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Thursday, May 03, 2012

Swallowed Up

Little niggling things continue to concern me about the latest campaign PERS has organized to collect from "window retirees" for the overpayments we were paid.  Part of my concern was raised in yesterday's post, and will be elaborated on in today's post.  However, another issue has bubbled to the surface as well.  I've been hearing from more and more PERS retirees from  2004, 2005, and 2006 (outside of the "window") who also received the pre-collection letter.  Since these members did not, to the best of my knowledge, receive any documented "overpayments" (their accounts were completely debited for the entire over crediting from 1999 after the settlement agreement was executed in January 2004).  Thus, they received no overpayments, yet are receiving a letter charging them with receiving overpayments.  One went so far as to call PERS and received the unwelcome news that there is a group of about 2000 post-window retirees whose accounts are being reviewed for possible overpayments.  It is hard to figure out how these retirees could have been overpaid, and the idea that PERS is using the cover of the Strunk/Eugene remediation to go after possible mistakes long after the statute of limitations has expired is more than a trifle worrisome.

Now, back to the 2%-5% issue.  While I now know the reason why PERS had to revise the minimum payment, I still cannot understand two things about it:  1) why wasn't this obvious to PERS when they first proposed the 2% default payback; and 2) how they are going to determine who is going to have to pay more than the 2% minimum.   If PERS stuck to the 2% repayment plan, some individuals would be in payback status for as long as 40 years; most are not anywhere near that long.  About 80% of "window retirees" receiving a monthly full benefit (i.e. did not take any lump sum) will be able to repay their entire obligation in 10 years or less.  PERS has decided, unilaterally I might note, that the collection process should not run for longer than that.  About 18% of regular monthly recipients would require longer than 10 years to repay their debt and these are the people PERS will tag with higher monthly reductions (up to 5%).  For the rest of the people - about 2% of regular monthly benefit recipients, and a large proportion of people who took a single lump sum payout - the reduction required to liquidate their "overpayment" in 10 years or less will be substantially higher than 2%, possibly as high as 10%.  PERS will be in contact with this group of individuals to arrange for some additional payment commitments to ensure repayment is complete in 10 years.

One question does not yet have a clear and unambiguous answer.  I serve as a perfect example of the problem.  My "overpayment" is in the mid 5 figure range.  If I take 2% of my current benefit and divide it into the amount I owe, it will take approximately 10 years and 4 months to repay the debt.  However, that calculation does not take into account cost-of-living increases I will receive along the way that will leverage up my benefit and my repayment amount (it is always set to be 2% of whatever my gross benefit happens to be at the time).  So, if I figure on getting a 2% COLA annually until my debt is repaid, it will be less than 9 years of actual repayment.  So, my question of PERS is this:  how is it determined whether an individual will need to pay the minimum 2% or something greater?  If the amount owed is divided by 2% of the current base benefit, I fall into the "more than 2%" category; however, if the amount owed is divided by 2% of the average expected benefit over the next ten years, I fall into a completely different category.  PERS would be wise to answer this question because I know an awful lot of people who will be swallowed up by this piece of arithmetic sleight of hand.  

Again, I remind all that WE DID NOT CAUSE THIS ERROR TO BE MADE.  Therefore, PERS' obligation is to be reasonable and not arbitrary.  The process started out to be quite reasonable and most people I've communicated with thought it was fair and equitable.  If now, every time we turn around, PERS starts changing the rules and making exceptions to the simple approach initially proposed, there are going to be a lot of people very angry, and a more vocal and intimidating group will start showing up at Board meetings to express their displeasure.



bogcandle said...

I've received the letter regarding overpayment recovery and have read the PERS faqs on the website and feel like I don't know a darned thing.

My concern is with taxes as well as how the repayments are being calculated. Obviously I'll have to pay an accountant to deal with tax issues, but here's my question: Why can't the repayments be taken from the 'bank' where funds are placed when the COLA exceeds 2%?

If that's a silly question I apologize but am kind of upset about all of this.

mrfearless47 said...

The repayments will be taken as a pretax deduction, so your taxes will be calculated on your benefit minus the repayment amount. The calculation methodology and amount you owe already appeared in the letter you received sometime between 2006 and 2008 when your monthly benefit was first adjusted for the overcredit. This adjustment is for actual overpayment of benefits from retirement date to readjustment date. As for the COLA bank, it exists only on paper, not in reality. Also, the supreme court ruled that PERS can't touch the cola in any form.

If you can find your original recalculation letter, you will also find out how much you owe. To determine how much you will be repaying, take 2% of your current gross benefit, or 2% of your August 2, 2012 benefit (current plus 2%) and divide it into the amount you owe. If the answer is 120 or less, then you will only be required to repay at a minimum of 2%. It isn't clear yet what will happen if the division is significantly greater than 120. I'm trying to get an answer to that question now.

Lovemedog said...

Received PERS letter dated 4/27/2012 stating I received a benefit overpayment for the 20% miscalculation. I retired March 1, 1999 and elected the 5-year lump-sum option. This was the first communication I received from PERS and I always assumed I was outside the window retirements. I said so in a letter to PERS and their response (5/10/2012) was that although I retired prior to the window, my lump sum retirement benefit was subject to the 1999 interest overpayment. After 13 years retired, how they can mess with your life is unconscionable and unfair. Statute of Limitations are intended to protect citizens from such injustices. All this through no fault of our own.

mrfearless47 said...

Regrettably people who elected the single lump and asked for a distribution over some period of years get snared because the money held was invested in PERS Fund and interest paid on each years ending balance. When your balance was reviewed for earnings for 1999, your balance was credited with 20%. Because you received your final payment in 2004, before all accounts were adjusted for the overcredit, you escaped with the 20% earnings untouched. IFf PERS Had been permitted to continue invoicing, they would have gotten around to invoicing you earlier PERS will give you some options to repay. PERS. would have been on this in 2005 if the courts ruling hadnt been challenged in a multitude of cases that delayed final jeopardy until late march 2012. Unfortunately, tge clock just starts now for tge statute of limitations. I wish I could offer more than sympathy. This redefines the long arm of the law.

Unknown said...

I am a window retiree who retired January 1, 2004. IN December 2006 I finally received my Notice of Entitlement and the letter advising they had calculated the unpaid COLA's and the Overpaid Interest and would reduce my benefit by $7.79 per month effective Jan 1, 2007. Having not received a repayment letter I contacted PERS by email and just received a response stating since my benefit had been already adjusted I would not receive any further PERS communication or change in benefit. Just wanted to let you know as I had asked last week if all the letters had been mailed.