In a win for members of the
Oregon Public Employees Retirement System, both current workers and retirees
who had money in the PERS variable account may see a minor upward bump,
following a decision May 12 by the Oregon Court of Appeals.
In the Murray case, the Court of Appeals reversed the Oregon PERS
Board on its decisions to charge the PERS variable account for administrative
expenses in years of account loss. Such losses occurred in down markets in 2001
Over those two years, PERS
charged the variable account principle just under $2 million to cover the
losses. According to attorney Tom Doyle, who argued the case for the PERS
Coalition law firm Bennett & Hartman, this was different than how PERS
handled the situation for the "regular" account.
"Basically, PERS argued that
the variable account is a stand-alone fund, separate from the overall umbrella
of the PERS system," said Doyle. "In fact, the general statute applies to the
variable account and how such administrative expenses are to be paid. Simply
put, the variable account is 'under the wing,' so to speak, of PERS in general
and has to be treated the same way."
Doyle says PERS argued that
the statutes allowed it to treat the variable account differently and charge
against what it termed its "negative interest."
"The court readily rejected
this 'negative interest' argument and held that the variable account was
entitled to be treated on the same basis as the regular account when allocating
administrative expenses," said Doyle.
So what does this mean?
Doyle says it is "unlikely, though possible" PERS will appeal this ruling to
the Oregon Supreme Court. Therefore, assuming this is the final ruling, this is
minor good news for some current members and retirees.
- Current members — If you had money in the variable
account in 2001 and/or 2002, you will see your variable account balance
re-figured to a higher level to reflect the amount that was taken from it
to cover the administrative expenses.
- Retirees — If you had money in the variable account in 2001 and/or
2002, you will see a slight increase in your monthly benefit check due to
your variable account balance re-figured to a higher level to reflect the
amount that was taken from it to cover the administrative expenses.
Doyle also said "it appears
likely" that PERS did the same thing in 2008, when the variable account also
sustained losses. He expects the agency to use the current ruling to settle
accounts vis-ˆ-vis 2008 losses as well, so that could mean an additional minor
increase for effected PERS members.