House of Pain

OK. I lied. THIS is my last post. Yesterday the PERS Board voted to lower the assumed interest rate from 7.2% to 6.9%. This falls between the maximum recommended by Milliman (7.0%) and their lowest bound recommendation (6.8%). This means that anyone still in Tier 1 (active or inactive) who expects to retire under Money Match will see benefits lowered from retirements during 2021 versus retirements taking place in 2022. Similarly, anyone retiring under Full Formula (from any tier) WITH A BENEFICIARY will see reductions in benefits beginning with retirements on or after January 1, 2022. We don't know how much the reductions will be. As a general guide, I've been telling people who ask that a 25 basis point reduction in the rate works out to be about a 3 month setback in benefits before crossing over into a higher benefit. The current reduction is 30 basis points, but other changes may make the setback slightly longer. We won't know anything with certainty until PERS releases the updated Actuarial Equivalency Factors sometime in late November or early December. The AEF tables combine information about mortality, assumed interest rates, inflation, salary growth, and a few other economic factors. We only know the assumed interest rate change at this point. I have no idea how the various factors come into play, because actuarial math is one of those places where I never received any formal education. I get math, but I don't have any idea how Milliman produces those tables. Now you can return to your normal channel and ignore this page in the future, unless you are researching PERS history.