HB 2115 And Oregon’s PERS Legislators

During the Regular Session of Oregon’s 2011 legislature, the PERS legislators who controlled that body took no action on HB 2115.  That bill had been introduced at the request of Governor Kitzhaber for PERS and it would have made a substantial change to SB 897, a PERS bill originally passed by PERS legislators in 2009.  Governor Kulongoski vetoed SB 897 but, in one of their first acts in the 2010 Special Session, PERS legislators overrode that veto.  In doing so they left in place an extraordinary potential  benefit for themselves and every other PERS member who would retired after July 1, 2011.

It is not surprising that the PERS legislators took no action on HB 2115 .   That bill would have substantially reduced the chance that SB 897 gave them to receive unearned PERS retirement benefits.  Any efforts to pass HB 2115 would have been in direct conflict with the personal financial interest of those PERS legislators, so they took no action on it.

This is what SB 897 does.  It allows a PERS member to request verification of the data that the member’s retirement benefits will be calculated on.  That data includes creditable service, employee contributions, account balance, unused sick leave and final average  salary.  Once a PERS member requests verified data, two independent actions are required.  The public employer(s) for whom the requesting member worked must provide the data to the PERS Board.  Then, the PERS Board must verify that data and give it to the requesting member.  If the PERS member does not agree with the verified data, the PERS member can dispute it by notifying PERS within 60 days after the verification is provided.  If the PERS member does not agree with how PERS resolves that dispute, the PERS member may seek judicial review of the decision.

While the PERS member has the right to challenge the verified data and to take the dispute to court, the public employer(s) who provided the data have no right to review what PERS has verified before it is sent to the PERS member and they have no right to dispute that data if PERS made an error.  The public employer(s) can only have incorrect data modified if the PERS employee knew that the data was wrong and failed to notify PERS of the error within 60 days of receiving it.

The benefit that SB 897 created for PERS members is that it requires the member’s PERS retirement benefit to be computed using the verified data in almost all cases, even if that data is wrong.  There are only three exceptions to the mandatory use of the verified data.

Exception (1).  Incorrect verified data will not be used if it reduces the PERS member’s retirement benefit.  This exception is absurd.  It requires incorrect data to be used if it gives a PERS member a larger retirement benefit but it prohibits incorrect data to be used if it reduces the PERS member’s retirement benefit.  This discriminatory exception could only make sense to the PERS legislators who voted for SB 897 and who hope to benefit from it when they retire.

Exception (2).  The verified data will be adjusted for a net loss in the account balance or used sick leave that occur after the verification date.  This exception is fair and reasonable but it is the only exception to the use of incorrect data that makes sense.

Exception (3).  The incorrect data does not have to be used if the PERS member knew the verified data was wrong and did not notify PERS of the error within 60 days of receiving it.  This exception appears to prevent abuse but it does not.   It is meaningless because PERS members have no obligation to read the verified data within 60 days of receiving it.   And if the PERS member does not read the verified data for 60 days, any wrong data can only increase the PERS member’s benefits, it can never reduce them.  So there is no reason why would a PERS member would read the verified data before the end of the 60 day period.

HB 2115 would have significantly changed SB 897.  It would have allowed the PERS Board to calculate a member’s retirement benefit on correct data, even if the verified data was wrong.  That would have added fairness to SB 897 but that law was never about fairness.  It was always about giving the PERS legislators and all other PERS members a chance to receive unearned retirement benefits.  And the PERS legislators are among those PERS members with the most to gain by not passing HB 2115.  Legislators usually have short periods of service and low compensation, which causes their PERS retirement benefit to be modest.  But with SB 897 they are no longer limited to just receiving the retirement benefit they  actually earned.  A mistake could be made in compiling a legislator’s verified data.  If the legislator delays reading the verified data for 60 days after receipt and if that mistake increases that legislator’s PERS retirement benefit, the legislator will receive a retirement benefit windfall and it makes no difference whether the incorrect data was the product of an error or if it was made intentionally.

The system created by SB 897 not only increases the chance of mistakes being made, it may even encourage mistakes.  Since the verified data is given to the PERS member by PERS, without review by the public employer(s) who provided the data, anyone with legitimate or illegitimate access to the PERS computer system can alter the data and thereby increase a PERS member’s retirement benefit.   If just one incorrect zero is added to a PERS member’s final average salary or the member’s account balance, that PERS member will receive a  retirement benefit many times greater than what the PERS member had actually earned.

SB 897 is unfair to the people of Oregon who have to pay for the PERS retirement benefits.  It could deprive them of necessary services.   The PERS legislators had a chance to correct that situation with HB 2115 but they refused to do so.  Their inaction on that bill is embarrassing and they should be ashamed of themselves.  But instead, they are probably hoping that after they retire from PERS they will be laughing all the way to the bank with unearned retirement benefits.

About Dan Re

I am an attorney who has lived in Bend and practiced law since 1981. In educating myself about the Oregon Public Employees Retirement System (PERS), I was shocked at how the PERS laws were changed by the legislature, once legislators were allowed to join PERS in 1971, 26 years after PERS was first created. Those changes personally benefitted the legislators who made them at the direct financial expense of the people they were elected to represent. That is wrong and I intend to change it. In 2009, I started a non-profit 501(c)(4) corporation, In RE The People, Inc., for the purpose of informing concerned citizens of what happened regarding PERS and other issues of social and civic importance. I then created this blog to further that objective.
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