The Associated Press

PORTLAND - The state's Public Employees Retirement System and local governments have tentatively settled the legal case that launched a pension reform effort four years ago.

But the agreement probably will not settle all the legal issues swirling around PERS.

The legal settlement reached Monday "is very, very good news," said Bill Gary, the lawyer for Portland and seven other local governments that challenged the PERS board's decision to impose large rate increases in 1999.

The case becomes known as the Lipscomb decision after Marion County Judge Paul Lipscomb ruled last year that the pension board used outdated life expectancy tables and improperly boosted member earnings during the height of the stock market boom.

The settlement largely follows the reform legislation passed by the 2003 Legislature. For example, Lipscomb had ruled the account earnings of 20 percent in 1999 should have been 11.3 percent. But lawmakers limited future earnings rather than reach back and reduce employees' accounts. The settlement adopts this approach.

The deal also adopts the Legislature's method for updating life expectancy tables.

A big catch remains, however. Public employee unions appealed the 2003 legislative plan to the Oregon Supreme Court. The next step in that lawsuit will be in April when a state Court of Appeals judge presents his findings to the high court.

Union lawyer Greg Hartman said Monday that he had not seen the details of the settlement but vowed to continue the appeal of the Lipscomb decision "if our perception is that the resolution adversely effects our clients."

Marla Rae, a spokeswoman for the local government plaintiffs, said they don't think the unions can continue the Lipscomb appeal, given settlement of the case.

The decision to go ahead with the settlement is an important step for the new PERS board, which Gov. Ted Kulongoski replaced in September.

"The settlement would not have been possible without the governor and the Legislature's leadership on PERS reform, or without the courage of the new PERS board to recognize and correct the mistakes of the past," Gary said.

Michael Pittman, the PERS board chairman, emphasized that "stability and predictability in the system is key."

"It's a very sound solution that will relieve a lot of tension and distractions that are wasteful for taxpayers," board member James Dalton said.