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Tuesday, November 21, 2017

Tin Foil Hat

If I were a paranoid person, I might be putting on my tin foil hat about now as I ponder two things “hanging” out there with PERS.  The first is a curious email I received about 10 days ago concerning Residency Recertification.  Others received a similar email, but so far as I can tell, a large swathe of others did not.  The email requested that we “recertify” our Oregon residency (or perhaps lack thereof) before December 15, 2017.  The puzzling thing about this email is that it offered no rationale, no reason, no apparent option for those whose residence has remained the same since retirement or after.  The issue at stake is the Income Tax Remedy that retired Tier 1 members get as long as they pay Oregon income taxes.  The law changed in 2013 (SB 822) requiring that Tier 1 retirees who live out of state and who retired before the end of 2011 be ineligible for and lose the Income Tax Remedy.  (Those members retiring on or after 1/1/2012 had already lost the tax remedy if they retired or lived out of state and did not pay Oregon income taxes).  SB 822 captured the rest of the out of state Tier 1 PERS retirees, regardless of when they retired.  The problem is that PERS gets tax information directly from the Oregon Department of Revenue, but the information is always a year out of date.  Thus, when the ODOR confirms to PERS that you paid Oregon income taxes, they are confirming late in one year for the previous calendar year.  PERS has always taken these DOR certifications as both retroactive and prospective, thus providing a window of two years for a residency certification.  But there are problems with this approach because some people don’t make enough while living in Oregon to be required to pay Oregon income taxes, while others file in October, which is too late for the DOR certification sent on to PERS.  So PERS has set up a mechanism where you can self-certify either via a printed form and paper mail, coming in and filling out the form in person, or doing it online via PERS’ OMS (Online Member Service) portal.  But herein lies the problem, and why my tin foil hat antennae are waving around in the wind.  First, the email was sent to what appears to be a nearly random group of people, almost all of whom have lived in Oregon during their working careers and their retirements and have consistently paid taxes in Oregon at the prescribed April 15 timeframe.  That begs the question of WHY these people (including me) had to go in and confirm what PERS already knows, that I am and continue to be an Oregon resident and, therefore, eligible for the tax remedy.  The second problem is that there doesn’t SEEM to have been any effort to communicate with people for whom PERS has no email address, nor with people who don’t have an active OMS account (many don’t; I didn’t until I got this notice).  Third, when asked, PERS doesn’t seem to have a rational reason to offer for the how and why of this email message, other than to say that it went out to a wider group (????) than they intended.  So…………..

Let this be a warning to ALL readers of this site.  Since we don’t know the real reason for this email, and we don’t know how the recipients were selected, my advice to ALL is to either go online to PERS’ OMS portal (go to the PERS web site and it will be obvious) and RECERTIFY YOUR RESIDENCY.  Failure to do so, particularly if you are an Oregon resident, might (we don’t really know the motivation here) cost you a tax remedy for all of 2018.  If you don’t have an email account (how are you reading this blog???), then get the paper certification form the PERS website (you got here; you can get there), print it out, fill it out completely, and send it to PERS.  The DEADLINE for receipt of this form is December 15, 2017.

The other gamma rays penetrating my tin foil hat these days has to do with the NON-APPEARANCE of the new Actuarial Equivalency Factors (AEF), promised by late October or early November.  These are the crucial tables that permit a member to figure out how their benefit would be affected if they retired on or after 1/1/2018.  The significance of these tables is that they take into account all the new assumptions, including the reduction in the Assumed Interest Rate from 7.5% to 7.2% and modifications to the mortality tables.  These factors apply to retirees under Money Match, Formula plus Annuity, and Full Formula with a beneficiary option (in other words, most potential retirees).  The last date to retire under the old AEFs is 11/30/17 for 12/1/17.  People eligible to retire right now are in a predicament because these tables are essential for determining how much a delay in retirement will cost them, both in future value (due to lower assumed rate) as well as the value of the lost retirement benefits from delaying (all other things being equal - longevity, pay, etc).  When I checked the PERS web site about an hour ago, the current (effective 1/1/2016) AEFs are still posted, and I cannot find a link to the NEW AEFs.  As far as I am concerned, this borders on being unethical by leaving people unmoored at one of the most important times in their lives.  A paranoid, tin foil hat-wearing person might think that the lack of these new AEF tables is a deliberate attempt to keep people in the dark so there isn’t a more massive rush to the door than I suspect will already be the case.

As a final note, I am tempted to be generous to PERS in my interpretations,  were the consequences not so severe for current, unnotified retirees eligible for the income tax subsidy, and for those on the very tippy cusp of retirement trying to figure out what to do before November 30th.  I will say that PERS Communications are not the same since David Crosley left the building and retired on June 30, 2017.  PERS has a difficult act to follow, but David’s retirement was hardly a surprise, and his replacement has been with PERS for quite a while.  To me, these two very unrelated events (or non-events) have left a very sour taste in my mouth.  But that isn’t half the taste others may feel if they get trapped by either of these nasty surprises.