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Sunday, March 25, 2012

Splitting The Atom

Now that the PERS Board has decided on the method for implementing the collection of the 1999 overcredit, there are a number of important details that remain to be decided.  Moreover, there exists considerable confusion among those "window retirees" for whom the collection is only a dim memory.  The purpose of this post is to summarize what is known, so far, about the collection effort, what remains to be answered, and to clarify a common misperception about the 2003 effort to freeze the COLA for Tier 1 members charged with an over credit.

There are four groups of people to be subjected to collection efforts.  The first group is the 20,000 or so retirees who were notified in 2006 of their adjusted benefits and were sent an invoice for overpayments, but whose invoices were suspended by Judge Kantor in his initial ruling on the Robinson case.  The second group consists of window retirees who took either a single or double lump sum, who've been invoiced, but collections were also suspended.  Third, are members of the two previous categories who have been invoiced and who started paying via actuarial recovery beginning in about 2006 or early 2007.  Finally, there are beneficiaries and alternate payees who are receiving benefits after the death of a PERS member, or a divorce from a PERS member who have not been invoiced or collected.

The most complicated group will be those retirees who collected their PERS benefit as a double lump sum settlement and have no ongoing business relationship with PERS.  In order to collect what is owed, PERS first has to locate these individuals.  If they remain in Oregon, the Oregon Department of Revenue will locate them.  If they are outside of Oregon, the Revenue Department does not have reach; consequently, PERS will have to contract with collection agencies who will use skip tracers to find these retirees.  (Heck, if they wanted to pay me, I could probably locate about ⅔ of them with a simple web search).  If found, and if these retirees work with PERS, PERS will allow these members to set up a payment plan to recover the lump sum that will span approximately 6 years.  This is a far better deal than before.

For any window retiree, beneficiary, or alternate payee in a current business relationship with PERS - i.e. receiving any sort of monthly benefit - a current address already exists, and PERS has an easy way to notify affected retirees.  The default repayment option is a base 2% reduction in benefits (from the gross benefit) for however long it takes to repay the amount invoiced.  In most cases, overpayments will be recovered in approximately 6.5 years, at which time the reduction will stop and members will have repaid all owed benefits.

Members have the option of repaying the benefit as a lump sum, or they have the option of accelerating the repayment by selecting a repayment amount greater than 2% of the gross benefit.

More details will be forthcoming next week as PERS prepares a "Frequently Asked Questions" document for posting on their website.

One question that has appeared with some frequency in my own mailbox has been the question of whether PERS will "finally" apply the "lost" COLAs for the years 2003, 2004, 2005 and possibly 2006.  The answer to this question is an unequivocal NO.  Regardless of what you think PERS has or hasn't done, PERS has already applied the necessary COLA payments to the revised benefit you're receiving now.  When PERS recalculated your benefit to comply with the court-ordered, legislatively approved and mandated 11.33% for the benefit year 1999, it went back and recalculated the benefit it actually owed you when you retired.  The original benefit was computed with a 20% credit for 1999.  The new benefit was computed with the "correct" credit of 11.33%.  Once they computed the correct benefit, they then applied subsequent COLA for 2003, 2004, 2005, and, if relevant, 2006.  The effect of this was to raise the corrected base benefit to nearly the level (or surpass it) that the un-COLAd benefit was at the time of the adjustment.  Thus, according to PERS, the courts, and the Legislature, there is no additional COLA to which members are entitled.  You may not agree with this, but this is exactly what happened.

I will update information as it becomes available.  Suffice it to say that the re-invoicing will take place sometime beginning this summer, and repayments will follow 30 days after you are re-invoiced and choose or default to the method of payback.  The initial billings are planned so that they coincide with the new 2% COLA for July, payable on August 1.  It will barely hurt.

Monday, March 19, 2012

Better Days

St Pat's Day turned out to be the magic day when this site crossed the 1,000,000 visitor mark.  Thanks to all who have made it possible.  Many eyes keep our legislators on the ball; many eyes keep PERS on the ball; many eyes TRY to keep the media in check.

I have been complaining for some time since the Supreme Court finally overturned the Robinson verdict that PERS was engaging in financial chicanery in calling their "actuarial recovery method" an "interest free" way of repaying money paid to "window retirees" (retired between 4/1/2000 and 3/31/2004) erroneously.  We may disagree with the verdict, but we are stuck with it.  In recognizing that fact, and also recognizing that collections would resume soon, I have been on a tear trying to convince people that the ARM is fiscal "sleight of hand".  Apparently, my words and the pressure brought to bear by OPRI, the PERS Coalition, and others have finally resonated inside PERS.  At their next Board meeting, members of the PERS Board will vote to implement a significantly revised recovery method for the 28,000 "window retirees" who haven't yet started paying, and to presumably revise the terms of repayment for those who began repaying before Judge Kantor enjoined PERS from further collection efforts.

The revised method, to be discussed and/or voted on March 22, 2011, will recover ONLY what an individual owes, not a penny more.  The mechanism for those eligible (monthly benefit recipients or alternate payees or beneficiaries receiving monthly benefits) is to set 2% of the gross benefit as the minimum repayment amount.  If implemented in August, as originally proposed, this would result in the sacrifice of the 2012 COLA until the bill is paid off - approximately 6.5 years for the typical retiree.  Retirees who want to accelerate their repayments can choose a larger amount (say 5%) and shorten the repayment period.  Of course, anyone can still write a check for the whole amount and be done with it.  This method, as far as it goes, satisfies my two requirements for fairness:  1) no interest is charged and 2) retirees obligated to pay ONLY what they owe, not a penny more.

There are some unanswered questions about PERS' proposed methodology.  First, will the deduction be taken pre-tax, as logic and tax fairness dictate it be (otherwise, we are subject to being taxed on money previously taxed).  Second, does the repayment amount remain constant at the initial 2% of the 2012 benefit as of August 1, 2012,or does the amount change every August when a new COLA is granted? Finally, will the 1099-R report this amount as an adjustment to box 2 (taxable amount), reducing further the obligations since the amount repaid has already been taxed?  The analogy here is that for those of us who worked prior to 1979, our PERS contributions came from our own money that was taxed at the time of contribution.  Thus, a small portion of our current retirement benefit is not subject to any taxes.  That amount is the difference between Box 1 and Box 2 on the 1099-R, it is also shown in Box 5 (Employee Contributions) on the same form.  Since we have already paid income tax on the money that we will be repaying, there is no reason why we should have to either (a) be taxed on it a second time, or (b) have to do anything special to try to recover it.

It strikes me that if PERS can clarify and resolve these questions/objections/challenges, those of us facing a large bill for amounts we had no control over will see better days ahead.

I will save my comments about the Sunday Oregonian editorial for another day.  Onwards towards 2,000,000.


Sunday, March 11, 2012

Memories are Made of This

Eight years and nearly 1,000,000 visitors.  By the end of the coming week, this site will have crossed that magic marker that distinguishes the occasional blogger from the serious blogger.  Thanks to all of you for this honor.  I hope to continue in this vein until my blood becomes blue.

Yee Haw.


Friday, March 09, 2012

Shackled and Drawn

Sometime late this afternoon PERS turned over the latest data dump on 117,000 retirees who were listed on PERS' rolls as of December 1, 2011. This increased the number of retirees exposed by almost 12,000 since the last exposure in October. This release was more specific and included information about final salary, length of employment, and current percent of final salary received. Already The Oregonian is carping about all the information PERS didn't release because it wasn't available easily from the newest computer upgrade PERS completed this past year. You would think that the Oregonian believes it has a right to participate in the RFP process for securing a computer system tailored for The Oregonian, rather than PERS. I'm really sorry to let the Oregonian know that computer systems are developed to meet the needs of the agency designing and paying for the system. I'm sure PERS would be more than pleased to accept large cash donations from the Oregonian to assist in developing a computer system that simultaneously meets PERS' and The Oregonians' needs. Unless and until the media wants to contribute to the costs of such a system, they should be damned grateful for the information received and they can go piss up a rope for any information they feel they deserve but didn't get. Information costs money and the Oregonian didn't have to pay a nickel for what they got. They've already posted the new data and those of us exposed feel just a bit more shackled and drawn by the latest financial colonoscopy.