If you wish to help support the ongoing costs of running this blog and you haven't purchased anything through Amazon on this site, please consider a small donation to defray basic costs. It isn't free to me to keep this site current. I have to pay for bandwidth, costs of duplicating documents when they exist only in paper form, and keep printer ink around to read lengthy documents, and the time to do the research. Thank you. Marc Feldesman, site owner and publisher.
Oregon PERS Information is Copyright Marc R. Feldesman (c) 2003 - 2017 All Rights Reserved. Posts may not be reprinted without prior consent.


Please don't post your comments more than once. I moderate all comments and a delay between posting and appearing is part of the drill here. I get to all comments in due time. Please don't continually repost the same comment. Only one will be posted. Thank you.

Monday, April 17, 2017

The Gilded Palace of Sin

I have to confess that the title of this Flying Burrito Brothers album jumped into my head after seeing a color news photo of the Capitol Building in Salem with its gilded statue on top.  It also reminded me of the line from an old Gilbert and Sullivan operetta “nothing is ever as it seems”, or its modern incarnation as “objects in mirror are closer than they appear.”  So what is this all about?  I am not a believer in conspiracy theories, blind and willful ignorance, or plain incompetence (I do occasionally make exceptions).  I’m also not one to panic, for myself, or for others.  But, I have to confess that actions in the past week have given me new respect for the power of mean-spirited people, being pursued by an angry and worried crowd, to come up with magician’s tricks to fool people into thinking they’ve won a small (or large) victory, when they have, in fact, won nothing.

Since you all know that I write only about PERS (and recently only about the Legislature and its long history of trying to take benefits away from workers), I have been following the discussion (and contributing to it) regarding the Senate Workforce Committee and its unwillingness to confront PERS in more than a desultory way (I mean that; I take nothing from all the informational meetings except a complete unwillingness to do anything for or against PERS bills except to pick two bills and send them up, with all their attached amendment and without any recommendation, so that the Black Hole known as the Joint Ways and Means Committee can do their bidding in the absence of light).  I think this is a cowardly and unprincipled position, and I suspect there are some deeply hidden agendas being played out by leaders of both parties, the Unions, and a variety of other organizations who want money and don’t really care all that much how they get it.

That’s the background, but what’s new?  In the final analysis, after all the stürm und drang over PERS, two bills seem to have survived and will be forwarded without recommendation (the cowardly act) to the Joint Ways and Means Committee, where the action is done is less-than-public view.  The two bills, well-discussed in previous posts are SB 559 (unamended) and SB 560 (unamended, plus 10 [or possibly only 9, see below] amendments) that will be forwarded without any further discussion.

Last Wednesday, the Workforce Committee held its only public hearing where the public was actually permitted to testify on these two bills.  The primary objection was to the presence of an Emergency Clause in both bills, but especially in Senate Bill 560.  Unfortunately, the magician’s trick worked.  Eyes were distracted from the true problem, and like magicians working an audience, the members of the Workforce Committee promised to amend the bill (SB 560) to remove the Emergency Clause.  And they did in a single amendment numbered dash-15.  But like all magicians, the amendment removed the Emergency Clause from the original bill, as introduced, without touching the Emergency Clause in any of the 9 amendments in which it is replicated.  Worse still, either through willful deception, magician’s tricks, or distraction, the Committee did not grasp (again naivete is not an excuse for this experienced group of legislators), that the REAL problem was not the Emergency Clause (in fact, the Emergency Clause is actually necessary for reasons illuminated in multiple previous posts), but the lack of a date certain in the dash-3 amendment, and the section on the bottom of pages 24-25 of the Dash-10 amendment pertaining to the decoupling of the Money Match annuity rate from the system’s actuarially assumed interest rate.  In both amendments, this particular change is fomenting all the fear, uncertainty, and doubt, not to mention causing untold anxiety for near-term Money Match pre-retirees and leading to a mass exodus of people since the beginning of the year.  In both sections of these amendments, these changes, but NO OTHERS, are targeted to “…take effect on passage”.  All other provisions take effect on January 1, 2018.  With the emergency clause in, the “takes effect on passage” means that the section in question would become law the moment the bill is signed into law (i.e. anywhere from late May to Early July).  Removing the Emergency Clause changes nothing about those sections because the courts would have to decide exactly when the bill took effect.  

The problem could be solved simply by omitting the passage “…takes effect on passage” and inserting “…takes effect with retirements on or after January 1, 2018”.  So far, the situation is made even more complicated because the Chief Legislative Counsel, Dexter Johnson, issued a memo to the Senate Workforce Committee pointing out why taking the emergency clause out is a bad idea.  The reasons are virtually identical to those articulated here in multiple previous posts, in responses to individual emails, and in posts over on PERS Oregon Discussion (see link to left).  Without the Emergency Clause, PERS is prohibited from recalculating employer rates until on or after January 1, 2018, and litigants are unable to begin the legal process of contesting any element of this bill before January 1, 2018.  There are other reasons as well, but the long and the short of this is that the Emergency Clause is necessary so that the legal status of any of these changes can be largely settled by about this same time in 2019, while the Legislature is undoubtedly dealing with other budget issues.  So, after everything that happened last Wednesday, it is likely that the dash-15 amendment will die, the Emergency Clause will remain, and PERS members trying to sort through their options will be left in the same position they were in last Wednesday before the promise “…not to create a crisis or chaos”.  No one can convince me that members of the Senate Workforce Committee were so ignorant, so naive, and so patronizing that they didn’t know exactly what they were doing.  I’m sure they deliberately agreed to removing the Emergency Clause, knowing full-well that it would be put back for the reasons enunciated here, there, and everywhere.

I don’t think I have ever seen a more concerted campaign to distract attention away from the real problem with any bill as I’ve seen in the Senate Workforce Committee.  In the past, legislators were downright nasty to one another over bills as harmful as these; this year, I’m nearly in a diabetic coma from the sweetness of members on this committee who have polar opposite viewpoints on issues pertaining to budgets, PERS, and workforce.  This all suggests to me that Dems, Repubs, Unions, Employers, Oregon Business Council, organizations like OPRI, the PERS Coalition are all involved in many backroom, off-the-grid discussions of how to balance the budget, partly on the backs of PERS members both near and far from retirement.  And this all leads me to brand the Legislature of 2017, meeting under that gilded dome, the Gilded Palace of Sin.

Believe nothing you hear from a Legislator or a Union at this point in time.  Only when you see something in writing, in the form of a bill, an amendment to a bill, or a complete revision of a bill should you take words seriously.  Written words matter; talk is cheap.  So far, nothing said and certainly nothing written offers any assurance that what is proposed to happen will happen in any other way.  Let those words guide your actions.  Make no assumptions, accept no assurances.  It is time for all these people who have been offering vague assurances to put their words on legal paper rather than in in tweets, emails, or E-lerts.  Only when those words make it to bills that matter do any of those stupid assurances have any meaning.  Beware of Emergency Clauses, but beware even more of clauses that have no certain date in them, or bills being forwarded into a Black Hole with blanks where numbers should be.  If you take those assurances at face value, then you are a sucker, and you are playing right into the hands of the charlatans of the Gilded Palace of Sin.

Note added later:  As predicted, the Senate Workforce Committee punted both SB 559 and SB 560 to the Joint Ways and Means Committee.  The votes were both 3-2 in favor of referring without a recommendation.  Senators Gelser and Monnes-Anderson opposed sending either measure forward.  But, in a seriously bizarre twist, perhaps influenced by this blog, perhaps by the sheer number of panicked members, there were three new amendments sent up along with the original SB 560 and the already extant 10 amendments (including the one to eliminate the Emergency Clause).  Of the three new amendments, only Dash-11 and Dash-12 merit note.  While these amendments seem to be variations on the same theme, there are three elements of note in each:  (1) the elimination of the decoupling of the Money Match annuity rate from the system’s actuarially assumed interest rate (the whole section has just vanished); (2) the inclusion of a clear implementation date for all remaining provisions of the bill at 1/1/2018; and, as predicted (3) the restoration of the Emergency Clause.  It would be nice to claim victory or to offer assurances, but this isn’t the way life works.  The effect of this is simply to add more permutations and more combinations of ways in which Joint Ways and Means can choose to implement changes to PERS going forward.  As I noted elsewhere, it appears that we are nearly back a ground zero, with a new group of people to consider changes to PERS not necessarily based on policy considerations, but solely on the basis of how well the changes help balance the 2017-19 budget.  Since the Senate Workforce Committee made no choices, made no recommendations, Joint Ways and Means now has a Chinese menu of options from which they can select one from Column A, one from Column B, and give current and inactive workers an egg roll and a misfortune cookie.  Sadly, this offers those in the position of trying to time retirements to avoid the impact of these changes no guidance whatsoever.  Not only has nothing been clarified, now people are faced with nearly the same list of options proposed long ago by the Portland City Club (except the COLA change is now off the table).  The list of amendments reads like a recitation of that list of changes, coupled with the spaghetti theory of jurisprudence attached - we magicians of the Gilded Palace of Sin do hereby resolve to throw anything we perceive as legal up against the Supreme Court’s wall, and we will take whatever sticks.  It probably isn’t that bad, but it sure feels that way.  [This will be my last post before the end of April; nothing is happening and I’m leaving town.  I’ll be back before anything worth commenting on takes place].

21 comments:

Georgi Farrell said...

Thank you, Marc.

~Georgi

Big-Al said...

Thanks Marc. I attended the April 17th committee meeting on SB 560 to see if the -10 amendment would be adopted. Sadly it was not (only removing emergency clause -15) and SB 560 then sent to Ways & Means committee. Today I turned in my papers to PERS for a full formula May 1st retirement as I felt that I needed to. BTW I sent in a small donation

Juneau62 said...

I"m retiring July 1st with full formula. I can't get out any earlier than that since my waiting time purchase put me at 30 years on that date. I'm not sure I'm understanding why option 1 wouldn't be touched and having a beneficiary would be. Doesn't the proposed change in rate start on Jan. 1, 2018? Would it be lowered for me due to the fact that a potential beneficiary would be collecting sometime after Jan. 1st, 2018 under a lower rate? Just making sure I understand...Thanks.

mrfearless47 said...

@Juneau62. I've answered this question before on other posts in other threads, but let me try to do this as concisely as I can here. The reason Option 1 is not affected is that its calculation depends only on two variables and a constant. The two variables are: Final Average Salary, and Years of Service. The constant is the service multiplier (either 1.67% if you are classed as General Service, and 2.0% if you are Police and Fire. Those three numbers alone determine the benefit. Once you add a beneficiary, there are now two additional variables to add to the mix: your age and life expectancy and your beneficiary's age and life expectancy. Those two numbers get ground together into a single "joint life expectancy" which determines the period over which the actuaries expect PERS to have to pay out the benefit. And the moment the actuaries get involved, that involves actuarial tables, and the cost of providing the "insurance" that your joint life expectancy will exceed your individual life expectancy. Your life expectancy doesn't matter in Option 1 because it is a Defined Benefit that has to be paid out no matter how long you live (if you die quickly, PERS wins; if you live to be 100, PERS loses). Since you are sacrificing the beneficiary, PERS is only making a single bet which is priced into the cost of the initial Full Formula benefit. But if you add the beneficiary, they have an additional calculation to make for the insurance that one of you will outlive actuarial expectations. And for that privilege you.

Now to the question of effective date. The only problem standing between you and retiring as late as December 1, 2017 is the amendment to SB 560-3 (referred to in other posts as Dash-3). Because of the wording in that post, it applies to not only Money Match retirements, but also to all other forms of retirement in which a beneficiary is involved. To be completely transparent, PERS Executive Director specifically testified against the Dash-3 amendment, cautioning the Legislature that it didn't really want to do what it proposed in Dash-3, because annuity rates and actuarial tables figure into many other calculations besides Money Match. If you read my other posts and comments to them, you will see that the Dash-10 amendment (if you understand the section of the statutes it refers to) refers ONLY to Money Match retirees (not in those terms, but in statutory terms). I believe that you are safe on two counts. First, nothing affecting Full Formula (aside from dash-3, which I give no chance of survival) takes effect until January 1, 2017. Second, subsequent amendments (-11 and -12) completely eliminate any decoupling of the Money Match annuity rate from the system assumed rate. Therefore, one can conclude that the objective evinced in later amendments is that decoupling those rates is probably more trouble, and will save less money, than the potential legal and implementation risk.

As far as your beneficiary collecting, you are buying insurance (via Option 2) on your beneficiary at whatever the actuarial tables and assumed interest rate is set at the time of your retirement. PERS does not recalculate benefits when the primary dies and the account passes to the beneficiary. They've already priced in (rather steeply I might add) the cost of insuring that the stream of income continues long past your demise.

Hope this helps to reassure you, and to make your retirement decision easier and a bit more relaxed. The Legislature hasn't made it easy on anyone (including me, who has been retired for quite awhile now).

mrfearless47 said...

In the 3rd paragraph from the bottom, I mistakenly typed January 1, 2017. That should be January 1, 2018. Sorry for the confusion. That was a plain typo, not a Freudian slip.

mrf

ProudMommy said...

So am I correct in the interpretation that if they adopt amendment -11 or -12 that Tier 1 Money Match employees, such as myself, would be safe until December 1st as well?

mrfearless47 said...

If they adopt -11 and/or -12 that would be a correct interpretation. But please read my cmment over on PERS Oregon Discussion to the person who asked about a June 1 date for a Money Match retirement.

mrfearless47 said...

I confess that I am occasionally possessed by evil demons. One of the amusing things about running a blog are the spammers. Today, I received the all time funniest and most pathetic spam post. I can't help myself but permit it to be posted, simply because people need a small dose of levity. I'm not sure whether it will appear before or after this post. I just wanted to warn people that this kind of crap fills my mailbox daily, and is the reason why your comments get delayed by my moderating them. But this one is a real winner in a perverse and sad kind of way. Enjoy, and please don't shoot the messenger. And Dr Akababa seems to be just my knd of guy.

Melinda Henderson said...

mfearless, I apologize for my lack of comprehension, so much of this is new to me and difficult to understand. I know this must get a bit tedious on your part to have people not understand even after you've explained many times. I appreciate your patience and your willingness to help people like me.

I have made an appointment with my financial advisor for April 26th, since the posting of "The Gilded Palace of Sin" post, in order to begin filling out papers to begin my alternate payee account that is a money match. I had hoped to hold on until Dec. 1, 2017, as opposed to a May 1st date, which would be $200/month more. I am not a gambler by any means, and would not like to lose any more than I have to. I know that you had written about people who say that all of this won't hold up in court, of which I ran into one the other day. But, I always wonder when the shoe will finally drop and am concerned that this could be the time. My question to you is, "Am I being wise, or paranoid?"

Again, I want to thank you for all that you are doing to assist those of us who have not joined the ranks of retirement and want to be given the benefits that we have "earned".

mrfearless47 said...

It appears that the SPAM Fairy deleted the post from Alecia referenced in the above comment. What a shame. Dr Akalaba won't be able to help the state with money problem. Quel domage.

mrfearless47 said...

@Melinda. I'm baffled at how a 6 month additional time could make a $200 per month difference, unless you reach some magic legal age where early benefits have penalized you. Since Money Match beneficiaries don't suffer the same kind of penalty as Full Formula for retiring before 58, I'm puzzled by the differential. Keep in mind that waiting until December will cost you the July 1 COLA (1.8 to 2%) depending on when your ex retired, I don't think you are being paranoid at all. I just think the numbers are wrong somewhere and dn't believe that 6 months could possibly cost that much unless there are some very unusual circumstances involved (like maybe your ex is in the really high value retirements). I'd make sure your Financial Advisor really understands how PERS works, knows which actuarial table is being used in your case, and knows about the COLA. Hope this helps.

Melinda Henderson said...

Thank you for taking the time to respond. The numbers were gained through the PERS site to get rough estimates as I wait for the official estimates from PERS. I will be meeting again with my advisor within the week.

My ex retired 11/09, and I don't think, but am not really sure whether he was in the really high value retirements or not.

Again, I can't thank you enough for your assistance in fighting the fight with those of us that don't understand how this all works.

Dale Fish said...

I am a 40 year employee in the PERS system and have been doing a little research of my own. My financial planner told me that these two bills would have to be passed by the ways and means committee, then to the house and senate for passage. He can't imagine that with all those hoops to jump through that they could enact these changes by May 1st. So I am choosing to sit tight and not jump on the retirement wagon as I'm planning to work another year. I will admit it's a scary time right now, but knee jerk reactions often don't work out for the best. In the past I have seen coworkers jump at the fear of something "bad" happening, and it not work out for them. They should have stayed employed.

Christine said...

Am I correct in assuming that while they are proposing a reduced annuity rate for Money Match, the interest accrual on pre-retirement balances would continue at 7.5% for Tier 1?

If so, it seems like a viable alternative to taking early retirement and locking in the rate, but receiving a pretty low payment, would be to wait for x years, take a lump sum, and roll it over into something else?

mrfearless47 said...

Never has been a chance before May 1, but the final revenue forecast is out on May 16, after which things will start to move fairly quickly.

ThisOldSpouse said...

@Dale Fish - With 40 yrs in do you really consider quitting, even tomorrow, knee jerk?

kennaleo111 said...

Tier 1 - 28 years - money match - put in for Oct 1, 2017 now I'm worried about the last part of HB 650. Thoughts?

mrfearless47 said...

@kenneleo111. It is hard to guess what will happen at this point. We've obviously survived the May1 deadline, and no one seems inclined, at the moment, to precipitate a crisis worse than they've already created up to now. All I can say is to have your papers prepared, signed, but leave the date blank. Follow this blog, the PERS Discussion group, and the Legislative website. If you make it to July 8 without something obnoxious happening, you will make it to October 1.

Dale Fish said...

Response to "this old spouse" the knee jerk reaction I was talking about comes from people who are not really looking into the system and what's going on. They hear information from coworkers who play the sky is falling card without really looking into the situation and scaring the hell out of folks. I have been with my financial planner for many years and go to them with questions about things I'm hearing for varification. And guess what... 99% of the time it's bad information being spread around. I have an acquaintance who just filed his retirement papers prior to May 1st beacuae he just knew that the pers money match was going to be hit with a May 1st vote. Guess what... he blew it! He was not ready for retirement, but left a good city job because of the bad information he was fed. He'll work his 1039hrs for a while until he gets another job somewhere. How did that work out for him? It didn't? Shot himself in the foot. I wish him good luck finding another job that has the bennies he just gave up. Knee jerk... yes.

As far as my situation, my pers account is not pie in the sky and working another year would greatly benefit my retirement situation. So running to jump over the wall into retirement would have been a knee jerk reaction base on fear, and totally have been a mistake. I do not base my retirement strategy on poor information from others.

mrfearless47 said...

@Dale. And a good thing too. I try to provide information, not advice. What people do with the information is up to them and their circumstances. I try to find unbiased information, at least insofar as PERS is concerned. I've had a long experience reading bills, legislations, and interpreting statute, but only the individual, in consultation with whomever is his/her financial adviser can decide when the right time to retire really is. This time was more difficult, however, because the Legislature was introducing bills faster than they could be reasonably evaluated. The "throw it against the wall to see what sticks" is most definitely in play this year, but with less guidance to base your decision on. I think you've made the right move, but one person's right move may be another's disaster. That's the purpose of this site.

Dale Fish said...

To mrfearless47, your blog site is good and I appreciate the effort you put into keeping the rest of us informed. Keep up the good work!