The Audits Division blamed the mistakes on human error -- inputting wrong numbers or miscalculating by hand -- as well as computer errors. PERS officials, who agreed with the findings, said the agency's computers cannot keep up with the complex benefit calculations required today.

The amount of money miscalculated is relatively small, compared with the $1.5 billion the system pays out to retirees each year.

But it's yet another problem for a system facing a $9.7 billion shortfall. A Marion County Circuit Court judge also ruled PERS may need to recalculate benefits accorded recent retirees. The agency also has struggled to update its life expectancy assumptions for calculating benefits but says its computers are not up to the task.

"The workload is going up . . . but the tool we have to do the work is deteriorating, and that's a bad situation," said David Bailey, PERS deputy director.

The audit reviewed 200 benefit calculations of people who retired or sought benefit adjustments in 2001. The report found 30 percent of the calculations had at least one error; half of those resulted in incorrect benefits.

The report found that PERS owed 13 members a total of $10,519. It also found 12 members owed PERS a total of $5,307.

Based on those numbers, auditors extrapolated that retirees in 2001 were overpaid by $73,000 and shortchanged by $98,000, through May 2002.

However, the sample was skewed. Of the 200 calculations, 70 percent were computed by hand and the rest by computer. Usually, computers calculate about 60 percent of retirement benefits.

PERS officials have been seeking money to update the agency's computers.

Bailey said the computers, which are about 14 years old, can't handle the complex calculations required today. For example, staff members need to compute by hand all divorce benefits and about one-third of disability benefits.

Plus, there are more PERS participants retiring, he said.

Audit Administrator Jason Stanley said some of the calculations were off by less than $10. A couple, however, were off by $4,000.

"The errors themselves weren't significant, but to the individual, they could be very important," Stanley said.

Auditors found that the agency emphasized speed over accuracy. PERS management set a goal of mailing the first monthly benefit payment within 45 days of retirement. State law allows for 92 days.

PERS officials said they have formulated plans to improve accuracy, including more staff and additional computer support. Some of the plans require additional funding. Janie Har: 503-221-8234; janiehar@news.oregonian.com

Oregon Live

-- Anonymous, November 20, 2002

Answers

SALEM (AP) -- A state audit of the Public Employees Retirement System showed the system making mistakes one out of seven times when setting Oregonians' retirement amounts or adjusting pensions, the Salem Statesman-Journal reported.

David Bailey, PERS' deputy director, said the problems are due to PERS' antiquated and overwhelmed computer system.

"We've got a 15 percent error rate in the dollar amounts of the calculations, far and away beyond a reasonable standard," he said.

The October audit randomly studied 200 people who retired in 2001 or sought adjustments to their pensions. Mistakes were discovered in 30 percent of those cases; in half of them, PERS set the pension checks either too high or too low.

The impact on retiree pensions varies "from pennies to hundreds, maybe thousands" of dollars a year, Bailey said.

That's still a relatively small portion of PERS' total budget of about $1.5 billion in benefits each year. Based on the sample of 2001 retirees, auditors estimated PERS overpaid that year's crop of retirees a total of $73,000 and shortchanged others by $98,000.

PERS officials trace the problem to their mainframe, which is now 14 years old, and not flexible enough to do the quantity and types of calculations PERS now requires. As a result, PERS has supplemented its main Retirement Information Management System with companion software and calculations done on personal computers or even by hand.

Many calculations, such as those involving divorced retirees, must be done manually. This year, PERS estimates 40 percent of the new retirees' pension amounts will be calculated manually, and 60 percent via computer.

PERS has been seeking a computer system upgrade for at least five years. The agency invested nearly $13 million into planning and designing a replacement system, but was stalled last year when objections surfaced from state auditors, managers and lawmakers.

Tim South, a state retiree, said PERS miscalculated his pension and demanded that he return $15,946.

"I was misled, for my future, for trying to have some type of life," he said. "I would not have retired, or I would have tried to get a medical retirement, or whatever you call it."

Marion County Judge Paul Lipscomb has ruled that PERS may need to go back and re-figure pensions awarded to many recent retirees. He also wants PERS to revise its outdated life expectancy assumptions.

The system is already under attack for racking up a $9.7 billion long-term shortfall due to the Wall Street slump and generous payouts to recent retirees. Employees retiring in 2000 and 2001 after 30 years in PERS made more from their pensions, on average, than they ever earned on the job.

The World Link

-- Anonymous, November 20, 2002