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.