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Wednesday, January 17, 2007

Caring is Creepy

During last week's PERS Board meeting, PERS staff reported that the average adjustment to retiree benefits was approximately 1% after the invoicing. This figure was left unexplained and so as a public service, I will attempt to explain this for you. PERS' report is technically correct, but is distracting. The benefit adjustment (plus or minus 1%) uses the CURRENT benefit the member is receiving as the basis for the 1% figure. Once you factor in the recalculated member balance for 1999 at 11.33% earnings and compound it forward to the date of retirement, take the "correct" benefit for the option chosen, and they apply relevant cost of living adjustments (COLA) to the adjusted benefit, figure out the amount PERS believes you've been overpaid, applies the actuarial adjustment, and nets out the benefit, the final benefit is within 1% of the amount you're currently receiving. PERS conveniently ignores the actual words of the Strunk ruling in 2005 and then makes you feel good by telling you it is only a 1% change (for the better or for the worse). I figure that my current benefit has already been reduced by frozen COLA to the tune of about 7% (compounded), so I'm guessing that after the adjustment I'll either be down 8% or 6% depending on where I am in the adjusted benefit-plus-COLA cycle. This is a pretty good snow job - at least as good as the WMD-in-Saddam's-basement scare a few years ago. With friends like these ....

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