sending checks to some newly retired public employees that amounted to 100 percent or greater of their salary, and unfunded costs mounting, the state legislature in 2000 decided the retirement system had to change. In 2003, it created a hybrid pension system that combines guaranteed but limited retirement benefits with a market-based contributory plan. With the changes, the state's liability today has been reduced from 12 percent of the previous year's liability to 3 percent, and retirees are receiving about 80 percent of their employment salary.
“I can't imagine going back to the old system,” says David Crosley, communication officer for the Oregon Public Employee Retirement System. “Now we have our liabilities under control. This is more in line with what the legislature originally intended.”
With pension plans again facing a difficult environment after the severe turbulence in financial markets over the last two years, governments are looking for retirement plan models that will reduce their financial burdens. Fortunately, there are states and local governments that adjusted their pension plans years ago, and have notable results that could be instructive for others considering a change.
