Oregon Supreme Court Restores COLAs for Retirees

The Oregon Supreme Court last week overturned a series of pension cuts enacted in 2013, paving the way for public employees and retirees to see their COLAs restored.

The decision is good news for members of the state’s Public Employees Retirement System, but state agencies and school districts aren’t rejoicing; for them, the reversal means higher costs, and what one government official calls an “actuarial nightmare”.

More on the original law and the court decision from the Statesman Journal:

Two bills passed by the Legislature in 2013, Senate Bills 822 and 861, reduced the 2 percent cost-of-living adjustment for retirees in the Public Employees Retirement System. SB 822 also ended a payment meant to compensate out-of-state retirees paying Oregon income taxes.

Retirees appealed, saying the changes violated the contractual agreement between the state and workers.

[…]

In its unanimous opinion issued Thursday, the court upheld the state’s ability to eliminate the income tax offset, and said the legislature can change the COLA for benefits being offered to current and future PERS members.

But it agreed with retirees that it is unconstitutional to cut the COLA retroactively. That provision accounted for the majority of the approximately $500 million in annual savings to public employers.

The COLA for current and new members is calculated with a series of graduated levels similar to tax brackets.

“As a result, PERS members who have earned a contractual right to PERS benefits both before and after the relevant effective dates of SB 822 and SB 861 will be entitled to receive a blended COLA rate, reflecting the different COLA rates applicable to benefits earned at different times,” the Oregon Judicial Department said in a news release.

It’s unclear how much the ruling will affect PERS’ unfunded liability or the state’s finances.