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Thursday, February 17, 2011

Don't Think Twice

The mailbag overflows with questions from worried PERS members wanting to know how to time their retirement to miss anything the legislature might do.  There is no simple answer to this question.  If you weren't planning to retire now, thinking about it as a way to avoid what the Legislature might do is just plain silly.  If you aren't READY to retire, you shouldn't give up your job and retire just to protect some benefits you might get.  The Legislature is in its third week and not a single PERS bill has been scheduled for a hearing.  This leads another group of members to wonder whether they should worry at all.  Also the wrong answer.  Just because bills haven't been heard yet doesn't mean they won't be heard.  It is true that a fair number of the 23 PERS bills are off in the danger zone of potential contractual violations.  The House leadership has made it clear that they want NO bills on PERS to pass that will be undone by the Oregon Supreme Court.  That doesn't leave very many bills to pass that avoid that potential fate.

What to do?  Let me go back to my principle that if you weren't already planning to retire this year, then you shouldn't be thinking about retiring this year.  You aren't ready and you won't like retirement because you'll be worrying about all the money you aren't making by working.  If you were already planning to retire in 2011 anyway, then timing might be an issue.  Since a few of the bills, especially those pertaining to the retiree COLA, are presented currently as applying to both new and pre-existing retirees, you don't gain anything by retiring early.  Bills that attempt to cap the pension benefit at the Final Average Salary are potentially devastating to some actives on the verge of retiring.  If you are in that category and want to be ahead of that prospective change, then getting out before the end of March would be the best plan.  This date slips the longer the Legislature doesn't take up such legislation.  Bills to eliminate the 6% pickup have little impact on someone retiring later this year.  The 6% doesn't make much of a dent in anyone's retirement, yet.  So, if you were to lose this, you really aren't risking enough to sacrifice a few extra months of income.  But if any of the legislation worries you to the point that you can't sleep at night, AND you were planning to retire anyway, then don't think twice - get out now.  You'll be happier, your sleep will improve, and you will avoid the worst of the possible changes.  But, if you do get out now, don't come back blaming me for inciting your decision.  Remember, I don't give advice.  I give information and it is up to people to decide what to do with that information.

On an unrelated note, congratulations to Paul Cleary of PERS.  He's one of the lucky Agency Directors who gets to keep his job in the Kitzhaber administation.  Maybe I should send a sympathy card instead.  It is going to be a tough year to be in charge of PERS and spend those days after days trying to be patient and cheerful while giving good answers to nasty legislators like Dennis Richardson who'd sooner take away his mother's PERS pension than allow us to continue to survive on ours.    Good luck Paul.

 

 

13 comments:

Jackie said...

For people retiring using Money Match formula, Final Average Salary is not part of that formula. Should we still be concerned?
Jackie

Jackie said...

For people retiring using the Money Match formula, Final Average Salary is not part of that formula.

Should we still be concerned?
Jackie

mrfearless47 said...

Jackie, there is no way to receive more than your Final Average Salary EXCEPT under Money Match. That's the entire purpose of the bill. If you expect to retire under Money Match at more than your Final Average Salary, this warning was meant for people like you! You should be very concerned if this bill were to get a hearing and pass. It would cap your retirement at your FAS. Also bear in mind that other bills also take out things that are usually included in FAS (sick leave, vacation time, comp time, etc). So these bills are quite toxic to someone in the position of retiring at more than FAS however it is defined.

Alan said...

Do you have a bill number to track this issue? I can retire at any time with more than FAS under MM. Wouldn't this effecively eliminate MM and therefore be a contract violation?

Jackie said...

Thank you. As it happens my retirement estimates are well below my current annual salary. Although I will have 27 or 28 years in service, I have been support staff. Office administration. Also, I was late in getting my Variable contribution up to 50%. Of course when I did it had a terrible year. Anyway, for me, it will not be hurtful to be limited to being capped at my final average salary.

Also, in the Money Match formula, vacation and sick leave accruals are not taken into consideration. I have very healthy balances in both areas but they will not be considered.

But I think there are a huge number of people who were smarter with where their monthly contributions went and were much better earners.

And, I still worry because that is me.

Thank you for taking the time with me,
Jackie

mrfearless47 said...

@Alan. The central bill is HB 2454. Whether this is a contract violation or not would have to be determined by the Court if the bill passes. I don't see it with a high probability of passing, but it is definitely worth keeping an eye on.

mpguy said...

@mrfearless47 ... 2454 is the bill that prohibits the use of sick leave and vacation time in the calculation of FAS.

HB 2455 is the bill that limits benefits to 100% of FAS, without the inclusion of sick leave, vacation, or other accumulated time.

People might also keep an eye on HB 2986. This is another one of Richardson's potential mischief makers. One section of it defines benefit levels for Tier 1, Tier 2, and Tier 3 PERS members. While it doesn't currently include language defining FAS or limiting benefits to 100% of FAS, it could be amended into a form that presents real problems for PERS members on the verge of retirement.

One interesting aspect of House bills is that, under the rules resulting from the current 30-30 split, no bill can be passed out of committee (in this case, Business and Labor) unless it has at least two votes from each party. (If I'm wrong about this, someone will let me know.) That would mean that at least two Dem committee members would have to favor such a provision, even if it had a majority on the committee. That makes it somewhat more difficult to reach consensus on specific reforms in this area.

mrfearless47 said...

@mpguy. Thanks for correcting the bill numbers. I was writing from memory out in the field, but I wanted to get an answer on the blog as quickly as possible. You saved me the trouble of correcting it when I got home.

mrf

mrfearless47 said...

Let me assure readers that the bill to limit pension to 100% of FAS has a low likelihood of even getting a hearing. There are so many contractual problems with this bill, and others that try to do the same thing, that the leadership probably won't let it come up for a hearing. They've already said that they do not want to enact *anything* that is likely to be struck down by the Oregon Supreme Court. This one would be struck down in a heartbeat unless something like Wisconsin were to happen here.

Alan said...

Thanks so much for the info. and for all you do for PERS members with this forum. I will be keeping a close eye on the bills and keep my paperwork ready!

Alan said...

Thanks so much for the good info and for all you do for PERS members with this forum. I will be tracking the bills and keeping my paperwork ready to go if necessary.

mpguy said...

When people are tracking bills through the state Legislature's web site, be aware of the difference between a "hearing" and a "work session."

Many bills get hearings. Some of them don't last long. I once testified on two bills that were listed consecutively on a committee's agenda. The two hearings together took eight minutes and neither bill was ever discussed again.

However, a "work session" is different. I believe that a vote cannot be taken unless it is during a work session. (If I'm wrong, someone will correct me.) So, if you see "Hearing and Work Session," or just a "Work Session" on a bill that's previously had a hearing, there's at least some chance that the bill will be passed out of committee. Bills receiving a "do pass" recommendation to the full House or Senate have at least a fair chance of passage.

Susan said...

My school district has just offered an incentive for retiring on July 1. I hadn't really done my homework about PERS changes since I wasn't much thinking about retirement. Now that I am poking around, I'm alarmed! If I'm considering retirement for this year, is it wise to wait until July 1? How much danger do you think there is that Money Match will disappear?