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 and 2002.
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-à-vis 2008 losses as well, so that could mean an additional minor increase for effected PERS members.