Lawsuit Questions Legality of New PERS Reform Law

Nine public employees filed a lawsuit earlier this month with the Oregon Supreme Court challenging the new law requiring public employees to help pay down the public pension debt. The lawsuit states that Senate Bill 1049 – which was passed by the legislature and signed into law by the Governor – unconstitutionally reduces pension benefits.

Senate Bill 1049 made headlines during the 2019 legislative session as legislators and the Governor made a renewed effort to curb the rising PERS pension debt. The law diverts a percentage of employee Individual Account Program (IAP) contributions – 2.5% for active Tier 1 and Tier 2, and 0.75% for active Tier 3 and Tier 4 – to go towards paying down the PERS pension debt. The bill also capped the Final Average Salary at $195,000. The lawsuit seeks to overturn these provisions, siting that it is a breach of contract.

This is not the first time PERS reforms have faced court challenges. In 2015, employee unions successfully overturned the Legislature’s 2013 PERS reforms in Moro v. State of Oregon. The court ruled that reducing cost of living adjustments for retirees was unconstitutional. The case set a precedent for future benefit changes, ruling that benefits could not be retroactively changed.

Plaintiffs in the lawsuit include a Molalla School District employee, Salem firefighter, a child welfare worker and a water mechanic in Portland, Multnomah County district attorney, a Gresham community college employee, state employee from Lebanon, and nurses from Multnomah County and OHSU.

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