The Oregon Supreme Court sided with Oregon public employers and taxpayers in a landmark decision today to dismiss the public employee union-backed appeal of the case known as the "Lipscomb Decision."

The dismissal will result in an estimated $1.6 billion reduction in the PERS Unfunded Liability (UAL) for school boards and other public employers. PERS actuaries estimate employer PERS rates will be reduced by at least 1.6 percent of payroll -- which equals a taxpayer savings of about $100 million a year.

"This dismissal is a victory for public employers because it restores a system that is fair, affordable and sustainable," said OSBA Associate Executive Director Ron Wilson. "While the employer rate increase will be reduced, it's still important to note that overall, PERS employer rates for education employers is estimated to increase to more than 22 percent of payroll in July 2007."

The impact on retirees and employees will be calculated by PERS in the near future, with member-specific information to be sent from PERS to all members. The earliest changes in employer rates will begin in July 2006 or 07.

Here's how this dismissal impacts Tier One PERS retirees:

• Reduced future monthly benefits; and
• The over-payment of benefits since 1999, based on the 20 percent credited earnings, will be "recaptured" according to agreements between PERS and each retiree. The 1999 earnings credited will be 11.33 percent, and PERS must not collect more than 10 percent of the monthly benefit, unless the retiree allows PERS to capture more.

Tier One "active" employees will face reduced regular account balances as PERS distributes the lower crediting amount from 1999.

"PERS is taking the time to calculate what this means to each member, which means they will have accurate, reliable information when the time comes -- so we encourage everyone to have patience with this process," Wilson said.

The case was initially brought by the City of Eugene, which challenged high PERS costs to government and taxpayers. Marion County Circuit court Judge Paul Lipscomb had successfully argued that the former PERS Board ignored its own policies by allocating 20 percent earnings for Tier One regular employee accounts in 1999. He ordered the PERS Board to recalculate 1999 earnings, based on an earnings rate of 11.33 percent.

Talking points about this dismissal from OSBA

Supreme Court Decision

OSBA Business Services Director Angie Peterman will assist business managers regarding employer rate changes; questions about individual PERS benefits should be answered by PERS. For general information on PERS reforms and litigation, contact OSBA Associate Director of Legislative and Public Affairs Jim Green at 800-578-6722 or via E-mail .