SALEM -- A House committee approved a reform plan for the state's troubled pension system Thursday that would protect pensions of workers close to retirement, while cutting back benefits for younger employees.

The plan would update the life-expectancy tables used to calculate retiree benefits for public workers. The new tables would be implemented July 1.

Lawmakers say the bill would immediately save $568 million over the next four years, and eliminate $1.6 billion from the system's $15 billion shortfall over the next 25 years.

They acknowledged, however, that the plan was contentious and will likely prompt lawsuits. A provision in the bill expedites any suit against it -- should it become law -- directly to the Oregon Supreme Court.

"This is as close to middle ground on this issue as we are going to get," said Rep. Tim Knopp, a Bend Republican who is chair of the committee taking up Oregon Public Employees Retirement System reform. "Ultimately the courts may have to answer many questions."

Updating the life-expectancy tables has proved the most contentious PERS reform proposal to date, because any change could cut the pensions of current employees in the system.

Retirees are living about five years longer than the life-expectancy tables predict, because PERS has not updated the tables since 1978. That means the PERS fund has to continue paying monthly benefits to retirees even though it doesn't have the money saved for that, adding to the system's shortfall.

The PERS board wants to replace the old tables beginning January 1, 2004. The board wants to phase in the changes to prevent a stampede of public employees toward retirement ahead of a deadline. So they've included a provision to guarantee that workers retiring after that date would receive no fewer benefits than if they had retired Dec. 31, 2003.

For each year a member close to retirement works beyond 2004, the board wants to take the 8 percent annual return on investments that most workers are guaranteed and factor it into the employee's final retirement benefits.

The House bill approved Thursday, however, is different in two ways. First, it makes the date of the change July 1. Second, though it too provides guarantees that workers who chose not to retire in July won't receive fewer benefits, it eliminates the guarantee that the 8 percent return would be factored in.

Members who are further from retirement, of course, won't get the same protection because modern life-expectancy tables will reduce their monthly benefits.

Under the bill, new tables will be implemented every two years beginning in 2005.

Unions that represent many of the 294,000 public employees in the system said the legislative proposal breaches existing contracts.

"If the Legislature passes it, we'll end up in court," said Tricia Smith from the Oregon School Employees Association.

Adding to confusion over the retirement system is a decision handed down last month by Marion County Circuit Judge Paul Lipscomb ordering the state to implement new life expectancy tables "immediately and fully." He ruled in a case brought by the cities of Portland and Eugene and five other public employers. Unions are appealing the ruling.