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Thursday, October 06, 2011

No Banker Left Behind

The Oregon Supreme Court delivered its final body blow to any semblance of contract law in Oregon today.  It ruled in favor of PERS and the employers in the Arken case, and it ruled in favor of PERS in the Robinson case, overturning the lower court's ruling in the latter.  Basically the court gave window retirees the middle finger when it wrote that, in effect, we were stupid if we believed our Notices of Entitlement since the City of Eugene case was so public, so prominent that we couldn't possibly have not known that the 1999 earnings were not final.  While this might have been true for anyone retiring after the early part of 2003, those who retired prior to the City of Eugene case ruling coming (i.e. before October 8, 2002) wouldn't have had any reason to expect that the 20% earnings crediting in 2000, for 1999, was in jeopardy.  Based on my lengthy experience with PERS retirees, very few people paid (or pay) attention to the minutiae of PERS court cases or the minor changes that affect people in a myriad of different ways.  If nothing else, the rulings in these cases should tell people that their PERS benefits are subject to the whims of the legislature and the courts.

People may wonder about the ruling in the White case - the PERS Coalition challenge to the settlement agreement between PERS and the 8 employers in the City of Eugene case.  The arguments in the White case took place some time after the arguments in Arken/Robinson, and the ruling will probably be handed down next month if the spread holds.  However, anyone holding out the slimmest of hopes for an affirmative ruling in White need only read today's decisions to realize that there is no possible way that this court will overturn the settlement agreement.  Today's decisions relied almost entirely on the fact of that agreement.

I am not going to bother to summarize the rulings today.  They are 71 pages long, and the ruling in Robinson is so infuriating that my blood boils just thinking about it.  The court essentially agrees with the plaintiffs legal arguments, but dismisses them in favor of an argument that wasn't actually made, and uses that reasoning to overturn the trial court's ruling (Kantor).  Both cases have been remanded back to Kantor for final implementation.

What does this all mean.  Arken was a long shot.  Losing it doesn't do anything to change the status quo.  Robinson, on the other hand, is the case that argued PERS had no authority to try to collect the "overpayments" we received before the Strunk decision was finally implemented in 2006.  If you can scrape your memory banks and go back to 2006, you will recall that you received a bill from PERS telling you that you owed them money - in my case, about $14,000 -which could be paid in either a lump sum or via a method called actuarial reduction at zero interest.  Assuming that offer remains, anyone who received one of those bills will now be obligated upon notification by PERS to begin the repayment process, either by writing PERS a check, or by accepting a small reduction in your monthly benefit.  Of course, we are all about 6 years older since those bills came out so that the actuarial reduction payments will be larger than they would have been had they started in 2006.

It is clear that the days of the PERS Coalition's success in fighting against changes in the PERS system are over.  It is clear that the Court is no longer persuaded by the stunning logic of the legal argument, but instead seems to bend over backwards further and further to rule in favor of PERS and the employers.  The more you read the Court's arguments, the more convoluted they appear, and the hidden forces behind them all are politics and economics.  Contracts aren't worth the paper they are printed on.  To me, this says that PERS and the employers are no different today than are the bankers and Wall Street firms who have skated by.  The new motto is "No PERS retiree gets ahead", or "No Banker Left Behind".


P.S.  If I weren't feeling crappy enough about the erosion of contract rights in these rulings, Steve Jobs' death hasn't left me in a better frame of mind.



Unknown said...

Well Prof its looks like the end of line for Window retirees. Too bad that the Court didnt uphold any of the contract rights mentioned in your analysis. So now here is question for discussion. Which "repayment" option would you think would benefit us retirees? Assuming one has the cash available to pay the full amount, it is my understanding of IRS rules that any repayment of these monies can be treated as a deduction($3000 or less) or as either a credit and or a deduction ( for amounts over $3000) in the Tax year it is paid. This would reduce your tax burden in the year paid. It would preserve your PERS pesnsion (no reduction) and allow future cola payments to increase your amount accordingly. Alternatively, if one takes the "accurarial reduction" route, your PERS Pension is reduced for you and any beneficiary forever until you die. It is possible therefore for you and/or your surviving beneficary to repay more back to PERS than your "ovepayment" owed.Additionally, You also will suffer the compounding effect of the reduction on your PERS pension as to future cola increases. So, which is better....pay now...if you can...or defer over your lifetimes with reduction into the future affecting your pension benefits? One final consideration ofcourse is if you choose the accurial method, the fact is that the money you are paying back into the "future" in worth less due to inflation. Would be interested in your thoughts. Thanks again for all you have done with your Blog and analysis over the years. Harvey

mrfearless47 said...

It is my understanding that the cola adjustments are pre-reduction so that the benefit would continue to grow at the base benefit rate before the actuarial reduction takes place. Until this point is clarified I wouldn't hazard an opinion on the prudence of either approach.

Unknown said...

Ah, thanks Prof. It wil be interesting as we proceed to see how PERS does implement this decision. I retired on May 1 2001. received the repayment "notice" On March 7 2008.
ORS 238.715 Section 7 states: " a Payment made to a person from the fund maynot be revovered bynthe board unless within six years after the date that the payment was madethe board has commenced proceedings to recover the payment. For purposes of subsection 1 of this section, the board shall be considered to have commenced proceddings to recover the payment to recover the payment upon MAILING OF NOTICE TO THE PERSON RECEIVING MONTHLY PAYMENT (Emphasis added) that the board has determined that an overpayment or other improperly made payment has been made"

Thus more that six years passed between my initial receipt of PERS pension and the said "notice". Do you think a protest citing this section of statue could/should be made to PERS citing these facts or did the Board act within the timeframes outlined to snag those window retirees whose retirement date commence on or before 2001?

Unknown said...

Ok...please disregard my previous posting. Just dug thru my PERS files and found that PERS sent out a July 25, 2003 notice in response to the Legs action that year where they cite the legs and need to "adjust" my Colas to recover "overpayments due to 1999 crediting.Again, on march 8 2006 the Board sent out its "Fianl Order to me adopting "Repayment" methods. So, I think these served as timely Notices in accordance with ORS 238.715 to Collect....sadly I am dead meat! LOL. Thanks

Common Sense Gresham Project said...

A bit of wrenching the gears: if everyone selected the lump-payback method (gold has risen dramatically since then), wouldn't PERS have a HUGE COLA payback to effect, immediately?

Seems to me that the issue is now one of collections, which, if you recall from your way-back machine, I posted to this blog, years ago.

Had we protested the then-illegal collection attempt in Federal Court, we'd have won it and Arken/Robinson would have been mooted, and probably withdrawn. Even if we had lost in Federal Court, we'd have opened the way for continuing appeals while Arken/Robinson was being considered.

I doubt that we have any Federal jurisdiction over collection action left, but it WOULD be worth a few hours of lawyer time to research that, because if we do, we might still stop the collection action while we negotiate a better settlement.

George Schneider

mrfearless47 said...

@George. No COLA payback is due to anyone for any reason. The only reason a COLA would be due would be if the court had ruled favorably in the Arken case. Then, it would have taken a COLA and a difference between our current base benefit and the base benefit at the time we retired to right those wrongs. Unfortunately, that didn't happen and so, lump sum repayment or not, PERS wouldn't owe us anything.

mrhops said...

I'm sure you saw Peter Bhatia's column in Sunday's Oregroanian about PERS retirees' names.

I went to oregonlive.com where I have a login as mrhops and posted this:

'"In Sunday's Oregonian, Peter Bhatia said:

"Those of us who work at newspapers have a passion for open records."

If that's so, why then, didn't the Oregonian ever publish the arrest and conviction of Bob Caldwell, one of it's top editors in May/June 2010 for DUII? See


Apparently the Portland Mercury had the story first followed by Willamette Week. It's an interesting commentary on the situation that WW's conviction story ends with

"In an added bit of context, an editor at the Bowling Green Daily News in Kentucky was recently arrested for DUII.

Not only did that paper pubish a story about it, but the editor, Mike Alexieff, resigned on Monday. Alexieff had previously argued in an editorial that it's appropriate to report the DUII arrests of public officials, saying they should be held to a higher standard.

The same should go for newspaper editors, Alexieff wrote.

“And yes, if I get a DUI, you can be assured an article about it will be in the newspaper,” he wrote."

I guess it's fortunate that the city has the Portland Mercury and Willamette Week to print the stories the Oregonian won't. I wrote a comment similar to this one Sunday evening that I thought went up on the Oregonlive.com web site but now I find it's been deleted.

People who live in glass houses. . ., Mr. Bhatia?"

= = = = =

I wrote something similar Sunday evening but unfortunately didn't save a copy. When I hit "post," I got the automated reply "Comment posted successfully." So I went back to the opinion page and, sure enough, it was there. But an hour later it was gone, without a trace.

So I did the comment above Monday morning at 0745 after which I got the same "Comment posted successfully" message. An hour or so later, it too was gone.

So I've sent the entire story to Mark Zusman at Willy Week with the subject, "Hit a nerve?" I don't think WW misses many chances to jab the O but we'll see.

Unknown said...

I have a question perhaps you can answer, since you seem to more informed. Even though PERS reinstated our COLAS a few years ago, I am still recieving over $500 less every month because of the years that we did not recive the COLAS. Will this count towards the amount that I supposedly owe PERS?

mrfearless47 said...

The money owed you for the withheld COLAs was applied against what you owed PERS when your benefit was adjusted for the overpayment. The amount shown in your recalculation letter is net of all outstanding COLAs. Unfortunately you have not further offsets to apply against the amount due.

charlieboy said...

Two can play the game. The Oregonian/Statesman can publish my name and info about my pension, and I can cancel my subscription. Then I can subscribe and and cancel again every week. If all the PERS retirees did this for a while, it might just make 'em think. If all working PERS folks joined in we could bankrupt 'em!

mpguy said...

charlieboy ... You only have to cancel once. If enough PERS retirees, their families, and their friends do this, that will be enough to drive the Boregonian out of business.

Unknown said...

All the talk about cancelling 'news'-paper subscriptions overlooks the reality the papers make money on the adds, not subscriptions. And, a number of us cancelled long ago, because it's been clear for a long, long time that most papers in this state are *not* a friend of public workers, PERS members or PERS retirees.

Thor said...

I worked for the county for 32 years.Over that time things changed a number of times regarding PERS. Regarding the issue of "repayment" of over payments; I read a recent letter in the Eugene RG by a PERS retiree who said the target population of those to do the paying had already paid. The letter writer says "those who retired in the affected years did not get the cost of living adjustment(Max of 2 %) that every other PERS retiree got, and that continued until all the "extra" money was accounted for, specific to each members account history"
That should make things interesting.
I wonder why it wasn't brought up in court.


chuck said...

I read your "No Banker Left Behind" post to mean these court opinions will allow PERS to resume cutting our pensions to recover our "over payments". Am I correct? How much has already been cut? Anything beyond the suspended COLAs? I had hoped the 2006 adjustments were the end of it.

mrfearless47 said...

Chuck: if you retired in the "window" between 2000 - 2004 you are still on the hook for four years of "overpayments". My bill is about $14,000. Others are more; many are less. This case made it OK for PERS to finally collect the rest of the money. Tough luck for us.

Ole Barn said...

My first observation is that the monthly benefits that were denied the cost-of-living adjustment were frozen until the monthly amount we should have received had increased via cost-of-living adjustments to what we were receiving. From that point forward we window persons have continued to receive cost-of-living adjustments.

My wife and I are both PERS retirees. We retired on the same day. I received an over payment collection notice, but my wife never received any such notice. I assume the six-year limitation would apply to my wife then, correct?

Please provide the IRS section regarding the tax credit/deduction regulation(s).

mrfearless47 said...

@Ole Barn. I'm not an accountant so I can't cite the IRS regulation that applies. However, if your wife never got an invoice, it is doubtful that she owes anything. This would only apply to members who retired under Money Match *and* who received an invoice. If she hasn't gotten an invoice by now, then I *believe* she's probably in the clear. However, I'm neither a CPA nor a tax attorney so the advice you get here is worth exactly what you pay for it....bupkis.