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Thursday, May 18, 2006

Hands Clean

Robert Gourley, of the SEIU retirees chapter, reported that he and others met with Dawn Morgan this morning in Albany (see "Tell Me Why?"). Robert specifically asked Dawn my question about the 1999 Board and the 1999 earnings crediting decision. According to Robert, Dawn said: "I don't remember getting any specific advice about how to distribute the earnings. What we did get advice about was about putting anything into the contingency reserve account. We spent a lot of time trying to figure out whether to put money into this account, and if so, how much. In the end the attorneys advised against funding the account. The PERS statute, which had been in place since near the beginning of the fund, states that the contingency reserve could only be used if the fund was unable to pay benefits. Because the fund is now so large that it is inconceivable that it would be unable to pay benefits, the lawyers said that any money put into the reserve could not be taken out. Interestingly enough, this information was never allowed into the court record. Had it been allowed, I'm confident that Judge Lipscomb would not have found that the Board had breached its fiduciary duty. That would have meant that they couldn't ask for the 1999 earnings back from retirees. Because the new PERS Board was prevented from having any contact with the old Board, they didn't have any way of knowing that this was the case. The settlement that was struck prohibited the information entering the record at the appeal level, too. This should be of interest to anyone trying to understand the Board's actions, or anyway that's what I think. Dawn"

This is very helpful piece of the historical record that has been missing from the discussions up-to-now. Many of us suspected that the Board's actions in crediting the 20% for 1999 was completely within the Board's discretion and that they acted in accordance with legal advice given at the time. Dawn's information indicates that there was virtually no discussion of the earnings crediting rate, but instead a discussion of the need to, or not, fund the contingency reserve. This puts the Board's actions in a slightly different perspective, but also reinforce the claim that there was nothing inappropriate about their actions in 2000. It's nice to see this information out in some form. The state, the employers, and PERS have been working double-overtime to prevent this information from reaching the courts. In so doing, they've permitted a legal travesty. Hopefully, we'll eventually get what we were promised. I'm not holding my breath. Blue is not a good color for me.

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