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Monday, July 28, 2008

Lawyers, Guns, and Money

It has been awhile since I used this particular title, but it seems appropriate again.

There has been considerable conversation both back channel and in the two newsgroups that cover Oregon PERS about the deductions for attorney fees on August 1, 2008. From the postings, it appears that the size of the deductions bear only a slight relationship to the size of the benefit. Obviously there is a fixed amount of money needed, and there is *some* (unknown) basis for apportioning that amount over the 21,000 retirees required to chip in. But, the relationship between the attorney fees, the ostensible 8/1/04 COLA and the 8/1/2008 COLA are highly variable. It has taken me a bit of time to figure out what is going on. I haven't determined precisely what influences the amounts, but these are facts I do know:

For retirees who retired prior to 8/1/2002, the 8/1/2004 COLA was 2% and the 8/1/2008 COLA will be 2% (This is slightly incorrect. Retirees between 7/1/00 and 7/1/01 get 2%; those between 8/1/01 and 7/1/02 get 1.73%. An alert reader brought this to my attention. Thanks Jim.)

For retirees who retired between 8/1/2002 and 3/1/2004, the 8/1/04 COLA was 1.36% and the 8/1/08 COLA will be 2%.

Some retirees have been "adjusted" due to the Strunk/Eugene remediation. This adjustment means that the 1999 earnings have been reduced downward to 11.33%, the final account balance duly adjusted, and the base benefit refigured. These people also have had all COLAs applied from first eligible date through to 2007 and will be getting the 2% on 8/1/08.

Some retirees have not been adjusted and are still receiving the fixed benefit, although they got a COLA on 8/1/07 and will, presumably, receive one on 8/1/08.

Taken together, these facts produce some disparities in the relationship between the attorney fee reduction amount, the 8/1/04 COLA, and the 8/1/08 COLA. The bottom line is that I've seen examples of retirees whose attorney fee reduction exceeds the 8/1/08 COLA (which means that on 8/1/08, their actual benefit will be reduced for that one month), retirees whose attorney fee reduction is only slightly less than the 8/1/08 COLA (which means that the August check will be almost the same as the 7/1/08 check), and finally, there are cases like mine, in which the 8/1/08 COLA is almost double the amount of the attorney fee reduction and will receive an 8/1/08 check larger than the 7/1/08 check. In all cases, the attorney fee reduction is ONLY FOR THE MONTH OF AUGUST. Normal checks resume again on September 1, 2008.

One thing is obvious. PERS explanation of how the attorney fee reductions affect individuals is both simplistic and suspect. It isn't the simple relationship explained in the reduction letter. All sorts of variables come into play. Rather than spell this out for the Supreme Court or for us, we are left to PERS' machinations to trust the calculations. They cannot be replicated without further information. So far, PERS hasn't offered a clear explanation of how these reductions were calculated, and we're again left wondering just exactly what PERS is doing. I suppose this de rigeur for those folks. Although PERS' motto is "transparency", this latest actions clearly fails the test for even remote clarity. Opaque would be too kind.

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