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Tuesday, June 05, 2012

Looking At The World From The Bottom Of A Well

Only in Oregon can we have a state agency(PERS) that has made no provisions for public employees to accelerate their payments to satisfy an obligation created by the PERS Board in 2000.

Back in 2006-2008, PERS finally began to compute what certain retirees owed as a result of the "mistake" made by the 2000 PERS Board to credit regular account balances at 20% instead of 11.33%.  After countless court battles PERS prepares to finally collect all the money owed (about $185 million) by this group of retirees.  Part of the money was recovered in 2006-2007-2008 via adjusting benefits (down) going forward to prevent individuals from receiving more than they were eligible to receive.  However, between April 2000 and April 2005, retirees received larger benefits and PERS intended to collect that money via a method known as "actuarial reduction".  This method took the amount overpaid, divided it by the remaining life expectancy of the retiree and the monthly benefit was reduced by this amount.  In a perfect world, retirees would have paid their obligation completely by the time they reached their anticipated life expectancy.  However, PERS, in its infinite wisdom (stupidity?), decided that the payment would never cease until the retiree and his/her beneficiary ceased to exist.  This would allow longer lived retirees to subsidize shorter-lived retirees, who would not "pay up" under this scheme.  Actuarial reduction was a very unpopular method with retirees who didn't feel they should be obligated to pay more than they owed.   Judge Henry Kantor stopped PERS from collecting from any retirees after June 2007, until higher courts could rule whether PERS had any legal right to collect at all.  So, some unknown number of individuals were trapped in "actuarial reduction" before Kantor's injunction, while others did not have to pay until starting sometime this year, when the Oregon Supreme Court entered a judgement permitting PERS to resume collections.  So,….

PERS heard the complaints of the retirees trapped by actuarial reduction, they heard from OPRI, they heard from the PERS Coalition, and they heard from ME.  People weren't going to go for the "actuarial reduction" because it was inherently unfair.  PERS came up with a more reasonable method which allows affected retirees to repay their "overpayments" over a period of up to 10 years.  This means that virtually all retirees will be paying between 2% and 5% of their gross benefit, pre-tax, until they are paid up, and then ….THE PAYMENT STOPS, ends, terminates.  We all agreed this was a fairer plan.  Moreover, unlike the actuarial reduction, PERS gets its money sooner, retirees have a chance to live part of their retirement without having a recurrent stream of money taken from their benefits.  Perfect…ALMOST.

You would think that the geniuses at PERS would want to allow EVERYONE who owes money resulting from the 1999 over credit to participate in a plan that give PERS its money back SOONER.  BUT NOOOOOO.  Those poor souls on the "actuarial reduction" plan are terminally locked into a plan that PERS itself admits is unfair.

As Ricky Riccardo would say:  "splain this to me".  PERS has computers - a really spiffy system as I understand - installed recently.  They just asked the legislative E-Board for about $3 million for staffing authority to collect this $164 million.  And yet they can't 1) permit "actuarial recovery" persons to shift to the new payment plan and pay their debt off SOONER; 2) tell "actuarial recovery" people how much they owe now, today, this minute, and 3) let "actuarial recovery" people just pay off their remaining balance today, this minute because of 2).

It makes a person wonder whether the people who bid and installed the PERS computer system took their guidance from the Portland Water Bureau or the Oregon DMV.  We (members) spent zillions on PERS' computer system and yet we have all these unfortunate retirees stuck at the bottom of a hole, unable to pay PERS off early by any means.  Talk about looking at the world from the bottom of a well.  All I know is that I regard this as a stupid policy, with no rational explanation, that deprives PERS of essential income earlier, and leaves affected retirees in the unenviable position of paying a bill that never comes to an end.  Just remember, the 1999 over credit was a decision made by the PERS Board, not by the members.  Computers are supposed to make life easier.  PERS has managed to spend a fortune on a bargain basement system that cannot be adjusted to changing circumstances, and are too dumb to realize that they have managed to stab themselves at the same time they've stabbed some retirees.  Nice work PERS (not)!

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