In 2003, the Legislature passed a bunch of reforms that affected PERS members and retirees in a series of negative ways. Much litigation followed and preceded the Legislature's actions. One of the changes that resulted primarily from the City of Eugene case and the "settlement" of said case, involved a change in the way PERS computed the employer match to variable account earnings at retirement. The bottom line is that when this passed, many members who were expecting dollar for dollar matches of their variable accounts discovered that the new rules required the employers only to match the variable accounts to the extent that the earnings had been in the regular account. During the 90's and again for the past three or four years, members were losing money at retirement due to this change in the matching requirements. Fast forward to 2008. In 2008, the variable accounts posted a -43% loss - a staggering loss by any criteria. While this is really bad news, it actually turns out that this loss won't be realized at retirement, especially if you retire in 2009 or 2010. Why? Because the shoe is on the other foot this time. Because the employers are required to match the variable earnings with the earnings only on the regular, members retiring shortly will receive an employer match on 2008 earnings of +8% - a 51% gain compared to actual earnings. This means that the net effect of employee earnings (-43%) and employer match (8%) will produce a slight net gain for members in the variable for 2008. So instead of having to match a -43% loss (a bonus for the employers), the employers now get hoist on their own petards and have to pony up an 8% gain for the variable accounts in 2008. Somehow, I think that the savings to the employers over the past few years will be completely wiped out by 2008.
This irony amuses me no end. The cleverness of Judge Lipscomb and Bill Gary have come back big-time to bite the employers on the butt at a time when they can least afford to have this happen. It tickles me to see these folks slowly twisting in the wind. Your cleverness, your brilliance, and your eagerness to sock it to PERS members and retirees has finally come back to haunt you. So sad.
2 comments:
While agreeing that giving up 8 to 10 percent is not something PERS retirees should do, I think it's fair to point out that Krieger is a PERS retiree himself. He was a state police officer, mostly a fish and game officer. So, I won't impugn his motives.
I have recently retired and am waiting for my first "payment" and this situation is of interest to me as I had a small portion in the variable account. I contributed to the variable account in 1978 & 1979 only and my research is leading me to believe that since I did not contribute to the account after 1982, I will not qualify for the once penalty now benefit of using the fixed account percentage when computing the employer match. Is this your understanding as well?
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