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Saturday, September 29, 2007

Hold On

I'm afraid the Police and Fire posts got a bit out of hand. My post yesterday netted me a few copies of the invoices in which the retirees had raised questions about PERS' reductions. After reviewing all these invoices very carefully, I've concluded that there's no there there. To understand this, you need to keep two different facts completely separate. The Strunk/Eugene remediation plan involves two DIFFERENT reductions that are only tangentially related. The first reduction involves adjusting the retiree's benefit to WHAT IT SHOULD HAVE BEEN if the 1999 earnings crediting had been posted at 11.33% instead of 20%. This requires PERS to go back to the date of the member's retirement adjust the account balance AT RETIREMENT to what it should have been if 11.33% had been credited instead of 20% and then refiguring the benefit on that basis. That benefit is called the adjusted benefit. To the adjusted benefit PERS then adds the COLAs from that point to the date of adjustment. That is now the new benefit. If that new benefit is greater than your current benefit, then you get the higher benefit. If that benefit is less than your current benefit, your benefit is reduced. The second reduction involves the overpayment of benefits (as a result of the 1999 20% earnings credit instead of 11.33%) from the date of retirement until the date of adjustment. For some retirees, the COLA on the adjusted benefit produces a "cross over" where the adjusted benefit exceeds the current benefit. When this happens, the overpayment amount is reduced by the amount underpaid after the cross-over. The OVERPAYMENT amount is subject to the Actuarial Reduction Method whereby PERS agrees to accept repayment of your OVERPAYMENT by reducing your monthly benefit by an amount based on your life expectancy and that of your beneficiary, if one is germane to your benefit.

With that explanation behind us, I can state confidently that PERS is NOT collecting or even documenting the actuarial reduction amount based on the "overpayment". They have been enjoined from doing that by Judge Kantor in the Arken/Robinson cases. The repayment amount has NO bearing on the amount of reductions Police and Fire members have been seeing on their recent invoices. The reduction of benefits being reported is ONLY the benefit reduction resulting from PERS continuing to adjust benefits (and account balances) to reflect the 11.33% crediting for 1999. Unfortunately, some Police and Fire members just happen to be in a situation where they were nowhere near the "cross over point" and were still being overpaid their benefits.

Apropos of those adjustments to benefits, PERS believes -- and so stated to Judge Kantor during the Status Conference on August 16, 2007 -- that Judge Kantor's injunction did not apply to those adjustments. Judge Kantor, in his (slightly incredulous) reply, let PERS attorneys know in no uncertain terms that he would clarify his final order so that PERS would know and understand exactly what he meant in his injunction. We are still waiting for Judge Kantor to issue that and, hopefully, stop PERS dead in its tracks and force them to reverse any adverse actions taken so far. Moreover, we hope that he will require PERS to follow the Supreme Court's ruling in the Strunk case that would restore COLA to the "fixed benefit" (the one you were receiving before you were invoiced). The Supreme Court was, in my opinion, quite clear on that order, but PERS disagrees and refuses to implement that. The Arken case raises that very issue and Judge Kantor is going to have to confront the Supreme Court's ruling directly in his final order. Whether PERS finds a way to parse the order to its advantage remains to be seen. One thing is certain, however. PERS will appeal Judge Kantor's ruling. So hold on to your hats, glasses, pens, computers, and iPods. It's gonna be a bumpy ride for the next couple of years.

Friday, September 28, 2007

Who'll Stop the Rain

A couple of days ago I wrote about Police and Fire retirees starting to get invoiced. I've now had emails from about two dozen P & F members who have been invoiced in the past month or so. Each of the emails raises the same problem. Although PERS is NOT reducing benefits to cover the repayment of benefits alleged to have been paid in error, PERS is including the amount the member owes and the actuarial reduction amount that WILL BE deducted monthly if PERS is authorized by the Courts to resume collections. The problem is that Police and Fire retirees tend to retire at younger ages and the ARM amounts included on their invoices are completely out of sync with what I've seen for General Service members who are similarly aged at the time of invoice. Controlling for variables such as option and beneficiary age, these amounts SEEM excessively high. I had assumed that PERS had different ARM factors for Police and Fire. PERS disabused me today of that assumption; Police and Fire retirees are subject to the same ARM factors as General Service members. This deepens the mystery. I'd like to be of help here but in order to do so I need to see about a half a dozen examples of real invoices to determine what pattern holds (if any) and whether or not PERS is doing something different than what they say they are doing. The only way this will happen is if recently invoiced Police and Fire (and General Service as well) retirees are willing to share a copy of their invoices with me. I absolutely, positively do not want to see any personal information (no addresses, social security numbers, account numbers or anything else of a personal identification nature) and these invoices can be FAXED to me with all that information blacked out. It isn't relevant. My plan is to use the software I have as well as some other information to see if I can reconstruct why and how PERS is invoicing members under the injunction. If it appears that there is a disjunction between what PERS is saying and what PERS is doing, I'm happy to contact the appropriate lawyers or provide you with information to contact your own representatives on the PERS Coalition. If you are willing to help out, please contact me via email so that I can provide you with my FAX number or other means of contact. Thanks for your help.

Thursday, September 27, 2007

I'll Sleep When I'm Dead

In the spirit of "World Have Your Say" on NPR, I've decided that for a short period of time I'm going to open this blog up to comments. Shortly after I post this I will turn on comments and let readers "have their say". To reduce the SPAM problem, users will have to register to post comments, and drive-by commenters will be moderated. If this turns out to be a successful addition to the blog, I will keep comments on indefinitely. But contrary to the title of the post, I DO plan to sleep, long before I'm dead. So if this gets to be a burden, comments will be turned off. I'm actually looking forward to reader comments, so have at them. I ask only that your comments be somehow related to the post itself. Use your own judgement as to what is and isn't germane.

Message In a Bottle

Judging from my email in the past two weeks, PERS must have begun its campaign of adjusting member benefits of retired Police and Fire. I've heard from about a dozen P&F retirees whose benefit adjustments have been large (negative) and whose actuarial recovery amounts are significantly higher than general service members who owe the same amount and are approximately the same age at implementation. The reason for this is obvious - at least to me. PERS uses different actuarial tables for P & F. Undoubtedly, they also use different actuarial recovery tables for P & F retirees. These recovery tables clearly expect P & F members to have shorter life expectancies and therefore the recovery period for overpayments is expected to be shorter. Consequently the adjustment to the regular benefit is greater (shorter life expectancy) and the payback amount by the ARM is significantly larger. The end result is that P & F members are getting hit significantly harder than general service retirees.

As soon as I get copies of the ARM tables for P & F members, I will begin to adjust my program so that P & F members can get a closer estimate of their adjusted benefits than they can now. Hopefully, Judge Kantor's injunction will hold upon review. At least this way the payback amount won't play into P & F benefits (or any one else's for that matter) until Arken and Robinson run their course through the courts.

Wednesday, September 26, 2007

Fixing a Hole

I've been carrying on an extended email conversation with a recent PERS retiree (I'll call her "Linda", which is not her real name). Linda's issue seemed to be quite subtle and quite complicated at the same time. She worked for a PERS employer in her early years, left to work in the private sector, and then returned to work in the early years of this decade, before all the legislation. She recently decided it was time to retire. Linda kept impeccable records and is a CPA by training. Consequently, when she got her Notice of Entitlement followed by her first check, she was incensed as the account balance that PERS used was significantly different from what Linda calculated. She had every account statement going back to the 1970's and her calculations of her at-retirement account balance couldn't have been off by more than a few pennies, which I verified independently. Her NOE contained no useful information (except for the final account balance, significantly different from hers and mine), and phone calls to PERS were met with a "wall of words" by a whole bunch of uninformed representatives. After poring over her numbers, nothing popped out to me except a possible PERS calculation error. But how? Where? Linda and I communicated regularly and I finally suggested she contact David Crosley at PERS to get more specific information. What exactly was her regular account balance at retirement? What exactly was her variable balance at retirement? David supplied her with her regular account balance at retirement, which turned out to be exactly what her account balance used for her retirement benefit was. Where was her variable account? Linda and I met this morning. Before we met, she emailed David Crosley again to ask what her variable account balance was when she retired. She knew that she had selected the option to transfer her variable account at retirement, but variable accounts are first figured as part of the retirement package and then added to the regular balance before determining final benefits. Linda understood this as well as I do. No mystery here. About a half hour before Linda and I met, she heard from David with the astounding news that she had NO variable account to include in her retirement. This was news to Linda since she had account statements all the way through 2006 showing a variable account earning interest at the terrific rates (except for the sorry years in 2001 and 2002). By the time we met, Linda had figured out the problem and began to work towards a remedy. It seems that back in 2002, Linda requested a one-time variable transfer. Linda NEVER got any response from PERS and considered that she had "Failed" the test. Her instincts were confirmed when she continued to get statements from PERS showing both a regular account earning the fixed 8.0% and a variable account earning market rates in 2003, 2004, 2005, and 2006 - the last statements she would ever get. Linda is also more well-trained in finances than I ever was, and she went to the Salem office in early 2004 to double-check on her hunch. This was confirmed when PERS printed for her a statement of account that showed she failed the variable at regular test and was thus still in the variable. After that, it became a moot point for Linda. The law changed, and the market started to recover. She never thought anything about this until today when she was astounded to find out that contrary to all evidence provided her (annual account statements, interim account statements directly related to the OTVT), she was moved out of the variable account as of 1/1/2003. Apparently, when she filed her retirement papers, PERS changed its mind, moved her out of the variable account retroactively, and reduced her account by about $15000. Needless to say, Linda is now preparing her attempt to fix this hole.

This sorry story is another sad example of how bad PERS has become. The suspicions have been there for a very long time. Bad customer service, lack of notification, unexpected unpleasant and costly surprises await many retirees or near-retirees around every corner. And PERS has the gall to put out customer service surveys. Why bother? The more things change, the worse it gets. And the truly sad thing is that members and retirees effectively pay for all this non-service. No wonder that PERS is truly one of the most hated agencies right now. And I can't say that I blame anyone for the antipathy. Cases like Linda's make one want to become Howard Beale screaming "we're mad as hell and we're not going to take this anymore".

Tuesday, September 25, 2007

Young Folks

Take heed. OPRI - Oregon Public Retirees Inc - is poised for some change. Currently, the OPRI Board consists of 3 "window retirees". That is not enough to effect any change in an organization whose bylaws were developed in the very early 1990's and reflect a style no longer relevant in today's electronically connected world. Several have tried to remake OPRI as more and more retirees piled up in the late 1990's and early 2000's. OPRI was not, and to some extent still isn't, entirely relevant to younger retirees. So long as the OPRI Board is controlled by members who are not well-versed and well-aware of issues germane to today's retirees, including all of the legislative changes and the litigation that is taking benefits away from the already-retired, OPRI will continue to be mostly irrelevant. But right now, the winds of change may be upon us. Two OPRI Board positions come vacant and will be selected by the current Board. One position is for a "state retiree" (a member who worked for any State of Oregon agency except Higher Education); the other position is for someone who worked for local school districts. Both positions expire in October. The current occupant of the local school district position, Dwayne Osburn, will not seek reappointment. It appears that the current occupant of the "state employee" position, Kathleen Beaufait, will seek reappointment. If you are interested -- and I strongly encourage someone from each area to BE interest -- please send a letter indicating your background and your interest to serving on the OPRI Board. Send your letter to: OPRI, P.O. Box 12945, Salem, OR 97309.

I cannot stress too strongly how important these two positions are. If it were to happen that "window retirees" or later were to be appointed to these two positions, recent retirees would control the OPRI Board. At that point it would be possible to get rid of some archaic by laws and implement some changes that would result in OPRI becoming more relevant to us "young folks". Right now, OPRI doesn't really represent our interests very well. It was once a feared organization with a reputation for getting retirees what they needed. Now, they're mostly ignored. It is time to restore the fear; it is time for OPRI to become relevant and to represent a whole new generation of retirees whose needs and interests differ in critical ways from the original founders of the organization. It is fine to honor our predecessors, but the time has come when we must cut the cords that bind the organization to outdated rules and attitudes.

Please, please, please. If you come from one of the relevant organizations and have a sincere desire to make OPRI relevant and feared, as it once was, please consider placing your name in nomination for one of the two vacancies. It is important now more than ever.

Wednesday, September 19, 2007

The Great Escape

Awhile back I wrote a detailed letter (email) to Greg Macpherson, who has announced his candidacy for Oregon's Attorney General. Macpherson is currently a representative in the Oregon House and happens to have represented my district (in both of my houses) since his election in 2002. In his "real" life, Greg is a lawyer with Stoel, Rives specializing in pension law and private benefit plans. It is that background that thrust him onto center stage in the 2003 Legislative session as Governor Kulongoski's "go to" guy on PERS reform. While Bill Gary's fingerprints are all over HB 2003 and HB 2004, Macpherson, with Kulongoski's blessing, if not his direct input, was instrumental in hammering out the details of HB 2003 and HB 2004 that didn't seem to be going anywhere under Gary's orchestration. In addition, it was Macpherson who helped grease the skids for the passage of HB 2020, which created the new "Tier 3" pension plan as well as the loathed IAP for current Tier 1 and Tier 2 members. It is Macpherson who helped the Oregon Senate General Government Committee, under Tony Corchoran, hammer out the compromise that became HB 2003, HB 2004, HB 2020, and HB 3020 (the bill that corrects all sorts of technical issues and errors that arose in HB 2003 and HB 2004 after passage). Such artful compromises as the "break in service" language that has confounded and confused both PERS and everyone else since 2003 have Rep. Macpherson's fingerprints all over it. Moreover, while Macpherson was probably not directly responsible, he participated in the travesty known as the COLA freeze and the 0% return for Tier 1 members until the deficit was paid out. Both of these were rejected by the Oregon Supreme Court. While PERS has reinstated the 8% guarantee for active members for 2003 and 2004, PERS has steadfastly refused to implement the Supreme Court's ruling in the Sartain case (part of Strunk et al). This was the ruling that rejected the COLA freeze as a breach of contract and held that the Legislature had defined a "new" benefit, called the "fixed benefit" that cannot be said to contain errors. Representative Macpherson was certainly involved in orchestrating this fiasco and if he is a pension lawyer, he can't be very smart or principled as to have NOT seen the inherent contractual violation. Furthermore, he certainly was not anxious to listen to the current Oregon Attorney General or the Legislative Counsel who both advised that these parts of HB 2003 (and 2004) were not going to survive a legal challenge in the Oregon Supreme Court.

So, I write all this in an email to Representative Macpherson. I explain that I can't support his candidacy for Oregon Attorney General and that I plan to work personally and through my blog to support his opponent (not then announced), John Kroger - a Lewis and Clark criminal law professor and former Federal Prosecutor. Macpherson writes me this "personal" response that more or less says: look, you don't understand how complicated this is. We (the legislature) tried to write legislation that wouldn't go back into retirees' accounts (true enough as far as it goes), but we didn't expect all this litigation.

HELLO!!!!!!! You want to be Attorney General? You want to give advice to the Legislature about the legality of proposed legislation and you can't even read a simple and straightforward letter. You can't grasp what I'm saying. I am blaming the original legislation for this entire mess, and you're telling me that your heart was in the right place. Bullshit!! You don't want to accept responsibility for failing to take proper legal advice. You don't want to accept the blame for the current fiasco. You can't think of any way to bring all this to a close in a way that will remove most of the basis for litigation.

Welcome John Kroger. I'll be posting more about him in a future post. In the maintain, let's watch Representative Macpherson try to plan his great escape from both the Legislature and the AG's office as PERS retirees and members thoroughly thrash his chances to succeed the quiet, soft-spoken, but incredibly prescient Hardy Myers. Greg, you aren't any Hardy. You aren't even Ed Meese. You're arrogant and you deserve to go. Bye, bye, bye.

Saturday, September 15, 2007

Cleanup Time

I've had so many emails from faithful PERS readers asking to see a picture of our new puppy, Emma, that I thought I'd take time out from my regular posts to share a recent photo of said creature. The title of this entry says it all. Here is a picture of the little monster - all 21 pounds of sheer muscle and willpower at 11 (now 12) weeks old .

Monday, September 10, 2007

The Devil's Been Busy

Not much new to report here in PERSland. As I had predicted elsewhere, PERS has finally gotten its act together and posted a much more detailed explanation of why the net (take home) September 1, 2007 check (and those for the rest of the year) increased by either $14.04 or $28.08 (except for out-of-staters) and a few others who got odd increases. You can read about the increase here.

Wednesday, September 05, 2007

In Repair

Well, I'm back from vacation more tired than I left. I forgot to mention that our final act during our vacation was to pick up a new English (Yellow) Labrador puppy. "Emma" is certainly an entertaining and tiring dog. But she is as smart as a whip and is nearly completely crate-trained and is almost making it completely through the night without requiring an outside "potty" break. She's certainly been an easy, if energetic, dog so far. And for those of you who didn't know this already, Curtis completely beat my ass into a pulp on the Sage Springs Racquet Club courts. Curtis was a delightful companion and a gracious winner.

September 1 brought a new surprise from PERS - a completely unexpected, unexplained, and peculiar increase in net benefits for many retirees. So far, the only explanation PERS has offered is that during the year from January through August, they were overwithholding State Income tax for retirees. Somehow they found this mistake and in the September 1 check nearly everyone's net amount increase by one of four amounts (rounded here for convenience) - $11, $22, $14, or $28 (about 200 tracking points now). I have had only one example each of the first two numbers and only have a theory about why they exist. Since I have too few data points to confirm, I'll wait to see IF PERS offers up any other explanation for these odd amounts. The other two amounts - $14 and $28 - consistently and without fail have gone to either people claiming SINGLE ($14) or MARRIED ($28). No other variable (such as number of exemptions or deductions claimed on the Federal W-4) seems to matter. Now it happens that Oregon's per exemption rate for 2007 is $165 annually. Broken up into monthly chunks it turns out that $14 (rounded down) is the per exemption per month rate (Single = 1 Automatic Exemption; Married = 2 Automatic Exemptions). That would explain the $14 and $28 increases. However, currently unexplained are the first two numbers I've seen. If you have any other amount besides this one, please let me know. I'm dying to find out what is really going on here. To determine what your increase is take your August 1, 2007 take home and subtract it from your September 1, 2007 take home benefit. That's your net increase in benefits.

To dispel an opt-repeated canard, this is NOT a benefit increase associated with the COLA or any other piece of litigation. This is simply a computer programming error that PERS just discovered. There are plenty of conspiracy theories floating around about the timing of all this, but I'd just prefer to wait to see what PERS does to explain these changes more fully.

Note added 9/5: There are NO retirees reporting an $11 increase. That retiree recalculated take home and discovered a math error. That one is also single and $14. That leaves but one example that is an outlier - the $22 report. I suspect that, too, is an error. In all likelihood, that change is actually $28 and the person is married.