The Associated Press

SALEM — A little-noticed provision of the 2003 pension reform act could have serious consequences for thousands of public employees who take extended leave from work.

Under House Bill 2020, which created a lower-cost pension plan for new hires, veteran public employees taking a "break in service" longer than six to 12 months lose their continuing status under the Public Employees Retirement System.

When they return to a public sector job, they are bumped out of the public employees retirement system and switched to the new Oregon Public Service Retirement Plan.

They won't lose accrued benefits under the old plan. But the new plan raises the retirement age five to seven years, trims benefits accrued each year and shifts a large chunk of worker funds into 401(k)-style accounts, reducing guaranteed monthly retirement checks.

The break-in-service provision could save school districts and state and local governments millions of dollars. But it also risks discrimination claims, based on medical conditions, gender, religion and union activity, experts say.

Nearly 50,000 Oregonians have amassed PERS accounts but have left public service. If those "inactive" members return to government jobs, they'll be shifted to the Oregon Public Service Retirement Plan.

Some inactive PERS members are parents taking breaks to raise children. If they remain home longer than a year with new babies or special-needs children, they lose their system seniority.

The change will penalize women more than men because they are more likely to seek longer parental leaves, said Kris Kain, president of the Oregon Education Association.

Kain also faces the loss of PERS seniority because she has taken a six-year leave from her Coos Bay teaching job to lead the teachers' union.

Labor leaders testified against the break-in-service language in the 2003 legislative session but didn't prevail, said Mary Botkin, lobbyist for the American Federation of State, County and Municipal Employees.

State Rep. Greg Macpherson, D-Lake Oswego, an author of the bill, called the break-in-service provision "fair and reasonable."

It saves taxpayer money and is consistent with what occurs when other retirement systems revise their plans, said Macpherson, a corporate pension lawyer. But Macpherson said there may be a need to tinker with the law when the Legislature comes back to Salem.

PERS is clarifying some of the procedures for determining breaks in service. But it has no authority to make exceptions to a law enacted by the Legislature, said Steve Delaney, the agency's lobbyist.