PAY ATTENTION

I am deviating from my normal pattern of using song titles as titles for my blog posts. There is an important item I want to bring people's attention to, especially if you are planning to retire after December 1, but could retire ON December 1..

The bottom line is this is that the Actuarial Equivalency Factors that PERS uses are adopted in the same year that PERS adopts the Assumed Interest Rate for the next even numbered year and the following year. In July, the PERS Board approved maintaining the assumed interest rate of 7.2%. At the time, it was expected that the Actuarial Equivalency Factors (AEF) would also remain unchanged. As it turns out, the Milliman Experience Study, which involves examining elements of mortality among recent PERS retirees of all classes, as well as national mortality rates among similar classes of people, showed increases in longevity that MAY result in some small adjustments to the Actuarial Equivalency Factors, which are used to compute benefits for anyone retiring under Money Match, or any other method involving a beneficiary (Full Formula, for example).

So, this means that the Action Item on the PERS Board Agenda for its December 6 meeting includes "Approve Actuarial Equivalency Factors". It is likely, though not certain, that the AEFs approved on 12/6 will be slightly different from the current AEFs even though the Assumed Interest Rate has not changed. The problem is that December 6 is past the last day for someone eligible to retire on December 1 to make that decision. Worse, PERS does NOT have the new AEFs yet from the actuary, so they do not know by how much the setback might be. PERS Phone Support has been suggesting 3 months as a "worst case", but they don't actually know that.

I have actually spent a fair bit of time on the phone today to a Senior PERS Manager who has assured me that if they get the AEFs on Monday (something apparently likely), they will get something on their website on Monday alerting people to this.

My advice at this point is to get your retirement papers in order if you were planning to retire in the early part of 2020. The additional work probably won't benefit you in terms of your computed benefit (it might be lower), and then make your decision after Monday's (hopefully) post from PERS. If nothing is forthcoming, and you don't want to take any risk, then you need to get your papers in by Friday November 29 Wednesday November 27 for a December 1, 2019 retirement.

This is NOT a stealth change as some have suggested, but results from a variety of factors including the altered timing of the Experience Study, the Economic Assumptions, and the PERS Board altered meeting schedule. It might also be a result of the changing leadership at PERS. In addition, both PERS Staff and Milliman have had to deal with a Secretary of State-ordered audit of PERS during 2018, which subsequently required both staff and Milliman to respond to pieces of the audit during 2019. Keep in mind that PERS has never before been subjected to an audit, and there was little experience anywhere on how to deal with one.

I have implored PERS to be forthcoming with this as soon as possible. Unfortunately, telling somebody that "something might happen" isn't sufficient. They need to be clear about what that "something" is. Without the new AEFs, there is nothing to say.

One final note, this isn't limited to Tier 1 retirees. This affects all retirees who retire with a benefit having a beneficiary. Tier 1 members are also affected with or without a beneficiary if they retire under Money Match.

Trampled Underfoot

It has been a long time between postings. Since the Legislature passed SB 1049 concerning diversion of part of the IAP contribution, salary cap, and a few other elements pertinent to the existing PERS members' accounts, things have been pretty quiet.

Predictably, the PERS Coalition filed suit within the 60-day window prescribed by the Legislature, contesting both the IAP diversion and the salary cap. Just as predictably, the State and the affected employers filed their responses. The plaintiffs (PERS Coalition) asked the Supreme Court to appoint a Special Master to compile the legal arguments, case law, and specific injuries so the Supreme Court would have a factual basis and a legal basis on which to draw their opinion. This was done in the Strunk case as well as in the Moro case. Unsurprisingly, the defendants (the State and other employers) objected to the appointment of a Special Master, by stipulating to the "facts" of the case and arguing that a narrow set of legal issues are at stake and that there is no need for a Special Master to sort the issues out. (This is unsurprising since the Respondents made nearly the identical arguments in Strunk and Moro, and the Court rejected their arguments both times). The Petitioners objected to the Defendants' argument and, as of today, things stand unresolved with the Supreme Court. It is unlikely that this will be untangled before Thanksgiving, making the likelihood of a formal Supreme Court resolution before the start of the 2021 Legislative Session.

Between the time of filing of the James et al case (the captioning for the SB 1049 litigation), the PERS Board finalized its decision on the 2020-21 assumed interest rate, leaving it at the current 7.2% rate that was set to expire on 12/31/19. They also confirmed that the Actuarial Equivalency Factors would remain unchanged for 2020-21. This means that both active and inactive members need not stampede to the door to exit before the end of 2019 to retain the current AEF and assumed interest rate. For actives, however, the effects of SB 1049 take effect on 1/1/2020 although there is still some confusion (mine mostly) on when the IAP diversion officially begins.

Not much else to report at this time. Once the Supreme Court oral arguments begin, or the Special Master begins taking testimony or both, I'll report back on what I expect based on what I read.

One caution. I will be traveling extensively from mid-January to the end of April. I will have wi-fi and email access until mid-March and then will be largely off-the-grid until late April. I expect that much of the litigation argument will take place during my traveling. I will be in the US for a good part of January - March, so if arguments occur then, I should be able to access them in near real time. But beginning in mid-March, I will have no access to any modern conveniences, especially wifi, so anything that occurs during that month of quiet for me will have to wait until my return.

Wishing all of you a happy holiday season and the blessings of good health.