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Please don't post your comments more than once. I moderate all comments and a delay between posting and appearing is part of the drill here. I get to all comments in due time. Please don't continually repost the same comment. Only one will be posted. Thank you.

Saturday, October 29, 2005

Boom Like That

Just a brief note to thank the thousands of readers who have made this blog so popular. It is hard to believe that in just a few days, this site will have recorded its 250,000th visitor - a quarter of million page views. I want to thank all the various people, named and unnamed, who continue to provide me with the information to post, the answers to all my (and your) questions, and who feel that this is a worthwhile place to recommend for people interested in PERS. There doesn't seem to be any end of the PERS assault in sight; I expect to be reporting on PERS issues for several more years, at least. Stay tuned.

Friday, October 28, 2005

Your Mother Should Know

The answer to the following question. I've been asked fairly frequently why PERS members and retirees can't sue the old PERS Board for damages arising from their actions in 2000 that are causing so much pain today. The answer to this question is actually pretty straightforward. The City of Eugene case was filed under the Administrative Procedures Act (APA); it was not a simple civil case where issues of tort and negligence apply. The PERS Board's actions are governed by the APA and for that reason the members of the Board are insulated from personal responsibility for their acts so long as the acts are within the scope of their administrative mandate. The Board perpetrated no fraud, did not embezzle funds, and made their decisions in open meetings. Their only "crime", according to Judge Lipscomb was an "abuse of discretion" (bad judgement). (The APA also protects the current PERS Board from personal liability for their decision to enter into the settlement agreement with the City of Eugene plaintiffs. The Board can be charged under the APA with breach of fiduciary responsibility -- see the White case -- but individual members are held harmless).

Saturday, October 22, 2005

Changing Times

PERS distributed a document at Friday's Board meeting entitled "PERS By the Numbers". This is essential FACTUAL information about membership, members, and retirees that should quiet some of the criticism (or not) about benefits received and the system's financial health. I've scanned in a copy and have posted it on my website. You can download it here (note added 10/24. This link is now to the PERS official copy posted on their website).

Get on the Natch - Part IV

For newcomers, I periodically use this blog to run copies of letters I've received from readers. A few days ago I got this email from a member nearing retirement. It expresses the frustrations of those trying to get accurate information from PERS before making this momentous decision. I've forwarded this to the management and Board of PERS, but wanted to share it more widely. I've removed the sender's name as I always do. If your experiences match this reader's, please let me know. The only way PERS is likely to do anything about it is if the matter gets bigger publicity and more pressure is put on PERS staff to figure out how to address this problem. (And by the way, current retirements have been treated as IF the City of Eugene Settlement and Strunk were already in effect, so it is absolutely not true that PERS doesn't know how this will play out. It has been this way since 4/1/05.)

Hello Marc,

Thanks for all your efforts on your blog. Have been avidly reading it for months now, ever since the Oregonian bit on your blog.

Here's my gripe: No one seems to be dealing with the question of accurate estimates for people soon to retire. My husband plans to retire the end of this year, and in an effort to understand what we're dealing with, we've recalculated his account from 1982 forward to:

1. take into account what his account would have earned had it all been in regular,
2. 11.33% interest for 1999 rather than 20%,
3. 8% interest for the whole account in 2003, 2004 and 2005 (he switched over from 75% variable to 100% regular at the end of 2000), and
4. that his contributions for 2004 and 2005 went into IAP and not into PERS.

We then created a little table that figured out what the variable discount was (difference between the account all being regular and part being variable), multiplied Item 1 above by 2 and added to that the variable discount. Upshot of all this blather is that we think we actually have a fairly good idea of the amount of money that should be in his account by the end of 2005 and how much PERS will have total counting the money match to base a retirement figure on. BUT!! Because apparently the PERS Board hasn't authorized PERS to do all this stuff, we are still stuck with an online Benefit calculator that is basically useless. When we requested another estimate, we were told that our limit was reached and that we had to pay $60 for a new estimate, which, by the way will be figured out USING THE ONLINE BENEFIT CALCULATOR! As I pointed out to the PERS folks, is it right to limit us if our previous estimates were useless?

When I mentioned to a woman at PERS that it seemed like the only thing we could do is put in the retirement papers and if we didn't like the results, stop the retirement process, she seemed upset at the idea of that workaround, then said it would still only be an estimate based on the fact that changes have not yet been made to how they are making their calculations. Aaaaaggghhhhh!!!!!!! How is anyone supposed to be making a cogent decision with inadequate information? At one point, she mentioned that there should have been a prompt on the benefit calculator that would have asked for a dollar amount (to be obtained from PERS and which we had already gotten) that would be the Variable Discount. I told her that I had seen no prompt. She went out and checked and came back and said that apparently someone had taken it off and made no reference to its removal on the site. Why would someone take it off and NOT TELL THE PEOPLE ANSWERING THE PHONES????!!! Ridiculous!!!

We are willing to accept 11.33% interest on 1999, we are willing to accept the IAPs, we are willing to accept the variable discount when it comes to Money Match, so why can't we get a good number, even if someone there has to hand-calculate it? While I can understand them not wanting to hand-calculate for everyone wanting an estimate for the next two years, why not at least accommodate the people looking to retire SOON, like within six months?

I've emailed Customer Service and gotten zero response. I emailed the Suggestion line and a nice man from there has played telephone tag with me for a few days, saying he would help me use the Benefit Calculator (we finally both gave up trying to reach each other), and I talked to a woman yesterday who wasn't anywhere near as helpful as I would have liked, who basically said "this is the way it is, we can't change it."

Can someone PLEASE give this issue some visibility? The window retirees are NOT the only ones who need answers.

Friday, October 21, 2005

The Squid Jigging Ground

I attended part of today's PERS Board meeting. (I confess that it was getting so tedious and boring that I left after about 105 minutes when it was apparent that there was still one long and boring report to go). There weren't too many surprises to report. Paul Cleary handed out a new document called "PERS by the numbers", which was intended to pull together all the disparate statistics PERS has given out over the years. It is a really useful document that PERS intends to post on its web site after the State finishes its maintenance early next week. Many of the facts will surprise people and will, hopefully, disabuse some of the system critics of ideas they have that retirees are getting fat and rich. The statistics simply don't bear that conclusion out. (I have asked for my own electronic copy, but haven't received one yet).

It is clear that the Strunk/Eugene implementation project will take a long time. The first order of business is to get 2004 Member Statements completed for still-active and inactive members. That will involve recrediting for 1999, adjusting 2003 and then crediting 2004. The goal is to have those statements out by the end of January 2006. To follow will be the 2005 member annual statements at close to the usual time in 2006 (mid May). The retiree piece is expected to consume the lion's share of time and resources. While the short-term deadline is April 1, 2006, it is obvious from comments and observations that this is expected to be a multi-YEAR project (it might have been Paul Cleary who remarked, somewhat off-the-cuff, that it would probably be 2008 before they'd be able to 'close the books' on the Strunk/Eugene implementation). One new fact emerged today. In terms of the actuarial reduction method, Craig Stroud confirmed that if the member took an option that involved joint survivorship (2, 2A, 3, 3A), the actuarial reduction *would* be based on joint life expectancies IF both parties were still alive. Otherwise, the reduction would be based on single life expectancy of the surviving recipient. The planning group and the Board are still open to alternative payment options and heard again today from someone advocating that PERS agree to an installment plan that allowed the member to repay the exact amount owed in something other than a lump sum. The Board was receptive to the idea, but there was no committment made to implementing such a method. The Strunk/Eugene implementation plan is still short on many details and it is expected that it will continue to evolve for 3 more months (and 3 more meetings) before a final plan emerges.

There was a lengthy and tedious discussion over the 2004 crediting order, which has never been finalized. PERS Staff asked for finality today so that the Strunk/Eugene implementation could proceed. As I was leaving, virtually everything about 2004 had been settled except for the matter of whether or not to fund the Capital Preservation Reserve (henceforth CPR). The Board struggled with the concept of taking money from Tier 2 members to put into the CPR. Staff had recommended that the CPR be funded at 0% for 2004; the Board wanted something more than 0% and something less than 7.5%. The discussion centered on 0.75%, but the real debate was whether Tier 2 members should have their earnings diverted to the CPR when there was no clear plan to repay Tier 2 members in down markets. Greg Hartman argued against putting money in the CPR, PERS Staff discouraged putting 2004 money into the CPR, Tom Grimsley wanted 0% to go into the CPR, while other Board members wanted something more than 0% to go in. Since this discussion seemed to be going nowhere quickly, I decided to leave. The main message is that Tier 2 members have been losing earnings to the CPR since 2003, even though they're supposed to "earn what they earn". That's another discussion for another time.

One other final note. Marsha Chapman, one of the two local Mercer actuaries assigned to PERS, has already resigned to "pursue other opportunities".

If I get a copy of the "PERS By the Numbers" presentation in electronic form, I'll post it here. Have a good weekend.

Wednesday, October 19, 2005

Mix up, Mix up

In yesterday's entry "Clampdown", I misrepresented an important piece of the proposed OAR pertaining to the recovery of overpayments. I remarked that PERS used the term "payee" in a very restrictive sense, which I interpreted as being only the retiree. Mea culpa. I should have taken the time to read the "definitions", which form the preamble to the rule. Had I done so, I would have discovered that PERS is defining - for the purpose of this rule - "payee" to mean anyone who could possibly be receiving (or have received) a benefit from PERS that included (includes) the 1999 earnings distribution of 20%. This means, among others, retirees, their beneficiaries, a divorced spouse and, presumably, the humane society. This significantly broadens the scope of recovery efforts and continues to impinge on the question of whether PERS intends to use "joint life expectancy" tables to determine the actuarial recovery period. So far, PERS has not answered that question, which I've now asked multiple times. Hopefully they'll give me an answer soon since it bears on the calculator output. [Note added at 11:30. Just heard back from PERS. While they "think" they know the answer to my question, they're waiting for more direction from the actuary before making their answer public. The actuary has to report on which table(s) to use, whether there are any "holes" in the tables, and what the policy implications are for the actuary's recommendation. So, it may be awhile longer before I can finalize the calculator or answer the question about "joint mortality"].

Tuesday, October 18, 2005


The PERS Board packet for the October 21, 2005 meeting is now posted on the PERS web site. As expected, the Board will be asked to take up issues pertaining to the implementation of the Strunk ruling and the City of Eugene "settlement". The packet contains a 15 page memo from Craig Stroud, head of the Benefits Processing Division, describing the basic method and timetable for implementing the ruling. For "window" retirees who've been using my calculator, the method should come as no surprise. Within the memo is a reasonably well-documented illustration of how the method would be implemented. The benefit recalculation method, application of COLAs, and the actuarial reduction method follow nearly identically to what I had worked out from their previous documents. In short, if you want to figure out how all of this will affect you, get hold of my latest calculator (left link) and enter the appropriate data.

There is a second document in the packet that describes and details a proposed administrative rule that covers "recovery of overpayments". This is a worthwhile read as it explains the lengths to which PERS is going to go to recover 100% of the overpayments. A couple of things to note. First, the proposed OAR refers exclusively to "payees" (and doesn't not, unless I missed it, refer to "beneficiaries" or "alternate payees"). This implies that PERS does not intend to hold beneficiaries or alternate payees responsible for overpayments made to the primary retiree. Don't quote me on this yet because the OAR doesn't say it. It is an inference by omission. Second - a minor piece of good news in an otherwise dismal post. The "actuarial reduction" in monthly benefits will NOT affect the COLA base. In other words, when a COLA is due, it is applied to the actual benefit, not the benefit diminished by the actuarial recovery amount.

The Board doesn't appear to be poised to "adopt" anything at this meeting; that probably awaits even more detail at the November meeting. The longer the Board delays adopting its methodology, the longer it is before any potential litigation will be triggered. It is clear that recovery efforts - initiated by a notice of an overpayment and a description of its computation - MUST begin before April 1, 2006. The statute of limitations for errors and overpayments is set in statute to be 6 years from the date of the error. This means that PERS must initiate the process AT THE INDIVIDUAL LEVEL not later than 6 years from the date the 1999 earnings were credited - approximately on April 1, 2000. The clampdown will start soon.

Monday, October 17, 2005

Fixing a Hole

I posted a new version of the Lipscomb Calculator over the weekend. This version fixes a "hole" in the previous iterations by adding the "actuarial" reduction calculation for "window" retirees. I based the reduction on the most current PERS tables (2001, effective 7/1/03) for life-expectancy of retirees. The new actuarial firm - Mercer & Co - has undertaken a newer study, but it is hard for me to imagine that the results will be too significantly different from the tables now used. In any case, the results should be a close approximation to final implementation. I've simultaneously released the Windows and the Mac OS X versions. It is labelled 1.0.2. You can obtain either version by following the link to the left of this blog labelled "Lipscomb Alpha Software".

Please keep in mind that the question of "joint mortality" has not yet been addressed by PERS Staff. At the moment, the Calculator assumes that the payback is over the RETIREE's life expectancy and does not carry forward to a beneficiary with joint survivor benefits. This may prove to be wrong, but joint mortality figures are not currently available and PERS has given no indication that it would extend the repayment period over a beneficiary's life expectancy too. So, until I have reasons to change the calculator, I'm not inviting trouble by making assumptions I can't currently justify.

The PERS Board meets this coming Friday (October 21) to take up further details of implementing the settlement and the Strunk case. I have no indication of whether the Board will finalize implementation details at this meeting, or wait until the November meeting. There will again be an opportunity for some public testimony, and members who are interested/affected should attend. It is again at the PERS Headquarters at 1:00 p.m.

Wednesday, October 12, 2005

Holla If Ya Hear Me

OK. So this is a shameless plug. The RAPS (Retiree Association of Portland State) has asked me to give a PERS Update at its Fall kickoff meeting. I've agreed and, in keeping with my musical themes, will be sharing my thoughts in a presentation entitled "The Long Arm of the Law." If you are in the Portland area and are interested, you can catch my lounge act on Thursday October 20 at 1:00 p.m. at PSU in room 338 Smith Memorial Center. If you regularly read this blog, I doubt you'll hear anything new, although with the strange way information finds its way to me, you never know.

P.S. To Chris. iTunes has the song title spelled incorrectly. I've changed it per your suggestion.

Monday, October 10, 2005

Less is More

I had a couple of interesting email exchanges in the past week. One began with the puzzled question: "What's all this talk about 20% earnings in 1999? I only got 18.5%". This led to an exchange of emails and some postings over on OPDG about this. To make a long story short, some unknown number of PERS members received "1999 Member Annual Statements" captioned with "1999 Regular Earnings Rate: 18.5%", while most of us got 1999 statements that reported the 1999 Regular Earnings Rate of 20%. When you do the math on these odd statements, it turns out that the actual earnings crediting WAS 20%, not 18.5%. While I always checked the math on my PERS statements, not everyone does. This was one of those cases where less really is more. It also means that those who hold those statements who were counting on a smaller "hit" when the PERS Board finally implements the settlement can fuggetaboutit.

Tuesday, October 04, 2005

Valley of Pain

Just when I thought that things couldn't get worse than yesterday's email fiasco, along comes PERS with an explanation of how they expect to implement the COLA offset ordered in the Strunk decision in relation to the recalculation of 1999 earnings required by the "settlement". As I feared, the "worst case" scenario computed by my calculator is what PERS' reality is - a valley of pain for you deeper than I had hoped for. PERS is NOT going to apply COLAs to the "fixed benefit" - a benefit they claim was computed in error. Instead PERS will: 1) add up the total amount you've been paid in monthly retirement benefits from date of retirement to implementation date; and 2) recalculate your benefits as though you had earned 11.33% in 1999, not the 20% they paid you (to get the revised benefit, they revisit 1999 and re-do the crediting on the regular account at 11.33% and compound the balance forward to the date of retirement - including contributions to accounts in 2000 - whenever you retired or 12/31/03, whichever is earlier). They will then add the appropriate COLAs to the revised benefit and get you to the implementation date. They will add up the monthly amount you should have been receiving from retirement to implementation date. They will then subtract the second balance from the first. If the result is positive, PERS owes you money. If the result is negative, that's the amount you owe PERS.

For those of you using my calculator, it has been calculating this "worst case" scenario since the beginning. It is the first large number flagged by the "<==". The second large number (smaller than the first) was the amount we'd hoped to owe PERS (actually, we hoped PERS simply owed us money, but that isn't going to happen to any "window" retiree). You might as well ignore everything in the section of the calculator labelled "COLA offset". There will be a COLA offset, but it is prefigured in the first set of calculations. Yet another revised calculator will be released shortly to reflect this sad reality. You might NOW seriously want to contribute (again or for the first time) to OPRI's Legal Defense Fund. We cannot allow this perversion of the justice system stand. Contributions to the OPRLF (Oregon PERS Retirees Legal Fund):

P.O. Box 7325
Salem, OR 97303-0065

P.S. Lipscomb Calculator (see link at left) has now been updated to reflect PERS' final implementation method. Actuarial recovery has not been programmed yet. Check back in a few weeks for that update.

Monday, October 03, 2005


After 3 months of quiescence, the old PERSLIST and PERSLIST-DIGEST have suddenly been resurrected from the dead (I thought they were dead) and have begun to generate tons of messages. These lists were discontinued in June; no messages should be coming from them at all. Suddenly, spam and the predictible cries to UNSUBSCRIBE and REMOVE ME FROM THIS LIST have sprouted like mushrooms after a spring rain. I've contacted the PSU Unix Team and have asked that this problem be rectified immediately. The lists are no longer used, period! They're working as fast as they can. In the meantime, please don't make the situation worse. I KNOW ABOUT THE PROBLEM. Emailing to tell me contributes nothing but clutter to my mailbox. WORSE, emailing the list asking to unsubscribe only makes the problem MUCH WORSE. Not only doesn't it work, it sends all those emails to all the others on the list, including me. Please bear with me. I didn't create this problem. I don't need this problem. I'm working as fast as I can to get rid of this problem.

Sunday, October 02, 2005

Getting Better

As a result of a very organized effort involving volunteers, the OPRI website has been updated, modernized, and is ready to receive visitors. The new site hasn't been fully propagated to the old space yet, but you can still get to it by going here. By the end of this coming week, the new site will have completed its move to the old domain and will be fully accessible as before. The organization of the web committee makes it possible to update the site quickly, get out documents that the OPRI Board feels are timely and relevant, and make more highly visible its efforts to raise funds for litigation or for lobbying. Those of us involved with the revised website hope that it won't be too much longer before it will possible to join OPRI online, to renew memberships online, and to contribute to the legal defense fund online.

Please take a few minutes to visit the new site (you'll be redirected at first, but this is short-lived) and let us know what you think. There is a link on the new site that will direct comments to the OPRI Board Member on the Web Design Committee.