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Tuesday, April 01, 2008

Money

PERS posted the final earnings for 2007 yesterday. Tier 1 regular accounts were credited at 7.97% on actual earnings of 10.10%. Tier 2 (and presumably IAP) members received 9.47%. The variable account earnings were a measly 1.75%. Tier 1 members may be puzzled why the credited earnings rate is less than 8%, the Tier 1 rate guarantee. Recall that the PERS Board and the PERS Coalition agreed that legal expenses attributable to the Strunk case would be apportioned over actives, inactives, and retirees in proportion to the actual benefits received as a result of the Strunk litigation. Tier 1 active accounts were assessed 0.03%, which explains the discrepancy (8.00% - 0.03% = 7.97%). The riskier variable account took a beating in the last quarter of 2007 and the final crediting reflects that. Retirees will see their 2008 COLA reduced by a similar amount to the Tier 1 reduction in July 2008.

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