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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.

 

7 comments:

McDuck said...

When will the PERS board decide the percentage of this year's COLA?

McDuck said...

When will the PERS Board decide the percentage of this year's COLA?

McDuck said...

When will the PERS Board decide the percentage of this year's COLA?

mrfearless47 said...

The PERS Staff announced that the COLA for 2012 will be 2%, with an additional 0.85% accruing in everyones'COLA bank.

Unknown said...

Actually .86%, for those of us with OCDC and track every dot and tittle of our precious COLA bank.
peg

McDuck said...

When I attempted to confirm with a PERS customer service representative that the COLA for this year had been set at 2%, I was told that the PERS Board had not yet decided the issue and was unlikely to do so until sometime in June. I intend to retire within this calendar year. Whether there is a 2% increase in this year's COLA is a very important factor in deciding whether to retire on July 1, or later in the fall. The precise date on which I retire is not only important to me, but also to my employer. Is there any way to confirm whether or not the PERS Board has made a decision one way or the other, and if not, when they might do so?

mrfearless47 said...

The PERS Board doesn't have anything to do with the COLA. It is based on a specific CPI that is published by the us department of labor in February. Paul Cleary announced the COLA at last weeks meeting. It is a fact that 2% will be paid effective JULY 1, 2012. An additional 0.86% will go into the COLA Bank. The people who answer the phone at PERS are usually the last to know. Check the PERS website for confirmation.