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.