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Friday, July 28, 2017

It Could Be Worse

After all the stürm und drang of the Legislature, the final piece of next year’s puzzle has fallen into place.  The PERS Board today adopted its new assumed rate for the 2018-2019 calendar years.  The Board spent very little time debating between the extremes of 7.1% recommended by the OIC and its consultant, and the slightly more optimistic forecast of other consultants used by Milliman at 7.2%.  In the end, the Board went to 7.2%, largely because the actuaries gave them the latitude to adopt any rate between 7.0% and 7.25% as a responsible choice.  A few wanted to split the difference at 7.15%, but there was no opposition when Board Member Pat West (the member rep on the Board) moved to adopt the 7.2% rate.  It was quickly seconded by the employer rep on the Board, Lawrence Furnstahl of OHSU.  The rest of the Board quickly approved the motion and, in a blaze of light, the meeting was over.

After the meeting, I checked with Matt Larrabee, the principal actuary for Milliman, who confirmed for me that the setback would be 4 months for a typical retiree.  This means that if you delay retirement past December 1, 2017, it will take you 4 additional months of working to recover the benefit you would have received if you retired on December 1.  While the most directly affected members are those who remain eligible to retire under Money Match (less than 13% of all non-retired members), it will have an impact on beneficiary options for Full Formula retirees as well.  The changes to mortality had virtually no impact on the rates, as changes in one element were offset by other changes.  Overall, the totality of the economic assumptions other than the assumed rate itself, had a near zero impact on liabilities for the system.  The impact to employers on the uncollared rates will be approximately 1.9% of payroll, less than it could have been.

There was no opposition by any stakeholder to the change, at least not at today’s meeting.  In fact, the Board didn’t even offer the possibility of public testimony, and the Board Chair John Thomas repeatedly interrupted almost any speaker at the podium to sermonize.  While he’s done a good job as Board Chairman, and clearly knows financial analysis, I find him personally tiresome as though he is lecturing small children.  Thankfully, I’ve chosen not to attend Board meetings because of his overall mien.  I went today solely because the decision was important to a lot of people, and because I’m still adjusting back to Portland time from my time spent in Iceland.

All in all, the title pretty much covers my feelings.  It could have been a lot worse.

This will be my last post for awhile, in large part because we are moving into “ordinary time”, where nothing of the moment will take place.  The next time for something significant to occur will be the working report from Governor Brown’s group studying how to lower the UAL by $5 billion.  That will, in turn, lead to some legislative momentum that might occur during the short Legislative session next February.  However, any substantial changes to PERS will probably not come before the 2019 Legislature.  If nothing positive happens between now and then, we might expect to see some attempts to significantly alter PERS.