Supreme Court Rejects Lipscomb Appeal

Supreme Court Rejects Lipscomb Appeal

PERS Members Angered

Aug 12, 2005
We suffered a setback Thursday in our Supreme Court appeal of Marion County Judge Paul Lipscomb’s ruling in the City of Eugene case, often referred to as "the Lipscomb case."
The Court issued its long-awaited decision, dismissing our appeal and refusing to hear the merits of the case. While they cited other pending lawsuits on the same issues, this non-decision will have a huge impact on thousands of PERS-covered members.

What does this mean for active PERS members and retirees?
Active members will see a reduction in their PERS fixed account balance when they receive their annual statements. For retirees, the ruling will have a more drastic impact. According to a memo from the PERS Board, retirees who started receiving their benefits between 2000 and 2004 can expect a bill ranging from $300 to $8,000 depending on when they retired and what PERS payments they earn today.

Our attorney, Greg Hartman, said, "These are people who did everything right, for the most part, were careful about their decisions, and are now finding out that what they thought they had, they don't really have. We see a fundamental unfairness in that."

In his opinion, Justice DeMuniz wrote that the PERS Board had settled this case with the employers and there was nothing left for the Court to determine. But in that settlement, the Board has left workers and retirees out in the cold.

This latest end-run around the legal system harms workers and retirees to the tune of about $1.6 billion in lost retirement benefits. The decision also continues a trail of broken promises by the Governor, the Legislature, the PERS Board, and now the Courts.

Background on Lipscomb
The City of Eugene (Lipscomb) case involved two major issues:

The PERS Board's decision to credit 20% earnings for Tier 1 member accounts in 1999,

and the method used to match variable account balances for retirees.

Local government employers had challenged the PERS Board's decisions on both issues, and Judge Lipscomb ruled in favor of the employers.

Looking back with 20/20 hindsight in 2002, Lipscomb said that PERS should have credited only 11.3% earnings in 1999. He also ruled that variable accounts should only be matched up to the amount earned in regular accounts. He said that while variable account members took a risk and were entitled to their earnings, the employers should no longer be required to match those earnings dollar-for-dollar as they had for decades.

SEIU Local 503, OPEU, along with other PERS Coalition groups, intervened in the case on behalf of members and appealed the Lipscomb decision. However, before that appeal could move forward, Governor Kulongoski’s newly-appointed PERS Board reached a settlement agreement with the employers.

We argued that although we were one of the parties in the case, we were not included in the settlement talks. In Thursday’s decision, the Supreme Court rejected our appeal and in effect, validated the settlement agreement.

Where do we go from here?
Speaking to a gathering of retirees and active members, Greg Hartman said he was disappointed that the Court chose not to make a decision and overrule Judge Lipscomb. He also noted “We previously filed a related case in Multnomah County Circuit Court. Unfortunately, it could be years until the court finally rules on this next case. In the meantime, workers and retirees will pay a bill they don't deserve."

Active Tier 1 members will now receive their annual PERS statement and it will reflect the reductions in 1999 earnings and the restoration of the 8% annual guaranteed return. That restoration was mandated by the March Supreme Court ruling in the Strunk case.

The PERS Board says it will likely be able to notify affected retirees of the reductions to their benefit payments by the end of the year. It is still unclear how the PERS Board will proceed to “recapture excess earnings” paid to members who retired after 1999. It may be possible that repayments will be permitted over time. The PERS Board plans to discuss alternatives at their September Board meeting.

The White Case
In anticipation of this decision, the PERS Coalition has another case pending in the Multnomah County Circuit Court entitled, "White et. al. vs. Public Employee's Retirement Board" challenging the authority of the PERS Board to enter into the disputed settlement, as well as taking on Judge Lipscomb's decision to overturn the PERS Board in crediting decisions.

Greg Hartman said Thursday’s decision now makes the White case our next opportunity to address issues that the Supreme Court said were “moot” in the City of Eugene (Lipscomb) case. He said, “There’s no doubt in my mind that White will eventually be decided by the Oregon Supreme Court. This could take anywhere between two and four years."