSRP Pension Program members and for new hires into the OPSRP IAP and Pension Program.

(18) Sections 17 and 18 are retroactive to contributions due on or after January 1, 2004.

Defines eligibility for community college academic employees.

(19) Adds the provisions of Section 20 to ORS Chapter 238A (OPSRP).

(20) Subsection (1) provides an academic employee of a community college will be credited with a minimum of 600 hours of service in a calendar year if they are employed 0.375 full-time equivalent on a 12 month basis, or 0.50 full-time equivalent on a nine- month basis (regardless of the actual hours worked during the calendar year).

Subsection (2) provides that an academic employee of a community college who is employed 1.0 full-time equivalent on either a nine-month or 12-month basis is to be considered to have performed 1200 hours (full-time value) in a calendar year (regardless of the actual hours worked during the calendar year).

Subsection (3) requires the community college to determine the "duties" for academic employees that constitute a full-time equivalent position (to receive 1200 hours full-time value). The governing body of each community college will make their own determinations.

(21) Provides that academic employees will receive one full year of retirement credit for each calendar year they are employed on a 1.0 full-time equivalent (as determined by the employer) on a nine-month or 12-month basis. Employees who perform less than 1.0 full-time equivalent will receive prorated retirement credit by dividing the number of hours calculated to be in excess of 0.375 full-time-equivalent on a 12-month basis or in excess of 0.50 full-time equivalent on a nine-month basis (listed in Section (20)) by 1,200, the full-time equivalent for academic employees.

(22) Provides that the provisions in Sections (20) and (21) will be applied retroactive to all service as an academic employee performed on or after August 29, 2003.

Text of HB 2189

HB 3262

PERS Omnibus Bill #2
Bill awaits the governor's signature. If signed, the bill has a special provision that makes it effective 91 days from August 4, 2005 when the Oregon Legislature went into Sine Die.

Clarifies that PERS is a single retirement plan with component programs and other items related to tax qualification of PERS programs.

(1) Provides that the PERS Chapter 238 Program and the OPSRP Programs are to be considered one system (the Public Employees Retirement System).

(2) Provides that the Variable Annuity Account is to be considered part of the system and not a separate plan or account.

(3) Provides the same as in (2).

(4) and (5) Clarifies the IRC section that applies to the Standard Retiree Health Insurance Account (SRHIA).

(6) and (7) Clarifies the IRC section that applies to the Retiree Health Insurance Premium Account (RHIA).

(8) Clarifies the IRC section that applies to the Benefit Equalization Fund (BEF).

(9) Clarifies that the OPSRP Pension Program and the IAP are separate accounts and not separate plans from the PERS system.

(10) Provides that employers shall remit the amount of contributions actuarially necessary to fund the benefits under the OPSRP Pension Program. Clarifies that the funding for the OPSRP disability benefits is provided under ORS 238A.240. Language was removed from ORS 238.225 concerning actuarial computations and moved to another section in the statute. The moved language is reflected under Sections 12, 13, and 14 of HB 3262.

(11) This language from another part of statute is to be moved. The law to have this language added hasn't been identified yet. The language:  Adds Section 12, 13, and 14  to ORS Chapter 238 covering actuarial employer contributions rates to be used for incoming employer contributions and written agreements with merged or split employers addressing the unfunded liability or surplus of the employers involved. Decisions must become part of the financial collections in CSD, so processes/procedures must include coordination between the Accounting and Employer Reporting Departments.

(12), (13), and (14) Incorporates in ORS Chapter 238 the moved provisions of ORS 238.225 as reflected under Section 10 of HB 3262.

(15) and (16) Incorporates ORS 238.225 and Sections 13 and 14 of HB 3262 into ORS Chapter 238A.

(17) Subsection (1) Provides that employers will make contributions for funding the OPSRP Pension Program under the provisions of ORS 238.225. Subsection (2) Clarifies that the liability for P & F members of the OPSRP Pension Program will be established separately.

(18) Clarifies that the amendments to ORS 238.225 and 238A.220 by section 10 and 17 of HB 3262 apply to all employer contributions whether made before, on or after November 4, 2005.

(19) Clarifies that the OARs adopted by the PERB are part of the written plan document required to maintain the system's tax qualifications status.

(20) Section 44e Clarifies that PERS may use moneys of the PERS Fund to pay the administrative costs of the IAP and that these moneys are in addition to, not in lieu of, the moneys attributed to the IAP. Provides that all moneys "borrowed" under this section to pay the costs of the administrating the IAP must be repaid by February 1, 2010, by adjusting member IAP accounts.

Removes Sections 2 through 6 of previous section 44e, Chapter 733, Oregon Laws 2003 which provided for the repayment of the loan referenced above; sets forth the interest rate to be used; noted the security interest of members in the amount loaned; provided for a cause of action if repayment was not made prior to January 1, 2010; provided for the inclusion of employer contributions necessary for paying the costs of administering the OPSRP Pension Program; and the deduction of a uniform percentage from IAP accounts.

(21) Clarifies that as soon as practicable after August 29, 2003, the PERB must submit the ORS Chapter 238A programs to the IRS and seek approval of OPSRP as parts of the tax qualified plan.

(22), (23), and (24) Clarifies that if a district splits, consolidates or merges, the districts affected by the split, consolidation or merger shall enter into a written agreement addressing any unfunded liability or surplus and deliver a copy to the PERB as required under Section 14 of HB 3262. Amends ORS 198.608 and 238.045. Clarifies that the written agreement addressing the manner in which any unfunded liability or surplus of a transferring employee is to be paid or credited will be administered under the provisions of Section 14 of HB 3262.

(25) Subsection (1) Clarifies that earnings on contributions of judges will also be credited to their member accounts. Also removed the quotation marks from certain terms (housekeeping only - no administrative consequence).

Subsection (2) Clarifies that notwithstanding Section 12 of HB 3262, judges will be considered a separate group of employees for the purposes of actuarial computation and contributions.

Allows veterans making "full cost" purchase to choose lower benefit.

(26) Subsection (3) provides that a person making a full-cost purchase for military service under ORS 238.157 may elect any benefit methodology (full-formula, money match, formula + annuity) they are eligible for to be used for their service retirement allowance even if that methodology does not produce the highest benefit.

(27) Provides that the amendment to ORS 238.157, above, applies only to members who have an effective retirement date on or after December 1, 2005.

Clarifies that withdrawal cancels Designation of Beneficiary.

(28) Provides that when a PERS Chapter 238 Program member terminates membership by either withdrawal or Loss of Membership, any designation of beneficiary made by the member prior to termination is invalidated.

(29) The amendment to ORS 238.390 through Section 28, above, applies to members whose membership is terminated before, on or after the effective date of HB 3262, but not to any member of the system who died before November 4, 2005.

(30) and (31) Did not become law because SB 108 became law.

Clarifies that an Alternate Payee Account is property that can be passed on to his or her beneficiary.

(32) Subsection (4): Provides that an AP may designate a beneficiary under ORS 238.390 and 238.395 for the purposes of the death benefit under the PERS Chapter 238 Program. Further provides that if no beneficiary is designated, the benefits will be paid under ORS 238.390(2) – to the personal representative of the AP's estate or under the provisions of a small estate affidavit proceeding. Also provides that an AP may designate a beneficiary for the purpose of the OPSRP IAP death benefit under ORS 238A.410. Further provides that if no beneficiary is designated, the benefits will be paid under the order or distribution provided under ORS 238A.410(3) – to the AP's surviving spouse, to the AP's surviving children in equal shares, and the AP's estate. Subsection (10) Provides that unless the divorce judgment, order, or agreement provides otherwise, the member has no interest in the benefit payable to an AP. Clarifies that upon the death of an AP, the benefit payable to the AP shall be made to the beneficiary designated by the AP and not to the member or the member's beneficiary or estate.

Modifies definition of Final Average Salary for the State of Oregon, school districts, and the Oregon University System as salary "paid" to the member.

(33) Redefines salary for the purpose of "Final Average Salary" (FAS) for Tier 2 and OPSRP Pension Program members.

Subsection (2): Provides that the amendments do not apply to members employed by local governments as defined in ORS 174.116. Provides that the average salary per calendar year for the three high years or the average of the 36 months prior to retirement is changed from "earned" to "paid."

Subsection (3): Provides that the calculation of FAS includes:

(a) any salary paid in or for the calendar month in which the member separates, but excludes:

(b) any salary paid for any pay period before the first full pay period that is included in the three calendar years, under Subsection (2) above, if the three calendar years are consecutive; and

(c) any salary for any pay period before the first full pay period that is included in the last 36 months before the effective date of retirement.

Subsection (4) Provides that FAS for Tier 2 members who are employed by local governments as defined in ORS 174.116, is the greater of either:

(a) the average salary earned in the three high years; or

(b) the average salary for the 36 months prior to the effective retirement date.

(34) Subsection (1) Provides that FAS for OPSRP Pension Program members is determined in the same manner as provided under Section 33, above.

Clarifies that school employees participating in the OPSRP pension program may use years of "active" service to meet eligibility criteria.

(35) Subsection (3) Provides that the normal retirement age for a member of the OPSRP Pension Program who retires from service as a school employee is the earlier of:

(a) 65; or

(b) 58 if the member has been an active member in 30 or more calendar years.

(36) Provides that an OPSRP Pension Program member who is not a school employee, as defined in ORS 238A.140, must have at least 10 years of retirement credit in order to qualify for a non-duty disability. Provides that an OPSRP Pension Program member who is a school employee, as defined in ORS 238A.140, must have been an active member in 10 or more years in order to qualify for a non-duty disability.

Codifies PERS practice to pay an inactive P&F member with 25 years of service an unreduced benefit at age 50.

(37) Subsection (1) Clarifies language (Housekeeping – no administrative consequence). Subsection (2) provides that an inactive P & F PERS Chapter 238 Program member who attains the age of 50 may retire with a reduced benefit as long as the last covered position the member held was a P & F position. Subsection (3) provides that the provisions in ORS 238.215(2)(b)(B), permitting a P & F member who attains age 50 and has 25 or more years of creditable service, applies only to inactive members whose last covered positions were qualifying P & F positions.

(38) Provides clarification that the last position under Section 37, Subsection (3), above, must be a qualifying position.

(38a) Provides that the changes to P & F retirement eligibility as set forth under Section 37 and 38, above, become operative January 1, 2006.

(39) Limits the reemployment exceptions (members allowed to be reemployed if retired more then six months or reemployed less then six months) under ORS 238.078 to members who have reached age 55 for P&F and 58 for GS.– Adds P & F at 50 with 25 years or "30 and out" as members who are not eligible to be reemployed under this statute.

(40) Provides for another exception to the 1,039 hour rule – exempts retirees reemployed by the Black Butte Ranch Rural Fire Protection District, the Black Butte Ranch Service District or the Sunriver Service District.

(41) Provides that ORS 238.088(2) – the exception allowing an elected or appointed official who is a PERS Chapter 238 Program retiree to be employed in the office of sheriff, county judge, or commissioner in a county of less than 75,000 inhabitants, who does not elect to become an active member to continue to receive PERS Chapter 238 Program retirement benefits - does not apply to a member who retires under ORS 238.280(1) and (2) – Adds P & F at 50 with 25 years or "30 and out."

(42) Unit captions are not statute.

(43) Provides that the bill becomes effective 91 days after the regular session adjourns. The session adjourned 8/5/05 – 90 days later is November 3, 2005.

Text of HB 3262

SB 54

Benefit Pop-Up
Sponsored by the PERS Board, this bill was signed by the Governor on June 7, 2005, effective January 1, 2006.

Modifies start date for "pop up" to higher retirement benefit due to divorce or death of beneficiary.

(1) Provides the application of an increased benefit under Options 2A, and 3A in ORS 238.305(6) to be effective the first of the month following the increased benefit reason; death of beneficiary or divorce of spouse (based on when the judgment of divorce is filed), regardless of when PERS is notified. Should PERS receive delayed notice, PERS is to pay any retroactive funds owed in a lump sum.

(2) Provides that the increased benefits allowed under the disability retirement program options 2A and 3A will have the increase effective on the first of the month following the death of beneficiary or divorce of spouse, regardless of when PERS is notified. PERS may have to pay retroactive funds owed in a lump sum.

(3) The changes apply to any retired member whose beneficiary dies on or after the effective date of this act or for whom a judgment of divorce is entered on or after the effective date of this 2005 act.

Text of SB 54

SB 108

PERS Omnibus Bill #3 - ORS 238 and ORS 238A Interaction
Sponsored by the PERS Board, this bill was signed by the governor on June 7, 2005, effective January 1, 2006.

Defines "inactive member" for ORS 238A.

(1) Provides the definition of an "inactive member" of the OPSRP Pension Program or the OPSRP IAP as being someone who is employed in a non-qualifying position (less than 600 hours in a calendar year). It removes the language that an inactive member is someone who is separated from all service with a participating employer or a participating employer's control group.

Clarifies that vested ORS 238 members do not suffer loss of membership.

(2) Provides that a vested inactive member of the OPSRP Pension Program may withdraw their OPSRP Pension Program funds if the actuarial equivalent of the member's benefit is $5,000 or less and the inactive member has separated from all participating public employers as well as any participating employer's controlled group (as defined by federal laws and rules). The member cannot remain in a non-qualifying job (less than 600 hours in a calendar year) and receive a withdrawal. Also clarifies that an "actuarial equivalent" does not include any value for cost-of-living adjustments under ORS 238A.210.

(3) Provides that an inactive OPSRP IAP member may only withdraw IAP funds (to the extent vested) if the inactive member has separated from all service with a participating employer and their control group. The member cannot be employed in a non-qualifying position (less than 600 hours in a calendar year) and receive a withdrawal.

(4) Clarifies that an inactive PERS Chapter 238 Program member will lose membership (cease to be a member of the system) if the member is not vested and is inactive for a period of five consecutive years from the date they become inactive. For school district employees, the employee will not cease to be a member if they are reemployed in a qualifying position (600 or more hours in a calendar year) at the beginning of the sixth year after a five school-year absence.

Clarifies definition of "qualifying position."

(5) Clarifies that an active member means a member who is presently in a PERS qualifying position (600 or more hours in a calendar year) with a participating public employer. This section also provides that an inactive member is someone who is employed in a non-qualifying position (less than 600 hours in a calendar year). A definition for a qualifying position was added as Subsection (19) (600 or more hours in a calendar year).

(6) Removes Subsection (4) from ORS 238.015. This was the former definition of qualifying position under the PERS 238 Program that included the term "normally require[s]."

(7) Corrects the reference under ORS 238.088 due to the renumbering of subsections in ORS 238.015. No substantive changes.

(8) Clarifies ORS 238.156 by replacing the phrase "that meets the requirements of ORS 238.015(4)" with  "qualifying position". No substantive changes.

(9) Statute updated due to the renumbering of sections.

Allows PERS Board to set by rule the minimum monthly amount of benefit payment from the IAP and allows ORS 238 member at retirement to receive IAP benefit as well.

(10) ORS 238A.400 Subsection (1) allows the board to adopt rules to establish minimum payments and to allow lump sum or installment payment periods that are different from the 5, 10, 15, or 20-year periods if necessary to pay the newly established minimum amounts. (PERS has already created an OAR for minimum payments.) Subsection (4) provides that a PERS Chapter 238 Program member may choose to receive their IAP funds upon retirement for service from the PERS Chapter 238 Program. Members under age 55 (who retire for service under 30 and out) who receive their IAP before age 55 will be subject to a 10% Federal Tax Penalty.

Text of SB 108

SB 109

Earnings Rate
Sponsored by the PERS Board, this bill was signed by the Governor on June 28, 2005, effective June 28, 2005.

Allows the PERS Board to establish interest rate paid to members on underpayment of "estimated benefits."

Text of SB 109

SB 5558

PERS Budget
Bill was signed by the governor on June 28, 2005, effective July 1, 2005.

Text of HB 5558

SB 5559

PERS Fees
Bill was signed by the Governor on July 7, 2005, effective July 1, 2005.

Authorizes PERS to charge fee for more than two estimates.

(1) Authorizes PERS to charge a fee of $60.00 per estimate for any third or subsequent estimates requested by members who are within two years of eligibility for service retirement.

Text of SB 5559