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Thursday, July 16, 2009

Tie Me At The Crossroads

For those of you wondering, Yahoo Newsgroups are down for routine maintenance today. It isn't clear when they will be back up, but rather than waiting, I'm going to try and report the latest news from the Board meeting as well as elsewhere. First off, the good news: As noted in my previous, brief message, the PERB voted today to retain the 8% "assumed rate" so that the "guarantee" will not change anytime in the next two years. That ought to reassure anyone near retirement, but not quite ready for retirement that earnings on Tier 1 account balances will not go down. I wish I could just stop here. It would be time to celebrate.

Unfortunately, along with the good news comes some not-so-good news. My friends at the meeting today report that Mercer and the Board threw a real curveball at both members and employers today when they decided to change the methodology used to construct the mortality tables. To make a long story short (and hopefully simple), the Board adopted the Mercer recommendation to move from "static mortality" to "generational mortality". What this does is to create a separate table for each whole number age (e.g. 60, 62, 67), and is based on the assumption that "anticipates mortality improvements on a generational basis". In other words, the assumption is that each age cohort is expected to live slightly longer than the same age might have lived a few years ago. This is a very tricky assumption, but is used by actuaries around the country. You can read more about this type of construction here and here. Mercer predicts that this will lower Money Match benefits by about 2% (don't know whether this is across the board or tails off by age). This will also increase employer rates as full formula begins to overtake Money Match as the predominant mode of retirement.

In short, PERB seemed to be giving with one hand, and taking away with the other. I have no idea of how this will play out until I see the first set of mortality tables (due for presentation at the November meeting) constructed under this new assumption. It is doubtful that people waiting to retire after January 1, 2010 will benefit from these changes. At the same time, it isn't clear how much impact they will really have. The change in methodology obscures what used to be a fairly simple set of rules.

Finally, in a piece of offbeat news, a correspondent pointed me to a piece in this afternoon's OregonLive. Our favorite judge, Henry Kantor, is on Senator Ron Wyden's short list for two vacancies in the federal judiciary. Also on the short list is current Supreme Court Justice (and friend of PERS members/retirees) Durham. Several others were on the list. Five candidates will be interviewed next month with Senator Wyden passing on his recommendations to the President for his nominations. God help us all if Judge Kantor wins this appointment. He could singlehandedly slow down the Federal Judiciary to an utter crawl - a challenge that few before him have managed to do.

Unless there are updates or clarifications about the Board meeting, I don't anticipate any more posts until after August 1. I'm going out of the country and will have very limited access to email and to the intertubes. While I'm gone, everybody needs to behave.

Oh Happy Day

Not surprisingly the PERB voted today to keep the assumed rate at 8%. The vote was 4-1, with everyone's favorite public employee, Brenda Rocklin voting against. More when time permits.

High Hopes and Heartache

As luck would have it, I will be unable to attend today's PERB meeting. The primary reason for attending was to listen to the actuary (Mercer) present the second part of the economic assumptions for the 2008 experience study. Fortunately for all of us, the PERS website has already posted the study, and it contains enough information for us to catch the feel of what is recommended. The only element of interest to most actives and near retirees is what Mercer would recommend in terms of the Assumed Interest Rate. On pages 5 and 23 of the report, they make their recommendation. If the PERB sticks to the Mercer recommendation alone, the Assumed Interest Rate would decrease to 7.5%. However, Mercer presents other data from other investment managers and actuarial firms that would recommend the assumed rate at anywhere from 7.5% to 8.5%. The median, modal, and mean of assumed rates for 125 large public sector funds remains at 8%. This leads me to believe, as I did after the May meeting, that the Board will probably elect to do nothing about the assumed rate and leave it at 8%. This isn't a guarantee, of course. Today's meeting will probably seal the deal on the rate for the next two years. Whatever decision is made today will have an impact on the new actuarial equivalency factors (AEF) that will be adopted at the Board's November meeting. For anyone wanting to beat any changes, retirement would have to occur before the end of the 2009 calendar year. Of course, if the Board doesn't change the assumed rate, then there would be no compelling reason to retire before the end of the year unless you were already planning to do so. My advice, pending additional information, would be to plan for high hopes and prepare for heartache. I will update this post tonight after someone at the meeting confirms for me what the Board actually decides to do today.

Wednesday, July 15, 2009


Sometime between yesterday and this morning, we crossed over the 700,000 viewer mark. Thank you all for keeping this blog going with your interest and your comments. Alas, I fear its need will never end.

Tuesday, July 14, 2009

Clap For the Killers

OK, not killers literally, but close. We've been ranting on this blog for weeks now to get your interest in writing or calling the Governor to emphasize how important SB 897 is to all of us retirees and near retirees. Perhaps a true story, ongoing as I write, will motivate you.

Heres the story. A former municipal law enforcement member retired in 2000. At the time of his retirement, he looked into ODS as a Health Insurance Program for retirees. He was quoted a price, which seemed high at the time, but offered a good program. This retiree then signed up for the ODS program. At the time of this decision, a PERS employee entered his status wrongly and posted him as a State of Oregon retiree, eligible for the RHIPA subsidy. Unfortunately, no one in PERS bothered to tell this retiree that he was misclassified and that not enough was being withheld to cover the true cost of his health insurance. During a routine audit in 2009 (yes, this year), PERS discovered the error and - you guessed it - billed the retiree for an additional $9000 to cover the cost of benefits he already thought he was paying for. He started the appeal process and has had tons of paperwork to fill out to begin the appeals process. His case appeal is simple. This wasn't HIS error and HE shouldn't be responsible for paying it. A PERS employee made the error and PERS should cover the cost of the error from their contingency fund. This follows the old tried and true principle of "you break it, you pay for it".

This past week, PERS held a telephone conference with the retiree and offered (generously NOT) to allow the retiree a 10 year time frame to pay the $9100 IF he drops the appeal. Otherwise, failure to take the deal and subsequent loss of the appeal would result in him having to repay PERS over a two year period of time. And the member has until this coming Friday to make his decision.

It is this kind of outrage that SB 897 tries to prevent. Instead of holding a gun to a retiree's head 9 years later, it would establish a "data lock" that would prevent PERS from coming after members for errors like these.

Please, I beg you to call the Governor and ask him to support SB 897. Members like the one I'm describing, and members like Kay Bell should not have to put up with the nonsense like this. No one should have to live in perpetual fear that their benefit will be adjusted because some clutzy, incompetent, careless, or sloppy clerk entered data incorrectly.

Saturday, July 11, 2009

Wait No More

On behalf of Kay Bell and others who have been really harmed by PERS misinformation, I urge you to call Governor Kulongoski's office at 503 378-4582 to urge him to sign Senate Bill 897. This bill would require PERS to be more accountable to members approaching retirement. It would require them to take various measures to insure accuracy in the final estimates given to members PRIOR to their signing over their jobs and entering the retiree category. This bill was sponsored by OPRI and was passed in the Oregon Senate and Oregon House by nearly unanimous votes. This is truly a bipartisan effort. There continue to be disturbing rumors that Governor Kulongoski may veto this bill despite the Legislative unanimity given the bill. PERS is strongly *opposed* to the bill on the grounds that it will cost them a lot of money to implement. I've called BS on this argument before and I continue to do so. Regardless of how much it costs to implement, PERS is supposed to be the trustee for OUR retirement money and OUR benefits. The least we can expect from them is an accurate estimate of our retirement benefits BEFORE we make an irrevocable decision to retire. There are far too many instances where PERS has said "oops, there was a mistake in your benefit. Your benefit will be reduced and you owe us money". This is unacceptable. I'm not talking about cases like the City of Eugene or the Legislative reforms. I'm talking about plain old data recording errors, employer errors, and errors caused by accidents and incompetence. PERS retirees and near retirees should not have to relinquish their jobs without having an ACCURATE estimate of their retirement benefits. Oregon is the only state where there seems to be no accountability for accuracy. SB 897 takes a small step in the direction of rectifying that situation. The bill is not ideal, but it is the best we've got right now. Urge the Governor to sign the bill and allow all of us to move on with our lives. Call 503 378-4582 and register your support for SB 897.

Saturday, July 04, 2009

Lonesome Me

For people who don't read comments to blog posts - and you really should as they are both interesting and informative - I was properly corrected for an error I made in my previous post "The Soul of a Man". This correction has been up several days, but seems to have been lost on more a few people. Here is the correction.

Oregon's constitution does not have a pocket veto. The Governor has 30 days to either sign, veto, or ignore a legislatively passed bill. The effect of signing or vetoing is pretty obvious, especially when the Legislature is adjourned. HOWEVER, if the Governor chooses to ignore a bill, it becomes law after 30 days or on the effective legislative date of the bill. Oregon does not pattern its executive after the US President, which was my error. With that out of the way, we can return to the primary point of my previous post.

All constitutional mechanics aside, the rumors still persist that the Governor may well veto SB 897. I've heard this rumor from multiple, independent sources. They could be wrong, of course. OPRI's lobbyists and OPRI itself continue to express optimism that this bill will be enacted by the Governor. Nothing would make me happier than to see it go into law, given the devastating effect its absence has had on the lives of some PERS retirees.

So, for those of you out there gloating that I've gotten the constitutional mechamics wrong, I fully admit that this was one area in my education (which was in California) that was weak. But, being wrong about the mechanics doesn't change the central point of my message.

Please, if you have not already done so, write or email the Governor soon to indicate your desire for him to sign this very necessary bill. It contains some important safeguards for future retirees so they don't end up in the predicament Kay Bell found herself.