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Sunday, December 23, 2012

Repo Man

Our Governor Retread keeps popping out with ever more ideas to "help" the PERS system, its members, and its retirees.  Although this is not a new proposal, expect the Legislature to take up the issue of "pension spiking", which is getting a lot of coverage over on the blogs at the Oregonian and the Statesman Journal.  I have no idea where people get their information, but it surely isn't coming from PERS or from fact-based accounts of what really goes on when someone retires.

The notion of "pension spiking" comes from another planet, not Oregon.  The idea is that people consciously hold on to sick leave, comp time, overtime, and vacation to spike up their final average salaries.  Let's suppose for a moment that this were the case.  What impact would it have on an individual's retirement.  Let me use myself as an example.  When I retired, I had 2500 hours of sick leave on the books, and 30 days of vacation time.  OUS paid out my vacation time and deposited 6% of the payment into my Tier 1 regular account.  The sick leave, which represented almost 17 months of paid time off was reduced to a dollar amount and half of it was added to my 3-year highest salary total and leveraged up my Final Average Salary by about $3000 per year.  Now, here comes the tricky part.  The ignorant would assume that somehow my PERS benefit was affected by that increase in my Final Average Salary by $3000 per month.  And this seems to be the essence of the bitching and moaning about the spiking (I'm sure that overtime and all those others "perks" may raise the FAS by some finite amount).  Somehow people think that everyone who has these benefits uses them to enhance their PERS benefit.  Unfortunately, what you want to believe isn't what really happens.  In reality, I didn't see a dime of my sick leave in my benefit.  My 30 days' vacation time increased my account balance by about $1500.  My benefit ended up being computed using Money Match, which does not bear any relationship whatsoever to all the "spiking" people claim are being taken advantage of.  In fact, I know virtually no one who benefited from a sick leave infusion.  The ONLY way that "spiking" occurs is when an individual retires under Full Formula or Formula + Annuity.  In these cases, the Final Average Salary plays a role in determining the retirement benefit.  But the large question to be asked is "by how much does the retirement benefit increase by 'spiking' up the FAS by, say, $10,000 per year.  If someone has 30 years of general service, the difference between a $50,000 FAS and a $60,000 FAS is approximately $5000 annually.  In other words, under a 30 year career, the dollar increase in FAS increases the retirement benefit by roughly 50 cents on the dollar.  Major problem, right?   You'd think so, but in plain facts, the number of Full Formula retirements from the mid-1990's until the mid 2000's was less than 15% of all retirements.  Only in the past few years with the 2003 reforms finally kicking in have the number of Formula retirements increased to be significant.  Thus, the major hue and cry against pension "spiking" has no basis in fact.  Perhaps it is occurring with more recent retirements, but the impact cannot be very large since, even now, Money Match retirements are the largest percentage of retirements as recently as 2011.

So what's the beef?  There isn't a shred of evidence (or beef) to support the claim that sick leave, vacation, and other forms of compensatory time have had even minor significance on the benefits received by PERS retirees.  This is just another red herring introduced by the main-stream media to inflame the public's ire against PERS and its retirees, but when you look even minimally at the data, the data do not support the claims.  The data are the facts.  The data are the truth tellers, but apparently there is a really strong snow job going on amongst the politicos and third rate journalist who want to become the "Repo Men" for PERS.  Unfortunately, there is nothing to repossess here.  Move along bozos.  You won't save a nickel from taking away non-existent benefits.  

Happy holidays to all my regular PERS friends.  Bite me to the media which continues to totally make up facts to fit their vision of the world.  Unfortunately, reals facts don't lie, but the media lies all the time.

9 comments:

Rivrdog said...

I retired under FF + A. I know dozens of PERS retirees of my era (retirement 1998-2003), and I'm the only one who retired under FF + A. PERS staff told me that I was one of less than 50, all Tier One people, to retire FF + A in 2003. The difference in my case was that I bought former County pension and military time when I left, dropping a cool $50K on PERS as the door closed on my 25 years of police work.

Didn't about 12,000 people retire with me in '03? If so, that's .004166 of the retirees who MIGHT have been able to "spike" their FAS.

I had 400 hours of vacation (10 weeks) on the books and NO sick leave, which I had used up with a work-related injury that was suddenly ruled "age related" 8 years after the fact. I had consistently worked 20+ hours of overtime per month for my entire career, and did so for my final 3 years as well, so my annualized wages added up to $14K more, and that was added. My "bump" was that I retired at 83% of my ending wage, and the "33% extra hog-slops" are due ONLY to my working overtime plus my OWN money which sweetened the retirement pot. I also bought the P&F annuity for cash as I left.

So, to the PERS-slayers, I challenge: find one dime of that 33% "spike" that I didn't either work for via my labor contract or buy outright via PERS' own rules. Here's the clue. You WON'T find that one thin dime because the conspiracy to "spike" is a figment of your imaginations, so go find a nice counselor with a comfy couch and un-burden yourselves of those stressful fantasies.

George Schneider

Spake Zarathustra said...

There is one 'perpsective' you may not be considering, that goes to the 'benefit' of the PERS retiree who retires under Money Match. When they make public and publish your monthly benefit, it will appear as a much lower percentage of your FAS ... as mine did. Thus sparing you from the criticism of retiring with over 100% of your FAS.

Spake

Paula Medaglia said...

After 22 and some months as a County employee, I also retired last May under the FF + A option, which was decided by PERS with no input from me. As other retirees have done, I also bought back two years' waiting time, adding almost $6,000 from my savings to the PERS coffers and getting another $200 or so per month. After all this, my PERS (after taxes) is about 60% of my take-home pay. All this to spike my PERS allotment? Don't think so.

Unknown said...

To re-state in real life terms the essence of your Dec 23 post, I would like to share a friends retirement story.
Larry retired and received his benefit statement. He was to retire under the Money Match feature.
He was frustrated that he did not get to use his sick leave as had been told to him. What he did say was that he called PERS to ask why and he was told that PERS had to offer him the benefit option that allowed him to have the largest monthly benefit of all the possible options. He, as a member had no choice, he had to take the Money Match option.
As public school teacher he did not accumulate vacation time.

PERS had to do what the state law demanded and the worker had to accept it.

Frank Lockwood said...

Well, I am glad that you are there. I grew so weary of all the PERS insanity years, no, decades ago. I just tried to put it out of my mind. The other day I got a letter telling me I owe them some amount, over $2,000, I didn't even pay attention to the exact amount.

Seems like what Oregon wants to do, it will do. I feel pretty helpless, when the state reneges on it's commitment. My salary is only something like $3,400 per month, with over a thousand of that going to health insurance. My salary would have been about half what it is except that I have a pension from my late wife.

That's because I was a "late bloomer" who went back to school at age 28 to earn a degree in English.

I worked in public schools for 13 years before the "seed" money grant expired. Out of work for a year or more, finally went into news reporting at half my former salary.

A school called me to go work for them in an ESL program (my specialty) but that only lasted another year and a half. So fifteen years total, equals lower payoff from PERS.

But I keep reading on the web sites how over-payed, under-worked I was/am. So total salary about 3,400 per month and the wolves are still attacking.

I don't know how any young person could even consider teaching in Oregon. It's an insane state!


Unknown said...

Public school teachers get no accumulated vacation time. I had a year's worth of sick leave when I retired. I suppose had I been as unscrupulous as the ignorant public believe public employees to be..I could have said...I am not feeling well..too much stress and taken at least 1/2 of that sick leave. As with you I retired using money match..the sick leave did me no good. I guess I could have taken more days off when I was ill and taught anyway...but those sick leave days were 'valuable'...

ndpace said...

after 25 yrs in police my 2280 hours of sick is worth $688/month. Thats a 19% increase in pay. I am thinking about leaving the state and not pulling PERS for 5-6 years. If everything stays the same would my sick still be used in my calc?
thanks, Jim

mrfearless47 said...

@ndpace. I'm assuming that you plan to retire under the formula calculation. If you are retiring or would retire under Money Match, the sick leave calculation wouldn't be much help to you. I could be wrong, and you really need to check with PERS, but it is my understanding that the sick leave only applies IF you retire immediately after separation. If you wait 5 or 6 years, the sick leave benefit disappears normally. As I say, I'm not certain about this. This is a question that should be directed to PERS.

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