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Saturday, May 25, 2013

Send In The Clowns

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!

21 comments:

Unknown said...

I grew up on Salem and we called ours Bobo the Clown. I never thought I'd say this, but I am starting to be glad that I retired in the 'window!' Things are getting so much worse these days. I can well understand if pre-retirement PERS members are starting to feel like they have been hit again and again and again. How long can one keep bouncing back up?

peg

mpguy said...

Once again, Marc, if the legislature tries to, in effect, eliminate Money Match, wouldn't PERS be hit with a wave of people who would simply take their cash balances and run?

MM is the better option because of the cash balance. I don't think our little thieves in the Leg can get away with simply stealing the employer half of the cash balance, an idea they floated a little while ago. If not, it would make sense for PERS members to take their money and run whenever they decide to retire.

mrfearless47 said...

If you read the DOJ opinion I had posted in POD a few days ago, you will note the AAG Kutler noted concern with implementing these kind of changes without notice (I.e. via an emergency clause) would probably NOT please the court. Thus, it would require advance notice and the scenario you envision would probably occur. But we are no longer talking about a "mere" 17,000 inactives, but closer to 60,000 actives and inactives scrambling to beat whatever clock such legislation would set in motion. Imagine something like a 9/30/13 deadline purely HYPOTHETICAL) and time that with the start of K-university school years, or the end of the Federal fiscal year. Chaos. I still see the likelihood of this happening as low, but the probability has increased from near zero a few days ago to a finite number greater than zero.

Unknown said...

A message to the Clowns that may read your blog;
Sine Die already.......

Dave Conine said...

Greetings...I have read your blog here off and on for a few months. Thanks so much for your efforts to keep some of us informed from the employees perspective. As a 26 year teacher, I am totally disillusioned with the PAT and OEA regarding their efforts to keep members informed and up to date. It is understandable that they have a dilemma on their hands based upon the dichotomy of supporting their members and supporting school funding, but my 26 years’ worth of dues seems to qualify teachers for more support from the Unions. I believe you summed it up well a few blogs ago, that there is no guarantee or watch dog group to make sure the diverted PERS funds ever make an impact in the classroom. I have much more to ask and offer but as a new commenter, I want to see how the post goes.

Hold the Mayo said...
This comment has been removed by the author.
mrfearless47 said...

These are politicians, not welfare workers. You expected honesty, integrity, honor, you should call a priest. Politicians - just whores by a different name.

Becki Robinson said...

Ending Money Match without giving near retirees an opportunity to retire first is immoral. I have almost 37 years in with PERS and the thought that the legislature could change my plans for retirement at the last minute leaves me speechless.

Dave Conine said...

The Enron comment is very apropos, and here is what my wife came up with yesterday w/o any prompt from the Blog: “Those Enron folk were imprisoned for tampering with people’s retirements, what does that say for the Oregon Politian’s?” I was watching Mel Gibson and Julia Roberts in Conspiracy Theory, and couldn’t help think of the Oregon School Board Association, the Oregon Business Councils, and of course the Portland Public School Board. Without great details, it suffices to say there is a great conspiracy going on to target PERS and Unions. The Education Unions aren’t much help either, being stuck between a rock and a hard place: Support PERS for their member’s sake and that implies no support for school funding. What is unclear to me is that as a PERS Tier one member, where is the equity (too use an overused educational term) for retiring next year vs. those that retire this year? Aren’t we ALL PERS Tier one and have equal retirement opportunities? Something sure stinks down in Salem. Once the PERs system is drained, the evil ones will look for another easy target, or perhaps they might consider the tiniest of sales tax – oops.

bobbie bogdanovich said...

What would be the impact of this to full formula plus annuity??

mrfearless47 said...

Depending on the rate and the timing, the impact on Formula plus Annuity would be in the vicinity of 30% of the Annuity payment; no impact on the formula.

Buck2520 said...

Wow, life long Republican here but can't believe this. I sent my paperwork in last Monday to make my retirement date June 1st. I am exactly the target of this criminal conspiracy. Left OR job 10 years ago and left my PERS money in system so I would have a small nest eye to supplement my Soc Security. Would have grown to about $1,700 per month at age 66, but will only be about $750 a month now. Taking the hit to avoid the possibility of loosing money match. As with most, I think the courts will strike down the unlawful actions the legislature takes, but then you can never completely trust the system to do the right thing 100% of the time. So sad that politicians and the school board assoc (and others) want to make PERS the scape goat in all this. How about responsible spending and living within your means. Oh, that would take character and common sense, sorry to say this is not a trait of the Republican Party Tea Bag worshipers anymore. Moved out of Oregon and glad to be gone, sad to see the Governor and Legislature become held hostage to far right Tea Baggers and far left tax and spend school board power players.

CW NP Trip said...

So what do these boobs in the legislature think will happen to the PERS fund if they take away MM or slash assumed rate? Have they considered the consequences? PERS people will be stampeding for the exits IF there is any time left to exit before the law takes affect. PERS will take a huge financial hit. Or, for those that are too late to get MM or have their annuity slashed by some other means, they will leave PERS and take the cash-out lump sum option, because who will have any future trust in the legistlature. PERS fund takes another big hit. being the largest Oregon "fund", does that sound like a wise financial plan? PEOPLE: CONTACT YOUR LEGISLATORS. Write or call them. Same with Governor Kitzrobber. Tell them how unjust and down right chicken-shit it would be to slash PERS before members had a way out. And if they move forward with such Draconian legislation, PLEASE meet me in Salem and lets raise hell.

Dave Conine said...

It bears asking what happens if the legislation passes to change 8% to 4% - reducing Money Match annuitization that hits everyone from a certain day forward - and I retire prior to sign in date, followed by a court case that upholds the 8% and leaves things staus quo? In that case is retirement final or can one reverse a decision to retire based upon a false pretense or legislation?

mrfearless47 said...

@Dave. You can always reverse a decision to retire if you repay all the money you've received. So, presumably you could alter your retirement, but that presumes your employer would take you back - a doubtful prospect. This has always been one of the issues. Once you've retired, your employer writes you off. Even if I had wanted to "unretire" it wouldn't have done me much good as my vacated position had been long filled.

Debbie Whitecotton said...

My wife is an Oregon PERS Inactive member and won't be 58 until October 2, 2015. I'm trying to understand the ramifications of what is being discussed at the legislative level. One question that comes to mind is, if they implement a lower assumed interest rate on the money match funds, will the full withdrawal option (member account balance plus money match funds)still be available for withdrawal? In other words, can the legislature legally disregard money match funds for future retirees. Thanks in advance for the information.

mrfearless47 said...

@Debbie. The legislature can do whatever they want. It is the courts who will decide whether what they do is legal or not. That said, the idea is that they want to eliminate or serious reduce Money Match for actives and inactives through some mechanism that denies money already earned. If this concerns you, so long as your wife is over 55, is certain she will retire under Money Match, she could get out sooner than 58. There is nothing magic about 58 under a Money Match retirement.

Debbie Whitecotton said...

Thanks for the clarification. Back to my question regarding the lump sum option......to your knowledge, is there discussion regarding the complete elimination of the money match for lump sum purposes, or is the discussion mainly around the annuity options. Thanks in advance.

mrfearless47 said...

Since I've seen no bill and only broad hints about what the legislature "might" do, I'd be reluctant to commit to an answer here. The concept of eliminating money match includes more than just annuity options, but no one will come out and say that. Also, keep in mind that a change to the annuitization rate implicitly affects the lump sum because they have to remain actuarial lay equivalent. I would assume the worst and be surprised rather than expecting the best and getting the worst.

Debbie Whitecotton said...

Thanks for your thoughts and tireless contributions to this blog. Now, what to do....what to do!

mrfearless47 said...

@Debbie. The PERS online benefit estimator is your friend. You can use it to see what Impact an earlier retirement might have, especially on lump sum options.