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Thursday, December 17, 2009

Heartaches By the Number(s)

I've been keeping score over the past year of the number of inquiries I've received, or of questions I've seen posted at various newsgroups concerning the accuracy of PERS' retirement estimates. The typical story goes like this: "I've been getting estimates for some time so I'm familiar with what they used to look like. The current version is almost impossible to interpret, much less replicate. I don't understand how PERS arrives at current account balance and why by my own calculations PERS' numbers are almost always lower than expected. Now they assume that the 6 month buyback is part of the account balance with the employee always purchasing waiting time. They used to make everything easy to understand; now the estimates are completely opaque."

Alas this story is so familiar that I've tried to replicate PERS' numbers on numerous occasions. I can come close, but never reach the elusive amount that PERS gets. The errors are beyond rounding and suggest a systematic bias of some sort. What is frustrating about this is that PERS speaks with a forked-tongue about such estimates. On the one hand, they are the only solid evidence one gets upon which to make a retirement decision (that and the semi-useless online calculator). Yet PERS absolutely, positively declaims the accuracy of these estimates, leaving potential retirees helplessly frustrated. On the other hand, PERS offers no other way to help a member get a fixed amount that can lead to a confident decision to retire. This led to the calumny known as the Kay Bell case, in which a member sued PERS (and won) because she tried repeatedly to point out errors in the estimates and PERS kept telling her not to worry about them. So she didn't, untill PERS billed her for the very errors after she retired.

The Legislature tried to "right" some of this uncertainty with SB 897 in the past legislative session. This bill would have made PERS take "ownership" of the estimate process and require it to place its money behind its estimates. The bill passed 58-0 in the Legislature, and was then vetoed by Governor Ted (the coward) Kulongoski. Perhaps we can work towards a reversal of the veto in next month's special session. In the meantime, members close to retirement seeking to get an estimate for their final retirement benefit probably get better odds of accuracy at one of Oregon's casinos. There is absolutely no way that pre-retirees should have to live with the kind of uncertainty that PERS produces. You can't get a reliable retirement benefit estimate, you can't depend on the estimate or hold PERS accountable for errors, and if there are errors, it becomes your fault and your bill. It is like the old coin flip joke: Heads PERS wins; Tails you lose.

1 comment:

MollyNCharlie said...

Well put, Marc and oh, so true! peg