Opinion ID: 1192606
Heading Depth: 1
Heading Rank: 5

Heading: Minimum Rate of Return Guaranteed on Annuity Investments.

Text: In 1975, the legislature enacted what was then numbered ORS 237.277, and has now been renumbered ORS 238.255 by the 1995 legislature as it includes an amendment by Oregon Laws 1993, chapter 177, section 31. The 1975 legislation established that, as to the annuity purchased with the employees' contributions, an assumed interest rate of return on the money paid in would be used to provide an annual minimum floor for the rate of investment return. That assumed rate of return was set by the Public Employes' Retirement Board. If the actual earnings were less than the assumed earnings, then the law required that surplus moneys be transferred from other years where the actual earnings had been at a rate of return higher than the assumed earnings rate. The surplus thus would shore up the deficient return for the year and cause that year's earnings to meet the assumed rate of interest earnings. The surplus was acquired by placing earnings from years where the rate of return on investment of the employees' funds exceeded the assumed rate of return established by the Board. Under the statutory program, a rolling five-year average of investment return performance was used to establish the reserve or surplus account from which an annual deficiency was made up, thereby keeping the state's statutory promise to provide the employee annuity portion a specific assumed rate of return. Any surpluses above the assumed rate not needed to shore up deficient annual earnings were available to PERS to meet its other obligations under the plan. The foregoing state of contract, obligation, and operation continued until 1989. PERS plan rights, whether accrued or still accruing, were tax exempt. The employer paid the dollars necessary to purchase the individual annuity portion of the retirement plan. A minimum interest rate on the annuity investment was realized and assured for each year. Unused sick leave benefits could be saved and one-half applied to increase final years' salary used to compute the service credit portion of retirement benefits. Measure 8 erased all of those contract obligations, as we shall see by a review of that measure.