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Tuesday, November 29, 2005

Get on the Natch - Part V (Catch 22)

In my continuing effort to expose the many ways PERS tries to shoot itself in the foot by pointing the gun at its head and watching the bullet travel through its entire body, I offer yet another real story from yet another real PERS retiree. All the changes PERS and the Legislature have made are bad enough, but stupid, inept, and timewasting mistakes are unconscionable. PERS should be stoned for this one.

"If anyone has seen the movie "Brazil", about a society evolved to the point where it becomes locked in immobility due to excessive and inflexible bureaucratic paperwork, one can easily appreciate how Brazil-like PERS has become.

For example: My request to withdraw my IAP was rejected for improperly completing the Effective Retirement Date field. The form says: "I am applying for an effective date of retirement the [bold] FIRST DAY OF_____________(month)_____________(year). So I put "August" and "2005) in the two blanks. WRONG!! My application was returned and the form stamped "INVALID". Confused, as I retired effective August 1st. 2005, I called PERS to ask what I should have put in the two blanks to complete it correctly. The answer: "August 1st 2005". Yup, Even though there is NO blank for the DAY, and even though the blank is proceeded with the words "..the first day of" in bold, no less, you apparently STILL have to put in the Month and the DAY in the "month" blank.

So I must complete an entirely new application packet because I didn't know that the words "first day of" on the PERS form are actually meaningless to them unless you actually write in that the first day of August is August 1st. After all, possible in the PERS world, the first day of August may indeed be August 3rd.

I will probably need to include a form 47/b and send the whole thing back to "Central Services" attention "Information Retrieval" department, which as we all know, does not give out information (That's, of course, "Information Disbursal").

Hmmm, I can't imagine why their workload is so high??"

Saturday, November 26, 2005


For those of you who don't follow every sinuous move of the PERS Board, here is an update on the "plan" to recover overpayments from retirees in the "window". As you probably know, the PERS Board instructed the PERS Staff to take suggestions and questions from stakeholders about implementing their plan. PERS opened the comment period via a link on their website and both retirees and others asked implementation questions and for consideration of alternatives to the recovery mechanism. It appears that the PERS Staff and PERS Board have disposed of all but three issues, which will be taken up at the December Board meeting. For now, we know that PERS is NOT going to allow any repayment schedule other than the options initially presented - one lump sum payment, or the actuarial reduction method over the retiree and (if applicable) beneficiary lifetime. We also know that PERS will NOT stop repayment once the member or beneficiary has repaid the amount owed. Moreover, PERS will NOT offer tax advice or even assistance to members who choose to repay in a lump sum. For those with lump sum bills in excess of $3,000, the tax ramifications are quite significant and non-trivial. Unless you're really skilled at doing your own taxes, a repayment of a lump sum in excess of $3,000 will send you on your merry way recomputing your taxes for EVERY YEAR since you retired. PERS will NOT permit a retiree already receiving "correct" benefits (i.e. not *estimated* benefits) to change the payment option once the repayment is triggered. There will be NO revised Notice of Entitlement for members who've already received their initial NOE. Furthermore, there will be no option for retirees to purchase additional service credit that may have been declined at initial retirement.

What remains to be answered are several fairly significant -- to many anyway -- issues. The first is the question of whether PERS will recompute the "test" for the "one-time variable transfer" for retirees who attempted this before retirement and "failed" the test. It is quite likely that many people who failed when 1999 was figured at 20%, would "pass" the test once 1999 is refigured at 11.33%. For many people, like me for example, being stuck in variable for a year longer than I wanted to be cost me significant money. If that action could be reversed, my repayment amount would be significantly reduced by the earlier transfer of my variable account balance to my regular account. The second important matter affects a smaller, but still significant, number of people who took a lump sum settlement of some sort and rolled the money into some tax-advantaged investment (e.g. an IRA). The question is whether PERS will *facilitate* (with the member's permission, of course) the direct recovery of the overpayment from the IRA-holding company so that no taxable event is triggered.

Given the cannonballs dropping from the sky lately, I'm not real optimistic that PERS will do anything that might actually benefit retirees, but the recalculation of the variable test is probably one area where they'll have to tread carefully. This has significant litigation potential. I doubt they'll do much else to make life easier, cheaper, or better for the people whose money they hold in TRUST.

Thursday, November 17, 2005

Chinese Arithmetic

Those folks over at PERS are on some of that funny stuff again, doing their best to sow a little FUD. Seems they've discovered that the current wording of ORS 238.715 needs to be revised a bit to accomodate their little shell game for recovering money from retirees. But before they can even begin to recover the money, they've got that small matter of notification of retirees that there's been an "error". By law, PERS has 6 years from the date of the error to notify a member; otherwise, they lose the right to collect. Well, with all PERS' computer problems and with all the multiple court rulings to implement, the 6 year limit is approaching fast - April 1, 2006 is the best guess. So PERS is busy promulgating a new administrative rule that has more than a few folks in a lather. The OPRI people www.opri.org have written PERS a letter outlining their concerns with the proposed rule. In short, what PERS is proposing to do is to comply with the law by simply NOTIFYING a retiree of their intent to change the benefit, without including the invoice explaining the error and how PERS is proposing to fix it. In other words, PERS wants to separate the notice from the invoice. However, the current ORS 238.715 triggers the contest period with the receipt of the NOTICE and never contemplates a separate invoice sent months or even years later. So, if this rule change were allowed to go unchallenged, members would have to file a contested benefit notice in the absence of knowing what they were contesting. This has all the hallmarks of Chinese arithmetic. If you want to protest, go to the PERS site and follow the links to proposed rulemaking. You can send an email to the rules coordinator right from the PERS site.

I've been a bit slowed the last week or so by multiple attacks of bad karma (an emergency root canal, a nasty case of hip bursitis, and a badly cut index finger). Hopefully the old axiom that bad luck comes in threes has already applied and I can soon look forward to a dose of some good karma. In the meantime, don't be on the road at the same time I'm out there. :-)

Thursday, November 10, 2005

Old Habits Die Hard

And the harder PERS tries to change, the worse the muddle they seem to create. Several weeks ago I shared an email I received from an irate active PERS member who was trying to get an accurate estimate on which to base a retirement decision. This letter was the most articulate of those flooding my mailbox, so I posted the letter. I also forwarded copies to the PERB, Mr. Cleary, and others in positions of PERS management. On November 1, PERS posted an announcement on their website that they would henceforth be producing retirement estimates using the Strunk/City of Eugene implementation (I take no credit for the announcement, but the timing wasn't lost on me). Members were concerned that previous estimates (1) did NOT reflect any of the crediting/recrediting adjustments for 1999, 2003, and 2004 and so the estimates were based on very outdated and wrong account balances, and (2) that the variable "match" was still being computed in the "old" (pre-settlement) way also resulting in highly inaccurate variable match estimates. Both of these conspired to seriously mislead (too high, too low, rarely 'just right') members about benefits at retirement.

So, it was with some relief that I read PERS' posting on November 1. Hopefully, PERS would supply reasonably accurate estimates so members could start making INFORMED retirement decisions. Alas, my relief was premature. I'm starting to get the first reports from people who've availed themselves of PERS' new estimates. While PERS seems to have solved the crediting issue, the variable match still remains unsolved and members are still getting estimates with their employee variable balance DOUBLED. From some of the communications that members have shared, this doesn't seem to be problem that PERS either intends to fix. PERS' recommended solution is for members to wait until after they submit their retirement application and get their "Notice of Entitlement", which will then have the variable match correctly calculated. You have got to be kidding!!!!! PERS is asking members to separate from service (because, they can't calculate actual retirement benefits until the separation papers are received from one's employer), and then trust their fate to PERS getting an accurate estimate in a timely fashion. Gee, I think I'll quit my job on the promise that PERS hasn't screwed up my estimate too much and my benefits will be within 80% of what PERS' new, customer-friendly, estimates are. Fat chance! Apparently, PERS is now making administrative policy decisions at the Joseph Heller Catch-22 school of business.