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Sunday, May 13, 2007

Looking at the World from the Bottom of a Well

The blog entries for these last two months have been dominated by various tales of woe from retirees caught in the snare of PERS Strunk/Eugene remediation team. One group that I've singled out for special care has been the not-so-small group of retirees who had the misfortune to retire after 3/1/04 - not window retirees - whose benefit was calculated on the basis of the "lookback". To refresh memories, the Legislature implemented the "lookback" as part of HB 2004, which mandated that PERS implement new mortality tables every two years as part of an ongoing effort to keep the tables current with actual experience. To "protect" a small group of individuals whose service occurred virtually entirely under one set of mortality tables, the Legislature offered a small sop. PERS was to calculate the benefit as if the individual had retired on 6/30/03, use the account balance at that time, use current service, and compute the benefit using mortality tables last updated in 1996 (sometimes called the 1978 tables for reasons that elude me). If the "lookback" benefit was higher than the benefit calculated using the current (at retirement) account balance and the newly implemented mortality tables, the retiree got the "lookback" benefit; otherwise the benefit from the new mortality tables.

When PERS set out to do the Strunk/Eugene remediation, it decided that it would completely recalculate the benefit by reviewing the entire employment history to make certain that as the new computer system was phased in, it began with entirely accurate information. As a side effect of this, the Strunk/Eugene remediation also adjusted the 1999 account balance to reflect the revised earnings crediting for 1999 (from 20% to 11.33%), and to recalulate 2003 and 2004 balances using 8% earnings rather than the 0% mandated by the legislature and struck down by the Oregon Supreme Court. Unbeknownst to most, the one group for which this recalculation was about to produce a most curious and deleterious effect was the "lookback" group. The "lookback" recipients had benefitted from the 20% in 1999 and received a pro-rate of 8% for 2003 at the time of retirement. No further additions occurred to their accounts. When the recalculations occurred, a curious thing happened. The "lookback" was no longer the winning benefit method. As PERS is obligated by statute to give the highest benefit to an individual, this should a moment for happy celebration. Unfortunately, "winners" in this situation found themselves with a significantly higher at retirement account balance, a lower balance for the "lookback", and a higher benefit from the non-"lookback". Paradoxically, the higher benefit is lower than the current benefit. Thus, "lookback" winners have been turned into big losers with a lower adjusted benefit and a higher repayment amount than they ever imagined. They expected a check; instead they got an invoice for a lot of money and a monthly benefit sizeably lower than their former benefit. Moreover, because these people were outside the "window", they had no COLA freeze dollars to rely on to offset some of the debt.

At my encouragement, several of my correspondents did two things: (a) appealed to PERS following the procedures described in the invoice and (b) communicated directly with Greg Hartman. To date, there has been no response from PERS, and very discouraging responses from Greg Hartman. In a nutshell, unless the White case wins and holds through appeals, there is no litigation potential for these folks. Talk about your caught between a rock and a hard place. Hence the title for my entry today.

I wonder how many other surprises still lurk out there? Back to celebrating Mother's Day. A reason to take pictures, look at a slide show, and not think about PERS for half a day.

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