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Monday, January 11, 2016

Changes

(RIP David Bowie).  A quick note to those still waiting for the COLA adjustments to be implemented.  I’ve just learned that the cohort scheduled for January restoration has been pushed back to February.  The major reason for this is that these calculations have proven to be a bit more complicated than first imagined, and PERS strives to make them accurate the first time.  With the added pressure of a quadrupling of December 1 retirements over 2014, something had to give.  As I understand the plan, the one-time catch up payment will drop sometime towards the middle of February, while the first regularly adjusted benefit check should be the payment on March 1, 2016.

On a related subject, the 2016 COLA will be known in early February.  Based on information from the US Bureau of Labor Statistics, the actual CPI change is likely to be very small, possibly 0.5% based on the first half of 2015.  If this happens, those who retired between August 1, 2015 and July 1, 2016 will only receive slightly more than 0.5%, while earlier retirees will have some COLA bank to draw from and will see COLA closer to the 2% range.  For those who retired prior to May 1, 2013 (unaffected by the Legislative changes to the COLA), the adjustment will be 2%, but this will draw down balances from the bank quite noticeably.  At this point, the actual CPI change is only a guess, but there isn’t much in the latter part of 2015 that inspires confidence that it changed very much from the first half.

15 comments:

val4pers said...

I think your estimate of a 0.5 percent increase is ballpark. It will probably come down to a contest between the decline in energy prices versus the increase in medical and housing prices. The numbers ordinarily come out in mid-January.

mrfearless47 said...

The CPI-U comes out in January, but it takes PERS until Feb to officially post the CPI info. We can, of course, do the calculation easily and post it ourselves.

capeman said...

I am beginning to wonder how safe PERS is even for current retirees. Employer costs are slated to go up in the next biennium, and it is said for the next two biennia as well. How are public agencies going to pay for this? Perhaps there will be tax increases, but I wouldn't bet too much on that. The stock market could turn back around, but it could just as easily go into a massive dive. How safe are pensions for retirees in the near future? I know the courts aren't letting the state off the hook, but something has got to give. What will it be?

mrfearless47 said...

@capeman. What will give is likely to hit the still-working members. The courts have made it clear that going after retirees is a legally fruitless enterprise. Aside from increasing employer rates, the only option left is to make those changes in the contracts of the still-employed. While I favor none of the ideas floating around, I suspect that any prospective change that secures the accrued benefit will pass muster with the court. Retroactive changes will never fly.

whoafish said...

The tax remedy has a major flaw. I'm moving back to Oregon next month. Per the current tax remedy process, I won't receive the tax offset increase in benefit until January 2017, but will I will be paying state income tax immediately.

mrfearless47 said...

You may see it as a flaw, but it was designed that way, on purpose. None of us agreed it was fair, but the Legislature didn't seem to care, and the issue didn't come up in the litigation. Not much can be done to change it now except by convincing PERS to change the administrative rule implementing the statute changed by the Legislature.

whoafish said...

It is amazing that the legislature will ignore the fact that some tax paying citizens are being treated unequally relative to others regarding this issue. I did email my district house and senate members.

mkw said...

I just got an email from PERS, today, saying that they hoped to pay my retro COLA in March. They said, "We have so many accounts to adjust, that we have some groups falling into different adjustment populations."

Karen Garst said...

I got an increase of about $240 in my PERS check deposited today. I am Tier 1, retired in 2008. Is that the February COLA you are talking about? Thanks for doing this blog. I couldn't find the info anywhere else. Karen Garst

mrfearless47 said...

@Karen Garst. Unlikely. Your benefit was most likely adjusted for the COLA during November 2015. If you check your November deposit history, you will probably notice a small (under $1000) deposit made to your account on November 14, 2015, and a higher benefit than for November 1 deposited on December 1. This represents the fully adjusted COLA for the years 2013, 2014, and 2015. If this didn't happen in November, the Feb 1, 2016 payment still isn't a corrected COLA; it represents a programming error in calculating the State of Oregon 2016 withholding. Many of us found errors of this magnitude in our Feb 1 checks and have traced it to under withholding for Oregon State income tax. Each year, the IRS and the Oregon Department of revenue issue new formulae to calculate withholding. PERS implements these tables starting with the February 1 benefit payment. PERS will notify affected recipients by mid February of the mistake and will have the correct withholding programmed before the March 1 check is issued. They will not correct the error for the current check, instead giving you the option to adjust your state W-4 withholding amount for the remainder of the year, or by doing nothing and settling up at tax time in 2017.

Karen Garst said...

Wow! Thank you for being so knowledgeable about PERS. so I guess I will not be counting it as a raise. Oh well. Thanks again.

Unknown said...

There is a 3rd option for making up for PERS' error of under withholding Oregon tax for some February checks. The individual can send an Estimated Tax payment for *2016* to the Oregon Department of Revenue (include your SSN, full name and the tax year). One advantage of doing it this way, you have the 'extra' money to make the payment in the check or deposit for this month. If you adjust your withholding for Oregon higher for the rest of the year, while meeting your obligation, it is coming out of your regular benefit. Just another way to get to the same place.

peg

marilyn sharp said...

Has PERS completed the refunding the COLA adjustments? I have just checked back over my deposits from Pers and I noticed a 347$ increase in monthly benefits for February only. Was this the COLA adjustment payment? I don't remember getting any notice of the adjustment, I understood mine would be sent later after initial payouts because of a change in my status because of survivor beneficiary changes.
thanks for all your work and knowledge of these issues.
m

mrfearless47 said...

Marilyn: my understanding is that all of the adjustments to monthly benefits would be completed by the time the next COLA was paid (on August 1, 2016). I have heard nothing to the effect that PERS was running behind. The February payment was probably the one-time adjustment of benefits to reflect you were owed for the underpayment of benefits from the date of the Legislatively mandated COLA adjustment in 2013 without adjusting your monthly benefit for the cumulative effects of non-compounded COLA. The monthly adjustment to reflect the compounding of the COLA over time to the present took place in stages, with the last stage to take place before the 2016 COLA got paid. If you've seen no adjustment in your regular monthly benefit, then I'd expect that August 1 will show a larger than normal adjustment - first, a resetting of your base benefit to reflect the compounding of all past COLA, plus the 2016 COLA. Typically, whenever there is any monthly benefit change of an enduring nature, you'll get a note of explanation. I don't recall getting an explanation of my one time payment. There may also be adjustments related to the change in beneficiary status that will affect your monthly benefit, so that may take awhile too. Your situation isn't the ordinary one that was "relatively" easy for PERS to manage.

Hope this helps explain.

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