Senate Bill 1049 is breach of contract, unconstitutional, lawsuit says.
9 public employees are asking the Oregon Supreme Court to review a new law that unfairly cuts retirement benefits in an attempt to reduce the cost of Oregon’s Public Employees Retirement System (PERS).
The class action lawsuit, filed August 9, contests portions of Senate Bill (SB) 1049, which lawmakers passed in May. It seeks to eliminate provisions that move employee contributions out of their retirement savings accounts and into the pension fund, as well as new limits on salary used to calculate retirement benefits. The employees contend that the resulting loss of benefits is unconstitutional and a breach of contract.
Jennifer James, the lead plaintiff in the case, is a member of OSEA Molalla River Chapter 110. She has served as a secretary for the Molalla River School District for 19 years.
“I love my school district and have been faithfully doing my job for nearly 20 years with the promise of a secure retirement,” said James. After nearly two decades of service, she earns less than $40,000 a year and is counting on every penny of her PERS for retirement security. SB 1049 reduces her individual retirement account by more than 13 percent. “The idea of a poverty-level retirement benefit is terrifying to me,” James said.
The other eight plaintiffs in James v. State of Oregon include a Salem firefighter, nurses from OHSU and Multnomah County, a Lebanon state employee, a Gresham community college employee, a child welfare worker and a water mechanic in Portland, and a Multnomah County district attorney. Their total PERS individual account program losses are between 5 and 14 percent each.
In public testimony on the bill, union officials warned lawmakers that the reductions were unconstitutional and that they would challenge them in court – as they have successfully done in the past.
“We have fought against illegal cuts to PERS before, and we are not afraid to do it again,” said OSEA President Lisa Gourley. “This is about right and wrong, and keeping promises to public employees. OSEA will always stand up to defend the rights of our members and all Oregon workers.”
Aruna Masih is the lead attorney for the case for Bennett Hartmen, Attorneys at Law LLP, the same firm that successfully challenged similar cuts before the Oregon Supreme Court in the 2005 Strunk ruling and 2015 Moro ruling.
“The plaintiffs and all PERS members accepted a job in good faith for a salary and benefits package, did the work they promised to do, and planned futures based on the package they agreed to accept. Their service for public employers creates certain contract rights to retirement benefits,” said Masih. “As the Oregon Supreme Court has ruled in the past, the State cannot breach the terms of those contractual promises.”
OSEA is part of Keep Oregon’s Promise, a coalition of Oregon labor unions backing the lawsuit.