History on PERS tax benefit


I have heard a lot of talk but no explanation of the “PERS Income Tax Windfall Benefit.” This is the increase in PERS benefits to cover Oregon income tax payments.

From 1945 to 1991, PERS retirees were exempt from Oregon income taxes, a typical practice across the country. A U.S. Supreme Court ruling in a Michigan case declared that state income tax laws must apply equally to both federal and state retirees. Until then, federal pension holders were liable for Oregon income taxes.

In 1991, the Oregon Legislature chose to tax both state and federal pensions and gave eligible PERS retirees, those hired before benefits became taxable, an increase in benefits of up to 9.8 percent, (depending upon the ratio of pre- and post-1991 service) to compensate for the new Oregon tax liability. This increase applied only to service prior to 1991. Thus, for the past 22 years earnings have not received this benefit.

However, many PERS retirees moved to states, like Washington, where their benefits are tax exempt. Senate Bill 822 removes this benefit for out-of-state PERS beneficiaries.

This change will most drastically affect those out-of-state retirees 77 years and older. They may have moved to be cared for by family or are now in nursing homes. I don’t expect any sympathy in Central Oregon for any public employee. This area has a bitterness for public employees. But I feel for the elderly affected by this.

Nancy Buffinton-Kelm

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