The History of PERS: 1945 – 1979


The 1940s: PERS early years


House Bill 344 was introduced to the 1945 Oregon Legislature with considerable support and high hopes. The Oregon Statesman ran an editorial by former Oregon
Governor Sprague on February 9, 1945, in support of the bill. “If at all possible, a general retirement system ought to be established at this session of the legislature. Perhaps it should be done even if it doesn’t seem to be ‘possible’ because there will always be reasons for postponing it and if it is ever to come, it will only be by taking the leap — just as business had to do with unemployment compensation.”

After discussing the bill and its supporters, the writer continued, “The legislature ought not to turn these bills down, but should make every effort to enact them at this session. They will promote stability in employment, end fears of political reprisals, and standardize employee relations for the state. If these measures are not adopted, there is the danger that more radical efforts may be made or more radical organizations attempted. The Employees Association has presented bills with real merit, which ought to be approved now.”

Distinguishing features of the bill were:

  The new system would be integrated with existing public employee retirement systems.

 The system would be open to all public employees except employees of political subdivisions that opted not to participate, public employees in other pre-existing systems, and employees working for a public employer with fewer than five full-time employees.

  All members would have separate accounts showing contributions, interest earnings, and deductions.

 The state treasurer would act as custodian and supervise annual audits and an actuarial valuation at least every four years.

  There would be both retirement and disability provisions.

  Funds would not be subject to taxes or to bankruptcy.

Suspense built as the 1945 legislators held their longest session in the state’s history. Finally, on the second-to- last day of the session, Friday, March 17, 1945, the bill passed.

After nearly half a century of struggle, PERS was official March 26, 1945, when Governor Snell signed it into law. While it was a major victory for Oregon public employees, another victory was far more staggering and grabbed the headlines
of the Oregon Journal: “German Licked, Ike Says,” and “Patton Halfway Across Germany.” A column in small print listing bills the governor had signed the previous day appeared on the front page, but the PERS legislation had been omitted. The Oregonian was more thorough, with a headline in section two reading, “Retirement Bill Becomes Law with Snell Signature.”

The legislation became effective July 1, 1946. Oregon had benefitted by the experiences of existing public employee pension systems and quickly earned a reputation for developing one of the best retirement programs in the country.

The 1950s: settling-in years
Early concerns and problems

Less than five years into the program, PERS members began to grumble that retirement benefits were inadequate. Indeed, inflation between 1939-1952 was staggering, and the cost of living had doubled. With World War II behind it, the country was beginning to focus on the future, which put retirement issues on the front line.

Resistance to retirement was still strong and many employees of retirement age resented being forced out of the workplace. Worse, their retirement funds did not cover even their most essential needs.

In 1950, the state only had to match payments on the first $3,000 of an employee’s annual salary. This set the maximum amount of retirement at $125 a month for an employee who retired after 30 years of service. While this amount was considered an adequate pension when the retirement law was passed, under existing economic conditions, it clearly was not sufficient. In reality, very few retirees were receiving as much as $50 a month pension. With room and board on a small room costing
$12-16 a week, the average pension check simply did not stretch far enough.

According to an Oregon State Employee Association (OSEA) publication, state employees, teachers, and city and county employees pressured the legislature for a repeal of PERS during the first part of the decade. “Those who were interested in keeping PERS were strangely silent during 1952 and into the middle of the 1953 legislative session. Therefore, many members of the legislature were thinking in terms of scrapping PERS altogether. But when the cry to cave [sic] PERS (led by the OSEA) become loud enough, thinking began to change in direct proportion to ‘the sound and the fury.’”

Social Security integration

Since the implementation of Social Security in 1935, the Social Security board had recommended it would like to see Social Security extended to state and local employees. For the first 15 years of the national system, there was considerable debate whether to admit public employees. In 1951, a state could elect Social Security coverage on a restricted basis. In Oregon, PERS set up a division to collect the funds from those political subdivisions who elected this option. The vast majority of Oregon public employees were still not able to participate in Social Security, however.

New hope came in 1953 when President Eisenhower announced during his State of the Union Address that “the provision of the Old Age and Survivors Insurance (OASI) law should promptly be extended to cover million of citizens who have been shut out of the Social Security System. No less important is the encouragement of privately sponsored pension plans.”

Eisenhower’s message generated immediate interest in assessing options to integrate PERS and the OASI. Governor McKay appointed a special committee, headed by Henry Kehrli, to investigate the possibility of integrating PERS with OASI.
In his methodical way, Kehrli began an exhaustive study of other state pension plans. He organized comparative studies, spent hours analyzing existing programs, and wrote countless letters to authorities in the pension field to ask advice about PERS.

Not only was the issue of combining state and federal legislation complex, it also aroused a certain degree of suspicion. Forrest Stewart, executive secretary of OSEA, wrote to Herman Kehrli on November 26, 1952, “Once the State of Oregon signs a contract with the Federal Social Security Board, it is signing away certain of its own rights and many of the rights of employees thereof for all time to come… once we are under OASI the federal government could and probably would set standards of employment as they have done and are doing in Public Welfare, UCC, and Public Health… The Republicans are in power now and we may have nothing to fear, but we have no assurance that some future congress or chief executive may have even more socialistic views than we have experienced in the past.”

Stewart’s views were not shared by many of the state employees he represented. In fact, the major problem from the standpoint of the employee appears to have been who was going to pay the cost of the OASI.

The governor’s committee found that many states had already found ways to supplement public retirement funds with OASI. The committee also found that to take advantage of Social Security’s 1951 start day, they would have to add OASI in 1953 or employees would lose two-and-a-half years of OASI coverage because the federal law would not be retroactive after 1953.

The committee unanimously opposed ending PERS and substituting it with OASI. “In our opinion, Old Age and Survivors Insurance was never intended, nor has it been represented, to be a complete solution to the problem of retirement. Because of its inadequate retirement benefits, we believe that future sessions of the legislature would be plagued by employee groups until this retirement problem is solved by the enactment of a supplemental plan. We therefore cannot advise the substitution of Old Age and Survivors Insurance for the present plan.”

Supplementing PERS with OASI seemed the most logical remedy. However, state employees could not be covered under OASI if they were already covered under an existing state plan. This hurdle was not insurmountable and, with ingenuity, it was cleared. A bill was submitted to the legislature to repeal PERS for long enough to adopt Social Security.

On March 19, 1953, the Oregon Joint Committee on Ways and Means introduced Senate Bill 396 to the 47th Legislative Assembly. The Public Employee Retirement Act of 1945 was repealed and replaced by the Public Employee Retirement Act of 1953. The existing plan was repealed, Social Security was adopted, and a new state retirement plan was put into place. For one day, PERS did not exist to enable public employees to fall under Social Security.

Benefit changes

This change brought badly needed relief, but problems still existed with the PERS plan. Many retirees in the higher income brackets were not getting adequate coverage. Retirees who had not been in the system for long were slipping through the cracks, and disability was inadequately addressed. PERS members still wanted employers to match more than $3,000 of their annual individual salaries. Retirement age was still a major issue, and many employees of retirement age resented that some state employees over 65 continued to work while others were not allowed to.
At the request of the OSEA and other public employee groups, the 1953 legislature directed a committee to study the whole program and to bring back recommendations to the 1955 session.

Based on the recommendations, further laws were enacted, and PERS emerged with a new look. Changes included liberalization of disability benefits, more equitable coverage for police and firefighters, and improved status for people remaining in employment.

In 1956, Max Manchester, PERS’ executive secretary, wrote in a guest editorial in the OSEA Sentinel, “With the new Public Retirement System Retirement Law in effect and with coverage under the Federal Old Age and Survivors Insurance program, the public employees of Oregon are in an enviable position compared to public employees throughout the U.S. It is true that some of the old, well-established retirement systems have broader benefits. However, in many instances the members of such systems do not have Social Security coverage. This coverage, especially for the younger employees who have minor children, is completely beyond that which most of us could afford through private insurance.”

As the decade rolled to a close, PERS was still intact, having faced and survived some serious threats. PERS had clearly established that it would meet problems head-on, would not hide from controversy, was willing to examine itself honestly, and would make whatever changes were necessary to build a strong retirement system. These traits would all be needed in the coming years.

The 1960s: years of change
 
The 1960s were a time of rapid change in the U.S. Civil rights, women’s rights, war protests, and demonstrations made the news daily. People were examining long-held beliefs and demanding a say in events that shaped their lives. Retirement issues may not have had the drama of some of the social changes in the country, but they did not escape examination.

The Oregon State Employees Association had been active in pension issues from the onset of PERS and began a retirement education program to better inform state employees about PERS. Simultaneously, it began publishing a regular retirement-issue column in its monthly newsletter.

These two communication efforts focused a great deal of attention on PERS, and many public employees began to worry that their pension checks were going to prove inadequate.

Need for increase in funding

Despite the fact that net earnings for 1961 were the highest ever (3.28 percent), there was growing concern that the system needed more funds. Suggestions to correct this included making employees contribute at the maximum rate available and raising the rate for prior service.

The most controversial suggestion, one that was met with serious doubts and resistance, was to write legislation that would permit investment of 50 percent of PERS’ funds in the three highest grades of corporate securities and in federal government-insured mortgages. To invest state funds in something as unpredictable as the stock market was considered revolutionary by some, but it was an idea whose time had come, and by early 1962, bankers, representatives of investment firms, and the staff of the Legislative Fiscal Committee all favored allowing stock purchases. They believed that this alone could increase the yield of investments by at least one percent, which would increase annual benefits by 25 percent.

The American Association of University Professors (AAUP) evaluated PERS in the early part of the decade and issued a statement expressing some degree of dissatisfaction with the system. “We think OPERS can  be classified as an above-average state retirement plan, but it falls short of our AAUP principles under the
important items of immediate vesting, adequacy of benefits and protection of purchasing power. OPERS was initiated as a minimum subsistence retirement program and with Social Security it serves that purpose. In 1946 it was a major improvement over the absence of a state-wide retirement system for public employees. Today increased expectations of retirement pay aggravated by reduced buying power of the dollar and misguided attacks of salespeople promoting private funds focus upon shortcomings of OPERS.”

Investing in stocks became an increasingly popular concept and was part of the platform for state treasurer candidates. Robert W. Straub and Howard Belton both were interviewed at length in the OSEA September 1964 newsletter. Straub supported investment in stocks. “If I were State Treasurer, I would have supported the principle of the State Investment Council. Benefits would accrue both to the State of Oregon and to employees covered under PERS. A senior, professionally trained financial specialist could earn far in excess the cost of his salary and operation of his small staff. Such large sums of money are involved that increasing earning on this money by a percentage of one percent can produce several million dollars more income per year.”

Belton was far more conservative in his view and felt investing up to 50 percent in stocks was far too risky. Straub won the election and was a strong advocate for PERS’ right to invest in stocks.

Dissatisfaction with retirement benefits continued, and Judge Lloyd Le Master wrote an article in the Corvallis Gazette-Times in December 1964 calling for several changes. He pointed out that PERS was established to provide the retiree with half of his last five years’ average salary at age 65, after 30 years of service, with an effective maximum benefit of $100 per month. Under this plan, a distinguished dean at Oregon State College could retire on $52.65 a month.

“Well, here we are 20 years later, and the system is 20 years older but we retired a distinguished and ranking scholar last year at the age of 70 under PERS on $97 a month. Yes, retirement pay went up from $52.65 to $97 in 20 years, while a carpenter’s pay went up from $6 per day to $24 and inflation jacked the price of everything comparably in the same 20 years. In reality, in real wages (purchasing power) the $97 becomes $24 of the kind that were used to retire the dean 20 years ago.”

Much to the dismay of the many people who had worked for change in the existing system, the 1965 legislature enacted only one minor retirement bill. Jerry Liebertz, OSEA retirement committee chairman, came down hard on the legislators, writing in the OSEA newsletter, “Let’s face it—this was not a good legislative session insofar as retirement was concerned. It is interesting to note that the legislature passed many bills that were favorable to state employees such as the salary increases, the private card mileage bill, the parking facility for the State Office Building in Portland, etc., but seemed determined not to pass any bill that would improve our retirement program. The treatment of this bill … is an example of the complete apathy that most lawmakers show toward our retirement program. The same senators and representatives who keep saying how the program should be improved seemingly would not do any improving.”

Perhaps legislators did not deserve such harsh condemnation. The reason they gave for failure to pass new PERS legislation was that the approach was “patchwork” and needed to be deferred until a comprehensive study was done and reform coordinated. The legislative fiscal committee received $10,000 to make an up-to- date study of the retirement law. One of the major objectives would be to consider liberalizing the investment of funds.

Campaign to improve PERS

For the next year interested parties worked around the clock to make sure PERS would not be ignored when legislators met again in 1967. The OSEA planned a day-long conference in October on improving PERS, urging all members to participate. Over 200 interested representatives throughout the state attended. The three major areas of concern were finding a method to ensure employees contributed maximum amounts to their funds, designing legislation to permit investment in common stocks, and finding a way to help people who had been in the system for many years but whose contributions were limited by legislation and low salaries.

Under the direction of Liebertz, the OSEA’s retirement committee completed an extensive study of retirement systems in other states. As reported in the April 1966 OSEA newsletter, “The committee’s conclusions that Oregon’s system could best be improved by going to a guaranteed benefits formula in place of the present money-purchase system became the basis of a proposal which was accepted by the conference steering committee and referred to participating organizations.” To ensure legislators would heed the need for change in the next session, Liebertz and his committee set up a series of local retirement conferences participated in by state, county, city, special-district employees, and public officials.

The subcommittee created to study PERS improvement came to the Legislative Fiscal Committee with a number of recommendations. By a four-to-four vote, the Legislative Fiscal Committee turned down the recommendations in July 1966.

However, in October of the same year, the same committee reconsidered its decision and voted to accept the recommendations after all. It prepared legislation to submit a bill to make basic changes in the retirement system to the 1967 legislature. Proposed changes included:

 Retirement benefits would be based on a combination of Social Security, employee annuity, and employer formula pension equal to 50 percent of the final average salary after 30 years of service.

 The employee annuity portion of the retirement benefit would be based on mandatory employee contributions of 3.5 percent of the first $6,600 in salary, and 7 percent in excess of that amount.

  The employer portion of the retirement benefit would be based on a formula.

 There would be no change in prior service benefits, but the formula for current services would be provided for all employees retiring after the effective date of change.

 Disability retirement would be permitted at any time up to normal retirement age, based on a more stringent definition of disability.

  Funds would be liberalized for investment in stock.

PERS members became involved in ways they never had before. Retirement meetings were organized and packed with employees wanting to hear what this new legislation would mean. Activists thought of unique ways to gain support. One state employee, George H. Dow, spent three of his lunch hours walking around the Capitol mall wearing a hand-painted sandwich sign that read, “State Employees Your Retirement System is NOT ADEQUATE! Do something about it! Attend the retirement meeting 7:30 P.M. Wed. Nov. 19.”

Governor Tom McCall supported the legislation. “We are in a time of inflation and high employment. I have personal experience with the difficulty of recruiting top quality people at the available salaries and personal knowledge of the real sacrifices made by some who have accepted positions in my administration … At all levels our state employment has shown heavy turnover. This requires expensive recruiting and training programs and threatens a real loss of competency if not checked … It seems unwise to start this new benefit (a $2 contribution by the state toward the payment of employee medical-hospital insurance premiums) before providing adequately for the major fringe benefit now offered. I am speaking, of course, of retirement. The Legislative Fiscal Committee has just compiled an extensive review in this area. I endorse its recommendations for a major revision and improvement in the state retirement plan.”

Stock investment

The tremendous efforts of the Oregon State Employees Association (OSEA), the Oregon School Employees Association, Oregon Education Association, PERS, and other organizations paid off and on May 12, 1967, a bill with numerous changes to PERS sailed through the house without a dissenting vote. It was sent on to the Senate Financial Affaires Committee where it was amended to include retirement benefits for legislators. The bill was signed into law and became effective January 1, 1968. Many applauded this bill as overhauling the system.

In addition to a change from “money purchase” to a guaranteed pension computed by formula and a change in employee contribution rates, a far-reaching change was made — the Oregon Investment Council was created to invest a portion of the fund in stocks.

No time was wasted protesting the change of investment policy and Marion County Circuit Judge Val D. Sloper declared the law creating the Oregon Investment Council unconstitutional on July 29, 1968.

A “friendly” suit to contest the law was filed by former Governor Charles A. Sprague and Fred H. Paulus. Defendants were State Treasurer Robert W. Straub and members of the Oregon Investment Council—Straub, Max Manchester, W.P. Stalnaker, Howell Appling, Jr., and Don Ellis.

Sloper concluded that the law violated a constitutional provision against the state having an interest in the stock of any company. He also ruled that the act violated the constitution in that it required the Oregon Supreme Court to rule on the validity of each investment that, he said, would require the court to exercise and execute rather than to act in a judicial function.

Two years later, the Supreme Court overturned the lower court’s decision and finally, nearly two years after the 1967 legislature passed laws creating the Oregon Investment Council (OIC) and authorizing it to invest a portion of PERS in common stock, the investment program was underway. The OIC was made up of the state treasurer, two representatives of PERS, and two persons appointed by the governor.

The first firms chosen by State Treasurer Robert W. Straub to oversee the funds were Trans-america Counselors, Inc., of Los Angeles; Capitol Guardian Trust Company of Los Angeles; and Fayez Sorofim Company of Houston. Initial investment was $42 million, 10 percent of the fund.

PERS members had the option of investing part of their funds in this variable annuity program. Initially, once a member opted to do this, the election was irrevocable. While early figures show that members did not leap on this opportunity, they were nevertheless excited about it.

As the decade came to a close, there was significant support from an ad hoc committee organized in Salem for proposed legislation to help some career state employees who withdrew their retirement contributions in 1953. According to Don Parker, chief counsel for the Department of Agriculture, “The 1968 retirement law, however unintentionally, seriously hurt employees who were between 35 and 50 years of age in 1953 and who have prior service credit, or any retirement credit for years worked prior to 1953.” This, as well as other concerns, would be addressed in the immediate future.

The 1970s: years of growth

What would become a major PERS development emerged in 1970 out of inadequate wages paid to state workers: the concept of employer pick up.

The social changes and political upheavals of the 60s continued into the 70s, exacerbated by Watergate and ensuing mistrust of government. The media blasted the public with images of young people demonstrating and stories of the drug culture and the sexual revolution, but middle America was still conservative and wanted secure jobs and financial stability.

Oregon state employees were frustrated by high inflation and low wages. They held rallies to draw attention to their demands for higher pay and better working conditions. With the recent overhaul of PERS, retirement issues took a back seat for a while.
By January 1970, 5,388 PERS members had signed up for the variable annuity fund. In April of the same year, 9,000 people who retired before January 1, 1968, received pension checks three times the normal monthly check as a result of the revised PERS retirement formula. Otherwise, things were relatively quiet on the retirement front.

James L. McGoffin became the PERS’ executive secretary in 1970 and promptly sought ways to improve the retirement system. He promised that PERS would break with tradition and become “proposer” of retirement improvement changes rather than to be mere administrator of the system. Months later, McGoffin announced that PERS earnings for 1970 were the highest ever.

What would become a major PERS development emerged in 1970 out of inadequate wages paid to state workers: the concept of employer pick up. Employees and employers alike began to consider the idea of employer pick up, a concept in which employers would pay employees’ retirement contributions in lieu of an increase in wages.

A second idea bubbled up as a result of member confusion over their benefits. Some PERS members found the changes and options confusing and talk of pre-retirement counseling was heard with increasing frequency.

The Oregon Education Association, the Oregon State Employees Association, and Oregon School Employees Association again formed a consortium to review provisions and benefits of PERS and made recommendations to the PERS board and the 1971 legislature. The five major areas were:

Employer pension formula would be changed to increase average benefits of retirees.

  Employees would have an annual option to discontinue their contributions in the variable annuity program.

  There would be more liberal death benefit provisions.

  Cost-of-living adjustment would be tied into pension benefits.

  The conference would support legislation to help those currently retired.

The bill passed, much to the delight of PERS employees. State employees would get bigger pensions because of the change in the benefit formula. Changes to beneficiaries were also made, and an OSEA spokesman called the PERS death benefits “one of the greatest and most unpublicized fringe benefits granted to state employees by the 71 legislature.”

The new law also established a basis for a cost-of-living adjustment for retirees. The adjustment was limited to 1.5 percent with the stipulation that in the event of a decrease, pension checks would never drop below the original amount awarded to each retiree.

A bill allowing the state to invest 25 percent of the fund was also introduced and passed. Two New York firms, Jennison Associates and B.E.A. Association, Rosenberg Capitol Management of California. and Columbia Management Company of Portland were selected to handle an additional $90 million in trust fund money. State Treasurer Straub announced the only guideline for investment would be growth and that “investments must be in conformity to those which men of prudence, discretion, and intelligence would make with their own funds.”

This guideline would be significant for many years to come. In August 1971, the PERS fund was valued at $430 million and earned an average interest rate of 5.67 percent.

Encouraged by the changes, the Oregon PERS Conference Steering Committee, organized under OSEA leadership in 1966, began studying proposals for further PERS improvements to be submitted to the next legislature. One of the ideas the conference intended to pass on to the legislature was the idea of using unused sick-pay in calculating benefits. Changes in retirement age were also a concern.

A new law passed 1973 achieved a number of these goals:

  It increased the percentage factor used in computing retirement benefits.

 It permitted employees to retire at age 60 after 30 years of service, or at 62 after 25 years; or at age 57 after 20 years.

  It increased the cost-of-living adjustment from 1.5 to 2 percent.

  It granted a 25 percent increase in benefits to employees who retired before 1968.

Public employees received these changes with enthusiasm. Early in 1974, the PERS Board convinced the legislature of the need for pre-retirement counseling, and a series of seminars was set up to cover such topics as retirement benefits and the available options, disability benefits, Social Security benefits, Medicare, and other issues related to retirement. PERS set up three satellite offices for counseling aid—one in Salem, one in Eugene, and one in Pendleton.

All seemed to be well. But the economy of the country was in turmoil and, with funds invested in stocks, PERS was bound to be affected. In 1974 PERS lost money as a result of poor stock market performance. Senate President Jason Boe (D-Reedsport) appointed a committee to review the state’s investment policies involving PERS funds after a report that none of the 87,000 public employees who were members of the retirement system earned any return on their accounts due to stock market losses. Despite the fact that Oregon’s stock investment program had a better yield than most in 1973, alarm spread quickly.

State Treasurer James A. Redden, a member of the Oregon Investment Council, was quick to point out that employees suffered only a “paper loss.” He predicted future market gains would replace the loss.

District meetings were held to explain PERS investment policies. The meetings confirmed that the average employee was not aware of how funds were invested nor what benefits were derived from the investments. However, after attending the meetings, the majority of employees felt no change should be made in investment policy.

Representative Sam Johnson (R-Redmond) was not convinced, and introduced a bill that would allow public employees to have none of their retirement contributions invested in common stocks. His bill proposed to create three separate funds: One would have no stock investments, one would contain up to 35 percent in stock investments, and the third would be completely invested in common stock. Public employees could pick the fund in which they wanted their money invested. The bill did not pass.

The 1975 legislature corrected the 1973 and 1974 stock losses by passing a bill that guaranteed employees at least a 5.5 percent annual return on their PERS accounts retroactive to 1974. The legislation did not apply to variable interest accounts. The issue quieted to barely a whisper when the stock market took a major upturn in July 1975, and the PERS fund showed a paper profit of more than $18 million.

In late 1976, high inflation raised concerns over the adequacy of funding, and the legislature set up a committee to investigate. Since the legislators themselves officially came under the system the following year, keen legislative interest in PERS was expected.

In the second half of the 70s, PERS received an infusion of energy from Wilma Hogle, a secretary with the Water Resources Department. Hogle and two other state employees incorporated as the Oregon Employees Retirement Investment Association to examine how the OIC was investing PERS money. Hogle served as president.

According to the January 4, 1978 edition of The Oregon Journal, “Her major aim was to get an independent evaluation of the PERS account. ‘We wanted reassurance that after 30 years with one actuary (Coates, Herford & England, San Francisco, California) the system was properly funded,’ she said.”

Hogle embarked on a mission to ensure the system was indeed properly funded.

She persistently attended PERS meetings, lobbied state officials, and issued a newsletter that, according to a January 4, 1978 article in The Oregon Journal, “skirted the borderline of being honest and libelous,”

The PERS board ordered an independent study by Milliman & Robertson, Inc. The study pointed out potential underfunding of the system. Consequently, higher employer rates began as of July 1, 1978, and increased every year until 1981.

This pleased Hogle, who wrote in a November 1978 editorial, “The Retirement Board has been adamant that the system will be fully funded, and if future actuary studies determine that adjustments in the contributions rates must be initiated to achieve full funding, the board will adopt them. Thus, Oregon becomes one of the few public employee systems in the country to adhere to this high level of pension integrity for its public employees.”

In the late 70s unforeseen trouble arose when the IRS became involved in taxing contributions. The problems began in 1970 when the employer pick up began and Social Security taxes were not withheld from the retirement contributions the state paid on behalf of the employee.

In August 1979 the regional office of the Social Security Administration issued an informal ruling that PERS contributions paid by the employer are taxable income for Social Security purposes. This meant a cost to both the employee and the employer. Both had an interest in fighting the ruling, and both did. As a result, Oregon retirement benefits were not taxed at that time.

Two other changes in the 70s were the use of unisex annuity tables and expanded health insurance for retired members.

Although PERS had its share of turmoil in the 70s, it was a good decade. The fund, challenged by a declining stock market mid-decade, had emerged solid. Many changes were made that strengthened both the system and the financial security of its members.

“The Retirement Board has been adamant that the system will be fully funded, and if future actuary studies determine that adjustments in the contributions rates must be initiated to achieve full funding, the board will adopt them. Thus, Oregon becomes one of the few public employee systems in the country to adhere to this high level of pension integrity for its public employees.”