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Friday, February 17, 2017

Stranded

Leave it to the Rs in the Oregon Legislature to come up with a do nothing, save nothing bill concerning PERS.  In a particularly mean mood, SB 791 was introduced yesterday.  The bill effectively ends the current 1039 hour per calendar year post-retirement work limit for PERS retirees.  Instead, the bill requires an employee to be fully retired from the employer for 6 months before he or she can be hired back in a part-time capacity.  While this is the SOP for private employer pension plans, it hasn’t been a feature of public employer plans.  I presume the reason for this bill is to “end” what some see as “double dipping” - a misnomer if there ever was one.  In fact, I can’t see employers happy with this bill because it may well cost them more money rather than less.  In common cases, an employee who is hired into a 1039-hour position after retirement possesses some unique skill that either isn’t easy to recruit for, or isn’t easy to train a new person into.  The role of the retiree is to help train a new employee assume the duties of a retiree who possesses a unique skill set.  Under the 1039-hour rule, no benefits are paid, no contributions made to PERS, and usually (though not always) no health care benefits. If employers are required to wait 6 months before they can hire a retiree back, how then are they to train someone is a hard-to-fill, hard-to-learn position that is essential.  Obviously this isn’t always the case; indeed, it may describe only half the cases.  Instead, what is going to happen is that employers are going to have to hire replacements before the essential employee leaves, and do the training simultaneously.  This results in double salary and benefits, certainly not a savings but an added expense.

To add insult to injury, this bill does not have a date certain for a starting date, instead stating that it covers any employee still active after the bill is signed into law.  So, while you’re being distracted by the effects of SB 559 and SB 560, which both would take effect on January 1, 2018, you can end up being stranded by this bill, which serves to prevent you from moving out of an agreed upon retirement plan into a brief period of part time employment with no interruption in payroll.  

The worrisome aspect of this bill is that it appears innocuous on the surface, will have broad public support as appearing to do something that it doesn’t really do, it has a possibility of slipping through the cracks and passing since it is targeted primarily at a relatively small sample of those on the cusp of retirement.   Since it obviously does not prevent reemployment of retirees, just puts a significant delay in their path, the bill will neither save money or will it do anything to address whatever ails  PERS.

One final, curious, note.  This bill completely removes the hour limitations on work for a public employer after retirement, provided that three conditions are met:  1) the employee must have spent a minimum of 6 months retired and off the payroll of any public employer; 2) if you are receiving Social Security prior to reaching normal Social Security age (i.e. between 62 and 66), the earnings limit is constrained by Social Security earnings rule (lesson:  if you plan to go back to work after retirement, don’t start drawing Social Security until you’ve fully stopped working); 3) if you are at least normal Social Security age (i.e. 66 or 67 depending on birth year), you can work as much as you want without any earnings limitation.  The only real change is with 1) as the other limits have been more or less in effect since the 80s.  What this bill does is to remove all of the exceptions now in the statutes that permit certain people to work more than 1039 hours if they live in places with certain demographic characteristics.  But then see 1) above for the important caveat.  The rule does not envision exceptions to 1), which happen to be the reason the original set of exceptions were introduced.

10 comments:

Richard McKay said...

Hi,

I didn't see any mention of the emergency clause within the bill. Does this not mean that the effective date would be Jan. 1, 18 no matter when it is signed?

Thanks,
-rick

mrfearless47 said...

Doesn't need an Emergency Clause. Takes effect on passage because there are no financial consequences.

mrfearless47 said...

Another perverse side effect of this bill. Given the elimination of the hourly limit, I can imagine a member of Tier 1 retiring at 58, after 30 years, drawing a good benefit, remaining retired for 6 months, and then going to work for the same or another PERS agency full time, with full benefits and becoming a member of OPSRP for the duration of his career. If he/she worked it right, the final benefit starting at age 67 could be a full PERS Tier 1 pension, full social security benefits starting at age 66 or 67, a full time salary from age 58.5 to whenever retirement from OPSRP occurs, and ultimately a higher social security benefit based on earnings received after starting to draw social security at the full benefit age. Talk about a jackpot. This could end up being a super bonanza for a healthy, workaholic, public employee. Somehow, I don't think this was intended either.

treehugger1 said...

This bill could potentially modify my retirement agreement with the university. My agreement with the President and Provost is contingent upon a successful signed 1039 contract. I am currently retiring April 1st with a 1039 agreement for April, May and June. I begin drawing my PERS on April 1. If this bill gets signed into law in May or June, there will definitely be some complications related to folks already on a 1039 at the time of passage. I would like to believe this bill doesn't stand a chance of passing.

mrfearless47 said...

If your 1039 contract is already in force (i.e. you've retired before the bill passes), you are protected. If you read the bill carefully, it will ONLY affect those not yet retired when at the time it passes. I would say this bill probably has a better chance of passing than SB 559 and SB 560, but nothing is moving quickly this year.

Beholdacandle said...

It's amazing to me that some people in the business community so resent the salary and benefits of government workers even though those salaries and benefits are often much less than they earn. I do understand that when a person has a small business, he or she often works double shifts and that a very large percentage of new businesses fail. Yet, it is their choice to work in this way. A very large percentage of teachers don't continue teaching after the first couple of years because it is hard and beginning salaries are low.
When it was time for me to retire early from teaching due to a heart condition, it was 2003. It seemed a good time to retire from Oregon due to proposed changes in retirement law. I finished out the school year, retiring in Washington in 2004. So I double dipped! Wow, big salary! I was happy to live away from small towns in Oregon where double dipping would have brought out the critics. The school administrator asked how they could keep me on, but I said that I had to retire due to my heart condition. (Besides I discovered how much my retirement benefit would be from Oregon plus a little one from Washington. I missed teaching the kids, but I discovered a whole new world of doing what I wanted when I wanted in retirement.) Busy, busy, busy without the stress! As a retired person living in a rural setting, I really don't care very much what those government critics say except to be sorry for them that they make their own lives miserable blaming someone else for their own choices.
I very much appreciate the comments on the PERS discussion group and this BLOG which keep me informed of changes in retirement law which could affect what is left of my life after 35 years of public service.

Ed Haney said...

Does the 1039 rule include those who retire and come back to work part time through an employment company. Or is it aimed at officially recognized "City-County-State" positions?

mrfearless47 said...

It all depends on who your check comes from. If you are working through an agency and get paid through the agency, you don't even appear on the records of who you work for. The rule is aimed at people who are returned to the payroll of a city-county-state agency and being paid directly from the agency.

mrf

Mad dog said...

Mrfearless,

Is it true that once a person reaches 66 years of age in retirement from pers, that the 1039 requirement no longer apples and you can work full time for a pers employer ?

Thanks
Mad dog

mrfearless47 said...

Mad Dog: if you were born before, I think 1954, you reach full Social Security age at 66 and neither Social Security nor PERS limits your working hours. Those born after 1953, again I believe, have to be 67 to reach full Social Security age and then the same rules apply. Of course, going back to work full time for a PERS agency at full social security age entitles you to more social security earnings, as well as re-enrollment in whatever current PERS plan is in force at the time. But you'd have to work another 5+ years to be entitled to a second pension from PERS.