REVISED Joint Stipulated Facts and General Stipulations · 17/01/2020 · 28, 2003; and (c) OPSRP (short for Oregon Public Service Retirement Plan) ... If a member chooses to remain

Page 1 REVISED JOINT STIPULATED FACTS AND GENERAL STIPULATIONS

JENNIFER JAMES, LISA RIEGEL, ROSANNE SCOTT, ROBERT MARTINEAU, REGINA THOMPSON, EMILY MARX, DUSTIN ANDREWS, BRANDON

SILENCE, and THOMAS CLEARY,

Petitioners,

v.

STATE OF OREGON; STATE OF OREGON by and through the Department of Human Services and the Department of Transportation; MULTNOMAH

COUNTY; CITY OF PORTLAND; CITY OF SALEM; OREGON HEALTH & SCIENCE UNIVERSITY; MOUNT HOOD COMMUNITY COLLEGE; MOLALLA

RIVER SCHOOL DISTRICT; and PUBLIC EMPLOYEES RETIREMENT BOARD,

Respondents.

S066933 ______________________________________________________________

REVISED JOINT STIPULATED FACTS AND GENERAL STIPULATIONS

The parties stipulate to the facts set forth below solely for purposes of this

proceeding to determine whether Senate Bill 1049 breaches any contract between

members of PERS and their employers or violates any provision of the Oregon

Constitution or of the United States Constitution, consistent with section 65 of SB

1049. The parties reserve all arguments based on materiality or relevance to the

issues before the court. The stipulated facts as set forth below shall not bind any

party in any other proceeding. The parties intend for this stipulation to be

consistent with SB 1049 and with the constitutional provisions, statutes, and

regulations governing PERS, and in the event of a conflict between a stipulation

and any such legal provision, the legal provision shall control.

System-Based Facts

PERS Membership Overview

1. Public employees in Oregon have had a contractual right to some

retirement benefits as provided by statute since 1945. Since 1953, those benefits

January 17, 2020 01:25 PM


have been administered under the Public Employee Retirement System (“PERS”).

2. The Public Employees Retirement System (PERS) is a tax-qualified

defined benefit governmental plan subject to sections 401(a), 414(d) and 414(k) of

the Internal Revenue Code (IRC). The provisions of the plan are contained in

chapters 238 and 238A of the Oregon Revised Statutes (ORS), as well as portions

of chapter 237, and also chapter 459 of the Oregon Administrative Rules (OAR).

3. Public employees become PERS members after working six months

in a qualified position for the state or one of the other 900-plus PERS-participating

public employers. As of October 2018, there were more than 367,000 members in

the PERS system, including members currently employed in qualifying positions

(active members), members not currently employed in qualifying positions who

have not withdrawn their accounts or retired (inactive members), and members

who have retired from the system and have begun receiving benefits (retired

members). All these PERS members fall into three broad membership categories

based on their date of hire: (a) Tier 1 members are those hired before January 1,

1996; (b) Tier 2 members are those hired between January 1, 1996 and August

28, 2003; and (c) OPSRP (short for Oregon Public Service Retirement Plan) are

those hired on or after August 29, 2003.

Pre-SB 1049 System Benefits Overview

4. The “2003 PERS Legislation” (used to refer collectively to Oregon

Laws 2003, chs. 67 (HB 2003), 68 (HB 2004), 625 (HB 3020), and 733 (HB 2020)),

in addition to making other changes referenced below, added the Individual

Account Program (“IAP”) as a component of the PERS plan. The IAP is a

retirement benefit that is derived from employee contributions and is based on the

balances of separate accounts of the members. The IAP and the pension program

are separate accounts within the Public Employees Retirement Fund, and the IAP


is treated as a defined contribution plan with respect to sections 72(d) and 415 of

the Internal Revenue Code.

5. PERS is a tax-qualified, defined benefit, governmental plan, which

since the “2003 PERS Legislation”, includes a “defined benefit” with a “defined

contribution” component. The “defined benefit” consists of the pension or service

retirement allowance, and the “defined contribution” component consists of the

Individual Account Program (“IAP”).

Defined Benefit—Pension or Service Retirement Allowance

6. Before the 2003 PERS Legislation, PERS Tier 1 and Tier 2 members

made employee contributions to a “regular” member account in PERS. In addition,

Tier 1 and Tier 2 members had the option to direct some of their contributions to a

“variable” account to be invested primarily in equities. Tier 1 members’ regular

accounts are guaranteed annual earnings of at least the system’s assumed

earnings rate (currently 7.2%). Tier 2 members’ regular accounts and Tier 1 and

Tier 2 members’ variable accounts are not guaranteed any rate of return. The 2003

PERS Legislation (ORS 238.200(4)) prohibited Tier 1 and Tier 2 members from

continuing to “make employee contributions to the fund for service performed on

or after January 1, 2004.” The pre-2004 “regular” and “variable” account balances

may be used by PERS when calculating Tier 1 and Tier 2 members’ service

retirement allowances under ORS 238.300 and provide part of the funding for

those allowances.

7. At retirement, PERS uses the three methods referenced in ORS

238.300 to calculate the service retirement allowance for Tier 1 and Tier 2

members. The three methods are known as Full Formula, Formula Plus Annuity

(available only to those members with service before August 21, 1981), and Money


Match. A PERS Tier 1 or Tier 2 member receives a service retirement allowance

based on the formula that produces the highest benefit amount.

8. Under the Money Match method, a Tier 1 or Tier 2 member’s service

retirement allowance is calculated by determining the annuity that is the actuarial

equivalent of the member’s pre-2004 regular account balance plus earnings

through the time of retirement (the annuity component) and then adding a sum in

an equal amount to the annuity that is charged to the employer, i.e., the “match”

(the pension component). The resulting service retirement allowance, therefore,

amounts to twice the actuarial equivalent of the member’s regular account balance

at retirement. If the member was participating in the Variable Program, did not

elect to remain in the variable program after retirement, and did not already make

a one-time variable transfer, PERS will transfer their variable account balance to

their regular account before calculating the benefit and make any variable

adjustment necessary to the benefit. If a member chooses to remain in the Variable

Annuity Program after retirement, separate calculations are performed to compute

the member’s regular and variable annuities, which are based on the regular and

variable account balances established at retirement.

9. Under the Formula Plus Annuity method, which is only available for

Tier 1 members with service prior to August 21, 1981, the annuity component is

the actuarial equivalent of the member’s pre-2004 account balances plus earnings

through the time of retirement. The pension component, funded by the employer,

is equal to one percent of the member’s final average salary (1.35 percent for

legislators and police and fire employees) for each year of service.

10. The Full Formula calculates a member’s service retirement allowance

by multiplying the member’s final average salary by a statutory factor of 1.67


percent (two percent for police officers and firefighters) and then multiplying the

resulting figure by the member’s years of service. That service retirement

allowance then is funded by calculating an annuity amount that is the actuarial

equivalent of the member’s pre-2004 account balances plus earnings through

retirement (the annuity component) and the remaining monthly benefit is funded

by employer reserves in an amount necessary to make up the difference (the

pension component).

11. The majority of PERS Tier 1 and Tier 2 members are now retiring

under the Full Formula, which was intended by the legislature to be the primary

calculation method.

12. The Full Formula was enacted in 1981 and in Strunk v. PERB, 338 Or

145, 190-191 (2005), the Supreme Court characterized it as “provid[ing] members

with a formula under which the risk of earnings loss fell—and continues to fall--

squarely on employers. The changes that the 1981 amendments made to former

ORS 237.147 (1979), now ORS 238.300 were material: they added a new, primary

benefit calculator to the system and shifted the downside risk of investment return

away from members.”

13. The OPSRP general service pension is calculated by multiplying the

member’s final average salary by a statutory factor of 1.50 percent (1.8 percent for

police officers and firefighters) and then multiplying the resulting figure by the

member’s years of service. The “normal retirement age” for OPSRP members is

later than for Tier 1 and Tier 2 members.

14. Prior to SB 1049, OPSRP members received a pension funded solely

by employer contributions and earnings on those contributions, and since January

1, 2004, the retirement allowance for non-judiciary Tier 1 and Tier 2 members has


been funded by employee contributions made before January 1, 2004, employer

contributions, and earnings.

Defined Contribution – Individual Account Program (“IAP”)

15. Since January 1, 2004, Tier 1, Tier 2, and OPSRP active members

have been required to make employee contributions of 6% of the member’s salary

to the IAP. The employee contributions to the IAP may be picked-up by the

member’s participating employer. The employee contributions have been credited

to individual employee accounts in the IAP and adjusted annually for actual

earnings and losses minus any administrative expenses. An employee becomes

vested in their IAP employee account when the account is created and at

retirement, can choose to receive the account balance as a lump sum payment, or

alternatively, in installments paid over 5, 10, 15, or 20 years or as an Anticipated

Life Span Option distribution.

16. PERS Tier 1, Tier 2, and OPSRP active members’ 6% employee

contributions to the IAP may be paid by the members’ participating employer

pursuant to ORS 238A.335. The participating employer may reduce the members’

employee compensation in order to pay the contribution or may pay the

contribution without reducing the employee compensation.

17. Between January 1, 2004 and December 31, 2017, the average IAP

account balances and distributions to retired members, withdrawals, and

deceased members were as follows:


18. During the period January 1, 2004 to January 1, 2017, the Oregon

Investment Council (“OIC”) invested all members’ IAP accounts balances without

regard to members’ dates of birth. Those investments produced an average

earnings distribution to the IAP accounts for this period of 8.34%.

19. Starting in January 1, 2018, all PERS members’ IAP account balances

were allocated in age-based Target-Date-Funds (TDFs), an effort by the OIC to

reduce investment risk and volatility as members age and get closer to retirement.

IAP members are invested automatically in the TDF that corresponds with their

birth year. All IAP members receiving installment payments after retirement were

allocated in the Retirement Allocation Fund. Pursuant to Oregon Laws 2018, ch

118 §2, effective January 1, 2019, PERS was expected to permit IAP members to

make an annual election to invest their IAP account balance in a TDF different than

the one to which they were assigned based on their birth year. However,

implementation of the IAP “Member Choice” program was delayed by PERS as a

result of legal concerns expressed by the Oregon State Treasury. As a result,

member IAP accounts remained invested in the TDF assigned to the member

based on their birth year.

20. By fall 2020, PERS plans to inform members of an “optional

investment choice window,” in which they can choose a TDF for their IAP


investments, different from the default option based on their birth year. Effective

January 1, 2021, IAP members may choose to invest their IAP account balance in

the TDF that is more reflective of their own risk tolerance than the default based

on their birth year.

Pre-SB 1049 System Funding

21. At the end of each calendar year, the PERS actuaries calculate the

system’s funded status using the following basic equation:

B BENEFITS

Present value of earned benefits

(Legislature)

=

C

CONTRIBUTIONS Employer funds to pay for

pension benefits (PERS Board)

+

E

EARNINGS Future returns on investment funds

(OIC)

22. The PERS System is 100% funded at a given point in time when the

PERS Fund’s current assets are equal to or greater than the PERS System’s

accrued liabilities, if actual experience going forward matches current

assumptions. The System is 90% funded at a given point in time when the PERS

Fund’s current assets are equal to 90% of the PERS System’s accrued liabilities,

if actual experience going forward matches current assumptions.

23. Every two years, the PERS Board sets individual employer

contribution rates so that, over time, those contributions will be sufficient to fund

the benefits earned, if earnings and other relevant actuarial factors (such as payroll

growth, withdrawals, retirements, and mortality) follow current assumptions and

the contributions are made. Employer contribution rates consist of two

components: the “normal cost” and the “unfunded actuarial liability” (“UAL”). An

employer’s normal cost is an “actuarial present value estimate” of its employees’

future benefits attributable to that biennium, stated as a percentage of employee

pay. The normal cost, therefore, is applicable only to active members. On the other


hand, the UAL can be attributed to all members, whether active, inactive, or retired.

When the plan is underfunded, the board increases employer contribution rates

above the normal cost by including a rate that is projected to systematically reduce

the UAL. Rather than increase employer contribution rates to eliminate the UAL

over a specified period of time if future experience matches assumptions and

contributions are made, contribution rates currently are set to pay off the UAL over

a 20-year period for Tier 1 and Tier 2 and over a 16-year period for OPSRP.

24. In its system valuations, employer rate orders, and investment

crediting, the PERS Tier 1 and Tier 2 program is tracked separately from the

OPSRP program. The PERS Tier 1 and Tier 2 program has separate individual

accounts for each participating employer. Though some employers participate in

rate pools, each employer’s contribution rate is individually calculated. Upon

retirement, funds are transferred from the Tier 1 and Tier 2 pre-2004 employee

accounts and employer reserve accounts into the Benefits-in-Force (“BIF”) reserve

in an amount estimated to be sufficient to fund each member’s benefit. In contrast,

all OPSRP employer contributions are placed into a single employer reserve

without differentiation and all benefits are paid from that OPSRP employer reserve.

Overall, the system tracks accounts and reserves within the Public Employee

Retirement Fund, including the following: (1) contingency reserve; (2) Tier 1

member regular accounts; (3) Tier 1 Rate Guarantee reserve; (4) Tier 2 member

regular accounts; (4) Tier 1 and Tier 2 member variable accounts; (5) Employer

reserves; (6) Benefits in Force reserve; (7) OPSRP pension employer reserve; (8)

Employer UAL Lump-Sum Payment side accounts; and (9) IAP accounts.

25. Every two years, the PERS Actuary prepares detailed employer

contribution rate reports for each PERS-participating employer which includes

information such as the following:


26. Employer contribution rates are calculated at an aggregate level for

each pool of employers and include a normal cost rate for various employee

groupings (Tier 1/Tier 2, OPSRP, general service and police & fire), the UAL for

the Tier 1 and Tier 2 system, and the UAL for the OPSRP system. PERS then

adjusts the rates of individual employers for offsets from side accounts and

transition liabilities or surpluses. PERS deposits the funds received from

employers into the appropriate Tier 1 and Tier 2 or OPSRP reserve.

27. The employer reserves in the PERS Fund include both normal cost

and UAL payments made by employers.

28. As of December 31, 2017, approximately 72 percent of the total

accrued liability of system was attributable to members who are no longer working

in PERS-covered employment (retired and inactive members).


29. As of December 31, 2017, PERS was 73 percent funded (80 percent

including employer side accounts). The unfunded actuarial liability (UAL) was

$22.3 billion ($16.7 billion including side accounts). Employer side accounts hold

deposits plus accumulated investment returns from individual PERS employers of

pension obligation bond proceeds and other advance lump-sum payments. These

side accounts are amortized and used to help pay the employer’s mandated

biennial contribution. According to the PERS analysis shown below, the liability for

retirees as of December 31, 2017 is $55 billion while the assets in the BIF which

are set aside to pay benefits to the retirees is only $24.3 billion. Tier 1 and Tier 2

active and inactive member accrued liability is $23.4 billion while funds in the pre-

2004 employee accounts and Tier 1/Tier 2 employer reserves is $33.3 billion.

OPSRP liabilities are $5.6 billion ($4.9 billion for active members, $385.2 million

for inactive members and $310.1 million for retirees) and OPSRP reserve assets

are $4.1 billion.


Actuarial and Other Analysis Provided to Legislature

30. At the request of the Legislative Fiscal Office and PERS, on or about

May 9, 2019, the PERS Actuary prepared an analysis of legislative concepts being

considered by the legislature, including: (1) Redirect Member Contributions; (2)

Final Average Salary; (3) Money Match Interest Rate; (4) Reamortization of Tier

1/Tier 2 Unfunded Actuarial Liability (UAL); and (5) Contributions on Rehired

Retiree Member Payroll. A copy of that analysis was provided by PERS to the

legislature and was cited in the SB 1049 Budget report and measure summary.

The PERS Actuary’s analysis showed the impact of the legislative concepts on the

December 31, 2017 Valuation results were as follows:


The analysis showed the estimated impact on 2021-2023 uncollared Base

employer contribution rates would be as follows:

The analysis indicated that the estimated dollar amount of redirected contributions

can be calculated for each biennium and converted as a percentage of system-

wide payroll that would offset the contribution otherwise paid by employers and

provided the following table showed the impact on employer rates by biennium of

that offset:

The analysis estimated that the impact of redirecting IAP contributions on

illustrative examples of PERS Tier 1, Tier 2, and OPSRP members’ IAP account


balances would be as follows, assuming a 7.0% annual investment return and pay

increases of 4%:

The analysis further indicated that based on the legislative concepts analyzed,

the PERS System would not reach 90% funded status until approximately 2035 if

the system met its assumed rate of return of 7.2% and even later if the actual

rate of return were lower such as 5%. Finally, with regard to the final average

salary limit legislative concept, the Actuary’s analysis explained:

In this Final Average Salary limit example, the PERS Actuary used what the

parties will refer to as a “segmented service” approach.


31. During the session, Legislative Counsel Marissa James and PERS

Manager, Policy Analysis and Compliance Division, Stephanie Vaughn also

discussed limitations on use of redirected member contributions, including the

following:

SB 1049 Changes

32. On June 11, 2019, the Governor of the State of Oregon signed into

law Senate Bill 1049 (“SB 1049”), altering, amending, or repealing provisions

related to PERS in (among other statutes) ORS chapters 238 and 238A.

33. Pursuant to Sections 1-3 of SB 1049, after July 1, 2020, if the IAP

member’s salary exceeds $2,500 in a calendar month (which is likely to be the

case for all petitioners), then 2.5% of the member’s salary for Tier 1 and Tier 2

members and 0.75% of the member’s salary for OPSRP members will be placed

in a new “employee pension stability account” (EPSA) used to pay the cost of the

pension or other retirement benefits which accrue after July 1, 2020. Pursuant to

Section 1 of SB 1049, this redirection of employee contributions from the IAP

account to EPSA will continue until “the funded status of the [entire] system,

including any lump-sum payments made [by employers] under ORS 238.229, is

90 percent or greater.” According to the PERS Actuary, the system will not reach

90 percent or greater funded status until after 2035, under current PERS

assumptions.


34. Pursuant to SB 1049, Section 1(2)(c), a portion of the employee

contributions to members’ IAP accounts of active Tier 1, Tier 2, and OPSRP

members will be redirected to the new “Employee Pension Stability Accounts”

(EPSAs) established for each member. The funds in the EPSAs will not be subject

to a match of employer contributions at retirement and the redirection will continue

until the system as a whole is 90 percent or greater funded, including employer

side accounts. The member’s ESPA will be applied to the cost of the member’s

pension benefit accrued on or after July 1, 2020. Any amount in the ESPA account

that exceeds the cost of the member’s post-July 1, 2020 accrued benefit will be

paid out to the member in a lump sum. According to the PERS Actuary, the system

as a whole (including employer side accounts) is not projected to reach this 90

percent or greater funded status until after 2035, under current PERS

assumptions. At the December 6, 2019 PERS Board meeting, the PERS Actuary

provided the PERS Board the following financial modeling and estimates regarding

funded status based on different investment earnings scenarios:


The amortization period for OPSRP UAL is shorter than the amortization period for

the UAL of the Tier 1 and Tier 2 program, and therefore, it is anticipated that there

will be no UAL attributable to OPSRP sooner than to the Tier 1 and Tier 2 program

if actual experience going forward matches current assumptions.

35. Prior to the enactment of SB 1049, ORS 238.005 contained no cap

for salary for Tier 1 PERS members like Petitioner Cleary.

36. Pursuant to SB 1049, Sections 39-40, after January 1, 2020, the

definition of salary will exclude any amounts in excess of a cap for a calendar year.

The cap is $195,000 for 2020, and the amount of the cap will be increased annually

to adjust for the cost of living.

37. Pursuant to SB 1049, Sections 39-41, effective January 1, 2020, the

definition of “salary” for all purposes under PERS (including for calculating PERS

Tier 1, Tier 2, and OPSRP members’ IAP contributions and pension benefits under

the system) is capped at $195,000 for a calendar year (adjusted annually for

inflation). If any period over which salary is determined is less than 12 months, the


$195,000 cap will be prorated for that period. PERS is granted the authority to take

action to implement the change.

PERS Implementation of SB 1049

38. To implement the terms of SB 1049, the PERS Board has

commenced the rule-making process. Proposed OAR 459-005-0525 will

implement the SB 1049 salary cap by providing that “the limit on annual

compensation taken into account for purposes of determining contributions or

benefits under ORS Chapter 238 or 238A for eligible participants shall be

measured on a calendar year basis, and shall not exceed $195,000 per calendar

year beginning in 2020.” PERS has also created a website explaining that it intends

to apply the SB 1049 salary cap to salary after January 1, 2020.

39. Pursuant to SB 1049, Section 62, the PERS Board is given the

authority to take action to implement the legislative change regarding the salary

limitation provisions of SB 1049. To implement the terms of SB 1049, the PERS

Board used the rule-making process. The PERS Board received comments from

two parties recommending that, at a minimum, PERS should implement the salary

limitation provisions of SB 1049 using the “segmented service” approach modeled

by the PERS Actuary in its May 9, 2019 analysis provided to the legislature. At the

December 6, 2019 PERS Board meeting, the PERS Board voted to adopt OAR

459-005-0525 (Ceiling on Compensation for Purposes of Contributions and

Benefits) from the notice of the rule without any changes. The final rule does not

use the “segmented service” approach. According to the PERS Actuary, use of the

“segmented service” approach would result in a higher retirement benefit amount

for some members. PERS has provided the following examples of how it intends

to apply the salary limitation provisions of SB 1049



40. PERS has not yet adopted proposed rules regarding the Employee

Pension Stability Account. However, the PERS Actuary has estimated the moneys

which will be coming into those accounts and their impact on employer contribution

rates for the 2021-2023 biennium. The PERS Actuary has estimated the impact of

that redirection on those projected employer rates as follows:


41. Pursuant to SB 1049, Section 60, the PERS Board is given the

authority to take action to implement the legislative redirection of member

contributions from the IAP to the new EPSA accounts. Although the PERS Board

has not yet made a final decision, the PERS Actuary’s analysis assumes that the

redirected IAP member contributions to their EPSAs will offset 2021-2023

employer contributions. At the October 4, 2019 PERS Board meeting, the PERS

Actuary provided the PERS Board the following information regarding the impact

of using the redirected IAP contributions to offset employer contributions in the

2021-2023 biennium.


42. SB 1049, section 1(c) allows employees to make voluntary

contributions to their IAP accounts in the amount credited to their EPSAs. PERS

may not be able to accept voluntary employee contributions by July 2020. If PERS

is not able to implement that provision by the effective date, it plans to allow

members to make up any voluntary contributions back to the effective date of the

provision. According to PERS, any voluntary contributions would be made on a

post-tax basis. Petitioner Specific Facts

43. Petitioners are public employee active members of the Public

Employees Retirement System (“PERS”). Some active member petitioners are

Tier 1 PERS members (i.e., those hired before January 1, 1996), some are Tier 2

PERS members (i.e., those hired between January 1, 1996 and August 28, 2003),

and some are members of the Oregon Public Service Retirement Plan (“OPSRP”)

of PERS (i.e., those hired on or after August 29, 2003). All petitioners are members

of the Individual Account Program (“IAP”) of PERS.

44. Petitioner Jennifer James is an employee of respondent Molalla River

School District and a member of the Oregon Education Association.

45. Petitioner Jennifer James (“James”) is an employee of Respondent

Molalla River School District and works as a Head Secretary. She is a Tier 2

member of PERS, with a membership date of April 1, 2000. Prior to the creation of

the IAP, in January 1, 2004, some of her 6 percent employee contributions went

to her employee “regular account” and some to her employee “variable account.”

Since January 1, 2004, her 6 percent employee contribution has gone to her

employee IAP account. As of December 31, 2018, her employee IAP account

balance was $36,786.86 and her 2018 salary was $39,570. For seven months of

employment in 2019, PERS records reflected a salary of $15,572.58. Petitioner

James’ affidavit with exhibits attached to the petition as EXHIBIT A establishes that


if she continues to work for PERS covered employers after July 1, 2020, SB 1049’s

provisions diverting 2.5 percent of her 6 percent employee contribution from her

IAP account to an “Employee Pension Stability Account” will result in a reduction

in James’ IAP retirement benefit and no increase in her service retirement

allowance benefit and that James has standing under SB 1049, Section 65(2) to

challenge that adverse impact. Under the assumptions used by Consulting Actuary

David MacLennan, who satisfies the Qualification Standards of the American

Academy of Actuaries to render the actuarial opinion, the projected loss to James’

IAP account at retirement age 57 is $18,111 or 13.3%.

46. Petitioner Lisa Riegel is an employee of respondent Mount Hood

Community College and a member of the Oregon Education Association.

47. Petitioner Lisa Riegel (“Riegel”) is an employee of Respondent Mount

Hood Community College and works as a Financial Aid Outreach Specialist. She

is an OPSRP member of PERS, with a membership date of March 1, 2009. Since

she became a member, her 6 percent employee contribution has gone to her

employee IAP account. As of December 31, 2018, her employee IAP account

balance was $28,788.74 and her 2018 salary was $52,608. For six months of

employment in 2019, PERS records reflected a salary of $18,012.00. Petitioner

Riegel’s affidavit with exhibits attached to the Petition as EXHIBIT B establishes

that if she continues to work for PERS covered employers after July 1, 2020, SB

1049’s provisions diverting 0.75 percent of her 6 percent employee contributions

from her IAP account to an “Employee Pension Stability Account” will result in

reduction in Reigel’s IAP retirement benefits and no increase in her pension benefit

and that Reigel has standing within the meaning of SB 1049, Section 65(2) to

challenge that adverse impact. Under the assumptions used by Consulting Actuary

David MacLennan, who satisfies the Qualification Standards of the American


Academy of Actuaries to render the actuarial opinion, the projected loss to Reigel’s

IAP account at retirement age 65 is $11,541 or 6.1%.

48. Petitioner Roseanne Scott is an employee of respondent State of

Oregon, Department of Human Services and a member of the Service Employees

International Union, Local 503.

49. Petitioner Roseanne Scott (“Scott”) is an employee of Respondent

State of Oregon, Department of Human Services and works as a Social Services

Specialist I. She is a Tier 2 member of PERS, with a membership date of October

1, 2001. Prior to the creation of the IAP, in January 1, 2004, her 6 percent

employee contributions went to her employee “regular account.” Since January 1,

2004, her 6 percent employee contribution has gone to her employee IAP account.

As of December 31, 2018, her employee IAP account balance was $82,403.93

and her 2018 salary was $73,661.72. For six months of employment in 2019,

PERS records reflected a salary of $37,687.02. Petitioner Scott’s affidavit with

exhibits attached to the petition as EXHIBIT C establishes that if she continues to

work for PERS covered employers after July 1, 2020, SB 1049’s provisions

diverting 2.5 percent of her 6 percent employee contribution from her IAP account

to an “Employee Pension Stability Account” will result in a reduction in Scott’s IAP

retirement benefit and no increase in her service retirement allowance benefit and

that Scott has standing under SB 1049, Section 65(2) to challenge that adverse

impact. Under the assumptions used by Consulting Actuary David MacLennan,

who satisfies the Qualification Standards of the American Academy of Actuaries

to render the actuarial opinion, the projected loss to Scott’s IAP account at

retirement age 55 is $41,562 or 12.8%.

50. Petitioner Robert Martineau is an employee of respondent City of

Portland and a member of the Oregon AFSCME Council 75.


51. Petitioner Robert Martineau (“Martineau”) is an employee of

Respondent City of Portland and works as a Water Operations Mechanic in the

Water Bureau. He is a Tier 2 member of PERS, with a membership date of October

1, 2000. Prior to the creation of the IAP, in January 1, 2004, his 6 percent employee

contributions went to his employee “regular account.” Since January 1, 2004, his

6 percent employee contribution has gone to his employee IAP account. As of

December 31, 2018, his employee IAP account balance was $117,682.06 and his

2018 salary was $86,158.07. For six months of employment in 2019, PERS

records reflected a salary of $37,593.06. Petitioner Martineau’s affidavit with

exhibits attached to the petition as EXHIBIT D establishes that if he continues to


diverting 2.5 percent of his 6 percent employee contribution from his IAP account

to an “Employee Pension Stability Account” will result in a reduction in Martineau’s

IAP retirement benefit and no increase in his service retirement allowance benefit

and that Martineau has standing under SB 1049, Section 65(2) to challenge that

adverse impact. Under the assumptions used by Consulting Actuary David

MacLennan, who satisfies the Qualification Standards of the American Academy

of Actuaries to render the actuarial opinion, the projected loss to Martineau’s IAP

account at retirement age 58 is $42,008 or 10.6%.

52. Petitioner Regina Thompson is an employee of respondent State of

Oregon Department of Transportation and a member of the Association of

Engineering Employees of Oregon.

53. Petitioner Regina Thompson (“Thompson”) is an employee of

respondent State of Oregon Department of Transportation and works as a Right

of Way Agent 2. She is a Tier 1 member of PERS, with a membership date of

December 1, 1987. Prior to the creation of the IAP, in January 1, 2004, some of


her 6 percent employee contributions went to her employee “regular account” and

some to her employee “variable account.” Since January 1, 2004, her 6 percent

employee contribution has gone to her employee IAP account. As of December

31, 2018, her employee IAP account balance was $22,762.02 and her 2018 salary

was $86,363.35. For six months of employment in 2019, PERS records reflected

a salary of $45,180.03. Petitioner Thompson’s affidavit with exhibits attached to

the petition as EXHIBIT E establishes that if she continues to work for PERS

covered employers after July 1, 2020, SB 1049’s provisions diverting 2.5 percent

of her 6 percent employee contribution from her IAP account to an “Employee

Pension Stability Account” will result in a reduction in Thompson’s IAP retirement

benefit and no increase in her service retirement allowance benefit and that

Thompson has standing under SB 1049, Section 65(2) to challenge that adverse



to render the actuarial opinion, the projected loss to Thompson’s IAP account at


54. Petitioner Emily Marx is an employee of respondent Multnomah

County and a member of the Oregon Nurses Association.

55. Petitioner Emily Marx (“Marx”) is an employee of respondent

Multnomah County and works as a Registered Nurse. She is an OPSRP member

of PERS, with a membership date of October 1, 2013. Since she became a

member, her 6 percent employee contribution has gone to her employee IAP

account. As of December 31, 2018, her employee IAP account balance was

$27,684.10 and her 2018 salary was $95,345.19. For six months of employment

in 2019, PERS records reflected a salary of $4,377.18, but Respondent County

reflects an annual salary of approximately $78,323. Petitioner Marx’s affidavit with


exhibits attached to the Petition as EXHIBIT F establishes that if she continues to


diverting 0.75 percent of her 6 percent employee contributions from her IAP

account to an “Employee Pension Stability Account” will result in a reduction in

Marx’s IAP retirement benefits and no increase in her pension benefit and that

Marx has standing within the meaning of SB 1049, Section 65(2) to challenge that



of Actuaries to render the actuarial opinion, the projected loss to Marx’s IAP


56. Petitioner Dustin Andrews is an employee of respondent Oregon

Health & Sciences University and a member of the Oregon Nurses Association.

57. Petitioner Dustin Andrews (“Andrews’) is an employee of respondent

Oregon Health & Science University and works as a Registered Nurse. He is an

OPSRP member of PERS, with a membership date of August 1, 2015. Since he

became a member, his 6 percent employee contribution has gone to his employee

IAP account. As of December 31, 2018, his employee IAP account balance was

$20,412.38 and his 2018 salary was $96,913.32. For six months of employment in

2019, PERS records reflected a salary of $55,469.68. Petitioner Andrews’ affidavit

with exhibits attached to the Petition as EXHIBIT G establishes that if he continues

to work for PERS covered employers after July 1, 2020, SB 1049’s provisions

diverting 0.75 percent of his 6 percent employee contributions from his IAP account

to an “Employee Pension Stability Account” will result in a reduction in Andrews’

IAP retirement benefits and no increase in his pension benefit and that Andrews

has standing within the meaning of SB 1049, Section 65(2) to challenge that




of Actuaries to render the actuarial opinion, the projected loss to Andrews’ IAP


58. Petitioner Brandon Silence is an employee of respondent City of

Salem and a member of the International Association of Fire Fighters, Local 314.

59. Petitioner Brandon Silence (“Silence”) is an employee of respondent

City of Salem and works as a Fire Captain. He is an OPSRP member of PERS,

with a membership date of February 1, 2007. Since he became a member, his 6

percent employee contribution has gone to his employee IAP account. As of

December 31, 2018, his employee IAP account balance was $91,505.80 and his

2018 salary was $102,677.25. For six months of employment in 2019, PERS

records reflected a salary of $47,104.16. Petitioner Silence’s affidavit with exhibits

attached to the Petition as EXHIBIT H establishes that if he continues to work for

PERS covered employers after July 1, 2020, SB 1049’s provisions diverting 0.75

percent of his 6 percent employee contributions from his IAP account to an

“Employee Pension Stability Account” will result in a reduction in Silence’s IAP

retirement benefits and no increase in his pension benefit and that Silence has

standing within the meaning of SB 1049, Section 65(2) to challenge that adverse



to render the actuarial opinion, the projected loss to Silence’s IAP account at


60. Petitioner Thomas Cleary is an employee of respondent Multnomah

County and is a member of the Multnomah County Prosecuting Attorneys

Association.


61. Petitioner Thomas Cleary (“Cleary”) is an employee of Respondent

Multnomah County and works as a District Attorney. He is a Tier 1 member of

PERS, with a membership date of January 1, 1992. Prior to the creation of the IAP,

in January 1, 2004, some of his 6 percent employee contributions went to his

employee “regular account” and some to his employee “variable account.” Since

January 1, 2004, his 6 percent employee contribution has gone to his employee

IAP account. As of December 31, 2018, his employee IAP account balance was

$202,192.29 and his 2018 salary was $181.271.92. For six months of employment

in 2019, PERS records reflected a salary of $7,769.72, but Multnomah County

reflects an annual salary of $199,558.13 effective 2019, $199,558.13 effective

January 1, 2020, and $209,146.90 effective July 1, 2020 and January 1, 2021.

Petitioner Cleary’s affidavit with exhibits attached to the petition as EXHIBIT I and

supplemental affidavit establish that if he continues to work for PERS covered

employers after the effective dates of the legislative changes, SB 1049’s provisions

diverting 2.5 percent of his 6 percent employee contribution from her IAP account

to an “Employee Pension Stability Account” and SB 1049’s provisions capping

salary at $195,000 effective January 1, 2020 will result in a reduction in Cleary’s

IAP retirement benefit and service retirement allowance benefit and that Clearly

has standing under SB 1049, Section 65(2) to challenge those adverse impacts.

Under the assumptions used by Consulting Actuary David MacLennan, who

satisfies the Qualification Standards of the American Academy of Actuaries to

render the actuarial opinion, the projected loss to Cleary’s IAP account at

retirement age 57 is $15,764 or 4.7% and the projected loss to his Full Formula

benefit at retirement age 57 is $344 per month or 3.8%.

62. According to the PERS Actuary, the assumptions used by Consulting

Actuary David MacLennan in his analysis regarding the projected impact on


petitioners’ retirement benefits, with the exception of the 7.2 percent earnings

assumption, are within the range of reasonableness. In the PERS Actuary’s

illustrative examples for the legislature, the PERS Actuary used 7.0% annual

investment return and annual pay increases of 4%. MacLennan’s analysis

assumed a 7.2% annual investment return and 3.5% annual pay increases.

63. Petitioners bring this action for a determination pursuant to section 65

of SB 1049, which confers jurisdiction upon the Oregon Supreme Court to

determine whether SB 1049 breaches any contract between PERS members and

their employers or violates any constitutional provision, including but not limited to

impairment of contract rights of PERS members under Article I, section 21, of the

Oregon Constitution, or Article I, section 10, clause 1, of the United States

Constitution.

64. There is a justiciable controversy between petitioners and

respondents.

65. Sections 1 through 19 of SB 1049 will reduce the amount of retirement

benefits that petitioners Jennifer James, Lisa Riegel, Roseanne Scott, Robert

Martineau, Regina Thompson, Emily Marx, Dustin Andrews, Brandon Silence, and

Thomas Clearly (collectively “petitioners”) will earn if they continue to work for

PERS-participating employers beyond July 1, 2020. Accordingly, petitioners will

be “adversely affected” by those sections, as the term is used in section 65 of SB

1049.

66. Sections 39 and 40 of SB 1049 will reduce the amount of retirement

benefits that petitioner Cleary will earn if he continues to work for PERS-

participating employers beyond January 1, 2020. Accordingly, petitioner Clearly

will be “adversely affected” by those sections, as that term is used in section 65

of SB 1049.


GENERAL STIPULATIONS

Without waiving any relevancy objections, the parties may cite to the

following documents in their briefing: 1. The factual findings of the Oregon Supreme Court in Moro v. State,

357 Or 167, 174-191 (2015) and Strunk v. PERB, 338 Or 145, 151-

168 (2005); and

2. Legislative History Records.

The parties agree that if in writing their briefs they need to cite to facts that

are contained in The PERS By the Numbers Updated October 2018 or The

December 31, 2017 Actuarial Valuation, they will approach the other parties for

additional stipulations before raising the issue with the court. DATED this day of January 17, 2020. Respectfully Submitted, BENNETT HARTMAN, LLP s/Aruna A. Masih Aruna A. Masih, OSB #973241 [email protected] Gregory A. Hartman, OSB #74128 [email protected] 210 SW Morrison St. Suite 500 Portland, OR 97204-3149 (503) 227-4600 Of Attorneys for Petitioners

Ellen F. Rosenblum Attorney General of Oregon /s/ Benjamin Gutman Benjamin Gutman #160599 Solicitor General 1162 Court St NE Salem, OR 97301 (503) 378-4402 [email protected] Of Attorneys for Respondents State of Oregon, State of Oregon by and through the Department of Human Services and Department of Transportation, and Public Employees Retirement Board


HARRANG LONG GARY RUDNICK PC s/Sharon Rudnick Sharon A. Rudnick OSB #830835 [email protected] William F. Gary OSB#770325 [email protected] J. Aaron Landau OSB#094135 [email protected] 497 Oakway Road, Suite 380 Eugene, OR 97401-3273 Of Attorneys for Respondents City of Salem, Oregon Health & Science University, Mount Hood Community College and Molalla River School District

s/Daniel Simon Tracy Reeve, OSB#891123 City Attorney Robert Taylor, OSB#044287 Chief Deputy City Attorney Daniel Simon, OSB #124544 Deputy City Attorney [email protected] Of Attorneys for Respondent City of Portland

s/ Jenny Madkour Jenny M. Madkour, OSB No. 982980 County Attorney [email protected] Of Attorneys for Multnomah County

Page 1 – CERTIFICATE OF FILING AND SERVICE

CERTIFICATE OF FILING AND SERVICE I certify that, I directed the REVISED JOINT STIPULATED FACTS AND GENERAL STIPULATIONS to be electronically filed with the Appellate Court Administrator, Appellate Court Records Section, by using the court’s electronic filing system pursuant to ORAP 16 on January 17, 2020. I certify further that I served the foregoing document upon the following individuals who are registered users, by using the appellate court eFiling system:

Benjamin Gutman OSB #160599 Oregon DOJ, Appellate Division 1162 Court St NE Salem, OR 97301 Of Attorneys for State Respondents

Tracy Reeve OSB #891123 Robert L. Taylor, OSB #044287 Daniel Simon, OSB #124544 Chief Deputy City Attorney City of Portland 1221 SW 4th Avenue, Ste 430 Portland, OR 97204 Of Attorneys for Respondent City of Portland

Jenny Madkour, OSB #982980 County Counsel, Multnomah County 501 SE Hawthorne Blvd, Room 500 Portland, OR 97214 Of Attorneys for Respondent Multnomah County

J. Arron Landau OSB #094135 Sharon Rudnick OSB #830835 William Gary OSB #770325 Harrang Long Gary Rudnick PC 497 Oakway Rd Ste 380 Eugene, OR 97401 Of Attorneys for Respondents City of Salem, Oregon Health & Science University, Mount Hood Community College and Molalla River School District

DATED this day of January 17, 2020. BENNETT, HARTMAN, LLP

s/Aruna A. Masih Aruna A. Masih, OSB #973241

Of Attorneys for Petitioners

Documents

REVISED Joint Stipulated Facts and General Stipulations · 17/01/2020 · 28, 2003; and (c) OPSRP (short for Oregon Public Service Retirement Plan) ... If a member chooses to remain