SALEM - The board of the Oregon Public Employees Retirement System has voted to take some of the edge off a coming increase in employer pension rates.

Rates are rising because of the 2008 stock market downturn. The new policy bases them on a sliding scale tied to how well-funded each employer's pension fund is.

Speaking to the Salem Statesman Journal, PERS Executive Director Paul Cleary characterized the move as based more on fairness than to provide rate relief.

Under the old policy, the investment declines most participating pension plans have suffered would have triggered an automatic 6 percent rate increase for employers.

The new policy means that better-funded pension plans within PERS will have smaller rate increases than public employers with plans hit harder by the economic downturn.

The rates must increase to make sure that retirees receive the benefits due them, board chairman James Dalton said.

"These are people who have already retired," he said. "We owe them the money. We have to have money in the system with which to pay them."

The board's decision did not set employer rates for the next biennium, 2011-2013. That will occur in September.

However, the decision sets policy for how much those rates will increase. State agencies, local governments and school boards now can estimate how much their specific rate increase will be and begin planning for it.

Consultants said changing the rate policy would make increases more stable for employers, smoothing out what would have been sudden, steep hikes.

The pension system faces increases in contributions from employers for years to come, one board member said.

"Even if markets consistently deliver strong returns, we're moving to a higher level of contributions for the next decade," Dalton, a former Tektronix executive, told The Oregonian in advance of Friday's action. "It's going to take a long time to recover. It's a different environment."

If returns are closer to the system's average over the last 10 years - 4.5 percent - the actuarial deficit will grow precipitously, The Oregonian reported.