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Monday, June 15, 2015

Dangling Conversation

Many people were confused when PERS posted its explanation of how the lost COLA will be restored to retiree accounts.  It always seemed to me that something was missing, yet was obvious.  After many questions addressed to me and to others over on our PERS Discussion Group, I decided that I would go to the source - PERS - and ask for clarification, and, if necessary, an update to the web site.  I am happy to report that the confusion is gone now, and PERS has corrected their FAQ about the restoration in the way I assumed it would be done, but was uncertain because of the unclear language.
You can go to the PERS website (see link to the left of the posts), or you can read the relevant change here.  In particular, for those members who retired prior to May 1, 2013, the COLA restoration will take place in only two steps.  The first step will be a 2% COLA on the CURRENT (uncorrected) benefit effective July 1, 2015 and paid out on August 1.  The second (and only) step will take place in the period between now and the payment received on November 1, 2015.  At that point, the 119,000 retirees who retired before May 1, 2013 will have the accrued unpaid COLA restored and the benefit RESET to the correct level so that the November 1, 2015 payment will be corrected (and will be a one-off large check).  Your first normal payment with all benefits corrected will be the December 1 check.  The official wording from the PERS website is below.  Hope this clears up the confusion.
  1. Calculate the amount owed to those benefit recipients (~119,000) who retired on or before May 1, 2013, and are not affected by the legislation. Our goal is to pay that group by October 30, 2015. The method of payment would be consistent with that currently selected by each benefit recipient (automatic deposit or paper check). We will also be resetting each benefit recipient’s compounded COLA and current year COLA so the benefit payment received beginning November 1, 2015 will be correct. 

14 comments:

Unknown said...

Woo Hoo! This is ever so much clearer than what PERS originally put on their website. Thanks for asking, Marc. And a big thank you to the folks at PERS for clearing this up. I like it that for the vast majority of folks, we can expect to be made whole by the December 1st check! Good news indeed.
peg

mrfearless47 said...

Peg. Everyone in the 119,000 will be made whole by November 1. The distinction is that November 1 will include the "catchup" amount and will be bigger than a normal check. The first normal check following the complete correction will be December 1, but everyone will be made whole by November 1.

Unknown said...

Thank you....nice clarification

mpguy said...

I don't see anything in their statement about interest on the back payments.

mrfearless47 said...

If you read it closely, you will see a citation to an Oregon Statute they are using to deny interest payments on the amounts owed. Not a real surprise.

mrfearless47 said...

See FAQ 5

mpguy said...

That they're not paying interest is not a good sign for the future. If there's no cost attached to these illegal takings of benefits, there isn't anything from stopping the legislature from simply passing legislation that cuts benefits whenever they need a few hundred million (or more) to balance the budget.

Even though they know up front that such a benefit cut would be glaringly unconstitutional, PERS has to go along. It would just turn into a series of interest-free loans from PERS retirees to the state government, with many retirees not living long enough to be reimbursed. (That will be the case this time, as no doubt thousands of retirees passed away and their estates are now closed.)

I think this is something the attorneys need to look into.

mrfearless47 said...

There are 6500 individuals who died before their accounts could be resolved. Closed or not, PERS owes the families the money on the benefit for the time between July 1, 2013 and the recipient's death. This is stated as part of the reconciliation process.

As for the matter of interest, I don't think anyone is going to take up that cudgel until it becomes a more pressing issue. The sword cuts both ways at the present time. No one is being charged interest on monies owed to PERS because of the Strunk case where back payments were owed to PERS. So, while I agree that interest should be paid whenever PERS owes us money, to get that might require PERS to collect interest from us whenever we owe them money. Is that a road you want to walk? If so, I suggest you get in contact with the PERS Coalition to find out what their thinking is. It just isn't a battle I'd be willing to fight at this stage in my life. At best, any victory would be pyrrhic. You may think otherwise, but I certainly don't.

phil carson said...

This is the story of my life, My whole life has gone this way, I always just miss out on everything. I retired June 1 2013, so as usual I miss out, if I did not have a family id flip out and leave the country. Retire in The Philippines, Panama Im happy for you guys who will receive this restoration, but feel it is wrong, the cut off should have been effective the end of the year. I think the ruling should be appealed.

mrfearless47 said...

Phil: you are not as bad off as you think. You will be restored via the old method all the way to May 1, 2013, and under the new way for only one month. Thus, if you worked 30 years, your benefit each July will be 2% minus 1/360 at 1.25%, an annual increase of roughly 1.995%. You will not suffer anywhere near as much as you imply. You'll get the benefit of the full COLA on virtually all of your benefit, reduced only by a single month out of an entire career. There is nothing to be appealed and nowhere to appeal it to anyway.

M&S said...

MrFearless47, Pls refresh my memory..... I like person above retired a few months after the effective date of May 1, 2013. So, does the COLA bank still exist for us "late" retirees, and does bank still exist intact for all who retire before May 2013?
PS I can identify with remark of "story of my life" as I watched my co-workers mass exit in 2003 due to that big shake up, and then as I neared my 30 years, I watched the 8% rate for PERS formula disappear after relying on it for 28 years for my Money Match outcome. I thought many times, My timing/age sucks in the PERS world.
Thanks, Igjeup (Michael)

mrfearless47 said...

Michael: The court ruling seems to say that you are entitled to the old (2%, COLA bank, etc) on all work performed prior to May 8, 2013, while your subsequent work will earn whatever rate based on the actual date of retirement. I read that to mean that you would receive 2% (max) on the benefit attributable to your work prior to May 8, 2013 and a lesser amount on the benefit attributable to your work after the cut off point. That complexity is the reason why it will take PERS longer to settle up with you than it does to me. Obviously, SB 822 and SB 861 both eliminate the COLA bank, but the COLA bank was in force for all the time worked up to the passage of SB 822 (May 8). Thus, you should still be eligible for access to a bank that will be applied to your COLA (if needed) on the large segment of your benefit.

This is not a statement of fact; it is statement of logic based on the court's ruling. I don't see how PERS avoids it since they have to "blend" your COLA, the bank has to figure in somehow. I genuinely think that anyone who got out during 2014 after a full career is going to be diminished much by how PERS implements the ruling. Only time will tell how that plays out. I don't think PERS has gotten around to the full consideration of the implementation for those who retired after May 1, 2013.

I hope this helps and is less discouraging than your initial reaction.

Oh, and BTW, the COLA bank will be fully restored and updated for all those who retired on or before May 1, 2013.

mrf

Liz S said...

I have a question I don't know who to ask. It is about the variable account for a tier one retiree. Is there a knowledgeable source for such information?

mrfearless47 said...

Liz S. You are welcome to ask me (my email address is available via a link on this blog), or an even better source is the PERS Discussion Group I run on Google. Look to your left on the Blog Page. There is a list of links and the first link is to POD (PERS Oregon Discussion). Follow the link. You will have to join the discussion group by registering but, once registered, you can post your question immediately. It would surprise me if it took more than 24 hours to have several intelligent and correct answers to your questions. We have about 1000 members and the group is actively viewed by many PERS experts besides me. One of those two options should fulfill your needs for answers.