Wow! A whole week has gone by without any murmurations or pronouncements from our boys and girls in the State Legislature. But have no fear, the clowns are being sent in for another attempt to batter us little "Bobos" (for those not old enough to remember, a "bobo doll" was an inflatable toy, about human height, with a weighted bottom that you could punch as often as you wanted, but the weighted doll never fell over. It may have gone by other names but in California, they were called "Bobo Dolls"). To be sure, the DOJ opinion offered little substantive support for the notion to declare open-season on "inactive" PERS members yet to retire. As you recall, the plan had been to eliminate or trim back Money Match for these people, many of whom have no idea what is going on because they've moved elsewhere and have lost touch with events going on. But the DOJ did offer a suggestion, veiled as support for the proposed cuts to Money Match for inactives. It would, said the DOJ, be more defensible if, instead of going after inactives any changes to Money Match would apply to ALL unretired PERS members. And, from the R point of view, it would generate over twice the savings that going after just the inactives would provide. And, even more, the defense would not have to deal with the problem of discrimination.
So, as of yesterday, the idea of decoupling the Money Match annuitization rate from the other assumed rate has been given new life. Whether this late in the session it can gain any traction remains to be seen, but a reduction from 8% to 4% is still the number floated. The idea, as it was floated then and now, is to force many more people into Full Formula retirements, or to significantly reduce the cost of Money Match retirements (to the employer).
The arguments against this are numerous and would present difficult challenges for the State to defend no matter what, but a bill reducing Money Match annuitization that hits everyone from a certain day forward removes one of the more challenging pieces that the AG's office would have to defend. Another warning is also buried in the Attorney General's opinion - the issue of timely notice. A bill passing with an emergency clause and becoming effective on the day it is signed would run headlong into a basic issue of fairness, especially if the bill did not permit anyone to retire before the effective date. The court looks askance at such legislation, but we've seen that rulings over the past decade have scarcely been concerned with niceties and proprieties.
Will this happen? Impossible to know. The legislature has 7 weeks until mandatory sine die in mid-July, plenty of time to mount this kind of attack. Could they back door the legislation? If, by back door, you mean that the Legislature could provide PERS with the statutory authority and responsibility to decouple the rates without specifying the rates, I'm pretty sure they could do that. Were that to happen, PERS would probably just fold this into part of the formal valuation process. But I'm not about to make predictions that anything of the sort is going to happen; only that it could happen.
All I know is that just when we thought it might be safe to poke our heads up, the clowns with the baseball bats are winding up to try to knock us down again. Send it the clowns!