Chapter 0808

Chapter 808 Oregon Laws 2005

AN ACT

HB 3262

Relating to public employee retirement; creating new provisions; amending ORS 198.608, 222.045, 236.610, 238.078, 238.082, 238.088, 238.095, 238.157, 238.225, 238.260, 238.280, 238.390, 238.410, 238.415, 238.420, 238.435, 238.465, 238.485, 238.515, 238.600, 238A.025, 238A.050, 238A.130, 238A.160, 238A.220, 238A.235 and 238A.450 and sections 44e and 46, chapter 733, Oregon Laws 2003; and prescribing an effective date.

Be It Enacted by the People of the State of Oregon:

TAX QUALIFICATION

SECTION 1. ORS 238.600 is amended to read:

238.600. (1) A system of retirement and of benefits at retirement or death for employees of public employers hereby is established and shall be known as the Public Employees Retirement System. The Public Employees Retirement System consists of this chapter and ORS chapter 238A. [Any similar system being operated by a public employer on April 8, 1953, may be integrated into this system as hereinafter provided.] It is the intent of the Legislative Assembly that the system be qualified and maintained under sections 401(a), 414(d) and 414(k) of the Internal Revenue Code as a tax-qualified defined benefit governmental plan.

(2) If the Public Employees Retirement System is terminated, or if contributions may no longer be made to the system, each member of the system has a nonforfeitable right to the benefits that the member has accrued as of the date of the termination, or as of the date that contributions may no longer be made to the system, to the extent that those benefits are funded.

SECTION 2. ORS 238.260 is amended to read:

238.260. (1) The purpose of this section is to establish a well balanced, broadly diversified investment program for certain contributions and portions of the member accounts so as to provide retirement benefits for members of the system that will fluctuate as the value and earnings of the investments vary in relation to changes in the general economy. It is anticipated that investment of those contributions and portions of the member accounts in equities will result in the accumulation of larger deposit reserves for those members during their working years, tend to preserve the purchasing power of those reserves and the retirement benefits provided thereby and afford better protection in periods of economic inflation.

(2) There is established in the Public Employees Retirement Fund an account, separate and distinct from the General Fund, to be known as the Variable Annuity Account. Interest earned by the account shall be credited to the account. The account is part of the Public Employees Retirement System and is not a separate defined contribution plan or account for the purposes of the Internal Revenue Code.

(3)(a) A member who is making contributions to the fund may elect at any time to have 25, 50 or 75 percent of contributions by the member to the fund on and after the effective date of the election paid into the Variable Annuity Account, credited to a variable account, and reserved for the purchase of a variable annuity. A member who has elected to have a percentage of contributions so paid, credited and reserved may elect at any time thereafter to have an additional 25 or 50 percent of contributions by the member, but not to exceed a maximum of 75 percent, so paid, credited and reserved. An election shall be in writing on a form furnished by the board and be filed with the board. An election shall be effective on January 1 following the filing thereof.

(b) Notwithstanding any other provision of this section, a member may not contribute to the Variable Annuity Account after December 31, 2003.

(4) A member who has elected to have contributions paid into the Variable Annuity Account under subsection (3) of this section may thereafter cause the contributions to cease being paid into the member’s variable account by filing a request in writing on a form furnished by the board and filed with the board. The contributions shall cease being paid into the member’s variable account after December 31 following the filing of the request. Contributions paid into the member’s variable account before the effective date of the request for cessation shall remain in the member’s variable account.

(5)(a) An employee who is a member of the system on January 1, 1968, and who thereafter made contributions to the Variable Annuity Account, may elect at any time to have an amount equal to 10 percent per year, for not more than five years, of the balance of the regular account of the member in the fund on the effective date of an election filed under subsection (3) of this section, transferred from the regular account of the member to the Variable Annuity Account, credited to the member’s variable account, and reserved for the purchase of a variable annuity. An election shall be in writing on a form furnished by the board and be filed with the board. An election is final and irrevocable upon the filing thereof. The first transfer pursuant to an election shall be made on July 1 following the filing of the election, but may be made, in the discretion of the board, on an earlier date.

(b) If the transfers elected by a member under this subsection have not been completed at the time of retirement, a transfer equal to one annual transfer shall be made pursuant to an election by the member made and filed as provided in this subsection.

(c) No transfer shall be made under this subsection after the first payment of the service retirement allowance of the member becomes normally due.

(d) Notwithstanding paragraphs (a) to (c) of this subsection, a member may not elect to transfer funds under this subsection after December 31, 2003.

(6) Moneys in the Variable Annuity Account may be invested in investments authorized by law for investment of moneys in the Public Employees Retirement Fund; but, notwithstanding any other general or specific law, moneys in the account shall be invested primarily in equities, including common stock, securities convertible into common stock, real property and other recognized forms of equities, whether or not subject to indebtedness. Not more than five percent of the amortized value of all the investments of the Variable Annuity Account and of moneys in the account immediately available for investment may be invested in the obligations of or equities in a single, primary obligor or issuer. A pro rata share of the administrative expenses of the system shall be paid from interest earned by the Variable Annuity Account.

(7)(a) Except as provided in subsection (8) of this section, the policy-making investment authority for the Public Employees Retirement Fund shall enter into contracts with one or more persons whom the authority determines to be qualified, whereby the persons undertake to invest and reinvest moneys in the Variable Annuity Account available for investment and acquire, retain, manage and dispose of investments of the account in accordance with subsections (1) and (6) of this section and to the extent provided in the contracts.

(b) Performance of functions under contracts so entered into shall be paid for out of the gross interest or other income of the investments with respect to which the functions are performed, and the net interest or other income of the investments after that payment shall be considered income of the Variable Annuity Account.

(c) The policy-making investment authority may require a person contracted with to give to the state a fidelity bond in a penal sum as may be fixed by law or, if not so fixed, as may be fixed by the authority, with corporate surety authorized to do business in this state.

(d) Contracts so entered into and functions performed thereunder are not subject to the State Personnel Relations Law or ORS 279.545 to 279.746.

(e) A person contracted with shall report to the policy-making investment authority as often as the authority may require, but at least annually, the earnings of the moneys invested during the period covered by the report, the capital gains and losses of the Variable Annuity Account during the period, the changes in the market value of the investments of the account during the period and such other information as the authority may require.

(8) The policy-making investment authority for the Public Employees Retirement Fund, for and on behalf of the Public Employees Retirement System and Public Employees Retirement Board, may enter into group annuity contracts with one or more insurance companies authorized to do business in this state. In lieu of any investment of moneys in the Variable Annuity Account as provided in subsections (6) and (7) of this section, the authority may pay, from time to time under contracts so entered into, any moneys in that account available for investment purposes. Contracts so entered into:

(a) May provide that annuities purchased thereunder be payable in variable dollar amounts, but if that provision is made, provision also shall be made that a member of the system who has a variable account, upon retiring from service and before the first payment of retirement allowance becomes normally due, may elect an option to have the annuities payable to the member or the beneficiary of the member in fixed or variable dollar amounts or both.

(b) May provide that payment of annuities purchased thereunder may be made by the insurance company directly to persons entitled thereto or to the Variable Annuity Account for payment therefrom to those persons.

(9) Upon retiring from service but within 60 days after the date of the first benefit payment, a member of the system who has a variable account may elect to transfer the balance in the variable account to the regular account of the member, and by that transfer the annuity shall be based on the amount in the regular account of the member as otherwise provided in this chapter and the member shall not receive a variable annuity as provided in this section.

(10) When an annuity is payable under this chapter to a member of the system who has a variable account, or is payable to a beneficiary of that person, the portion of the annuity payable from the Variable Annuity Account shall be proportionately increased or decreased for a calendar year when, as of October 31 of the preceding calendar year, the balance of the member’s variable account exceeds or is less than the current value of the annuity, determined in accordance with the rate of interest and approved actuarial tables then in effect.

(11) Notwithstanding subsection (10) of this section, the board, in the event of extraordinary fluctuation in the market value of investments of the Variable Annuity Account and in order to avoid substantial inequities, may increase or decrease the portions of annuities paid from the account for periods less than a calendar year and determined as of dates other than October 31.

(12) Notwithstanding any other provision of this chapter, the retirement allowance to which a member of the system who has a variable account or who made contributions on salary in excess of $4,800 per year during the period January 1, 1956, through December 31, 1967, and whose effective date of retirement is January 1, 1982, or later, is otherwise entitled under this chapter shall be subject to the following adjustment:

(a) The board shall determine the difference between the member account of the member and what the member account of the member would have been had the member not participated in the variable annuity program on or after January 1, 1982, plus the contributions made on salary in excess of $4,800 per year during the period January 1, 1956, through December 31, 1967.

(b) If the member account of the member due to participation in the variable annuity program or due to the contributions made on salary in excess of $4,800 per year is greater, the monthly retirement allowance of the member shall be increased by the value of the difference, using the annuity tables applicable to the plan selected by the member.

(c) If the member account of the member due to participation in the variable annuity program or due to the contributions made on salary in excess of $4,800 per year is lesser, the monthly retirement allowance of the member shall be decreased by the value of the difference, using the annuity tables applicable to the plan selected by the member.

(13) Except as otherwise specifically provided in this section, the rights and benefits under this chapter of an active or retired member of the system or of a beneficiary of the member are not affected by this section and the provisions of this chapter applicable to regular accounts of active and retired members of the system in the fund are also applicable to variable accounts.

(14)(a) In addition to the transfer provided for in subsection (9) of this section, a member of the system who has a variable account may at any time prior to retirement elect to transfer the balance in that account to the regular account of the member in the fund if:

(A) The member is other than a police officer or firefighter and has attained the age of 50;

(B) The member is a police officer or firefighter and has attained the age of 45; or

(b) An election under paragraph (a) of this subsection is irrevocable, and a member who has so elected may not thereafter elect to make contributions to the Variable Annuity Account under subsection (3) of this section.

(c) An election under paragraph (a) of this subsection shall be in writing and shall be filed with the board. The board by rule shall prescribe a form for the purposes of application. An election so made shall be effective on January 1 of the year following the year in which the election is made. If the member account of the member as of the effective date of the election is less than what the member account of the member would have been had the member not participated in the variable annuity program, not including the contributions made on salary in excess of $4,800 per year during the period January 1, 1956, through December 31, 1967, the monthly retirement allowance of a member calculated under ORS 238.300 (2)(a) or (b)(B) shall be decreased by the value of the difference.

(d) As of the effective date of an election under this subsection, the board shall credit all earnings to the member’s variable account based on the actual calendar year variable earnings rate for the year in which the election is made. This account balance shall:

(A) Be used by the board in determining whether the member’s election is effective under paragraph (c) of this subsection; and

(B) Be the account balance credited by the board to the regular account of the member in the fund if the election is determined to be effective.

(e) Subject to paragraph (c) of this subsection, the annuity of a member who makes an effective transfer under this subsection shall be based on the amount in the regular account of the member in the fund as otherwise provided in this chapter, and the member shall not receive a variable annuity as provided in this section.

SECTION 3. ORS 238.260, as amended by section 218, chapter 794, Oregon Laws 2003, is amended to read:

(b) Notwithstanding any other provision of this section, a member may not contribute to the Variable Annuity Account after December 31, 2003.

(c) No transfer shall be made under this subsection after the first payment of the service retirement allowance of the member becomes normally due.

(d) Notwithstanding paragraphs (a) to (c) of this subsection, a member may not elect to transfer funds under this subsection after December 31, 2003.

(d) Contracts so entered into and functions performed thereunder are not subject to the State Personnel Relations Law or ORS 279A.050 (2) and 279A.140.

(A) The member is other than a police officer or firefighter and has attained the age of 50;

(B) The member is a police officer or firefighter and has attained the age of 45; or

(A) Be used by the board in determining whether the member’s election is effective under paragraph (c) of this subsection; and

(B) Be the account balance credited by the board to the regular account of the member in the fund if the election is determined to be effective.

SECTION 4. ORS 238.410 is amended to read:

238.410. (1) As used in this section:

(a) “Carrier” means an insurance company or health care service contractor holding a valid certificate of authority from the Director of the Department of Consumer and Business Services, an insurance company or health care service contractor licensed or certified in another state that is operating under the laws of that state, or two or more of those companies or contractors acting together pursuant to a joint venture, partnership or other joint means of operation.

(b) “Eligible person” means:

(A) A member of the Public Employees Retirement System who is retired for service or disability and is receiving a retirement allowance or benefit under the system, and a spouse or dependent of that member;

(B) A person who is a surviving spouse or dependent of a deceased retired member of the system or the surviving spouse or dependent of a member of the system who had not retired but who had reached earliest retirement age at the time of death;

(C) A person who is receiving retirement pay or a pension calculated under ORS 1.314 to 1.380 (1989 Edition), and a spouse or dependent of that person; or

(D) A surviving spouse or dependent of a deceased retired member of the system or of a person who was receiving retirement pay or a pension calculated under ORS 1.314 to 1.380 (1989 Edition) if the surviving spouse or dependent was covered at the time of the decedent’s death by a health care insurance plan contracted for under this section.

(c) “Health care” means medical, surgical, hospital or any other remedial care recognized by state law and related services and supplies and includes comparable benefits for persons who rely on spiritual means of healing.

(2) The Public Employees Retirement Board shall conduct a continuing study and investigation of all matters connected with the providing of health care insurance protection to eligible persons. The board shall design benefits, devise specifications, invite proposals, analyze carrier responses to advertisements for proposals and do acts necessary to award contracts to provide health care insurance, including insurance that provides coverage supplemental to federal Medicare coverage, with emphasis on features based on health care cost containment principles, for eligible persons. The board is not subject to the provisions of ORS 279.005 to 279.111 in awarding contracts under the provisions of this section. The board shall establish procedures for inviting proposals and awarding contracts under this section.

(3) The board shall enter into a contract with a carrier to provide health care insurance for eligible persons for a one or two-year period. The board may enter into more than one contract with one or more carriers, contracting jointly or severally, if in the opinion of the board it is necessary to do so to obtain maximum coverage at minimum cost and consistent with the health care insurance needs of eligible persons. The board periodically shall review a current contract or contracts and make suitable study and investigation for the purpose of determining whether a different contract or contracts can and should, in the best interest of eligible persons, be entered into. If it would be advantageous to eligible persons to do so, the board shall enter into a different contract or contracts. Contracts shall be signed by the chairperson on behalf of the board.

(4) Except as provided in ORS 238.415 and 238.420, the board may deduct monthly from the retirement allowance or benefit, retirement pay or pension payable to an eligible person who elects to participate in a health care insurance plan the monthly cost of the coverage for the person under a health care insurance contract entered into under this section and the administrative costs incurred by the board under this section, and shall pay those amounts into the Standard Retiree Health Insurance Account established under subsection (7) of this section. The board by rule may establish other procedures for collecting the monthly cost of the coverage and the administrative costs incurred by the board under this section if the board does not deduct those costs from the retirement allowance or benefit, retirement pay or pension payable to an eligible person.

(5) Subject to applicable provisions of ORS chapter 183, the board may make rules not inconsistent with this section to determine the terms and conditions of eligible person participation and coverage and otherwise to implement and carry out the purposes and provisions of this section and ORS 238.420.

(6) The board may retain consultants, brokers or other advisory personnel, organizations specializing in health care cost containment or other administrative services when it determines the necessity and, subject to the State Personnel Relations Law, shall employ such personnel as are required to assist in performing the functions of the board under this section.

(7) Pursuant to section 401(h) of the Internal Revenue Code, the Standard Retiree Health Insurance Account is established within the Public Employees Retirement Fund, separate and distinct from the General Fund. All payments made by eligible persons for health insurance coverage provided under this section shall be held in the account. Interest earned by the account shall be credited to the account. All moneys in the account are continuously appropriated to the Public Employees Retirement Board and may be used by the board only to pay the cost of health insurance coverage under this section and to pay the administrative costs incurred by the board under this section.

(8) The sum of all amounts paid by eligible persons into the Standard Retiree Health Insurance Account, by participating public employers into the Retiree Health Insurance Premium Account under ORS 238.415, and by participating public employers into the Retirement Health Insurance Account under ORS 238.420, may not exceed 25 percent of the aggregate contributions made by participating public employers to the Public Employees Retirement Fund on or after July 11, 1987, not including contributions made by participating public employers to fund prior service credits.

(9) Until all liabilities for health benefits under the system are satisfied, contributions and earnings in the Standard Retiree Health Insurance Account, the Retiree Health Insurance Premium Account under ORS 238.415 and the Retirement Health Insurance Account under ORS 238.420 may not be diverted or otherwise put to any use other than providing health benefits and payment of reasonable costs incurred in administering this section and ORS 238.415 and 238.420. Upon satisfaction of all liabilities for providing health benefits under this section, any amount remaining in the Standard Retiree Health Insurance Account shall be returned to the participating public employers who have made contributions to the account. The distribution shall be made in such equitable manner as the board determines appropriate.

SECTION 5. ORS 238.410, as amended by section 219, chapter 794, Oregon Laws 2003, is amended to read:

238.410. (1) As used in this section:

(b) “Eligible person” means:

(C) A person who is receiving retirement pay or a pension calculated under ORS 1.314 to 1.380 (1989 Edition), and a spouse or dependent of that person; or

(2) The Public Employees Retirement Board shall conduct a continuing study and investigation of all matters connected with the providing of health care insurance protection to eligible persons. The board shall design benefits, devise specifications, invite proposals, analyze carrier responses to advertisements for proposals and do acts necessary to award contracts to provide health care insurance, including insurance that provides coverage supplemental to federal Medicare coverage, with emphasis on features based on health care cost containment principles, for eligible persons. The board is not subject to the provisions of ORS chapters 279A and 279B, except ORS 279B.235, in awarding contracts under the provisions of this section. The board shall establish procedures for inviting proposals and awarding contracts under this section.

SECTION 6. ORS 238.415 is amended to read:

238.415. (1) As used in this section:

(a) “Board” means the Public Employees Retirement Board.

(b) “Eligible retired state employee” means:

(A) A retired member of the Public Employees Retirement System who was a state employee at the time of retirement, is retired for service or disability, is receiving a retirement allowance or benefit under the system, had eight years or more of qualifying service in the system at the time of retirement or is receiving a disability retirement allowance including a pension computed as if the member had eight years or more of creditable service in the system at the time of retirement, and has attained earliest service retirement age but is not eligible for federal Medicare coverage; or

(B) A person who is a surviving spouse or dependent of a deceased eligible retired state employee as provided in subparagraph (A) of this paragraph at the time of death, who:

(i) Is receiving a retirement allowance or benefit under the system; or

(ii) Was covered at the time of the eligible retired state employee’s death by the retired employee’s health insurance contracted for under ORS 238.410, and the employee retired on or after September 29, 1991.

(c) “Qualifying service” means creditable service in the system and any periods of employment with an employer participating in the system required of the employee before becoming a member of the system.

(d) “System” means the Public Employees Retirement System.

(2) Of the monthly cost of coverage for an eligible retired state employee under a health care insurance contract entered into under ORS 238.410, an amount as determined under subsection (3) of this section shall be paid from the Retiree Health Insurance Premium Account established by subsection (4) of this section, and any monthly cost in excess of the amount so determined shall be paid by the eligible retired state employee in the manner provided in ORS 238.410 (4). Any amount paid under this subsection shall be exempt from all state, county and municipal taxes imposed on the eligible retired member.

(3) On or before January 1 of each year, the Public Employees Retirement Board shall calculate the average difference between the health insurance premiums paid by retired state employees under contracts entered into by the board under ORS 238.410 and the health insurance premiums paid by state employees who are not retired under contracts entered into by the Public Employees’ Benefit Board. For the purposes of subsection (2) of this section, an eligible retired state employee shall be entitled to receive toward the monthly cost of coverage under a health insurance contract entered into under ORS 238.410:

(a) For an eligible retired state employee with eight years or more of qualifying service in the system, but less than 10 years of qualifying service in the system, 50 percent of the amount calculated by the board under this subsection.

(b) For an eligible retired state employee with 10 years or more of qualifying service in the system, but less than 15 years of qualifying service in the system, 60 percent of the amount calculated by the board under this subsection.

(c) For an eligible retired state employee with 15 years or more of qualifying service in the system, but less than 20 years of qualifying service in the system, 70 percent of the amount calculated by the board under this subsection.

(d) For an eligible retired state employee with 20 years or more of qualifying service in the system, but less than 25 years of qualifying service in the system, 80 percent of the amount calculated by the board under this subsection.

(e) For an eligible retired state employee with 25 years or more of qualifying service in the system, but less than 30 years of qualifying service in the system, 90 percent of the amount calculated by the board under this subsection.

(f) For an eligible retired state employee with 30 years or more of qualifying service in the system, 100 percent of the amount calculated by the board under this subsection.

(4) Pursuant to section 401(h) of the Internal Revenue Code, the Retiree Health Insurance Premium Account is established within the Public Employees Retirement Fund, separate and distinct from the General Fund. Interest earned by the account shall be credited to the account. All moneys in the account are continuously appropriated to the Public Employees Retirement Board and may be used only to pay costs of health care insurance contract coverage under subsection (2) of this section, paying the administrative costs incurred by the board under this section and investment of moneys in the account under any law of this state specifically authorizing that investment.

(5) The Retiree Health Insurance Premium Account shall be funded by employer contributions. The state shall transmit to the board those amounts the board determines to be actuarially necessary to fund the liabilities of the account. The level of employer contributions shall be established by the board using the same actuarial assumptions it uses to determine employer contribution rates to the Public Employees Retirement Fund. The amounts shall be transmitted at the same time and in the same manner as contributions for pension benefits are transmitted under ORS 238.225.

(6) The Public Employees Retirement Board shall, by rule, establish a procedure for calculating the average difference between the health insurance premiums paid by retired state employees under contracts entered into by the board under ORS 238.410 and the health insurance premiums paid by state employees who are not retired under contracts entered into by the Public Employees’ Benefit Board.

(7) As provided in section 401(h)(5) of the Internal Revenue Code of 1986, upon satisfaction of all liabilities for providing benefits described in subsection (2) of this section, any amount remaining in the Retiree Health Insurance Premium Account shall be returned to the state.

(8) No member of the system shall have an interest in the Retiree Health Insurance Premium Account or in the benefits provided under this section.

SECTION 7. ORS 238.420 is amended to read:

238.420. (1) As used in this section, “eligible retired member” means:

(a) A retired member of the Public Employees Retirement System who is retired for service or disability, is receiving a retirement allowance or benefit under the system, had eight years or more of qualifying service in the system at the time of retirement or is receiving a disability retirement allowance including a pension computed as if the member had eight years or more of creditable service in the system at the time of retirement, and is eligible for federal Medicare coverage; or

(b) A person who is a surviving spouse or dependent of a deceased eligible retired member as provided in paragraph (a) of this subsection at the time of death, who is eligible for federal Medicare coverage and who:

(A) Is receiving a retirement allowance or benefit under the system; or

(B) Was covered at the time of the retired member’s death by the retired member’s health insurance contracted for under ORS 238.410, and the member retired before May 1, 1991.

(2) For purposes of subsection (1)(a) of this section, “qualifying service” means creditable service in the system and any periods of employment with an employer participating in the system required of the employee before becoming a member of the system.

(3) Of the monthly cost of coverage for an eligible retired member under a health care insurance contract that provides coverage supplemental to federal Medicare coverage entered into under ORS 238.410, an amount equal to $60 or the total monthly cost of that coverage, whichever is less, shall be paid from the Retirement Health Insurance Account established by subsection (4) of this section, and any monthly cost in excess of $60 shall be paid by the eligible retired member in the manner provided in ORS 238.410 (4). Any amount paid under this subsection shall be exempt from all state, county and municipal taxes imposed on the eligible retired member.

(4) Pursuant to section 401(h) of the Internal Revenue Code, the Retirement Health Insurance Account is established within the Public Employees Retirement Fund, separate and distinct from the General Fund. Interest earned by the account shall be credited to the account. All moneys in the account are continuously appropriated to the Public Employees Retirement Board and may be used only to pay costs of health care insurance contract coverage under subsection (3) of this section, paying the administrative costs incurred by the board under this section and investment of moneys in the account under any law of this state specifically authorizing that investment.

(5) The Retirement Health Insurance Account shall be funded by employer contributions. Each public employer that is a member of the system shall transmit to the board such amounts as the board determines to be actuarially necessary to fund the liabilities of the account. The level of employer contributions shall be established by the board using the same actuarial assumptions it uses to determine employer contribution rates to the Public Employees Retirement Fund. The amounts shall be transmitted at the same time and in the same manner as contributions for pension benefits are transmitted under ORS 238.225.

(6) As provided in section 401(h)(5) of the Internal Revenue Code of 1986, upon satisfaction of all liabilities for providing benefits described in subsection (1) of this section, any amount remaining in the Retirement Health Insurance Account shall be returned to the employers participating in the retirement system on an equitable basis as determined by the board.

(7) No member of the system shall have an interest in the Retirement Health Insurance Account.

SECTION 8. ORS 238.485 is amended to read:

238.485. (1) Pursuant to section 415(m) of the Internal Revenue Code, there is established a Public Employee Benefit Equalization Fund, separate and distinct from the General Fund and from the Public Employees Retirement Fund. The Public Employee Benefit Equalization Fund is declared to be a trust fund. Interest earned on the fund, if any, shall inure to the benefit of the fund. The Public Employees Retirement Board shall administer the fund and shall act as trustee for the fund.

(2) The assets of the Public Employee Benefit Equalization Fund that are attributable to the contributions of a participating public employer pursuant to ORS 238.488 remain available to the general creditors of the employer in the event of the employer’s insolvency until those assets are distributed to members of the Public Employees Retirement System, distributed to the beneficiaries of those members or used to pay the administrative expenses of the fund. Before distribution, members of the Public Employees Retirement System and beneficiaries of those members have no right to or interest in any asset of the fund.

(3) All moneys paid into the fund shall be deposited with the State Treasurer, who is custodian of the fund. The board may draw warrants and issue checks on the fund in the same manner that it draws warrants and issues checks on the Public Employees Retirement Fund.

(4) Any warrant, check or order issued by the board for payment from the fund that is canceled, declared void, abandoned or otherwise made unpayable pursuant to law because it is outstanding and unpaid for a period of more than two years, may be reissued by the board without bond if the payee is located after such warrant, check or order is canceled, declared void, abandoned or otherwise made unpayable pursuant to law.

SECTION 9. ORS 238A.025 is amended to read:

238A.025. (1) The Oregon Public Service Retirement Plan is established. The purpose of the Oregon Public Service Retirement Plan is to provide career public employees with a secure and fair retirement income at an affordable, stable and predictable cost to the taxpayers. The Oregon Public Service Retirement Plan [shall be] is composed of a pension program[, established and maintained with the Public Employees Retirement System as a tax-qualified governmental defined benefit plan,] and an individual account program[, established and maintained as a tax-qualified governmental defined contribution plan]. The pension program and the individual account program are separate [plans] accounts for purposes of federal income tax qualification, and the assets of each program must be held [in a separate] as part of the trust established by ORS 238.660 for the exclusive benefit of the participants and beneficiaries [in each program]. It is the intent of the Legislative Assembly that pursuant to section 414(k) of the Internal Revenue Code the individual account program be established and maintained as a tax-qualified defined contribution governmental plan for the purposes of sections 72(d) and 415 of the Internal Revenue Code. The Public Employees Retirement Board may create separate accounts within the Public Employees Retirement Fund for the [assets of the pension program and of the individual account program.] pension program and the individual account program.

(2) Notwithstanding any provision of ORS chapter 238, any person who is employed by a participating public employer on or after August 29, 2003, and who has not established membership in the Public Employees Retirement System before August 29, 2003, is entitled to receive only the benefits provided under the Oregon Public Service Retirement Plan for periods of service with participating public employers on and after August 29, 2003, and has no right or claim to any benefit under ORS chapter 238 except as specifically provided by this chapter.

(3)(a) Any person who is an active member of the Public Employees Retirement System on August 28, 2003, is entitled to receive the benefits provided by ORS chapter 238 for all service performed before, on and after August 29, 2003, unless the person has a break in service on or after August 29, 2003. If the person has a break in service on or after August 29, 2003, the person is entitled to receive the benefits provided by ORS chapter 238 for all creditable service performed before the break in service, and the benefits provided under the Oregon Public Service Retirement Plan for periods of service with participating public employers after the break in service.

(b) Except as provided in paragraphs (c), (d) and (e) of this subsection, a person has a break in service for the purposes of this subsection if the person performs no service with a participating public employer in a qualifying position for a period of six consecutive months.

(c) If a person leaves employment with a participating public employer for purposes that would qualify the person for family leave under ORS 659A.150 to 659A.186, the person has a break in service for the purposes of this subsection only if the person performs no service with a participating public employer in a qualifying position for a period of 12 consecutive months after leaving employment with the participating public employer.

(d) If a person leaves employment with a participating public employer for career development purposes pursuant to written authorization of the participating public employer under a written policy of the employer that applies generally to the class of employees to which the member belongs, the person has a break in service for the purposes of this subsection only if the person performs no service with a participating public employer in a qualifying position for a period of 12 consecutive months after leaving employment with the participating public employer.

(e) A person does not have a break in service for the purposes of this subsection by reason of any period of time during which the person leaves employment with a participating public employer for the purpose of serving as a member of the Legislative Assembly during a legislative session.

(4) A person establishes membership in the system before August 29, 2003, for the purposes of this section if:

(a) The person is a member of the system, or a judge member of the system, on August 28, 2003; or

(b) The person performed any period of service for a participating public employer before August 29, 2003, that is credited to the six-month period of employment required of an employee under ORS 238.015 before an employee may become a member of the system.

(5) Except as provided in this chapter, ORS chapter 238 does not apply to the Oregon Public Service Retirement Plan.

(6) The provisions of this section do not apply to a person elected or appointed as a judge as defined in ORS 238.500.

SECTION 10. ORS 238.225 is amended to read:

238.225. [(1)] A participating public employer shall, at intervals designated by the Public Employees Retirement Board, transmit to the board those amounts the board determines to be actuarially necessary to adequately fund the benefits to be provided by the contributions of the employer under this chapter and the benefits to be provided under the pension program established by ORS 238A.100 to 238A.245, except for the disability benefit for which funding is provided under ORS 238A.240. From time to time, the board shall determine the liabilities of the system and shall set the amount of contributions to be made by participating public employers, and by other public employers who are required to make contributions on behalf of members, to ensure that those liabilities will be funded no more than 40 years after the date on which the determination is made.

[(2) For the purpose of the actuarial computation required under subsection (1) of this section:]

[(a) The school districts of the state shall be grouped together and regarded as a single employer; and]

[(b) All community college districts and the state shall be grouped together and regarded as a single employer.]

[(3) For the purpose of the actuarial computation required under subsection (1) of this section, any participating public employer may elect to be grouped with the state and all community college districts and treated as a single employer for actuarial purposes only. An election under this subsection may be made only by participating public employers other than school districts and community college districts. Any public employer that makes an election under this subsection may not revoke the election.]

[(4) The computation of the contributions of a participating public employer that makes an election under the provisions of subsection (3) of this section shall be based only on the liabilities of the employer that are incurred after the effective date of the employer’s election. The board shall separately compute the contribution of the employer for the liabilities incurred by the employer before the effective date of the employer’s election.]

[(5) A participating public employer may make an election under subsection (3) of this section only by the adoption of a resolution or ordinance by the governing body of the public employer.]

[(6) Except as provided in subsection (2) of this section, the board may not require that any participating public employer be grouped with any other participating public employer for the purpose of the actuarial computation required under subsection (1) of this section. If two participating public employers merge or otherwise consolidate, and one of the public employers has made an election under subsection (3) of this section:]

[(a) The board may not require that the public employer that is the product of the consolidation be grouped with the state and all community college districts unless the public employer makes an election under subsection (3) of this section; and]

[(b) The board may require that the public employer that is the product of the consolidation make contributions based on the group rate only for those members for whom contributions based on the group rate were made before the consolidation.]

[(7) Except as provided in this section, the board may not group participating public employers for the purpose of the actuarial computation required by subsection (1) of this section.]

[(8) If a public employer is grouped with any other public employer for the purpose of the actuarial computation required under subsection (1) of this section and the individual public employer makes a lump sum payment that is in addition to the normal contribution of the public employer, the board shall adjust the amount of contributions to be made by the individual public employer to ensure that the benefit of the lump sum payment accrues only to the individual public employer making the payment. An individual public employer that makes a lump sum payment under the provisions of this subsection shall remain grouped with other public employers as provided in this section for the purpose of all liabilities of the employer that are not paid under this subsection. The board by rule may establish a minimum lump sum payment that must be made by an individual public employer before adjusting contributions under this subsection. Notwithstanding any minimum lump sum payment established by the board, the board must allow an individual public employer to make a lump sum payment under the provisions of this subsection if the payment is equal to the full amount of the individual public employer’s accrued unfunded liabilities.]

[(9) The board shall establish a separate account within the fund for each lump sum payment made under subsection (8) of this section or made by any other participating public employer that is not grouped with other public employers under this section. The board shall credit to each account all interest and other income received from investment of the account funds during the calendar year. Except as provided in subsection (10) of this section, the board may not collect any administrative expense or other charge from the account or from earnings on the account. The account shall be used to offset contributions that the public employer would otherwise be required to make for the liabilities against which the lump sum payment is applied.]

[(10) The board may charge a participating public employer expenses for administration of an account established under subsection (9) of this section in an amount not to exceed $2,500 during the year in which the account is established and the immediately following two calendar years, and in an amount not to exceed $1,000 in all subsequent years.]

[(11) If a participating public employer has any liabilities that are attributable to creditable service by employees of the employer before the participating public employer was grouped with other public employers, whether under the provisions of this section or pursuant to board rule, any lump sum payment made under subsection (8) of this section must be applied first against those liabilities, with the oldest such liability being paid first. Any amounts remaining after application under this subsection must be deposited in a separate account established under subsection (9) of this section.]

[(12) If a participating public employer transfers employees who are members of the Public Employees Retirement System to another public employer, the two public employers must enter into a written agreement that addresses the manner in which any unfunded liability or surplus of the transferring public employer will be paid or credited. If two or more public employers merge or consolidate, and any of the public employers participate in the system, the public employers that merged or consolidated must enter into a written agreement that addresses the manner in which any unfunded liability or surplus of the merged or consolidated public employers will be paid or credited. If a participating public employer splits into two or more public employers, the public employers that result from the split must enter into a written agreement that addresses the manner in which any unfunded liability or surplus of the original participating public employer will be paid or credited. A written agreement entered into under this subsection must be delivered to the board not later than 60 days after the transfer, merger, consolidation or split becomes effective. If public employers affected by a transfer, merger, consolidation or split, including public employers created by a merger, consolidation or split, fail to deliver a written agreement that addresses the unfunded liabilities or surpluses to the board, or fail to deliver a written agreement that addresses the unfunded liabilities or surpluses in a manner satisfactory to the board, the board shall decide the manner in which unfunded liabilities or surpluses will be allocated among the public employers.]

SECTION 11. Sections 12, 13 and 14 of this 2005 Act are added to and made a part of ORS chapter 238.

SECTION 12. (1) For the purpose of computing the employer contributions required under ORS 238.225 for benefits to be provided under this chapter:

(a) The Public Employees Retirement Board shall group together the school districts of the state and treat the school districts of the state as a single employer for actuarial purposes; and

(b) The board shall group together all community college districts and the state and treat the community college districts and the state as a single employer for actuarial purposes.

(2) For the purpose of computing the employer contributions required under ORS 238.225 for benefits to be provided under this chapter, any participating public employer other than school districts may elect to be grouped with the state and all community college districts and treated as a single employer for actuarial purposes. An election under this subsection is irrevocable.

(3) The computation of the contributions of a participating public employer that makes an election under subsection (2) of this section shall be based only on the liabilities of the employer under this chapter that are incurred after the effective date of the employer’s election. The board shall separately compute the contribution of the employer for the liabilities incurred by the employer under this chapter before the effective date of the employer’s election.

(4) A participating public employer may make an election under subsection (2) of this section only by the adoption of a resolution or ordinance by the governing body of the public employer.

(5) Except as provided in this section, the board may not require that any participating public employer be grouped with any other participating public employer for the purpose of computing the employer contributions required under ORS 238.225 for benefits to be provided under this chapter. If two participating public employers merge or otherwise consolidate, and one of the public employers has made an election under subsection (2) of this section:

(a) The board may not require that the public employer that is the product of the consolidation be grouped with the state and all community college districts unless the public employer makes an election under subsection (2) of this section; and

(b) The board may require that the participating public employer that is the product of the consolidation make contributions based on the group rate only for those members for whom contributions based on the group rate were made before the consolidation.

SECTION 13. (1) If a participating public employer is grouped with any other public employer for the purpose of computing employer contributions under ORS 238.225 and the individual public employer makes a lump sum payment that is in addition to the normal contribution of the public employer, the Public Employees Retirement Board shall adjust the amount of contributions to be made by the individual public employer to ensure that the benefit of the lump sum payment accrues only to the individual public employer making the payment. An individual public employer that makes a lump sum payment under the provisions of this subsection shall remain grouped with other public employers as provided by section 12 of this 2005 Act and ORS 238A.220 for the purpose of all liabilities of the employer that are not paid under this subsection. The board by rule may establish a minimum lump sum payment that must be made by an individual public employer before adjusting contributions under this subsection. Notwithstanding any minimum lump sum payment established by the board, the board must allow an individual public employer to make a lump sum payment under this subsection if the payment is equal to the full amount of the individual public employer’s accrued unfunded liabilities under this section and ORS chapter 238A.

(2) The board shall establish a separate account within the Public Employees Retirement Fund for each lump sum payment made under this section by an individual public employer. The board shall credit to each account all interest and other income received from investment of the account funds during the calendar year. Except as provided in subsection (3) of this section, the board may not collect any administrative expense or other charge from the account or from earnings on the account. The account shall be used to offset contributions that the public employer would otherwise be required to make for the liabilities against which the lump sum payment is applied.

(3) The board may charge a participating public employer expenses for administration of an account established under subsection (2) of this section in an amount not to exceed $2,500 for the calendar year in which the account is established and for the immediately following two calendar years, and in an amount not to exceed $1,000 per year for all subsequent years.

(4) If a participating public employer has any liabilities that are attributable to creditable service by employees of the employer before the participating public employer was grouped with other public employers under section 12 of this 2005 Act, whether under this section or pursuant to board rule, any lump sum payment made under this section must be applied first against those liabilities, with the oldest liability being paid first. Any amounts remaining after application under this subsection must be deposited in a separate account established under subsection (2) of this section.

SECTION 14. (1) If a participating public employer transfers employees who are members of the Public Employees Retirement System to another public employer, the two public employers must enter into a written agreement that addresses the manner in which any unfunded liability or surplus of the transferring public employer under the system will be paid or credited.

(2) If two or more public employers merge or consolidate, and any of the public employers participate in the system, the public employers that merged or consolidated must enter into a written agreement that addresses the manner in which any unfunded liability or surplus of the merged or consolidated public employers under the system will be paid or credited.

(3) If a participating public employer splits into two or more public employers, the public employers that result from the split must enter into a written agreement that addresses the manner in which any unfunded liability or surplus of the original participating public employer under the system will be paid or credited.

(4) A written agreement entered into under this section must be delivered to the Public Employees Retirement Board not later than 60 days after the transfer, merger, consolidation or split becomes effective. If public employers affected by a transfer, merger, consolidation or split, including public employers created by a merger, consolidation or split, fail to deliver to the board a written agreement that addresses the unfunded liabilities or surpluses, or fail to deliver to the board a written agreement that addresses the unfunded liabilities or surpluses in a manner satisfactory to the board, the board shall decide the manner in which unfunded liabilities or surpluses will be allocated among the public employers.

SECTION 15. ORS 238A.050 is amended to read:

238A.050. (1) The Oregon Public Service Retirement Plan is part of the Public Employees Retirement System and is administered by the Public Employees Retirement Board.

(2) ORS 238.225, 238.445, 238.450, 238.455, 238.458, 238.460, 238.465, 238.470, 238.600, 238.601, 238.605, 238.610, 238.615, 238.618, 238.630, 238.635, 238.640, 238.645, 238.655, 238.660, 238.661, 238.665, 238.675, 238.692, 238.694, 238.695, 238.696, 238.698, 238.700, 238.705, 238.710 and 238.715 and sections 13 and 14 of this 2005 Act apply to the Oregon Public Service Retirement Plan.

(3) The Oregon Investment Council shall invest the assets of the Oregon Public Service Retirement Plan as a part of the Public Employees Retirement Fund. Except as provided by subsection (4) of this section, the investment of Oregon Public Service Retirement Plan assets is subject to the provisions of ORS 293.701 to 293.820. The Oregon Investment Council may invest assets of the individual account program and pension program differently than the other assets of the Public Employees Retirement System.

(4) Investment of the assets of the Oregon Public Service Retirement Plan is not subject to the limitations imposed by ORS 293.726 (6).

(5) The board may contract with a private provider for the administration of the individual account program. The board is not subject to the provisions of ORS 279.005 to 279.111 in awarding a contract under the provisions of this subsection. The board shall establish procedures for inviting proposals and awarding contracts under this subsection.

SECTION 16. ORS 238A.050, as amended by section 3a, chapter 733, Oregon Laws 2003, is amended to read:

238A.050. (1) The Oregon Public Service Retirement Plan is part of the Public Employees Retirement System and is administered by the Public Employees Retirement Board.

(4) Investment of the assets of the Oregon Public Service Retirement Plan is not subject to the limitations imposed by ORS 293.726 (6).

(5) The board may contract with a private provider for the administration of the individual account program. The board is not subject to the provisions of ORS chapter 279A or 279B in awarding a contract under the provisions of this subsection. The board shall establish procedures for inviting proposals and awarding contracts under this subsection.

SECTION 17. ORS 238A.220 is amended to read:

238A.220. (1) A participating public employer shall [contribute to the pension program] make employer contributions to the Public Employees Retirement Board at intervals designated by the [Public Employees Retirement] board [all] in the amounts determined by the board under ORS 238.225. [to be actuarially necessary to adequately fund the pension program benefits to be provided under ORS 238A.100 to 238A.245, other than the disability benefit provided under ORS 238A.235, and the reasonable costs of administering the pension program and the trust in which assets of the program are held. From time to time, the board shall determine the liabilities attributable to the pension program, other than the disability benefit provided by ORS 238A.235, and shall set the amount of contributions to be made by participating public employers, and by other public employers who are required to make contributions on behalf of members, to ensure that those liabilities will be funded no more than 40 years after the date on which the determination is made.] All participating public employers shall be considered to be a single employer for the purposes of the employer contributions under ORS 238.225 that are required [under this section] for funding the pension program established under ORS 238A.025.

(2) For the purpose of the actuarial computation required under [subsection (1) of this section] ORS 238.225, the board shall separately establish the liability of participating public employers for police officers and firefighters[,] under the pension program and shall require that public employers that employ police officers and firefighters who are members of the pension program make contributions for those employees based on the liability established under this [section] subsection.

SECTION 18. The amendments to ORS 238.225 and 238A.220 by sections 10 and 17 of this 2005 Act apply to all employer contributions made to the Public Employees Retirement Board, whether made before, on or after the effective date of this 2005 Act.

SECTION 19. ORS 238A.450 is amended to read:

238A.450. (1) The Public Employees Retirement Board shall adopt rules for the administration of this chapter.

(2) All rules adopted by the board under this section become part of the written plan document for the Public Employees Retirement System [purpose of] that is required to maintain the status of the pension program and the individual account program as [qualified] parts of a tax-qualified governmental retirement [plans and trusts] plan under the Internal Revenue Code and under regulations adopted pursuant to the Internal Revenue Code.

SECTION 20. Section 44e, chapter 733, Oregon Laws 2003, is amended to read:

Sec. 44e. [(1) Subject to the provisions of this section,] Until June 30, 2005, the Public Employees Retirement System may use [assets] moneys of the Public Employees Retirement Fund that are unrelated to the Oregon Public Service Retirement Plan to pay the administrative costs of [the pension program and] the individual account program. The authority created by this [subsection] section is in addition to and not in lieu of the authority of the system to use [assets of the pension program and] moneys attributable to the individual account program to pay administrative expenses of [those programs] that program. Not later than February 1, 2010, all moneys used under this section to pay the costs of administering the individual account program must be repaid to the fund from individual accounts by means of adjustments to those accounts under ORS 238A.350 (1).

[(2) Not later than January 1, 2010, the Public Employees Retirement Board shall transfer from accounts of the Oregon Public Service Retirement Plan the amount used under subsection (1) of this section, with interest, to accounts in the fund established to provide retirement benefits under ORS chapter 238. The rate of interest must be at least equal to the rate that the moneys would have earned had the moneys remained invested in the fund established to provide retirement benefits under ORS chapter 238, and in no event less than two percent per annum.]

[(3) Until such time as all moneys and interest are repaid under subsection (2) of this section, beneficiaries of the fund established to provide retirement benefits under ORS chapter 238 have a security interest in the assets of the Oregon Public Service Retirement Plan equal to the amount used under subsection (1) of this section and the interest required under subsection (2) of this section. The security interest may be foreclosed in an action at law.]

[(4) If the board fails to transfer any amount required under subsection (2) of this section before January 1, 2010, a person entitled to benefits under ORS chapter 238 may bring a mandamus action to compel the board to make the transfer and to perform all acts within the authority of the board to collect employer or employee contributions to the Oregon Public Service Retirement Plan necessary to fund the transfer.]

[(5) In determining the amount of employer contributions necessary under the provisions of section 24 of this 2003 Act, the board shall include any amounts required to be transferred under subsection (2) of this section that are attributable to paying the costs of administering the pension program.]

[(6) The board shall deduct from the individual accounts established under section 37 of this 2003 Act the amounts to be transferred under subsection (2) of this section that are attributable to paying the costs of administering the individual account program. The deduction must be a uniform percentage of the individual accounts.]

SECTION 21. Section 46, chapter 733, Oregon Laws 2003, is amended to read:

Sec. 46. As soon as practicable after [the effective date of this 2003 Act] August 29, 2003, the Public Employees Retirement Board shall submit the provisions of [sections 1 to 45 of this 2003 Act] ORS chapter 238A to the Internal Revenue Service and seek approval of the pension program and individual account program as parts of a tax-qualified governmental retirement [plans and trusts] plan under the Internal Revenue Code.

SECTION 22. ORS 198.608 is amended to read:

198.608. If a district splits into two or more districts, or two or more districts consolidate or merge, the districts affected by the split, consolidation or merger, including districts created by the split, consolidation or merger, must enter into a written agreement that addresses any unfunded Public Employees Retirement System liabilities or surpluses and deliver a copy of the agreement to the Public Employees Retirement Board as required by [ORS 238.225 (12)] section 14 of this 2005 Act.

SECTION 23. ORS 222.045 is amended to read:

222.045. If a city splits into two or more cities, or two or more cities consolidate or merge, the cities affected by the split, consolidation or merger, including cities created by the split, consolidation or merger, must enter into a written agreement that addresses any unfunded Public Employees Retirement System liabilities or surpluses and deliver a copy of the agreement to the Public Employees Retirement Board as required by [ORS 238.225 (12)] section 14 of this 2005 Act.

SECTION 24. ORS 236.610 is amended to read:

236.610. (1) No public employee shall be deprived of employment solely because the duties of employment have been assumed or acquired by another public employer, whether or not an agreement, annexation or consolidation with the present employer is involved. Notwithstanding any statute, charter, ordinance or resolution, but subject to ORS 236.605 to 236.640, the public employee shall be transferred to the employment of the public employer that assumed or acquired the duties of the public employee, without further civil service examination.

(2) The transferred public employee shall not have the employee’s salary reduced as a result of a transfer under this section during the first 12 months of employment with the receiving employer. After the first 12 months of employment with the receiving employer, the transferred public employee shall be placed at the closest salary for the position as designated under the receiving employer’s salary schedule.

(3) It is the responsibility of the transferring employer to liquidate accrued compensatory time at the time of transfer, consistent with any applicable statute or collective bargaining agreement.

(4)(a) At the time of transfer, the transferred public employee may elect to:

(A) Retain any accrued sick leave;

(B) Retain up to 80 hours of vacation leave; and

(C) Retain additional vacation leave if agreed to by the transferring employer, the receiving employer and the transferred public employee.

(b) At the time of transfer, the transferring employer shall pay to the receiving employer a sum equal to the number of hours of accrued leave retained times the employee’s hourly rate of pay.

(c) After the transfer, the receiving employer shall grant any leaves according to its rules or any bargaining agreement governing use of leaves.

(5) In the event that any transferred employee is subject to a waiting period for coverage of preexisting conditions under the health insurance plan of the receiving employer, the receiving employer shall arrange for a waiver of such waiting period with its health insurer. The transferring employer shall reimburse the receiving employer for the additional premium costs, if any, resulting from such waiver, for a period of not to exceed 12 months.

(6) In transferring a public employee under subsection (1) of this section, the employer shall furnish the employment records of that employee to the receiving employer at the time of transfer. The time of transfer shall be by written agreement between the public employers involved.

(7) If the public employer that is transferring a public employee participates in the Public Employees Retirement System, the transferring employer and the receiving employer must enter into a written agreement that addresses the manner in which any unfunded Public Employees Retirement System liability or surplus of the transferring public employer will be paid or credited, as required by [ORS 238.225 (12)] section 14 of this 2005 Act.

SECTION 25. ORS 238.515 is amended to read:

238.515. (1)(a) Each judge member shall contribute monthly to the Public Employees Retirement Fund seven percent of the monthly salary of the judge member. The contributions of a judge member and earnings on the contributions shall be credited to the member account of the judge member.

(b) The state shall [“pick-up,”] pick-up, assume or pay the full amount of contributions to the fund required of judge members. The full amount of required judge member contributions [“picked-up,”] picked-up, assumed or paid by the state on behalf of judge members shall be considered [“salary”] salary only for the purpose of computing a judge member’s [“final average salary”] final average salary within the meaning of ORS 238.535 (2) and not for any other purpose. The full amount of required judge member contributions [“picked-up,”] picked-up, assumed or paid by the state on behalf of judge members shall be added to the member account of the judge members and shall be considered judge member contributions for all other purposes of ORS 238.500 to 238.585.

(2) The state shall make employer contributions to the fund in respect to judge members as provided in ORS 238.225. Notwithstanding section 12 of this 2005 Act, for the purposes of actuarial computation and contributions of the state [based thereon] under ORS 238.225, judge members shall be considered a separate group of employees.

CREDIT FOR SERVICE IN ARMED FORCES

SECTION 26. ORS 238.157 is amended to read:

238.157. (1) Any person who entered or reentered active service in the Armed Forces of the United States after January 1, 1950, for other than active duty for training, or who was in active service in the Armed Forces of the United States on January 1, 1950, for other than active duty for training, and who, after being other than dishonorably discharged therefrom, entered the employ of an employer participating in the Public Employees Retirement System, may acquire retirement credit for up to four years of active service in the Armed Forces by paying in a lump sum to the Public Employees Retirement Board within 90 days of the member’s effective date of retirement an amount determined by the board to represent the full cost to the system of providing the retirement credit to the member, including all administrative costs incurred by the system in processing the application for acquisition of the retirement credit.

(2) No person shall receive retirement credit under this section for any period of service with the Armed Forces of the United States for which that person receives credit under the provisions of ORS 238.156 or for which the person is receiving or entitled to receive a pension or retirement pay under a public retirement system established by the United States for the performance of service in the Armed Forces.

(3) Any person acquiring retirement credit under this section may elect to have the service retirement allowance of the person determined under any calculation for which the person is eligible under ORS 238.300, even if the calculation does not produce the largest service retirement allowance. An election under this subsection must be made within 90 days of the member’s effective date of retirement.

SECTION 27. The amendments to ORS 238.157 by section 26 of this 2005 Act apply only to members of the Public Employees Retirement System who have an effective date of retirement that is on or after the effective date of this 2005 Act.

DESIGNATION OF BENEFICIARY

SECTION 28. ORS 238.390 is amended to read:

238.390. (1) If a member of the system dies before retiring, the amount of money, if any, credited at the time of death to the member account of the member in the fund shall be paid to the beneficiaries designated by the member. For this purpose a member may designate as a beneficiary any person or the executor or administrator of the estate of the member or a trustee named by the member to execute an express trust in regard to such amount. [The withdrawal from the fund of the amount in the member account of a member pursuant to ORS 238.265 shall not invalidate a prior designation of beneficiary in the event a member returns to covered employment, regardless of whether the sum is repaid to the fund pursuant to ORS 238.105.] The termination of a person’s membership in the system pursuant to ORS 238.095 (1) or (2) invalidates any designation of beneficiary made by the person before the termination of membership.

(2) If a member dies before retiring and has not designated a beneficiary under subsection (1) of this section, the Public Employees Retirement Board shall pay the amount of money, if any, credited at the time of death to the member account of the deceased member to a personal representative appointed for the estate of the deceased member. If an affidavit has been filed under ORS 114.505 to 114.560, and the amount of money credited to the account does not exceed the maximum amount of personal property for which an affidavit may be filed under ORS 114.505 to 114.560, the board shall pay the amount to the person who filed the affidavit.

(3) The beneficiary designated under subsection (1) of this section may elect to receive the amount payable in actuarially determined monthly payments for the life of such beneficiary as long as such monthly payments are at least $200.

(4) Accrued benefits due a retired member at the time of death are payable to the designated beneficiary or as provided in subsection (2) of this section. For the purpose of determining accrued benefits due a retired member at the time of death, accrued benefits are considered to have ceased as of the last day of the month preceding the month in which the retired member dies; but if Option 2 or Option 3 under ORS 238.305 has been elected as provided in this chapter and the beneficiary survives the retired member, the benefits to the beneficiary shall commence as of the first day of the month in which the retired member dies, and payment of benefits under Option 2 or Option 3 shall cease with the payment for the month preceding the month in which the beneficiary dies.

(5) If a member dies before retiring and has designated a beneficiary under subsection (1) of this section, but the beneficiary dies before the member, or dies before distribution is made under this section, the Public Employees Retirement Board shall pay the amount of money, if any, that would otherwise have been paid to the beneficiary to a personal representative appointed for the estate of the deceased beneficiary. If an affidavit has been filed under ORS 114.505 to 114.560, and the amount of money that would have been paid to the beneficiary does not exceed the maximum amount of personal property for which an affidavit may be filed under ORS 114.505 to 114.560, the board shall pay the amount to the person who filed the affidavit on behalf of the estate of the beneficiary.

(6) Interest upon the member account of the member shall accrue until the date that the amount in the member account is distributed. Any balance in the variable account of the deceased member is considered to be transferred to the regular account of the member as of the date of death. The board shall establish procedures for computing and crediting interest on the balance in the member account for the period between the date of death and date of distribution.

(7) Payment by the board of amounts in the manner provided by this section completely discharges the board and system on account of the death, and shall hold the board and system harmless from any claim for wrongful payment.

SECTION 29. (1) Except as provided in subsection (2) of this section, the amendments to ORS 238.390 by section 28 of this 2005 Act apply to all members of the Public Employees Retirement System whose membership in the system is terminated, whether the termination occurs before, on or after the effective date of this 2005 Act.

(2) The amendments to ORS 238.390 by section 28 of this 2005 Act do not apply to any member of the system who died before the effective date of this 2005 Act.

TERMINATION OF MEMBERSHIP

SECTION 30. ORS 238.095 is amended to read:

238.095. (1) An employee shall cease to be a member of the Public Employees Retirement System if the employee withdraws the member account, if any, of the member in the manner provided by ORS 238.265.

(2) Except as provided in subsection (3) of this section, an employee shall cease to be a member of the system if the employees not vested and is absent from the service of all employers participating in the system for a total of more than five consecutive years after the employee becomes a member of the system.

(3) A school district employee shall not cease to be a member of the system under subsection (2) of this section if:

(a) After completing a school year, the member is absent from the service of all employers participating in the system for the next following five school years; and

(b) The member either returns to school employment at the beginning of the sixth school year, or reaches earliest service retirement age before the beginning of the sixth school year.

(4) Interest shall not accrue on the amount in the member account of the former member from the date that membership is terminated under subsection (2) of this section. Upon request by the former member, the Public Employees Retirement Board shall pay the amount in a member account to a former member upon the termination of the membership of the former member under subsection (2) of this section if the former member is separated from all service with employers who are treated as part of a participating public employer’s controlled group under the federal laws and rules governing the status of the system and the Public Employees Retirement Fund as a qualified governmental retirement plan and trust. The board may deduct, from the amount paid to a former member under this subsection, all reasonable costs incurred by the system in locating the member.

SECTION 31. If Senate Bill 108 becomes law, section 30 of this 2005 Act (amending ORS 238.095) is repealed.

ALTERNATE PAYEES

SECTION 32. ORS 238.465 is amended to read:

238.465. (1) Notwithstanding ORS 238.445 or any other provision of law, payments under this chapter or ORS chapter 238A of any pension, annuity, retirement allowance, disability benefit, death benefit, refund benefit or other benefit that would otherwise be made to a person entitled thereto under this chapter or ORS chapter 238A shall be paid, in whole or in part, by the Public Employees Retirement Board to an alternate payee if and to the extent expressly provided for in the terms of any judgment of annulment or dissolution of marriage or of separation, or the terms of any court order or court-approved property settlement agreement incident to any judgment of annulment or dissolution of marriage or of separation. Notwithstanding any other provisions of this section, the total value of benefits payable to a member and to an alternate payee under this section may not be greater than the value of the benefits the member would otherwise be eligible to receive. Any payment under this subsection to an alternate payee bars recovery by any other person.

(2) A judgment, order or settlement providing for payment to an alternate payee under subsection (1) of this section may also provide:

(a) That payments to the alternate payee may commence, at the election of the alternate payee, at any time after the earlier of:

(A) The earliest date the member would be eligible to receive retirement benefits if the member separates from service; or

(B) The date the member actually separates from service due to death, disability, retirement or termination of employment.

(b) That the alternate payee may elect to receive payment in any form of pension, annuity, retirement allowance, disability benefit, death benefit, refund benefit or other benefit, except a benefit in the form of a joint and survivor annuity, that would be available to the member under this chapter or ORS chapter 238A, or that would be available to the member if the member retired or separated from service at the time of election by the alternate payee, without regard to the form of benefit elected by the member.

(c) That the alternate payee’s life is the measuring life for the purpose of measuring payments to the alternate payee under the form of benefit selected by the alternate payee and for the purpose of determining necessary employer reserves.

(d) Except as provided in ORS 238.305 (10) and 238.325 (7), that any person designated by the member as a beneficiary under ORS 238.300, 238.305, 238.325, 238A.190 or 238A.400 be changed, even though the member has retired and has begun receiving a retirement allowance or pension. If a change of beneficiary is ordered under this paragraph, the board shall adjust the anticipated benefits that would be payable to the member and the beneficiary to ensure that the cost to the system of providing benefits to the member and the new beneficiary does not exceed the cost that the system would have incurred to provide benefits to the member and the original beneficiary. The judgment, order or settlement may not provide for any change to the option selected by the retired member under ORS 238.300, 238.305, 238.320, 238.325, 238A.190 or 238A.400 as to the form of the retirement benefit.

(3) The board shall adopt rules that provide for:

(a) The creation of a separate account in the name of the alternate payee reflecting the judgment’s, order’s or agreement’s distribution of the member’s benefits under this chapter or ORS chapter 238A;

(b) The establishing of criteria to determine whether domestic relations judgments, orders and agreements comply with this section; and

(4) An alternate payee may designate a beneficiary for the purposes of death benefits payable under ORS 238.390 and 238.395. Subject to ORS 238A.410 (2), an alternate payee may designate a beneficiary for the purposes of death benefits payable under ORS 238A.410. If the alternate payee fails to designate a beneficiary for the purposes of death benefits payable under ORS 238.390 and 238.395, the benefits shall be paid as provided by ORS 238.390 (2). If the alternate payee fails to designate a beneficiary for the purposes of death benefits payable under ORS 238A.410, the benefits shall be paid as provided by ORS 238A.410 (3). If a judgment, order or agreement awards an interest to an alternate payee, and if the alternate payee predeceases the member before the alternate payee has commenced receiving benefits, the alternate payee shall be considered a member of the system who died before retiring for the purposes of the death benefits provided in ORS 238.390, 238.395, 238A.230 and 238A.410, but for purposes of the death benefits provided in ORS 238.395, the alternate payee shall be considered a member of the system who died before retiring only if the member would have been eligible for death benefits under ORS 238.395 had the member died at the same time as the alternate payee. Payment of the death benefits to the beneficiaries, estate or other persons entitled to receive the benefits under ORS 238.390, 238.395, 238A.230 and 238A.410, shall constitute payment in full of the alternate payee’s interest under the judgment, order or agreement.

(5) Any increase in the retirement allowance provided to the member shall increase the amounts paid to the spouse or former spouse of the member in the same proportion, except that an alternate payee is not entitled to receive cost-of-living adjustments under ORS 238.360 or any other retirement allowance increase until benefits are first paid from the system on behalf of the member.

(6) An alternate payee under this section is not eligible to receive the benefits provided under ORS 238.410, 238.415, 238.420 and 238.440 by reason of the provisions of this section.

(7) An alternate payee who elects to begin receiving payments under subsection (1) of this section before the member’s effective date of retirement is not eligible to receive any additional payment by reason of credit in the system acquired by the member after the alternate payee begins to receive payments.

(8) Subsection (1) of this section applies only to payments made by the board after the date of receipt by the board of written notice of the judgment, order or agreement and such additional information and documentation as the board may prescribe.

(9) Whenever the board is required to make payment to an alternate payee under the provisions of this section, the board shall charge and collect out of the benefits payable to the member and the alternate payee actual and reasonable administrative expenses and related costs incurred by the board in obtaining data and making calculations that are necessary by reason of the provisions of this section. The board may not charge more than $300 for total administrative expenses and related costs incurred in obtaining data or making calculations that are necessary by reason of the provisions of this section. The board shall allocate expenses and costs charged under the provisions of this subsection between the member and the alternate payee based on the fraction of the benefit received by the member or alternate payee.

(10) Unless otherwise provided by the judgment, order or agreement, a member has no interest in the benefit payable to an alternate payee under this section. Upon the death of an alternate payee, the board shall make such payment to the beneficiary designated by the alternate payee as may be required under the form of benefit elected by the alternate payee. If a death benefit is payable under ORS 238.390 or 238.395 by reason of the death of an alternate payee, payment of the death benefit shall be made to the beneficiary designated by the alternate payee under ORS 238.390 (1), or as otherwise provided by ORS 238.390 and 238.395.

[(10)] (11) As used in this section, “court” means any court of appropriate jurisdiction of this or any other state or of the District of Columbia.

DEFINITION OF “FINAL AVERAGE SALARY”

SECTION 33. ORS 238.435 is amended to read:

238.435. (1) Notwithstanding the definition of “salary” or “other advantages” provided by ORS 238.005, for the purpose of calculating the retirement allowance of a person who establishes membership in the system on or after January 1, 1996, as described in ORS 238.430, the Public Employees Retirement Board shall not include any lump sum payment for accrued vacation pay made to the member during the last 36 calendar months of membership before the effective date of retirement of the member, or during any period of time taken into account for purposes of determining the three years in which the member was paid the highest salary for the purposes of determining the member’s final average salary.

(2) Notwithstanding the definition of “final average salary” provided by ORS 238.005, for the purpose of calculating the retirement allowance of a person who establishes membership in the system on or after January 1, 1996, as described in ORS 238.430, and who is not employed by a local government as defined in ORS 174.116, the term “final average salary” means whichever of the following is greater:

(a) The average salary per calendar year [earned by] paid toad public employee who is an active member of the system in three of the calendar years of membership before the effective date of retirement of the employee, in which three years the employee was paid the highest salary. The three calendar years in which the employee [earned] was paid the largest total salary may include calendar years in which the employee was employed for less than a full calendar year. If the number of calendar years of active membership before the effective date of retirement of the employee is three or less, the final average salary for the employee is the average salary per calendar year [earned by] paid to the public employee in all of those years, without regard to whether the employee was employed for full calendar years.

(b) One-third of the total salary [earned by] paid to a public employee who is an active member of the system in the last 36 calendar months of membership before the effective date of retirement of the employee.

(3) For the purposes of calculating the final average salary of a member under subsection (2) of this section, the Public Employees Retirement Board shall:

(a) Include any salary paid in or for the calendar month of separation from employment;

(b) Exclude any salary for any pay period before the first full pay period that is included in the three calendar years of membership under subsection (2)(a) of this section if the three calendar years were consecutive; and

(c) Exclude any salary for any pay period before the first full pay period that is included in the last 36 calendar months of membership under subsection (2)(b) of this section.

(4) Notwithstanding the definition of “final average salary” provided by ORS 238.005, for the purpose of calculating the retirement allowance of a person who establishes membership in the system on or after January 1, 1996, as described in ORS 238.430, and who is employed by a local government as defined in ORS 174.116, the term “final average salary” means whichever of the following is greater:

(a) The average salary per calendar year earned by a public employee who is an active member of the system in three of the calendar years of membership before the effective date of retirement of the employee, in which three years the employee earned the highest salary. The three calendar years in which the employee earned the largest total salary may include calendar years in which the employee was employed for less than a full calendar year. If the number of calendar years of active membership before the effective date of retirement of the employee is three or less, the final average salary for the employee is the average salary per calendar year earned by the public employee in all of those years, without regard to whether the employee was employed for full calendar years.

(b) One-third of the total salary earned by a public employee who is an active member of the system in the last 36 calendar months of membership before the effective date of retirement of the employee.

[(3)] (5) The normal retirement age is 60 years of age for a member who establishes membership in the system on or after January 1, 1996, as described in ORS 238.430, and who retires as other than a police officer or firefighter.

[(4)] (6) ORS 238.255 does not apply to any person who establishes membership in the Public Employees Retirement System on or after January 1, 1996, as described in ORS 238.430.

[(5)] (7) Notwithstanding any other provision of this chapter, for the purpose of calculating a monthly disability retirement allowance payable to a member who establishes membership in the system on or after January 1, 1996, as described in ORS 238.430, the sum of the monthly amount of the disability retirement allowance and of any monthly payment on account of temporary total disability or permanent total disability under the provisions of ORS chapter 656 may not exceed the member’s monthly salary, determined as of the date the member becomes disabled. The board shall reduce any disability retirement allowance payable under this chapter in the amount determined to be necessary by the board to meet the limitation imposed by this subsection.

[(6)] (8) Except as provided in this section, all provisions of this chapter are applicable to persons who establish membership in the system on or after January 1, 1996, as described in ORS 238.430.

SECTION 34. ORS 238A.130 is amended to read:

238A.130. (1) Except as provided in subsection (3) of this section, for purposes of the computation of pension program benefits under ORS 238A.125, “final average salary” means whichever of the following is greater:

(a) The average salary per calendar year [earned by] paid to an active member in the three consecutive calendar years of membership that produce the highest average salary, including calendar years in which the member was employed for less than a full calendar year. If the number of consecutive calendar years of active membership before the effective date of retirement of the member is three or less, the final average salary for the member is the average salary per calendar year [earned by] paid to the member in all of those years, without regard to whether the member was employed for full calendar years.

(b) One-third of the total salary [earned by] paid to an active member in the last 36 calendar months of membership before the effective date of retirement of the member.

(2) For the purposes of calculating the final average salary of a member under subsection (1) of this section, the Public Employees Retirement Board shall:

(a) Include any salary paid in or for the calendar month of separation from employment;

(b) Exclude any salary for any pay period before the first full pay period that is included in the three consecutive calendar years of membership under subsection (1)(a) of this section; and

(c) Exclude any salary for any pay period before the first full pay period that is included in the last 36 calendar months of membership under subsection (1)(b) of this section.

(3) For purposes of the computation of pension program benefits under ORS 238A.125 of a person employed by a local government as defined in ORS 174.116, “final average salary” means whichever of the following is greater:

(a) The average salary per calendar year earned by an active member in the three consecutive calendar years of membership that produce the highest average salary, including calendar years in which the member was employed for less than a full calendar year. If the number of consecutive calendar years of active membership before the effective date of retirement of the member is three or less, the final average salary for the member is the average salary per calendar year earned by the member in all of those years, without regard to whether the member was employed for full calendar years.

(b) One-third of the total salary earned by an active member in the last 36 calendar months of membership before the effective date of retirement of the member.

[(2)] (4) For purposes of calculating the final average salary for a member during any period in which the member worked in a qualifying position that requires fewer than 2,000 hours of service in a calendar year, the salary of the member for that period is the salary that would have been paid if the member had worked in the same position on a full-time basis.

[(3)] (5) For the purposes of calculating the final average salary of a member under this section, the salary of the member does not include any amounts attributable to hours of overtime that exceed the average number of hours of overtime for the same class of employees as established by rule of the Public Employees Retirement Board.

SCHOOL EMPLOYEES

SECTION 35. ORS 238A.160 is amended to read:

238A.160. (1) Except as provided in [subsection (2)] subsections (2) and (3) of this section, normal retirement age for a member of the pension program is the earlier of:

(a) 65 years of age; or

(b) 58 years of age if the member has 30 years or more of retirement credit.

(2) Normal retirement age for a member of the pension program who retires from service as a police officer or firefighter, and who has held a position as a police officer or firefighter continuously for a period of not less than five years immediately preceding the effective date of retirement, is the earlier of:

(a) 60 years of age; or

(b) 53 years of age if the member has 25 years or more of retirement credit.

(3) Normal retirement age for a member of the pension program who retires from service as a school employee as defined by ORS 238A.140 is the earlier of:

(a) 65 years of age; or

(b) 58 years of age if the member has been an active member in 30 or more calendar years.

[(3)] (4) The normal retirement date of a member is the first day of the month beginning on or after the date the member reaches normal retirement age.

SECTION 36. ORS 238A.235 is amended to read:

238A.235. (1) Subject to subsection (3) of this section, an active member of the pension program described in subsection (2) of this section who becomes disabled shall receive a disability benefit in the amount of 45 percent of the salary of the member determined as of the last full month of employment before the disability commences.

(2) The provisions of this section apply only to:

(a) A member, other than a school employee as defined by ORS 238A.140, who has accrued 10 years or more of retirement credit before the member becomes disabled;

(b) A member who is a school employee as defined by ORS 238A.140 and who was an active member in 10 or more calendar years before the member becomes disabled; or

[(b)] (c) A member who becomes disabled by reason of injury or disease sustained while in the actual performance of duty.

(3)(a) Except as provided by paragraph (b) of this subsection, the sum of the monthly amount of the disability benefit under this section and of any monthly payment by reason of temporary total disability or permanent total disability under the provisions of ORS chapter 656 may not exceed 75 percent of the member’s monthly salary, determined as of the date the member becomes disabled. The Public Employees Retirement Board shall reduce any disability benefit payable under this section in the amount determined to be necessary by the board to meet the limitation imposed by this subsection.

(b) This subsection does not affect cost-of-living adjustments under ORS 238A.210, and increases in the monthly amount of the disability benefit under this section due to those cost-of-living adjustments may not be considered by the Public Employees Retirement Board in determining whether the limitation imposed by this subsection has been exceeded.

(4) A disability retirement pension under this section shall be paid until:

(a) The member is no longer disabled; or

(b) The member attains normal retirement age under ORS 238A.160.

(5) A member is considered to be disabled for the purpose of this section if the member is found, after being examined by one or more physicians selected by the board, to be mentally or physically incapacitated for an extended duration and unable to perform any work for which qualified, by reason of injury or disease that was not intentionally self-inflicted.

INACTIVE POLICE AND

FIREFIGHTER MEMBERS;

REEMPLOYMENT OF RETIRED MEMBERS

SECTION 37. ORS 238.280 is amended to read:

238.280. (1) Except as otherwise provided in this section, [a police officer or firefighter who is a member of the system and attains the age of 50 or any other employee who is] a member of the Public Employees Retirement System [and] who attains the age of 55 shall be retired upon written application by the member to the Public Employees Retirement Board on a reduced service retirement allowance, which shall be the actuarial equivalent of the service retirement allowance provided for in ORS 238.300 at the normal retirement age.

(2) A police officer or firefighter who is a member of the system and attains the age of 50 shall be retired upon written application by the member to the board on a reduced service retirement allowance, which shall be the actuarial equivalent of the service retirement allowance provided for in ORS 238.300 at the normal retirement age. The provisions of this subsection apply to an inactive member of the system who was employed as a police officer or firefighter in a position meeting the requirements of ORS 238.015 (4) immediately before becoming inactive.

[(2)] (3) Notwithstanding [subsection (1) of this section and] ORS 238.215 (2)(b)(B):

(a) A police officer or firefighter who is a member of the system, attains the age of 50 and has a combined total of 25 years or more of creditable service in the system and prior service credit shall be retired upon written application by the member to the board on a service retirement allowance including, without actuarial reduction, the same current service pension and prior service pension provided for in ORS 238.300 at the normal retirement age. The provisions of this paragraph apply to an inactive member of the system who was employed as a police officer or firefighter in a position meeting the requirements of ORS 238.015 (4) immediately before becoming inactive.

(b) An employee who is a member of the system, has a combined total of 30 years or more of creditable service in the system and prior service credit, and is not eligible to retire under paragraph (a) of this subsection shall be retired upon written application by the member to the board on a service retirement allowance including, without actuarial reduction, the same current service pension and prior service pension provided for in ORS 238.300 at the normal retirement age.

SECTION 38. If Senate Bill 108 becomes law, ORS 238.280, as amended by section 37 of this 2005 Act, is amended to read:

238.280. (1) Except as otherwise provided in this section, a member of the Public Employees Retirement System who attains the age of 55 shall be retired upon written application by the member to the Public Employees Retirement Board on a reduced service retirement allowance, which shall be the actuarial equivalent of the service retirement allowance provided for in ORS 238.300 at the normal retirement age.

(2) A police officer or firefighter who is a member of the system and attains the age of 50 shall be retired upon written application by the member to the board on a reduced service retirement allowance, which shall be the actuarial equivalent of the service retirement allowance provided for in ORS 238.300 at the normal retirement age. The provisions of this subsection apply to an inactive member of the system who was employed as a police officer or firefighter in a qualifying position [meeting the requirements of ORS 238.015 (4)] immediately before becoming inactive.

(3) Notwithstanding ORS 238.215 (2)(b)(B):

(a) A police officer or firefighter who is a member of the system, attains the age of 50 and has a combined total of 25 years or more of creditable service in the system and prior service credit shall be retired upon written application by the member to the board on a service retirement allowance including, without actuarial reduction, the same current service pension and prior service pension provided for in ORS 238.300 at the normal retirement age. The provisions of this paragraph apply to an inactive member of the system who was employed as a police officer or firefighter in a qualifying position [meeting the requirements of ORS 238.015 (4)] immediately before becoming inactive.

SECTION 38a. The amendments to ORS 238.280 by section 38 of this 2005 Act become operative January 1, 2006.

SECTION 39. ORS 238.078 is amended to read:

238.078. (1)(a) A retired member who has been retired for more than six consecutive calendar months may be reemployed by a participating public employer in the manner provided by this subsection.

(b) Any person reemployed as provided in this subsection shall resume making contributions to the retirement fund, and the employer shall make contributions on behalf of the person as provided in ORS 238.225. Payments of retirement allowance received by such person during separation from the service shall not be repaid into the retirement fund after the person reenters public employment except as provided in paragraph (c) of this subsection; but the amount of such payment shall be deducted from such employee’s reserve in the retirement fund and the remainder shall be credited pro rata to the funds from which it was derived.

(c) Upon reentering public employment as provided in this subsection, the former retirement of such person and any election of option for payment of retirement benefits theretofore made by the person shall be canceled; and thereafter upon retiring such person may elect any option for payment of retirement benefits authorized by this chapter, except that a person who elected to receive lump sum payment of benefits pursuant to ORS 238.305 (2) or (3) at the time of former retirement may not elect any other option at the time of subsequent retirement unless an amount equal to the lump sum and the interest that would have accumulated on the sum has been repaid by the employee to the fund. Upon such subsequent retirement any prior service pension due the employee shall be derived from the unused portion of the prior service credit reserve and shall be calculated on the basis of then attained age.

(2) A retired member who has been retired for less than six consecutive calendar months may be reemployed by a participating public employer only upon immediate repayment in a lump sum by the member of the amount of retirement benefits drawn. The member account of the member shall be reestablished just as it was at the time of earlier retirement after the lump sum repayment is made.

(3) If a member of the system who retired before August 21, 1981, is reemployed, as provided in subsection (1) or (2) of this section, beginning on or after August 21, 1981, the service retirement allowance received upon subsequent retirement by the member shall be:

(a) For service before August 21, 1981, an allowance including a current service pension computed on the basis of ORS 237.147 (2) (1979 Replacement Part).

(b) For service on or after August 21, 1981, an allowance including a current service pension computed on the basis of ORS 238.300 (2).

(4) A person may be reemployed by a public employer that is not participating in the system, or may be employed by a participating public employer in a position that is in a class of employees that was not designated by the public employer under ORS 238.035 as a class of employees that become members of the system, without affecting the person’s status as a retired member or the person’s continued receipt of retirement benefits.

(5) Subsection (4) of this section does not apply to any member who retires under the provisions of ORS 238.280 (1) or (2).

SECTION 40. ORS 238.082 is amended to read:

238.082. (1) Subject to the limitations in subsection (2) of this section, any public employer may employ any person receiving a service retirement allowance if the administrative head of such employer is satisfied that such employment is in the public interest.

(2) The period or periods of employment by one or more public employers of any person receiving a service retirement allowance may not total 1,040 hours or more in any calendar year; but if the person is receiving old-age, survivors or disability insurance benefits under the federal Social Security Act, the person may be employed for the number of hours for which the salary equals the maximum allowed for receipt of the full amount of those benefits to which the person is entitled.

(3) The limitations on employment imposed by subsection (2) of this section do not apply to a retired member who is employed as a teacher or as an administrator, as those terms are defined in ORS 342.120, if the retired member is employed by a school district or education service district that has its administrative office located within a county with a population of not more than 35,000 inhabitants according to the latest federal decennial census. A retired member who is employed as a teacher, as defined in ORS 342.120, by the same public employer that employed the member at the time of retirement remains in the same collective bargaining unit that included the member before retirement.

(4) The limitations on employment imposed by subsection (2) of this section do not apply to a retired member who is employed:

(a) By the sheriff of a county with a population of fewer than 75,000 inhabitants, according to the latest federal decennial census;

(b) By the municipal police department of a city with a population of fewer than 15,000 inhabitants, according to the latest federal decennial census;

(c) By the state or a county for work in a correctional institution located in a county with a population of fewer than 75,000 inhabitants, according to the latest federal decennial census; [or]

(d) By the Black Butte Ranch Rural Fire Protection District, the Black Butte Ranch Service District or the Sunriver Service District; or

[(d)] (e) By the Oregon State Police for work in a county with a population of fewer than 75,000 inhabitants, according to the latest federal decennial census.

(5) The limitations on employment imposed by subsection (2) of this section do not apply to a retired member who is employed to temporarily replace an employee who serves in the National Guard or in a reserve component of the Armed Forces of the United States and who is called to federal active duty.

(6) The limitations on employment imposed by subsection (2) of this section do not apply to a retired member who is employed by a road assessment district organized under ORS 371.405 to 371.535.

(7) Subsections (3) to (6) of this section do not apply to any member who retires under the provisions of ORS 238.280 (1) or (2).

(8) Employment under this section does not affect the status of a person as a retired member of the system and a recipient of retirement benefits under this chapter.

SECTION 41. ORS 238.088 is amended to read:

238.088. (1) Except as provided in subsection (2) of this section, a person who is elected to a full-time salaried office of the state or one of the participating political subdivisions thereof, or who is appointed to a full-time salaried office having a term fixed by statute or charter, whether or not the person has been retired, does not forfeit any rights accrued or accruing to the person under this chapter. However, for the period that such person holds such office the person is not entitled to any pension or annuity provided by this chapter. Upon ceasing to hold such office, benefits shall be computed or recomputed by the Public Employees Retirement Board on the basis of age then attained.

(2) If a person is elected or appointed to the office of sheriff or county judge or commissioner in a county with a population of fewer than 75,000 inhabitants, according to the latest federal decennial census, and the person does not elect to become an active member of the system under ORS 238.015 (6), the person shall continue to be a retired member and to receive retirement benefits for as long as the person holds the office.

(3) Subsection (2) of this section does not apply to any member who retires under the provisions of ORS 238.280 (1) or (2).

CAPTIONS

SECTION 42. The unit captions used in this 2005 Act are provided only for the convenience of the reader and do not become part of the statutory law of this state or express any legislative intent in the enactment of this 2005 Act.

EFFECTIVE DATE

SECTION 43. This 2005 Act takes effect on the 91st day after the date on which the regular session of the Seventy-third Legislative Assembly adjourns sine die.

Approved by the Governor Approved by the Governor August 29, 2005

Filed in the office of Secretary of State Filed in the office of Secretary of State August 29, 2005

Effective date Effective date November 4, 2005

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