The Associated Press
PORTLAND State employees hired before 1996 likely will not see any growth in their regular retirement accounts for 2003 after the state Public Employees Retirement System board decided the pension plan still cannot afford it.
The PERS board tentatively decided to limit retirement account growth at a meeting Friday, even though board members were told the pension system assets grew last year.
But as part of an overhaul designed to reduce PERS costs, the Legislature passed a law specifying that, beginning with 2003, earnings cannot be credited to the accounts of employees hired before 1996 while the system still has a deficit.
PERS began last year with a $1.9 billion deficit. Although the rising stock market pushed up its assets by more than 20 percent during the year, agency estimates indicate the deficit is about $600 million.
Based on that figure, the board gave preliminary approval for a plan that will not credit any earnings to regular accounts for employees hired before 1996, when earlier legislative changes rearranged the pension system.
The board's decision won't be finalized until March, but Friday's vote will affect more than 100,000 PERS members if it stands.
PERS has about 300,000 members and retirees. Employees hired before 1996 can put as much as 75 percent of their retirement money in a variable account that rises and falls with investment returns.
In their regular accounts, however, those PERS members were guaranteed 8 percent annual growth until last year, when the Legislature and Gov. Ted Kulongoski said the 8 percent would be a career average, not a year-to-year guarantee.
The new law does not affect state and local government employees hired after 1996. Their pension accounts rise and fall with investment returns. It also does not affect the variable accounts of state workers hired before 1996.
The changes came in response to projections that the pension system would fall $17 billion short of meeting its obligations during the next 25 years.
After Friday's board meeting, public employee unions said they had expected the zero-credit vote. They noted that the law is one of the PERS changes they are challenging in a lawsuit. The challenge went directly to the Oregon Supreme Court, which may not rule until next year.
PERS figures show the system has about $7.8 billion in earnings from 2003. The board plans to decide in March how much to put in several reserve accounts.