The Associated Press

SALEM — A Marion County judge has ordered the Public Employees Retirement System to immediately update obsolete life expectancy tables and redo the way it distributed earnings at the height of the stock market boom.

The Wednesday ruling by Judge Paul Lipscomb could help ease the PERS system's projected $15 billion shortfall. But it could also reduce worker pensions.

A coalition of public employee unions will appeal, said coalition attorney Greg Hartman. He estimated the ruling could shift as much as $1 billion from employee pension accounts.

The PERS board hasn't decided if it will appeal, said pension fund spokesman David Crosley.

The PERS board made a preliminary decision Tuesday to adopt new mortality tables next January, but it is not clear if that would meet the judge's requirements for timing.

The PERS system covers 294,000 past and current state and local government workers.

Lipscomb said the PERS board must reallocate $6.9 billion from 1999 stock market earnings so more goes into reserves and less into employee pension accounts.

The decision would require PERS to refigure past pension expenses for state and local governments to mid-1998, presumably lowering government charges for the retirement system.

The long-awaited ruling has worried many public employees and recent retirees who fear they might have to give back some of their pension benefits accrued since 1999.

The lawsuit was brought by the cities of Portland and Eugene, Multnomah County and four smaller public employers who claim their PERS charges imposed in 2000 were too high because of improper PERS board decisions.

The PERS board used the high 1999 stock market earnings to boost members' regular accounts by 20 percent. Employees are allowed to put up to 75 percent of their accounts into a stock fund.

An additional 4.9 percent was put into a reserve used to cover the 8 percent guaranteed annual return that most employees get on the nonstock part of their accounts. They get the guaranteed earnings even if PERS investments don't yield that much.

Lipscomb faulted the board for not putting enough in reserve to meet its goal of being able to pay the 8 percent guarantee during 30 months of a flat stock market.

Doing that would have required putting almost $1.7 billion more into reserve, said Dale Orr, PERS fiscal services administrator.

Lipscomb said the board also didn't put enough into a separate contingency reserve required by law, which Orr said could require as much as $518 million more in reserve.

Lipscomb agreed Wednesday to hold another hearing on one claim in the lawsuit.

Labor unions charge PERS awarded some 1999 investment earnings to employers based on a policy that wasn't adopted until the next year. A victory in that claim could send $85 million from employers back to workers, Hartman said.