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Monday, January 05, 2009
Pacing the Cage
Nothing is new in the PERS litigation arena. Judge Kantor is still sitting on the White case, and the Arken case is now before the Oregon Court of Appeals awaiting a date for a hearing. Robinson is still tied up with the question of whether it should be certified as a class action.
Retirees holding money in variable accounts will be paying the piper on February 1, 2009, when PERS adjusts the variable portion of the benefit to reflect performance from November 1, 2007 to October 31, 2008. It is likely to be quite dismal with estimates ranging to nearly -40%. Some people I know are girding for a significant benefit cut. I suppose the good news is that not too many retirees opt for the variable in retirement, and PERS limits the percentage of your retirement check that can derive from variable. Nevertheless, this *might* come as a shock to some PERS members who haven't been following the stock market too closely.
At the end of January, the Bureau of Labor Statistics will release the annual CPI for the Portland-Salem area. This is the number PERS uses to determine the annual COLA adjustment for all retirees. The best estimates are that the CPI will be in the low 1% area, which means that the "official" COLA will be less than 2%. However, for most retirees, prior years' COLAs have been maxed out at 2%, while the CPI exceeded 2%. When that happens, PERS "banks" the excess over 2% for the retirees and then draws on the "bank" to backfill in years when the COLA is less than 2%. So, except for a small number of retirees, most everyone should see a 2% increase this year. Possible exceptions are people who retired between August 1, 2007 and June 1, 2009. You will see either the actual CPI, or a small bump over the CPI depending on when you retired. The actual amounts will be known in February for everyone.