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Saturday, May 04, 2013

Tumbling Dice

The Legislative crap game hasn't folded its tent yet, unfortunately.  The Governor and the Dems are so desperate for revenue - at least another $275 million - that they are willing to sell our souls for a few Repub votes.   PERS members are still in the crosshairs since SB 822 didn't satisfy the bloodlust of the media, the Rs, and the Governor.  Last week Gov. KitzRobber held a round of meetings with legislative leaders to plead for more revenue.  The only way they see this possible is with more PERS revenue transfer from members into the pockets of employers.  Basically, the Legislature, the Governor, the media have all decided that the entire increase in this year's budget will be funded off the backs of PERS retirees first, and then from future retirees - the actives and in actives.  (Keep in mind that all these changes to PERS replace any changes to the tax structure in Oregon; few, if any, additional tax revenue will be needed if all these PERS' robbing ideas get implemented.)

Ideas currently in circulation include bills to prevent pension "spiking"  (a current non-problem), flexibility on the 6% employee contribution (i.e. taking away part or all of the "pickup"), ending Money Match for inactive members with less than 10 years of service and no service in the past 10 years.  The "spiking" provision would reduce employer contributions by about 0.7% or approximately $660 million (this is a total amount over 20 years; about $66 million per biennium) since it only applies to Tier 1 and Tier 2 members (not OPSRP) who retire under Full Formula or under Formula + Annuity, but not Money Match.   The "pickup" saves a variable amount of money depending on how it is implemented both statewide and locally.  The objective is simply to provide more negotiating room in collective bargaining.  Finally, the issue of inactive members retiring under Money Match came into focus after Paul Cleary's testimony on SB 822.  I have seen no analysis of how much a bill ending Money Match for certain inactive members would save, nor have I seen a bill with that objective.  The other ideas are part of SB 754, introduced by OSBA, and being actively pushed by a group entitled Reform PERS Now.

As I have indicated before, I don't give advice to people who are on the verge of retirement.  But, if you are already considering retirement this year, know that you will retire under Full Formula or Annuity Plus, and don't have a complex situation that will require time to assemble funds or paperwork, I do know that the removal of sick leave, vacation time, and overtime will have a huge impact on a small number of people.  You might want to get your affairs in order and be prepared to submit your retirement papers before May 31 for a June 1 retirement.  I don't think the Legislature can move quickly enough to pass bills to eliminate pension "spiking", which is the major concern for most people, or for eliminating Money Match retirements for those who stopped working for a PERS employer more than 15 years ago.  These bills have a relatively long cycle to get passed and signed, even with an emergency clause.

Both the Legislature and unretired, but eligible PERS members, are both throwing dice in difference craps games.  If this concerns you, there are two actions you can take.  First, start lobbying your own legislators on how unfair this kind of change is just before someone retires, and two, get your retirement affairs in order.  Your only option if things start to go pear-shaped is to get out of the system quickly.

15 comments:

bobbie bogdanovich said...

Great....I don't turn 50 until November and had planned on retiring December 1st. Any chance this might be handled in the 2014 session?

mrfearless47 said...

@bobbie. The legislature and Gov have decided that they need at least another $275 million to balance the budget. The Repubs are unwilling to sign off on some revenue increases that require a 60% super majority. It is unlikely that this will hold until the 2014.

mpguy said...

Should inactive PERS members who haven't worked in more than ten years lose the right to Money Match, it will be very much in their best interests to strongly consider taking their entire account balance and rolling it over into an IRA. (Frankly, I think almost anyone retiring at this point should study this option carefully. At that point, they can also pretty much stop worrying about what additional thefts the legislature will fore ahead with in the near future.)

This is especially true if those members are beyond the normal retirement age of 58.

I wonder if the fools in the legislature have considered that the more they eliminate reasonable options for potential retirees, the more people will simply take their money out of the system and run?

CW NP Trip said...

Marc, is the reduction in the assumed 8% annual rate being considered/re-considered, as it was in SB754? I see nothing regarding that in your article. It would affect my wife's retirement the most, as we see it.
Thanks

mrfearless47 said...

The assumed rate cut is something that will be left toPERS since it is already midway through its normal (every other year) review of the assumed rate. Most are betting on a drop to 7.5%, to be effective for members, employers and those who retire on or after 1/1/14. I don't think that the HB 754 decoupling could get the needed votes.

Scott Lane said...
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Scott Lane said...
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the thom41 said...

Is this Legislation likely to be challenged in Oregon State Supreme Court by the Unions and retiree organizations or is it a slam dunk ??

mrfearless47 said...

@Scott. Get the retirement packet from PERS. It has all the forms you need to initiate a retirement application. It also provides a checklist of things that need to be done.

mrfearless47 said...

@thethom41. Yes, any legislation adversely affecting PERS members and retirees will be challenged in the State Supreme Court by the PERS Coalition and OPRI. Nothing is a "slam dunk". There are arguments that can be made in favor of and against each proposal. Strictly speaking, from a purely contractual viewpoint, the Legislature's actions so far don't start from a position of strength. But everything assumes that the OSC will rule strictly on contract law; that isn't always the case.

JOHN TREDWAY said...

As PERS members living out of state, we see that SB822 has been signed into law. It looks like those non resident retirees will lose the payment granted years ago to help with state income taxes in Oregon. Does anyone know an estimate of that monthly calculation? We are not seeing anything about out of state retirees having to pay state income tax to Oregon in the bill? Was that eliminated from the bill? That sounds too good to be true. Thanks.

mrfearless47 said...

@John. Out of state retirees cannot be required to pay Oregon Income tax on pension income because federal law prohibits it. The reduction in benefit will occur with your January 2014 payment. To calculate the reduction you have to know two numbers, assuming continuous service. The first date is your starting date, the second date is you ending work day. In between October 1991 is the crucial dividing line. Count the number of full months you worked prior to October 1991. Then keep counting, starting with October 1991 to figure your total work time. The ratio of the first number divided by the second number gives you a fraction. Multiply that fraction by 0.099, multiply by 100 and you will have the percentage of your income that derives from the income tax subside. That will give you a good idea of he benefit reduction coming on Jan 1.

M.E. said...

Marc, thank you for your SB822 formula and education. I figured about a 4% hit and wonder if my math is correct. I started teaching in 1983 then retired and moved out of state in 2011. Does 4% seem a likely figure and will the reduction start in Jan. 2014? Thank you for keeping us all up to date.

A1call said...

Thanks for looking out for all of us. I know it is time consuming. What are they currently doing with the full formula calculation? They were talking about deducting the OT and sick leave and going with base wage or was this only for what they called 'spiking' of final pay? Could you please explain how full formula is being targeted? Thank You.

mrfearless47 said...

As of today, June 23, full formula calculations are not being altered. The Rs have proposed anti-spiking legislation but it has no D support and the proposal died in committee. I don't think it will be an issue in the current legislative session. Things could change, but unlikely at this late date.