Oregon Democrats Offer Pension Peace Treaty to Revolting Republicans

Oregon Democrats unleashed a pension reform bill this month that in very small ways compares to Gov. Kate Brown’s “Robin Hood” solution that would essentially pin higher taxes on wealthier entities in the state and redistribute the earnings amongst its relatively poorly funded pension plans.

The new move was provoked after a walk-out from state Republicans, who argued they wouldn’t address any new education funding that doesn’t address the state’s public employees’ retirement system (PERS), which is spiraling into more than $25 billion in debt. The Republicans have repeatedly maintained a choreographed absence from the state Capitol in protest of the pension’s dire situation, encouraging Democrats to prioritize the issue.

The proposed bill would redirect 2.5% of the 6% that employees pay to their 401(k) plans to help fund PERS, which stands at about 80% funded today. It would lead to less funds for individual pension accounts, but would simultaneously mitigate the amount that school districts and other public employers contribute to the retirement plan.

The redirect would only apply to members who earn $30,000 or more in a year, and would be indexed in future years.

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The plan earned a swift rebuttal from unions. President of the Oregon Education Association John Larson said, “Oregon educators have shown time and time again that they will stand up for their students. If lawmakers turn their backs on educators and cut retirements, we will see them in court.”

Under current circumstances, contribution rates are projected to increase until 2035. Employers can expect a 5.5% rate hike in 2021, an obstacle that Democrats said could be averted with the adoption of their plan.

Under Brown’s proposed plan, funds would be sourced from the income tax kicker rebates, which she claims disproportionately benefit wealthy Oregonians. She said she would give everyone the first $100 of the rebate and retain the rest. Transferring surplus funds from the state-owned insurance company was an additional proposal she put on the table.

Sponsors of the plan didn’t respond to requests for comment.

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Oregon Gov. Proposes Robin Hood Pension Solution

Tags: Oregon, Oregon Public Employees Retirement System (PERS), Pension, Pension Reform

Retirees of Saint James Hospital of Newark, New Jersey, are suing the Archdiocese of Newark, claiming it wrongly denied them at least $2.7 million in lifetime pension benefits.

According to the complaint, which was filed in the Superior Court of Essex County, the Archdiocese did not inform the retirees about an IRS ruling that led to the loss of federal protections for its pension, yet it continued to assure the retirees that they were entitled to lifetime benefits.

In October 1988, the Archdiocese sent a letter to past and present employees informing them that it wanted to terminate the hospital’s pension plan. In the letter, the Archdiocese said the termination would not reduce or adversely affect vested benefits, and that “there appear to be sufficient assets to pay all benefit commitments under the plan.”

The retirees say the last statement was false.

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“There was not in fact enough money in the SJH Plan to cover the full cost of the pensions promised to its participants and beneficiaries,” said the plaintiffs in the complaint. “Instead of putting more money into the plan, the Archdiocese developed a strategy to escape PBGC scrutiny and the protections of ERISA [The Employee Retirement Income Security Act of 1974].”

The complaint said that without informing the plan’s participants and beneficiaries, the Archdiocese sent a request to the IRS to change its status to that of a church plan, and in 1990, the request was granted. The change meant that the plan was no longer subject to the rules of ERISA.

The plaintiffs say that the Archdiocese concealed the IRS ruling from the plan participants, and did not provide documents describing the new rules that governed the plan after it was no longer under ERISA jurisdiction.

Beginning in 1996, the Archdiocese began to transfer trust assets dedicated to funding the retirees’ pension benefits to another account that plaintiffs say was insufficient to pay the promised lifetime benefits. The complaint alleges the Archdiocese transferred $2.7 million less than was necessary to pay the promised full lifetime pensions, despite having a $20 million surplus in its overall pension accounts.

The plaintiffs consist of a group of 135 retirees who worked primarily for Saint James Hospital, earned pensions, and left the hospital before becoming eligible to collect their pensions.

“The Archdioceses knew that it was not providing enough money to pay lifetime pensions,” said the complaint. “But it also knew that, because none of the individual named plaintiffs or class participants had even started receiving their pension payments at the time of the 1996-1997 transactions, it would be decades before the money ran out.”

Tags: Archdiocese, Lawsuits, Pension, Saint James Hospital