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Saturday, July 02, 2011

Miles To Go

On Thursday, the Oregon Legislature bid sine die and all went home for the remainder of the year.  PERS members and retirees escaped from any significant harm, although HB 2546B did finally pass and so our fellow members who retire on or after January 1, 2012 and who live out of Oregon and who accumulated PERS credit for work performed before October 1, 1991 will see that the income tax subsidy they were entitled to disappear.  The Legislature wisely avoided the potential legal pitfalls associated with trying to take this subsidy away from those members already retired.  In all, this was the sum and substance of the Legislative "tinkering" with PERS for this session.  Beware, however, that a lot of people are still unhappy with the Legislature and, more especially, with Public Employee Unions.  Now that we have annual sessions of the Legislature, it is possible that more harmful bills will be researched and proposed during the shorter Legislative session beginning next February.

Now that the Legislature has been removed from the current equation, the next hill to climb is with the PERS Board.  On July 28, 2011, the Board will consider whether to change the assumed earnings rate from its current 8% to a lower amount.  The most likely lower amount will be either 7.5% or 7.75%, although neither is a certainty.  Mercer, the actuarial firm in charge of PERS' mortality tables, has to decide whether to formally recommend lowering the rate.  To do so has profound consequences for all active and inactive members as well as employers.  While all earnings under the 8% rate are protected, a lowering of the rate for future earnings would mean two things for members.  First, all subsequent earnings will be reported at the lower guaranteed rate.  In the short run, this has little immediate effect on members; in the longer term it does.  Because the mortality tables are built from a set of assumptions, chief among them is the assumed rate of return on investments, lowering the assumed rate will mean that the actuarial tables will change and the benefits paid out will be lower because the expectation is for lower earnings.  On the employer side, interest rate assumptions are inversely related to employer contribution rates.  If PERS lowers the assumed rate of return, the employers will be expected to contribute more to insure that the "true-up" when a person retires is as small as possible.  With all the various "accomodations" employers have been given to pay for their increasing rates, the short-term effect on the employers would be to raise their contribution rate.  In this particular instance, employer and employee interests are aligned, at least for the first few years.  I'm sure that the PERS Board will find some way to lessen the burden on the employers, but all this means is that the "unfunded" portion of the PERS fund will grow.  So, if you are interested in commenting on this possible change, having input on not changing the rates, you would be extremely wise to plan on attending the PERS Board Meeting on July 28, 2011 at the PERS HQ in Tigard.

Finally, as the icing on the cake, the benefit payments that retirees receive on the first of every month got a bit FUBARed on Friday July 1, 2011.  As reported on the PERS Web Site, there was some sort of coding error that resulted in one of several possible things happening with the July 1 check.  First, as many of us discovered, the check got deposited in our savings account rather than our checking account.  This is a known problem at OnPoint, Advantis, and several other credit unions here and elsewhere, including out of state banks.  The second thing is that some deposits were simply rejected because there was no savings account to put the deposit in.  The people in this situation are the worst off because of the holiday weekend.  It will be mid-week next week before all this can be straightened out.  Finally, some of you may have noticed your check went to the same old place.  You were lucky.   If you have any issue with this, you are asked to call PERS on Tuesday morning July 5 so they can help get this sorted out for you.  PERS assures us that this programming issue will be resolved before we receive our August 1, 2011 checks.

I hope you all are planning to be involved in safe activities over this long weekend.  Don't get too much sun, drink plenty of fluids, practice safe fireworks, do not drink and boat or drive.  In other words, behave normally.  If you are crossworder, practice safe lex.  Above all, be thankful we live here and not in some of the other less friendly places on the planet.

11 comments:

Suzanne said...

Hello: Does anyone know how soon a change in the assumed interest rate could go into effect, if the PERS Board decides to change it at the July 28th meeting? Thanks in advance!

Unknown said...

Hello: Does anyone know how soon a change in the assumed interest rate might go into effect, if the PERS Board approves it at the July 28th meeting? Thanks in advance!

mrfearless47 said...

If they change the assumed interest rate, it would go into effect on January 1, 2012, at the same time the new actuarial tables would go into effect.

There is no necessary reason why they should change it because it is a long-term (20 year) rate, but Mercer has suggested that they, at least, think about it.

Andrew said...

Has HB 2456B been signed into law? I couldn't find anything indicating it has been. I assume there's no real chance of a veto (?)

mrfearless47 said...

@Andrew. I regard the chances of a veto at about the same as the vote passing the bill in the first place. The final tally on HB 2456B was 88-2. I think the odds against a veto are 88-2. Kitzhaber is no fool. He needs the Legislature to support whatever agenda he has in mind for the next several years. Pissing legislators off over a bill that was virtually unanimously passed is bad politics. Moreover, Kitz is no Kulongoski with a death wish.

misterchuck said...

Apparently, few Oregonians will care what I have to say. Oregon seemed like the land of promise when I relocated there in 1979. I spent what I consider the best years of my life there. Started a family and career. I am one of those 2000 unfortunate people who had to move out of Oregon and haven't retired yet. I relocated in 2000 for family reasons after working 21 years for a PERS-covered emplyer. While I wanted to defer drawing PERS until 2013, looks like I'll have to change my plan. I calculate it would take two years to break even on the nearly 6 percent reduction in pension income. When I left Oregon I had a estimate from PERS showing a monthly income that was 20% higher than what I will get. I know many others have had to deal with pension changes, some much more severe that what's happening to me. But what a spiteful place Oregon has become. Is there no shame? Watching what's happened there since I left makes me sad. It's not the Oregon I remember. I wanted to retire in Oregon, but a decade of anti-public employee policies makes it clear that Oregon does not welcome people like me.

Unknown said...

Mr. Fearless, thank you for this blog. I am an inactive PERS member, but still working full time. I am eligible to retire, but don't really want to at this point. It gives me peace of mind to be able to read your blog and know that I can figure out when it is time to just take the pension and be done with the uncertainty.

oregontrailster said...

On The state national and local levels there is no interest in maintaining benefits for the retirees. It is a shame and very short sighted.

mauidog said...

misterchuck's comments ring very true. Back in the 70's, there was a pride in having the privilege of living in Oregon.

As time passed and the economy improved, I ran into people who told me (literally) that they moved to Oregon only for the job.

My wife and I moved to Hawaii in 2000 and we already felt the loss of the Oregon spirit. I read the online version of the RG regularly and misterchuck has it correct - it does not appear to be the same Oregon. I'll be visiting Oregon again at the end of September for the first time in almost 11 years and it will be interesting to actually observe the changes since then.

Oh yes - I started collecting my meager (300/mo.) tier1 PERS a few years ago and my wife claimed her 20 years of service tier1 a little over a year ago to avoid the punitive changes that seem to be continually coming down the pike.

BTW, the vitriol towards public employees exists here as well.

Aloha

oona said...

My husband left a professorship in 2007 to teach at UC Davis. When we called PERS about his retirement funds, we were advised to leave them where they were as they would double in four years or so.

Last year, my husband was diagnosed with terminal cancer. We again called PERS and were advised that his funds would double after December 2, 2010 if he were still alive.

Recently, I received a benefits packet and discovered that the funds were not doubled. When I called to inquire, I was told that my husband had needed to file a designated beneficiary form to be eligible for the employer matching fund. I looked this form up and there was nothing stated on it to this effect. Nor were we advised to file one.

Do you think I have a case to appeal, or should I just take the money and run? -I am now a widow left with twin nine year old daughters to raise...

Sincerely,

Oona

mrfearless47 said...

@Oona. To the best of my knowledge, which is substantial, the spouse is always the default beneficiary, whether there is a beneficiary form filed or not. The tricky part here is that I do not know for certain what the rules are if a member dies before retiring and has not named a beneficiary. I advise two things: 1) look at the most recent statement from PERS (it should have come in May) and see what is filled in under "beneficiary". If it says "standard designation", I believe that you are covered. Second, you should contact David Crosley at PERS, who can get the definitive information for you. If you email me at the address on this blog, I will email back with David's contact information. I hope this turns out to be helpful.