Opinion ID: 835784
Heading Depth: 1
Heading Rank: 9

Heading: ADOPTION OF NEW ACTUARIAL EQUIVALENCY FACTORS (AEFs)

Text: The 2003 PERS legislation modifies the preexisting statutory scheme regarding PERB's application of actuarial equivalency factors (AEFs) to convert a member's account balance to a monthly allowance, among other things. Petitioners contend that, pursuant to a lawful delegation of rulemaking authority, PERB had adopted rules in 1993 ( former OAR 459-05-055) and 1996 (OAR XXX-XXX-XXXX) that required PERB to refrain from changing any AEF if the adoption of the new factor would have the effect of lowering a periodic or single benefit payment to a member. According to petitioners, PERB's rules constitute[d] a part of the system, as ORS 238.630(3)(g) (2001) provided, from the time of their adoption. Therefore, petitioners argue, by amending certain statutes to require PERB to update its AEFs, the legislature impaired an aspect of the retirement contract between the state and the affected members of PERS. Oregon Laws 2003, chapter 68, section 2, requires PERB to adopt new AEFs that use the best actuarial information on mortality available at the time the board adopts the tables[.] Section 4 of that law incorporates the new AEFs as a part of the retirement calculus for members who retired on or after July 1, 2003, and exposes those retirees to the possibility of lower retirement allowances under the new AEFs. Petitioners contend that those sections of Oregon Laws 2003, chapter 68, impair the state's contractual obligation to its employees. The majority rejects that claim, and I concur for the following reason. There is no question that PERB's 1993 and 1996 rule, in its amended 1996 form, in absolute and unconditional terms, prohibited PERB from changing any AEF to the economic detriment of any member who established PERS membership before January 1, 1999. It is unnecessary to decide in this proceeding whether PERB exceeded its rulemaking authority in adopting those rules. The only true question is whether the statutes requiring establishment of AEFs by PERB reflect a contractual intention by the legislature, such that the Legislative Assembly in 2003 lacked authority to impair any obligation regarding AEFs that PERB's rules embodied. I assume arguendo that the legislature may create a binding contract by a valid delegation of authority to an administrative agency to specify contractual terms through rulemaking. However, that is not what occurred here. For many years before it enacted the 2003 PERS legislation, the legislature had required PERB to establish from time to time the necessary actuarial factors that would allow PERB to determine the actuarial equivalency of the optional forms of retirement under the system. See, e.g., former ORS 237.251(3)(g) (1991). [1] Actuarial means relating to statistical calculation esp. of life expectancy. Webster's Third New Int'l Dictionary 22 (unabridged ed. 2002). As a variable in the statistical calculation of actuarial equivalency, the factor of life expectancy has no constant and unchanging value. Rather, it is constantly in flux, shifting with the prevalence in the subject population of the various factors ( e.g., health history, diet, exercise, tobacco use, etc.) that influence longevity. [2] Former ORS 237.251(3)(g) (1991) required PERB to take account of the changing character of the factors that determine actuarial equivalency by establishing the necessary actuarial factors from time to time. There is no question that the legislature has delegated broad rulemaking authority to PERB. When PERB adopted the two rules now under consideration, former ORS 237.263 (1991), renumbered as ORS 238.650(1995), provided:  Subject to the limitations of ORS 237.001 to 237.315, the board shall, from time to time, establish rules for transacting its business and administering the system in accordance with the requirements of ORS 183.310 to 183.550. (Emphasis added.) That statute has remained in effect without substantive modification through the present time. Aside from any question of the lawfulness of the 1993 and 1996 rules, that statute confirms that PERB had authority to alter those rules at any time. PERB's broad authority to alter its rules is insufficient, standing alone, to demonstrate that PERB's rules did not reflect a legislative contractual intent while they were in effect. However, in view of PERB's duty under former ORS 237.251(3)(g) (1991) to evaluate the accuracy of its AEFs and publish new ones from time to time, and the necessary qualifying effect of that statute on PERB's rulemaking authority in former ORS 237.263 (1991), I cannot read PERB's rules to create a contractual obligation that later legislation could not impair. Former ORS 237.263 (1991) required PERB from time to time to establish rules for conducting its business, and ORS 237.251(3)(g) (1991) and its statutory successors in force through 2001 also required PERB to establish new AEFs from time to time. Those provisions underscore the impermanence of the AEF rules on which petitioners base their claim. The foregoing discussion demonstrates that the majority correctly rejects petitioners' contract impairment claims based on PERB's 1993 and 1996 administrative rules.