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Friday, January 27, 2006

Stories We Could Tell

Oh the stories we could tell.... Attended the PERS Board meeting today. No fireworks at all, despite my predictions earlier this week. The meeting was sparsely attended and was actually pretty boring. The Board unanimously adopted the "Final Order" concerning the repayment methods in the Strunk/Eugene cases. There were no questions and no discussion. The Board also unanimously adopted OAR 459-005-0610, which relates to recovery of overpayments. PERS Staff took two items off the table for discussion today. The first was its recommendation to NOT recalculate the "one time variable transfer" for members who failed the test in 2000, 2001, 2002, and 2003. PERS determined that 313 members would be affected by the decision. Staff asked that stakeholders be permitted until the next Board meeting to comment on the recommended course of action. PERS staff also took the question of lump sum rollovers back to PERS off the table for the same reason. While PERS staff could find no legal or IRS support for making this transfer possible (to facilitate repayment for the alleged 1999 overcredit), staff was willing to allow stakeholders a chance to help PERS find a way to achieve this. Staff is not fundamentally opposed to this; in fact, it would make life easier for everyone, but absent any statutory or IRS authority to do this, PERS feels its hands are tied.

Concerning the notification of overpayments, the Board and staff both took pains to emphasize that there will be two different notifications. The first concerns the fact of an overpayment situation and the methods of recovery PERS will allow. This notice will contain appeal information and it is PERS' intent to seek a single unified legal ruling that establishes whether or not their approach is legal and to provide a consistent way of handling all future claims arising from such notices. While individuals will be permitted to appeal the notice, there will probably NOT be individual contested cases over this element of the recovery plan. PERS plans to send out a SECOND notice -- a detailed invoice -- that will contain all the information an individual would need to check PERS' calculation of revised account balances, revised pension benefits, and application of appropriate COLA increases. That notice will also have appeal rights and it is THIS notice that individuals will be allowed to appeal as individuals.

Other issues of note. Tier 1 regular fund earned 13.19% in 2005 (8% will be credited, pending preliminary approval by the Board in February and the legislative eBoard), while the variable account earned 7.49%. For the first time, there was an explanation offered for the significant discrepancy in the earnings between the regular account and the variable. The regular fund is widely diversified and includes domestic equities, foreign and international equities, alternative equities, and real estate. The variable is solely invested in domestic equities. Domestic equity returns were very close in both regular and variable accounts; however, the returns on alternative equities, international equities, and real estate were 44%, 39%, and 28% respectively, dramatically increasing the return on the regular side of the ledger. This is an unusual circumstance, but 2005 turned out to be an unusual year.

Finally, in a pre-meeting conversation, I learned that the PERS Coalition has amended its class action lawsuit (Arken et al v. City of Portland et al) to include actions taken by the PERS Board at today's meeting. The amended complaint will be filed on Monday January 30, 2006.

This will be my last post for the next week. I'm off to San Francisco to accompany my wife through another surgery (her last). We hope to return to a semi-normal life by the end of next week. Stay tuned for more PERS news.

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