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Wednesday, August 28, 2013

Shout out Loud

Not PERS related but associated.  For reasons I cannot explain, Yahoo has started to implement its new group format, called NEO.  Obviously they didn't watch The Matrix because NEO could fix any problem.  It seems more like Morpheus has taken over since the Yahoo group (POD), which is associated with this blog, has suddenly become a real mess due to Yahoo's weird and unannounced way of rolling out changes to the group.  I'm a victim right now too, and so far the only way I've been able to defeat the rollout is to use my desktop computer.  If you attempt to login and see a stretched out, pixelated picture of the Scrabble board or of Haystack Rock, you've been rolled.  At the moment I don't have an easy solution to the problem as Yahoo administrators are nowhere to be found.  So, PLEASE bear with us as we try to sort out the problems,  notify Yahoo, and pray they get fixed.  I don't know what or how the rollout is taking place, but if some of you still see the old group format, consider yourself fortunate.  I'm hoping I can find someone at Yahoo who owns this rollout and can get our problems fixed.  In the meantime, if people post and it looks all screwed up, please be kind.  None of us have any control of the format right now. Just hang in there; sooner or later all of this will be resolved (I hope).

Saturday, August 24, 2013

Pay in Blood

The past few weeks have been pretty dull in PERS land.  Our Governator has been trolling east of the cascades and south of the Willamette Valley trying to round up support for calling a special session to go after that great PERS "grand bargain" along with some targeted tax increases for the well-to-do and for the less well-to-do retirees.  The Rs seem hell-bent on agreeing to the Special Session *only* if they get a few tax CUTS for small businesses thrown into the mix.  On August 17, the Gub announced that he would make a decision on a special session within 10 days.  That means that August 27 would be the date.  There are still legislators who want to bring up topics other than PERS and tax increases, like reanimating the discussion of the Columbia River Crossing.  I figure that the more topics people want to throw into the mix the less the likelihood of getting the special session.

People have asked what kind of PERS changes would be sought in the Special Session, were one to occur.  There are really only two that I can think of right now:  first would be further reductions in the retiree Cost-of-Living adjustments, taking them down to near nominal levels (think of it as a tiny tip for bad service).  The other area is to tinker with the benefits for inactive members.  Last time through the Legislature considered making the annuitization rate, (think "special assumed rate") for those members seeking to retire and qualifying for Money Match, considerably lower than the rate used for active members.  Currently all rates are 8%.  On January 1, 2014 the rates will be 7.75%, and the Legislature would like the inactive member annuitization rate to be about 4% less than the active rate.  The AGs office doesn't like the idea of singling out inactive members and has gone so far as to suggest either doing it for all active and inactive members, or for none at all.  This has no bearing on whether the Legislature will listen to the AG -- they certainly didn't in 2003 -- and so I expect that "special" rate to come up again, if not in a Special Session then in February in the short, regular Legislative session.

Just to show how hypocritical organizations can be, OSBA (the school Boards organization) has just joined the SB 822 lawsuit as an intervenor to assist the State and PERS defend the actions taken by SB 822.  Do recall that OSBA opposed SB 822 because it wasn't draconian enough.  But, here they are making sure that whatever piece of the pie they can steal from retirees, they want to be first in line to get the biggest slice.

PERS itself seems to be wrapping up the Strunk/Eugene collection effort.  The absurdities that have arisen have taken comedy to new forms, except when it doesn't.  My favorite story (told with permission) is the story of Martha Sartain.  For newer retirees, Martha's name may not ring a bill.  Martha was the named plaintiff in OPRI's lawsuit against the COLA freeze from the 2003 Legislature.  Martha was one of my favorite people, and she was one of the brightest, most sophisticated plaintiffs the PERS Coalition had during the Strunk case.  Martha also served on OPRI's Board and she fought regularly with Board members to modernize the organization, update the website, go digital for many aspects, and to bring on more recent retirees who had a vested interest in everything taking place in the Legislature.  She dragged a couple of us along to several Board meetings and it was there that we discovered just how archaic OPRI was.  (It is better now, but has a long way to go before becoming a fully modern organization).  In any case, Martha retired in late 2002 and in early 2007 was diagnosed with an extremely aggressive form of cancer.  She died before the end of 2007.  Martha was divorced and her PERS benefit was paid out as an option 1 monthly benefit.  She had no beneficiary so that when she died, PERS scooped up hundreds of thousands of dollars in funds that were hers the instant before she died.  Her estate executor (her son) followed the law to the letter, notifying PERS of her death, dealing with the State and the Federal governments paying the necessary taxes due on the estate and settling with all creditors.  The estate formally closed in mid 2008.  Several weeks ago a letter addressed to Martha Sartain Decd arrived at her son's house demanding about $12,000 to be paid to PERS because of the 1999 over credit that affected all retirees in the 2000-2004 window as well as a varied group of others who retired before or after the window.  Her son got in contact with me.  Since I had dealt with one of these before, I advised her son to contact Revenue and PERS to inform them that Martha left no beneficiary (on her PERS account) and that the estate had closed in 2008.  This seemed to satisfy Revenue (although I'm sure there was paperwork to be filled out), and satisfied PERS (again, I'm sure there was paperwork there too).  PERS, however, could not resist informing Martha's son that although they could not collect the debt, the debt would not be written off, but merely noted as uncollectible.  When her son pointed out that Martha's pension account had enough money to pay off the balance 20-30 times over and that PERS recovered all of that, PERS gleefully noted that the two are completely unrelated.  No matter what is left in the retirement account, it can't be used to retire this debt.

Since hearing from Martha's son, I've heard from several other people in similar predicaments.  Every case is different and sometimes even though it doesn't seem like PERS or Revenue should have the right to collect, circumstances make it difficult to mount a compelling argument.

In these kinds of cases the questions you need to ask are 1) did the decedent ever receive notification from PERS about owing money because of the 1999 over credit?  2) did the deceased have a beneficiary (and if so, who?); 3) how did the decedent structure his/her retirement benefit (i.e. monthly benefit with no beneficiary, monthly benefit with spouse as a beneficiary (full benefit, half benefit, with or without pop up), 15 year annuity certain, refund annuity (who got the refund?), lump sum settlement (full or half).  There are lots of complications involved in determining whether the estate has liability for repaying the bill.  If there is no beneficiary and the estate is fully closed (Martha's case, there is no one from whom PERS can collect); if there is a beneficiary still getting the benefit, PERS should be collecting from the beneficiary.  

They say you can't collect blood from a stone, but it is clear that PERS is definitely trying to collect money from a stone, or from ashes.  Make sure you are fully armed with the necessary information before you call PERS or Revenue.  No beneficiary, no open estate, no repayment is necessary.  In any other circumstances, your mileage may vary.  Feel free to check with me or post your situation over on POD (see left for link) to see how we view it.  With the right array of information, you may not have to worry about this.  

Thursday, August 01, 2013

Pacing the Cage

Right now, the action on PERS seems to be a combination of the PERS Board finalizing the new assumed interest rate (7.75%), the effective date for new rates and new mortality tables (January 1, 2014), and approving the final set of assumptions for the 2013 experience study that will determine employer rates for 2015-17.

The only area where no real hints are available is in the construction of the new mortality and AEFs.  The new tables go into effect of 1/1/14 and I've received conflicting information on how those tables might affect individuals who retire on or after January 1, 2014.  Early information suggested greater longevity for the PERS population, which would lead to actuarial equivalency factors that result in lower monthly benefits to members.  This would happen anyway since the assumed rate will have been lowered, but the information initially received suggested that the PERS member experience was unusual and that the tables would have a far greater impact on benefits than expected.  Lately, however, I'm getting a completely different set of rumors.  While it may be true that the PERS experience data indicate longer life expectancies, the general population data show exactly the opposite.  Actuaries and epidemiologists have been noting this effect since mid-2012 and the overall population numbers suggest that mortality rates are declining by several years.  They've correlated this impact with education attainment and have noted that those with either less than a high school education or only a high school education have mortality reduced by more than 4 years over the rest of the population.  This results in general population mortality figures that are shorter than in the past.  If this is true, and the data certainly seem to support the claim, then what may happen is that PERS' actuaries will have to revise the mortality tables downward and report lower life expectancies.  Ironically, this will have exactly the opposite effect for members.  In the main, it would probably return the mortality tables back to the point where they would have been in the mid-1980s, slightly better than the 1978 tables, but worse than the 2003 revision.  If this happens, the lower interest rate will be offset by lower mortality and member benefits would be higher than expected because they aren't expected to live as long.  I see no resolution of this issue until the new tables are reported out, possibly at the September 27, 2013 Board meeting.

In the meantime, our illustrious Governor Kitzrobber is pacing the state trying to build support for more PERS cuts and higher taxes to support the public schools.  The Governor has hinted at what he wants as part of the "grand bargain", which seems to be similar to Senate Bill 857.  Recall that SB 857 had two parts:  further cutting the retiree COLA (amending SB 822 from 4 tiers to 2 more punitive steps), and cutting the annuitization rate for inactive members seeking to retire at some point in the future.  SB 857 died when the House failed to pass HB 2456, which would have increased taxes for several different groups of people.  The net effect of these two bills would have been to increase revenue in the state by about $250 million per biennium and further reduce employer costs by lowering the unfunded actuarial liability of the PERS fund.  

The issue now is that the possibility of enacting a cut to inactive members retirement benefits shook the tree pretty heavily.  Recall that during his testimony on SB 822, Paul Cleary, PERS Executive Director, noted that 4% of the inactive members were responsible for 40% of the liability of all the inactives (not ALL PERS members).  From various sources I've concluded that many of those people retired June 1, July 1, or August 1, thereby reducing the amount of money that would be available to recapture by cutting the annuitization rate for the remaining inactives.  Thus, any bill including the inactives would probably generate about half the savings as before, and possibly less if the Legislature gives inactives a free-pass for a few months before implementing the rule.  Since the AG warned the Legislature that passing a bill that provided essentially no notice, or trapped people with no option to get out before the effect date, would be viewed negatively by the Supreme Court.  So, it appears that the inactive cut would not be very lucrative for the employers or PERS, and would force the burden back on retirees, again.

I have no sense of whether a Special Session will be called or not.  I know that the Governor wants to call the session in September, if at all.  I've heard that some legislators are balky at the idea of more cuts to retirees, while the Rs are balky at the prospect of tax increases without some tax cuts to help small businesses.  I do not regard the special session as a done deal by any stretch of the imagination, but if the Gov can keep all the Ds together, he needs only 2 Rs to pass everything he wants.  The bar is not high, but it still will require some hard sales pitches.  In the meantime, keep those cards and letters going to your legislators.  They need to know what you think of these ideas.