Your Gold Teeth

Sometimes I feel as though PERS retirees are to the Legislature and Governor as gold teeth were to the Nazis in Germany (if this is offensive to some, I'm sorry.  The metaphor seems entirely appropriate).  We represent the gold teeth the Legislature, PERS, and the Governor get to pluck before we are sent off to our "just rewards".  Yesterday, the PERS Board approved the reduction in the assumed rate used for Tier 1 rate guarantee, mortality tables, and for employer contribution rates.  The new rate, effective 1/1/14 will be 7.75%.  For most caught on the cusp, the difference between 8% and 7.75% is relatively minor.  Longer term, however, the effect is significant.  The mortality tables will be adjusted accordingly, but I haven't seen the new ones yet as the PERB is waiting on the Legislature to do its thing on Monday.  Speaking of Monday, the sop for the poor seems to be a 0.25% one-time payment at PERS' discretion to make them feel like they really got a 1.5% COLA increase.  Of course, it isn't the same.  It is simply a one-time payment, not added to the salary base for compounding on future benefits.  Those in the range between $20,000 and $60,000 *might* get one of these too, depending on finances.  This is entirely at the discretion of the PERB.  It also would be a non-compounding payment.    The only good news in all of this is that the employers will have increased payments resulting from the lowering of the assumed rate.  This will assure the continued employer whining, sniveling, and complaints come 2015, so we should never be complacent that the teeth pullers will ever be through.

Speaking of gold teeth, the amount of money spent on education just continues to amaze me.  That malodorous group called Fix PERS Now and its financial sugar daddies, OSBA, COSA, Oregon Business Alliance, Chamber of Commerce and others, don't seem to be the least concerned about how much money is wasted on the administrative infrastructure in education.  They don't seem to be even slightly concerned about the existence of 987 local school districts, superintendents, transportation systems, negotiators with teachers' unions.  Worse still, they don't seem to be unsettled with the salaries of the people selected to replace one elective position valued at $72,000 per year, with two appointed people earning, respectively $180,000 (Robb Saxton, Head, Department of Education and Deputy Superintendent), $225,000 (Nancy Golden) [both sources from articles in the Oregonian].  That's a lot of gold teeth that no one crying for more money "for the children" seems to be disturbed by melting down.

Right now, my mouth hurts like hell, and after Monday the pain will get greater.  And, like almost everything else in this state, the Dems will allow the rich to get richer off our gold teeth, while the libertarians at the Oregonian slaver for more.

 

Train of Fools

The circus train has left the station and the lead clown, our own Governor Kitzrobber, is sitting like Captain Kangaroo to lead the merry band of fools on another journey to rape and pillage the pensions of PERS retirees (and future retirees).  It wasn't bad enough that SB 822 put the kibosh on over half the cost-of-living increases for about half of PERS retirees, but the latest feast day for fools (September 30th, this year), will now go after the other half of the PERS retirees - the poor ones.  

During the entire discussion of SB 822, the objective was to protect the poorest retirees from any cuts, and subject those who weren't the very poorest to a progressively lower COLA as benefits rose.  Thus, for the nearly 40% of PERS retirees making less than $20,000 per year, they could continue to get the measly 2% COLA spelled out in statute.  Once the benefit exceeded $20,000, brackets at $20,000, $40,000, and $60,000 per year kicked in and progressively lowered the marginal COLA received on each dollar in excess of the last bracket.  So, for people earning between $20,000 and $40,000, the COLA would be 2% on the first $20,000 and 1.5% on the amount over $20,000 and less than $40,000.  Basically, a worker at the top of the second margin, earning $40,000 per year would receive a 1.75% COLA until the benefit exceeded $40,000.  With each bracket the marginal COLA declined so that the marginal bracket at $60,000 would drop to 0.25% on excesses above $60,000.

On the surface, the original cuts from SB 822 look pretty small, but the compound effects of the cuts become dramatically larger the greater the amount of time.  The cumulative losses to retirees become staggeringly large at about 20 years post-retrement, with inflation adjusted benefits being reduced by nearly half at one's most vulnerable point in life.

All of that was draconian, but the newest proposal shephered by the Bhutanese Cowboy would make SB 822 look positively generous.  No longer does he even  pretend to protect the poorest PERS retirees.  Now, he's just slavering for money, however he can get it.  The new proposal, to be voted on next Monday (Feast Day For Fools), simply takes the existing SB 822 proposal and cuts it essentially in half.  Now, there is no modicum of protection for the poorest (see next paragraph); the first $60,000 gets 1.25% COLA, period.  After $60,000, the marginal rate drops to 0.15%.  In viewing spreadsheets comparing the impact of SB 822 (described in the previous two paragraphs), and the new proposal, the 20 year inflation adjusted benefit has been reduced by nearly 70%, with the hardest hits accruing to the lowest paid members.  This is not only greedy; it is downright cruel.  It is money-grubbing at its worst, and SAIF-like as its best.  PERS members and PERS retirees have now been fully trotted out, skinned, skewered, and stuck on a spit to roast for every sin ever committed by public education in this state.  

To mollify the poorest, the head legislative clowns, chief among them, Peter Buckley have offered the possibility of an adjustment - roughly equivalent to a tiny one-time payment - as a sop to the poorest.  The bad news is that it will be really tiny; the worse news is that it won't increase the benefit base.  That's cynical and evil as far as I am concerned.

I've been a life-long Democrat and have donated thousands of dollars to support various legislators in their election and re-election campaign.  But now, that support no longer exists.  Thus far, every House Democrat and every Senate Democrat supported SB 822.  There are a couple of really easy, low-hanging fruits in that basket and I can promise them - Devlin, Kotek, Buckley - not a penny of support, but active support for any Democratic opponent regardless of philosophy.  I don't really care any more.  The incumbents disgust me.  They cynically took money from labor and then turned around and stabbed organized labor and all public employees in the back, without a moment's regret.  They have completely lost our trust in their ability to protect working class, labor, and middle class families.  As for the Governor, the leader of the clown brigade and architect of this "grand bargain", he's done as far as I'm concerned.  To be honest, and not the least hyperbolic, I'd sooner vote for Dennis Richardson than John Kitzhaber.  Why?  Because Richardson doesn't even try to hide his contempt for public employees.  He's so disgusting that he could be more easily neutralized than the country-bumpkin from Roseburg.  Dr. John needs to go back to fishing, hunting, and seeking spiritual awakening in Bhutan.

Once more I will say to the critics of PERS.  You've been lied to, you've been misled.  Little that you read about PERS stands up to any critical scrutiny.  PERS has been incredibly transparent, more so than many of us wish, and the result of that transparency has been for the shrill critics to cherry pick facts and figures that describe very few people I know (and I probably know more PERS members than the average PERS member or Legislator).  PERS members and retirees did absolutely nothing wrong.  We entered into agreements with our employers to perform certain tasks in exchange for salary, benefits, and the deferred compensation of the pension system we had no choice in.  The number of ways the system can be gamed are few and far between and very few people even have a clue how to do it; it also requires the complicity of the employer to get away with (think about that for a minute).  Most of the stories involving people with very high incomes are of people who (a) had high paying jobs, (b) worked for very long periods of time, and (c ) took advantage of the variable annuity program where they were willing to forgo a guaranteed rate of return in exchange for market rates for as much as 75% of their portfolio.  There's no gaming there.  Those people could just as easily lost their shirts.  That they were willing to risk their own money completely should be rewarded, not criticized.  As for the COLA, it has been a promissory part of the PERS contract (yes, contract) since 1973.  It isn't anything new.  The COLA has NEVER been guaranteed to be paid out annually at 2%.  That was the ceiling on the COLA.  Many of us started our retirements in the early aughts and received either no COLA or a minimal COLA.  That's because the cost-of-living increase in the years we retired was minimal.  The new way guarantees a minimal payment regardless of the cost-of-living increases or decreases.  It completely decouples the thing called a COLA in statute with the statutory meaning of the word COLA.  

Legislators who vote for this latest attempt to blame PERS members for problems of the public schools will pay a heavy price for that vote.  I predict that some 150,000 or more PERS members and retirees might decide to either sit on their hands in 2014 and let the chips fall where they may, or may actively support opposition candidates.  This is an ugly place for the Ds to be.  Just remember that we already know what to expect from the Rs, so having them would produce no surprises.  What surprises us is the Ds contempt for its natural constituency.  It begs labor for endorsements and, more importantly, cash.  Now that they've spit in the eye of organized labor, I expect that money will be a little harder to come by.  What's worse, I expect, is that after all of this, the court is likely to overturn the legislation concerning the "COLA".  And so, you will have expended all of your political capital and then some, only to be hoist on your own petards when the court gets through with you.  Think about this simple question:  when does a COLA cease to be a COLA, by definition?  And, then, "PERS shall not pay a benefit to which a COLA does not attach", Strunk, 2005.  Good bye, and good luck.  You deserve your own fate.

 

 

Not Gonna Beg

The clown of Mahonia Hall is at it again, running around with all the little people trying to figure out a way to stab us PERS members (actives, inactives, retired) in a variety of evil ways.  More than that, it isn't enough to beat up on retirees, they want to take away the $183 personal exemption for individuals earning more than $100,000 per year, or families earning more than $200,000.  And just when you thought it couldn't get any worse, discussion is circling around the "senior" medical deduction, setting the benefits only for those over 67.  All you PERS retirees between 62 and 67 can just bite the little man's weenie.

The latest "leak" from Mahonia Hall  is that retirees will see yet another smack to the COLA before the next one is awarded in 2014.  The "plan" is to set the COLA at 1.25% for everyone, and then for those earning more than $60,000 per year, the benefit would drop at the margin to 0.15% of the amount over $60K.  There is a very tricky legal definition floating in the sewer the legislators are swimming in.  The word COLA stands for "Cost of Living Adjustment".  The legal question is how can a fixed and invarying amount be considered a "Cost of Living Adjustment".  The COLA is an amount determined annually by the bureau of labor statistics to measure the increase or decrease in a market basket of goods and services that the average consumer must buy.  Perforce, the amount varies from year to year, and prior to SB 822, there was a cap on the size of the COLA increase, but the amount over the COLA would be banked and drawn on in years when the actual COLA was less than the 2% cap.  Since the 2013 legislature, the concept of a COLA has been shredded. They have unlinked the COLA from the annual BLS market basket change (a true measure of COL), they have removed the "bank", and so the "cost-of-living" has become a gratuitous 1.25% benefit increase annually without any regard to inflation.  Just think, when inflation roars back to 8% or 9% and seniors can no longer afford their medicine, expect to see them applying for food stamps at Mahonia Hall.   Left in the mess, is the question that the legal beagles will have to sort out:  when is a COLA not a COLA, because the Strunk court mandated that PERS cannot pay a benefit to which a COLA does not attach.  So, if what is changing is ruled a gratuity, not a COLA, then the Legislature will lose again on this spawn of satan.

Buried inside a sentence discussing the changes to COLA, is another time bomb intended to hit inactive PERS members who haven't yet retired.  Although not specific, the general consensus seems to be that the inactives who are eligible to retire under Money Match will see their annuity rate decrease from 8% (7.75% after December 31) to something in the vicinity of 3.5%.  This will cut the prospective benefit by about 37%.  Many inactives are all over the country.  They vested in PERS, PERS would not let them take all their accrued benefits out (including the employer match), and so they've been stuck in PERS all these years, expecting that they would retire and have a decent pension for the time they worked in PERS and compensating them for the time value of their money kept in trust for them because they had no other way out.  Now that there are quite a few of these people out there, it is time to retroactively change the rules.  Sure, you can still retire under the different benefit arrays, but you will no longer receive the benefit you thought you were going to get.

Related to the inactive issue is another, far more perverse and cynical.  These are people still working for public agencies in Oregon full time.  In 1995, just before Tier 2 began, OUS offered its faculty the option of moving to their own (OUS) retirement system, called the Optional Retirement System.  Members were allowed to join up into the new system, advertised as equal to or better than PERS, and have all future contributions directed to the ORP.  Members electing this were assured in person and in writing that their PERS benefits would remain as they were and that accounts would continue to grow as the money is being held in trust for them.  The new ORP works more like a 401-K and many are discovering that it is anything but equal to or better than PERS.  Nonetheless, people accept the choices they made, but now they've come to discover that they are classed as "inactive" PERS members and will fall into the same morass that all other truly "inactive" members will be.  So despite the fact they were promised their PERS benefits as contracted, the Legislature is now trying to take away about 37% of their benefits earned while they fell victim to the OUS' bait and switch routine.  

As the title says, "not gonna beg", but you can bet your life that these issues - ALL OF THEM - will be played out in full Shakespearean drama before the Oregon Supreme Court.  And when all the various questions are asked and answered, it would not shock me to see the PERS member side win a few for the hipper.

One thing is also fairly certain.  This blog will not support a single member of the Legislature who votes in favor of this bill.  It doesn't matter what party, what else he/she may have done.  The buck stops right here.  If you are a legislator and you are reading this, I promise you I will use this space to campaign for every one of your primary rivals in May.

50 Ways To Leave Your Lover

In this case, it only takes one, but the decision has been forced upon us by the continued saga with Yahoo Groups.  As of today, we are no longer accepting messages posted to Yahoo Groups and are actively encouraging users to join us at the new site of our PERS Oregon Discussion Group located on Google.  You can get there easily https://groups.google.com/d/forum/persoregondiscussion .  You will need to register.  If you run into difficulty, contact one of the group moderators back channel (via email) and we can assist.  You do not need Google Mail to participate.  You merely have to register and provide the same information that you are required to provide the first time you try to use a closed group at Yahoo.  There are still clean-up efforts going on and we will keep the Yahoo site open for members indefinitely as the archives of nearly 6 years of posts are there.  Until we can figure out a way to capture that archive for use elsewhere, we feel obligated to maintain the Yahoo Group at a minimal level so that the archives are available.  Please keep in mind that to access the archives, you have to remain a member of the Yahoo Group, which is why we discourage users from necessarily closing their Yahoo accounts or resigning from the group.  You may, if you wish, but should you ever want to access those archives, like looking up something said two years ago about a particular issue that is reoccurring today, this would be the way to do it.

The new Google Group has a lot to like about it.  There are some operational differences, but none very complicated that users will find the interface very different from the old Yahoo.  If you have any problems, all of the moderators are around and with access to the Internet to help you out.  We are trying to make this transition as seamless as possible under the circumstances.  So, if you point your browser at the address hyperlinked above, or go to the left side of this blog and look for the very top link under Links, it will take you to the new group.  The link to Yahoo is gone and it isn't coming back.  As of early today, we had already gotten 375 users to move over. There are still slightly less than 500 members not accounted for.  If you are one of those, and you are still interested in the real-time discussion of PERS issues, PERS Oregon Discussion on Google is the place to be.

It is probably going to require some expensive software to try to capture the archives at Yahoo.  If you want to help out with that project, you can feel free to use the donate button here to help out.  No matter what we do, this move has been extremely time consuming, the fight with Yahoo tiring, and all of the moderators are pretty worn out from the recurring and unrelenting battle against spam.  We won, but as they say, it was a pyrrhic victory.  Our win came at the cost of the group and shutting down all posting without moderation.

I, along with the group moderators, look forward to seeing you over at Google (which also hosts this blog) Groups.  I think you will like the format, and some of the options we have that we didn't at Yahoo.  Again, any difficulty accessing the group, check with one of the moderators - addresses still posted on the Yahoo Groups site.

Across The Great Divide.

Tomorrow is the big day. The Moro et al legal case (contesting SB 822 and SB 861, passed during the two legislative sessions during 2013) will have its day in court. The cases - 4 in total - will be argued before the Oregon Supreme Court. The plaintiffs in these consolidated cases are arguing the legality of the cuts to the retiree COLA that were part of both bills, and the discontinuation of the income tax remedy for retirees living out of Oregon and, on the basis of residency are not required to file Oregon Income Tax on their PERS benefits. The out of state tax remedy takes two different forms and affects individuals differently. One of the two remedies appears to be a straightforward contractual element; the other a bit more complicated. In any case, the oral arguments are tomorrow in Salem, with a final decision expected in four to six months.

The PERS Coalition has asked that any affected or to be affected retirees or actives to have a visible presence in the courtroom tomorrow. Sorry for the late notice but I've been traveling for the past month.

Movin' on Up

Not to the eastside but to Google.  We owners and moderators of POD (PERS Oregon Discussion) have not made a formal decision to leave Yahoo Groups, but things are going disastrously bad since Yahoo rolled out the update called NEO.  It is happening to random people right now, but all but one of our moderators have been affected (infected) by the NEOization of Yahoo Groups.  In short, NEO is a disaster.  It prevents the most basic control, it destroys the formatting of messages and replies, it opened the floodgates to spam (more than 100 in the past three days), and it makes management a nightmare.  To prevent some of the worst issues (the spam), I've shut the group down to any unmoderated content.  It keeps out the chaff, but it is a pain for moderators and the members trying to post legitimate questions and add content.  While we plan to give Yahoo until the end of September to sort itself out, I'm not optimistic.  To prevent the complete destruction of the group, I have already created a new POD on Google.  To get to the site go to https://groups.google.com/d/forum/persoregondiscussion .  You will have to join the site, but we are starting to take legitimate, unmoderated, PERS-related questions from all members there.  You must be a member to read and to post.  Things work similarly to the way the old Yahoo worked.  There are a few differences and as we note them and implement them we will post a document (a FAQ) comparing the old functions in Yahoo with the new way to do things in Google.  Most of the 125 or so members of the Google group seem to like it so far, so I would encourage anyone interested in keeping up with PERS information in real time to join the new group.  I'm going to remove the link to the Yahoo group from here, principally because I don't want new members to join there; I want them to join Google.  You can join Yahoo easily enough if we end up keeping the old group, but the actions and behavior so far make it highly unlikely that is going to happen.  This last week of NEO has been the biggest time-sink of my life, having wasted no less than 50 hours trying to work around, avoid, undermine, seek help, going outside of Yahoo, and creating the new group, all to maintain continuity for all members and other interested parties.

Please join the Google group.  It has some wonderful search features that simply don't exist on the Yahoo side.  I wish the move didn't have to happen - and in the end in might not - but being prepared is the only way I know to being able to Move on Up.

Again, thats https://groups.google.com/d/forum/persoregondiscussion

Thanks

Shout out Loud

Not PERS related but associated.  For reasons I cannot explain, Yahoo has started to implement its new group format, called NEO.  Obviously they didn't watch The Matrix because NEO could fix any problem.  It seems more like Morpheus has taken over since the Yahoo group (POD), which is associated with this blog, has suddenly become a real mess due to Yahoo's weird and unannounced way of rolling out changes to the group.  I'm a victim right now too, and so far the only way I've been able to defeat the rollout is to use my desktop computer.  If you attempt to login and see a stretched out, pixelated picture of the Scrabble board or of Haystack Rock, you've been rolled.  At the moment I don't have an easy solution to the problem as Yahoo administrators are nowhere to be found.  So, PLEASE bear with us as we try to sort out the problems,  notify Yahoo, and pray they get fixed.  I don't know what or how the rollout is taking place, but if some of you still see the old group format, consider yourself fortunate.  I'm hoping I can find someone at Yahoo who owns this rollout and can get our problems fixed.  In the meantime, if people post and it looks all screwed up, please be kind.  None of us have any control of the format right now. Just hang in there; sooner or later all of this will be resolved (I hope).

Pay in Blood

The past few weeks have been pretty dull in PERS land.  Our Governator has been trolling east of the cascades and south of the Willamette Valley trying to round up support for calling a special session to go after that great PERS "grand bargain" along with some targeted tax increases for the well-to-do and for the less well-to-do retirees.  The Rs seem hell-bent on agreeing to the Special Session *only* if they get a few tax CUTS for small businesses thrown into the mix.  On August 17, the Gub announced that he would make a decision on a special session within 10 days.  That means that August 27 would be the date.  There are still legislators who want to bring up topics other than PERS and tax increases, like reanimating the discussion of the Columbia River Crossing.  I figure that the more topics people want to throw into the mix the less the likelihood of getting the special session.

People have asked what kind of PERS changes would be sought in the Special Session, were one to occur.  There are really only two that I can think of right now:  first would be further reductions in the retiree Cost-of-Living adjustments, taking them down to near nominal levels (think of it as a tiny tip for bad service).  The other area is to tinker with the benefits for inactive members.  Last time through the Legislature considered making the annuitization rate, (think "special assumed rate") for those members seeking to retire and qualifying for Money Match, considerably lower than the rate used for active members.  Currently all rates are 8%.  On January 1, 2014 the rates will be 7.75%, and the Legislature would like the inactive member annuitization rate to be about 4% less than the active rate.  The AGs office doesn't like the idea of singling out inactive members and has gone so far as to suggest either doing it for all active and inactive members, or for none at all.  This has no bearing on whether the Legislature will listen to the AG -- they certainly didn't in 2003 -- and so I expect that "special" rate to come up again, if not in a Special Session then in February in the short, regular Legislative session.

Just to show how hypocritical organizations can be, OSBA (the school Boards organization) has just joined the SB 822 lawsuit as an intervenor to assist the State and PERS defend the actions taken by SB 822.  Do recall that OSBA opposed SB 822 because it wasn't draconian enough.  But, here they are making sure that whatever piece of the pie they can steal from retirees, they want to be first in line to get the biggest slice.

PERS itself seems to be wrapping up the Strunk/Eugene collection effort.  The absurdities that have arisen have taken comedy to new forms, except when it doesn't.  My favorite story (told with permission) is the story of Martha Sartain.  For newer retirees, Martha's name may not ring a bill.  Martha was the named plaintiff in OPRI's lawsuit against the COLA freeze from the 2003 Legislature.  Martha was one of my favorite people, and she was one of the brightest, most sophisticated plaintiffs the PERS Coalition had during the Strunk case.  Martha also served on OPRI's Board and she fought regularly with Board members to modernize the organization, update the website, go digital for many aspects, and to bring on more recent retirees who had a vested interest in everything taking place in the Legislature.  She dragged a couple of us along to several Board meetings and it was there that we discovered just how archaic OPRI was.  (It is better now, but has a long way to go before becoming a fully modern organization).  In any case, Martha retired in late 2002 and in early 2007 was diagnosed with an extremely aggressive form of cancer.  She died before the end of 2007.  Martha was divorced and her PERS benefit was paid out as an option 1 monthly benefit.  She had no beneficiary so that when she died, PERS scooped up hundreds of thousands of dollars in funds that were hers the instant before she died.  Her estate executor (her son) followed the law to the letter, notifying PERS of her death, dealing with the State and the Federal governments paying the necessary taxes due on the estate and settling with all creditors.  The estate formally closed in mid 2008.  Several weeks ago a letter addressed to Martha Sartain Decd arrived at her son's house demanding about $12,000 to be paid to PERS because of the 1999 over credit that affected all retirees in the 2000-2004 window as well as a varied group of others who retired before or after the window.  Her son got in contact with me.  Since I had dealt with one of these before, I advised her son to contact Revenue and PERS to inform them that Martha left no beneficiary (on her PERS account) and that the estate had closed in 2008.  This seemed to satisfy Revenue (although I'm sure there was paperwork to be filled out), and satisfied PERS (again, I'm sure there was paperwork there too).  PERS, however, could not resist informing Martha's son that although they could not collect the debt, the debt would not be written off, but merely noted as uncollectible.  When her son pointed out that Martha's pension account had enough money to pay off the balance 20-30 times over and that PERS recovered all of that, PERS gleefully noted that the two are completely unrelated.  No matter what is left in the retirement account, it can't be used to retire this debt.

Since hearing from Martha's son, I've heard from several other people in similar predicaments.  Every case is different and sometimes even though it doesn't seem like PERS or Revenue should have the right to collect, circumstances make it difficult to mount a compelling argument.

In these kinds of cases the questions you need to ask are 1) did the decedent ever receive notification from PERS about owing money because of the 1999 over credit?  2) did the deceased have a beneficiary (and if so, who?); 3) how did the decedent structure his/her retirement benefit (i.e. monthly benefit with no beneficiary, monthly benefit with spouse as a beneficiary (full benefit, half benefit, with or without pop up), 15 year annuity certain, refund annuity (who got the refund?), lump sum settlement (full or half).  There are lots of complications involved in determining whether the estate has liability for repaying the bill.  If there is no beneficiary and the estate is fully closed (Martha's case, there is no one from whom PERS can collect); if there is a beneficiary still getting the benefit, PERS should be collecting from the beneficiary.  

They say you can't collect blood from a stone, but it is clear that PERS is definitely trying to collect money from a stone, or from ashes.  Make sure you are fully armed with the necessary information before you call PERS or Revenue.  No beneficiary, no open estate, no repayment is necessary.  In any other circumstances, your mileage may vary.  Feel free to check with me or post your situation over on POD (see left for link) to see how we view it.  With the right array of information, you may not have to worry about this.  

Pacing the Cage

Right now, the action on PERS seems to be a combination of the PERS Board finalizing the new assumed interest rate (7.75%), the effective date for new rates and new mortality tables (January 1, 2014), and approving the final set of assumptions for the 2013 experience study that will determine employer rates for 2015-17.

The only area where no real hints are available is in the construction of the new mortality and AEFs.  The new tables go into effect of 1/1/14 and I've received conflicting information on how those tables might affect individuals who retire on or after January 1, 2014.  Early information suggested greater longevity for the PERS population, which would lead to actuarial equivalency factors that result in lower monthly benefits to members.  This would happen anyway since the assumed rate will have been lowered, but the information initially received suggested that the PERS member experience was unusual and that the tables would have a far greater impact on benefits than expected.  Lately, however, I'm getting a completely different set of rumors.  While it may be true that the PERS experience data indicate longer life expectancies, the general population data show exactly the opposite.  Actuaries and epidemiologists have been noting this effect since mid-2012 and the overall population numbers suggest that mortality rates are declining by several years.  They've correlated this impact with education attainment and have noted that those with either less than a high school education or only a high school education have mortality reduced by more than 4 years over the rest of the population.  This results in general population mortality figures that are shorter than in the past.  If this is true, and the data certainly seem to support the claim, then what may happen is that PERS' actuaries will have to revise the mortality tables downward and report lower life expectancies.  Ironically, this will have exactly the opposite effect for members.  In the main, it would probably return the mortality tables back to the point where they would have been in the mid-1980s, slightly better than the 1978 tables, but worse than the 2003 revision.  If this happens, the lower interest rate will be offset by lower mortality and member benefits would be higher than expected because they aren't expected to live as long.  I see no resolution of this issue until the new tables are reported out, possibly at the September 27, 2013 Board meeting.

In the meantime, our illustrious Governor Kitzrobber is pacing the state trying to build support for more PERS cuts and higher taxes to support the public schools.  The Governor has hinted at what he wants as part of the "grand bargain", which seems to be similar to Senate Bill 857.  Recall that SB 857 had two parts:  further cutting the retiree COLA (amending SB 822 from 4 tiers to 2 more punitive steps), and cutting the annuitization rate for inactive members seeking to retire at some point in the future.  SB 857 died when the House failed to pass HB 2456, which would have increased taxes for several different groups of people.  The net effect of these two bills would have been to increase revenue in the state by about $250 million per biennium and further reduce employer costs by lowering the unfunded actuarial liability of the PERS fund.  

The issue now is that the possibility of enacting a cut to inactive members retirement benefits shook the tree pretty heavily.  Recall that during his testimony on SB 822, Paul Cleary, PERS Executive Director, noted that 4% of the inactive members were responsible for 40% of the liability of all the inactives (not ALL PERS members).  From various sources I've concluded that many of those people retired June 1, July 1, or August 1, thereby reducing the amount of money that would be available to recapture by cutting the annuitization rate for the remaining inactives.  Thus, any bill including the inactives would probably generate about half the savings as before, and possibly less if the Legislature gives inactives a free-pass for a few months before implementing the rule.  Since the AG warned the Legislature that passing a bill that provided essentially no notice, or trapped people with no option to get out before the effect date, would be viewed negatively by the Supreme Court.  So, it appears that the inactive cut would not be very lucrative for the employers or PERS, and would force the burden back on retirees, again.

I have no sense of whether a Special Session will be called or not.  I know that the Governor wants to call the session in September, if at all.  I've heard that some legislators are balky at the idea of more cuts to retirees, while the Rs are balky at the prospect of tax increases without some tax cuts to help small businesses.  I do not regard the special session as a done deal by any stretch of the imagination, but if the Gov can keep all the Ds together, he needs only 2 Rs to pass everything he wants.  The bar is not high, but it still will require some hard sales pitches.  In the meantime, keep those cards and letters going to your legislators.  They need to know what you think of these ideas.

Outside Looking In

We are back from our short refresh in the American Southwest.  I'm happy to report that Idaho is still hot, Utah has 80 mph speed limits, Arizona 89 is presently closed from Page north, and 89A is as crappy as ever.  Also, I was pleased to find out that in Arizona, firearms are not allowed in restaurants that serve alcohol.  That saved me from any confusion before I walked in.  Also, Oregon still has 65 mph speed limits that make the drive from Portland to Boise as tedious as ever.

On the PERS front, the only news is that the PERS Board meets this coming Friday (July 26) to finalize the change to the assumed rates.  No one knows for sure whether the new rates will be 7.5% (likely) or 7.75% (less likely).  One thing certain is that whatever the new rate is, Oregon employer rates will have to rise in 2015-17 just to accommodate the reduction in rates.  A 50 basis point reduction in the assumed rate will probably wipe out most of the savings from SB 822, which will bring us to replay in the 2015 Legislature, if not much sooner.

The PERB will also take up the new administrative rules that cover the changes from SB 822 - the gradually reducing COLA with benefit level, and the elimination of the SB 656 and HB 3349 subsidies to benefits for retirees living out of state.  Apropos of SB 822, the COLA for retirees out July 1, 2013 or earlier is a fixed 1.5%, which will show up on the August 1, 2013 benefit check.

The PERS Coalition has filed its 13-plaintiff lawsuit against the State of Oregon and PERS for reductions to benefits resulting from SB 822.  The suit details are posted on the www.bennetthartman.com website.  In addition, two other suits were filed by out of state retirees as individuals.  Both these cases focus exclusively on the loss of the SB 656 and HB 3349 income tax remedies.  The Coalition suit focuses exclusively on the loss of the SB 656 remedy.

At the close of the 2013 Legislative Session, both the Governor and Senate President announced that if there was some compromise struck on additional taxes and PERS reform, either or both would call the Legislature back into Special Session prior to the February 2014 short session.  People have asked me when this might occur.  I don't have the faintest idea, but I suspect that if one were to occur, early Fall might be the earliest.  These legislators need to get back to the reality-based world for awhile before they can go back into the fantasy-fueled world of partisan politics.

I'm sure I'll have more to say once the PERB meeting has passed and both the assumed rate and the associated actuarial equivalency factors for January 1, 2014 show up.  I expect some significant changes to the AEFs.

Postcards from Paraguay

The Fearless one is charting course for a brief vacation in the American southwest.  Regular blog posts will resume upon my return on July 19.  In the meantime, the Oregon Legislature closed up shop today, bidding sine die until next February.  The only bad bill to emerge this session is SB 822, which cuts this year's COLA for retirees to a flat 1.5%.  In addition, the bill repeals the income tax subsidies embodied in SB 656(1991) and HB 3349(1995) for any PERS retiree not subject to Oregon Income Tax (essentially all retirees no longer living in Oregon).  Supposedly PERS is required to contact every retiree fairly soon and get an affidavit of whether the retiree's pension is subject to Oregon Income tax for 2013.  Just in case you haven't retired and spun the roulette wheel to decide whether to retire while the legislature was in session, there is more possibly bad news on the horizon.  Both the Governor and the Senate President announced that they are going to let legislators rest and then try to revive the grand tax and PERS cuts bargain that eluded legislators in the waning days of this session.  If the leaders can get the right number of legislators to commit to voting for the two pieces, they will call a special session (probably in the Fall) to enact additional legislation.  It will take more PERS cuts to get the Rs to sign on, but they would also have to agree to Revenue measures the Ds want badly enough to sell out more PERS members and retirees.  It is unlikely that a special session will take place before the ongoing labor negotiations conclude.

I will continue to post any relevant updates while I'm gone.  You can get those by following my Twitter feed @mrfearless47.  It is filled with as much snark as I can manage in 140 characters.  Sometimes the most snark can be found in the hash tags (#), which provide guidance on the topics you can follow on twitter to get even more information (or not).  One useful hash tag is #orpers.

Shadow Days

The end of this year's Oregon Legislature is near at hand.  So far the two bills critical to PERS members, retirees, and seniors seem to lack the necessary support to make it to a final vote.  HB 2456 is a revenue vote on a package of tax increases that can't seem to get the required 18 votes in the Senate to pass.  Without that outcome, SB 857 doesn't move.  To keep it from passing without the packaged revenue bill, the Senate Ds shipped it back to the Senate Revenue and Finance Committee, where it originated, and there it remains with no scheduled action.  It just may die there.  If these bills fail, there will be no cut to inactive benefits, no additional cuts to the retiree COLA, no phase out of senior medical deduction, and a host of other noxious tax increases.

For on the spot news coverage of PERS, please follow me on Twitter @mrfearless47, checking hash tag #orpers

Burning and Looting

You know you are in a world of hurt when the lead witness in the testimony in favor of the full blown red herring bill called SB 857 is the robber in Chief for Oregon, John "who used to be a 'do no harm' physician" Kitzrobber.  The bill began its life last week as a proposal to form an nterim committee to study potential PERS reform.  By this morning, the cat had escaped from the bag and the lovelies who represent Oregonians, acting complicitly with the Guv had cobbled together 4 amendments to the original bill.  The dash 3 amendment removes all the language inthe original SB 857 (the gutting) and replaces it with changes to the COLA adjustments to SB 822, adopted about 7 weeks ago.  This bill imposes only 2 levels of COLA and screws everyone just a little bit more.  It changes the COLA max from 2% to 1.25% (for everyone up to $60k) and 0.15%for amounts greater than $60k.

The dash 4, 5, and 6 amendments take to new COLA language and provide a multiple choice of options for legislators to choose among.  Rather than describe the complicated choices, it is really about two issues - by how much shall the actuarial equivalency factors be adjusted for inactive members (choice include the commercial annuity average rate, or the current assumed rate minus 4%), and the effective date for the changes (August 1 or September 1, 2013).  Those dates are crucial to understand.  If you aren't eligible to retire either due to age or service or both) you are screwed (unless the court overturns these changes before you retire) as your money match benefit will see a 37% or more reduction.  The PERS Board is considering changes to the assumed rate, which will affect Tier 1 earnings guarantee on August 1, 2013 and thereafter.   Since the time is not adequate for the bill to be completely processed by close of business tomorrow, anyone who is inactive and who is already eligible to retire is taking a huge risk if tomorrow passes and a retirement application for July 1 isn't already in PERS'hands.  If the legislature passes this bill with an effective date of August 1, missing tomorrow's last eligible day for a July 1 retirement means that you cannot retire without exposing yourself to the severe effects of this bill.  Of course, you can gamble that the Legislature would have this bill not take effect until September 1, leaving you an additional month to organize for your retirement.  If this were my decision, the benefit difference between a July 1 and an August 1 retirement is trivial.  Moreover, a July 1 retirement gets you the 2013 COLA of 1.5%, which isn't available if you retire after July 1.  In the end, even assuming a September effective date, in these circumstances the July 1 date might actually be more beneficial than waiting til August 1.  Of course, if the effective date is August 1, you will not only lose out on the July 1 COLA, but also suffer a 37% cut in the benefit you would have received had you gone July 1.  I don't give advice, but the choice here seems completely self evident.

Lest you think this bill isn't going to survive the end of session games, think again very carefully.  The bill has the support of the Governor, Senate R and D members, OSBA. OBA.  We don't know how the bill will fare in the Oregon House, but it is fair to say that theD caucus holds all the needed votes to pass this bill even if the Rs were to hate it, something highly unlikely.

The culls we have managed to elect to represent us have aligned to perform a full scale arson on benefits of retirees -70% of all the "shared sacrifice" this session, - the soon to retire if not quick enough inactives -about 10% of the "shared sacrifice" - and the rest from the hospital provider tax and a further insult to retirees in a general phasing out of the senior medical deduction.  All in all, this has been the most hostile assault on senior citizens ever mounted in the state of Oregon. I hope the legislators running for reelection on this record will be reminded of how badly they tried (and possibly succeeded) to burn and loot benefits earned, promised, and contracted benefits.

Ship of Fools

This will be very brief.  In a classic gut and stuff the Senate Finance and Revenue Committee will hear a bill that will further reduce the retiree COLA, and will savage certain inactive members who retire under Money Match.  I don't have time to describe these bills as I am literally on my way out the door.  But the short version is that if you want to avoid the impact of this bill, should it pass, you need to get out tomorrow for July 1.  From what I've seen the bill is actually worse than what has been discussed; it might not take effect until September 1, but another version has it taking effect August 1.  If you are not a gambler, get your tail in gear and get your papers in tomorrow by 5 pm.

 

More later.

It Is What It Is

It appears that the circus in Salem is finally winding down.  The R clowns have relented on the Hospital Provider Tax and will vote to extend it when it finally comes up for a vote.  That clears the way for the final denouement of the 2013 Legislature, the K-12 Budget.  Both from Salem sources and later confirmed by those master reporters at the local moribund rag, the Boregonian, the attempt to savage inactive PERS members is pretty much dead this session.  Our friends with the Oregon Business Council have cheerfully offered their assistance in developing a proposal to decouple the Money Match annuitization rate from the assumed rate during the period between the end of the 2013 Session and before the 2014 session takes up in February 2014.  From what I know, the objective will be to go after all future Money Match retirees, not merely the inactives.  So, while it is good news that inactives have some breathing room for now, that room will be short lived before this next attempt to devalue PERS benefits won't wait too long before striking again.  If that isn't enough good news, there is always the actions of our other friends, the two power ladies in the Senate and House - Ginny Burdick and Tina (I won't cut PERS benefits unless there is shared sacrifice) Kotek.  These two wunderkind are still busking for pennies to throw at the schools to help them reach their new hostage level of $7 billion, up about $250 million from the budget agreed to in the Co-Chairs budget.  Since the Rs won't sign off on tax increases (except for the Hospital Provider Tax, which is not an increase, but an extension of a tax in existence since 2003), and the Ds won't approve any tax cuts, the only viable source for that extra money is --- wait for it --- retiree COLAs.  Wait, you say.  SB 822 cut retiree COLAs.  Indeed it does, but this seems to be no longer enough money for the raptors in Salem.  We might just be facing even more cuts to our COLA to help the schools out.  What I fail to understand is how the Legislature does not get the fact that by increasing the school budget to $7 billion (if it happens, which is questionable) for the 2013-15 biennium, that $7 billion becomes the new base budget for 2015-17.  When you've already ravaged retirees for all that is realistically possible, or better yet, you have to repay retirees because what you are doing is illegal, then what.  If the economy doesn't improve between now and then, there won't be any more money for schools that even for now.  Where will the needed funds come from?  Oh wait, I forgot about the decoupling of the Money Match annuitization rate.  That ought to free up enough cash to help the schools again.  But you can only go to the PERS well so many times before the well runs legally dry.  I guess the Legislature could try SAIF again.  After all, that worked really well the last time.

So, I guess I'd describe this post as sort of good news if you are not yet retired.  Your ship hasn't landed yet, but the Oregon Business Council will be working its tush off to make sure that when you do land, it will be really rocky.  For retirees, your story isn't over yet, but the drama won't last much longer.  The good news there is if they go after the retiree COLA some more, the legal argument will be stronger but no new legals will have to be sacrificed in the production of the legal show.  It is the same old same old.   Money goes in, money goes out, and it is what it is.  Time for today's cliche-ridden post to end.  

The Beat Goes On

I don't like to be publishing a post just for the sake of saying something.  Nevertheless, this post falls into that category.  There are lots and lots of rumors about what may still happen as the Legislature gets closer and closer to its mandatory sine die date of July 13, 2013, but so far there has been no real action on any of the rumors.  There seems to be a lot of miscommunication even between members of the same committee.  At a Town Hall on Tuesday night, Richard Devlin, co-Chair of the Joint Ways and Means Committee told an audience that adjournment would be sometime between July 3 and July 10.  The next night at another Town Hall, Peter Buckley, the other Co-Chair of the Joint Ways and Means Committee told a different crowd that adjournment is still scheduled for June 28.  If Buckley is right, next week is going to be extremely busy.  I rather doubt Buckley is right.  In the meantime, the significant budget - K-12 - has been delayed and delayed with the next vote scheduled for June 26.  The Hospital Provider tax still has not been scheduled for a vote, unless I've missed its schedule.  Somewhere in this maze may be one or two more bills related to PERS - one to reduce further the COLA for retirees, and another (or included with the COLA modifications) to reduce the annuitization rate for inactive members who retire under Money Match.  Neither bill has a chance unless the Ds in the Legislature get commitment from a number of Rs (greater than 2) to vote for the proposed $200 million more in increased taxes.  So, there is still a great deal to accomplish in what is a very diminishing time period. One clue about potential PERS changes lies in the bill to appoint an Interim Committtee on PERS that would be tasked with reviewing ways to change PERS benefits (to future retirees) that would survive legal challenges.  The task force has a vague charge, but is designed to report to the interim leadership of the Legislature just before the 2015 session and disband and sunset before the actual convening of the 2015 session.  The bill has a number but I don't know what the schedule for hearings is, or whether it even needs hearings.  I'm pretty sure the Legislature can appoint a task force by mutual consent of the party leadership.  Do recall that a similar task force existed prior to the 2003 session, and virtually all the bills, adopted and rejected, originated from that task force.  The fact that such a task force is being contemplated again suggests that the Legislature may be uncomfortable going forward with much more (if any) changes to the benefit structure without a detailed legal, political, and economic analysis.  I'm agnostic on the appointment of such a committee.  Indeed, if they were seeking representation from a retiree, I would certainly volunteer to participate.  But, I'm pretty sure no one wants me on their committee <g> for pretty obvious reasons.  Deep thinking does not seem to be a qualification that is desirable in such a setting.  But, stranger things have happened.  

Anyway, that's the news for this week.  Another week or two of agony for retirees, and another week or two of agony for inactive PERS members eligible to retire.  Just remember that anything enacted with an emergency clause takes effect the day the Governor signs the bill.  Again, you've been so advised.  Take from that whatever you want to take.

Train of Fools

Things have been awfully quiet on the PERS front for the past several weeks.  With so much sturm und drang over PERS dominating the entire session, with so much media muckraking driving much of the discussion, with the heavy lobbying effort by the group FIX PERS NOW (and all its high profile backers, including the CEOs of nearly every major Oregon business and public utility), and the Governor's wish to be a lame duck, there is no shortage of speculation about where the next "shared" sacrifice will be coming from.  If you were to hit the bookies on London street corners, the gaming parlors in Las Vegas, or Chinook Winds casino, you would probably find the oddsmakers taking bets that the next victims of the "draw and quarter" club will be (surprise!) PERS retirees who have, apparently not felt the cold steel of a loaded gun severely enough; they might be in line for another round of financial rape with further cuts to their COLA increase because, obviously, the pain of SB 822 hasn't been enough "shared sacrifice". The logic must be that if the legislature is going to be sued over cutting the retiree COLA anyway, why not go for more cuts.  The litigation won't change, so, what the hell?  Of course, that isn't enough for the blood-suckers in Salem, so the next candidates for a significant financial haircut will be those unretired, inactive PERS members.  Obviously, they had the gall to leave, and thus don't deserve the benefits they were promised so lets cut THEIR projected benefit by roughly 37% by cutting the interest rate assumed for computing monthly retirement benefits.  Apparently these fools think that because the inactives are not represented by any of the PERS Coalition partners, the inactives will have no labor or organizational support for litigating these cuts.  I think that would be a bad assumption to make.  There are more than inactives in the mix whose oxen will be gored by a change like this.

 

I don't want to alarm people that these things WILL happen, but I'd also not wager any money that they won't happen.  For those curious enough or worried enough there is a town hall meeting in Lake Oswego's Heritage House tomorrow evening starring two of the major players in this year's Legislative session.  Senator Richard Devlin, co-chair of the Joint Ways and Means Committee, and Representative Chris Garrett, Speaker Pro-Tempore of the Oregon House will be on hand to discuss the current happenings, future directions, and take questions from the audience.  The Heritage House is at 398 10th St, Lake Oswego and the party will start at 7 pm.  Lake Oswego has usually supported these events with decent turnouts.  I suggest arriving about 10-15 minutes early if you want parking and a seat.  This may be your last chance this session to have an opportunity to have any input into whatever the train of fools in Salem have cooked up for those of us dumb enough to believe that our work was wanted, needed, and honorable, and that the retirement promises we accepted in place of tangible up-front cash were has honorable as we were.  This session has finally put the lie to that fairy tale, and confirms the real opinion towards PERS members.  It also completely redefines the meaning of that feel-good phrase "shared sacrifice" as the Democrats new slogan for sharing PERS retirees' money with everyone but PERS retirees.  Apparently, PERS retirees are the only ones who get the privilege of sharing their sacrifice with everyone else.  That low rumble you hear in the background should not be ignored; it is the train of fools barreling down the track at high speed towards retirees and inactive PERS members.

 

More after tomorrow's love-fest with Devlin and Garrett.  Hope to see you there.

Idiot Wind

The week has passed with no additional news on the fate of PERS in the Legislature.  Two days of "high level" discussions at the Governor's mansion with leaders of both parties produced nothing of substance, and have managed to leave PERS members and all agencies receiving money from the State of Oregon on tenterhooks.  The failure of the Ds, the Rs, and the Kitzrobber to reach any sort of budget and PERS agreement increases the likelihood of either a session running into July and/or a special session when all the parties have cooled off and start to feel pressure from their constituents.

I remain puzzled by one issue.  The Ds and Rs paint their disagreement as one between additional tax revenues and additional cuts to PERS.  Obviously the Rs want additional (read draconian) cuts to PERS, while the Ds "only" want $200 million in additional revenue.  The Rs want $7 billion for schools, but again with no mechanism in the money (or the money from SB822) to insure that the funds actually make it to the classroom before being skimmed off by administrators, superintendents and other highly compensated individuals.  This seems to be foolish and even if the schools were to get all they asked for or at at least all they wanted, what would stop them from coming back in 2015-17 for even more.? We all know that the schools, in particular, have an insatiable appetite for more money, yet astonishingly little additional money goes to the people who need it - classroom teachers, classroom assistants, new books, more modern curriculum, etc.   But let's assume that this is the central wedge issue between Rs and Ds.  More PERS cuts for more school dollars, while the Ds want more revenue and lesser (or no more) PERS cuts.  Assuming this is the case, and also assume that the Kitzrobber was correct when he stated that, with the May forecast, the state has enough money to meet current budget needs and could adjourn and go home.  If this is true, why are the Ds still meeting with Rs.  Why not go home and let the Rs rest of their lack of accomplishments in this session.  Why not let them twist in the wind?

The answer, it seems, rests in what isn't being stated, what's blowing around in the idiot wind.  The elephant in the room isn't PERS right now.  The elephant is the nearly $2 billion in revenue generated by the renewal of the Hospital Provider's tax.  This tax, first approved in 2003 (if I recall correctly), is worth $1.3 billion in revenue to Oregon from providers and Federal reimbursements.  It was slated to sunset at the end of fiscal 2012, but is being continued indefinitely if approved by the Legislature.  The Oregon House approved the continuing resolution in mid-May by a 54-5 vote, but the bill is currently stalled in the Senate, undoubtedly because of R reluctance to support it unless they get additional PERS reform.  Since it is a revenue bill, it requires a 60% supermajority to pass.  The Ds have a shaky 16-14 majority in the Senate and would require 2 R votes to pass the resolution, assuming all Ds hold firm (which itself is questionable).

So, it is disingenuous, in the extreme, to suggest that the differences between the Rs and Ds is over the budget.  The budget is set.  The Rs want another $250 million or so for the schools, and they want to get it by cutting PERS by $1.3 billion.  The math doesn't work out there.  The Ds want another $250 million in taxes for what?  Who can't use additional revenue?  In any case, the issue is really about PERS versus the hospital tax, not PERS versus the Ds desire for an additional $250 million in taxes on corporations and affluent individuals and senior citizens who have medical expenses.

Neither side seems willing to budge at the moment; all the signs point toward a stalemate.  After Tuesday's meeting, in which Tina Kotek walked out, there are no further meetings scheduled.  The Ds can't just vote the current budget and go home because the hospital tax lingers there without the required two R votes.  Whatever happens, it doesn't seem to be happening quickly or at all.  I'm betting on continuing budget resolutions to keep government functioning past the end of the biennium, June 30, a possible adjournment, and then a special session to finish the budget later in the summer, about the time legislators are planning to take their summer vacations.  You better send spouses and kids away now legislators.  It is going to a long, hot, summer for the rest.  Don't blame anyone but yourselves.  You're all greedy, and you reap what you sow.  Enjoy your vacations in Salem.

 

Today Is OK

After a weekend of confusion, chaos, and disbelief, it appears that PERS has updated its "Assumed Rate FAQ" and script used when getting calls.  According to the revised "Assumed Rate FAQ" at the PERS Oregon Official Website -http://www.oregon.gov/pers/docs/financial_reports/assumed_rate_faq_5-31-13.pdf - the date for implementation of the revised Actuarial Equivalency Factors is 1/1/2014, which is what we thought it was supposed to be from the very beginning.  I don't know whether this represents a shift from PERS and the Board, or whether it was just clumsily presented on Friday.  In any case, it would appear that the assumed rate change (to 7.5% or 7.75%) will take place on August 1, 2013, as promised, but the revision to the accompanying mortality tables and annuitization factors won't take place until January 1.  This means that members who expect to retire this year will not be adversely affected by the AEF change unless they retire after 12/1/2013.  While earnings crediting will take place at the new rate (one of the two amounts above) beginning on 8/1/2013, the underlying annuitization tables won't change until 1/1/14, meaning that retirements up to 12/1/13 will be figured under the old mortality tables.  This should ease some of the pressure for potential retirees.  If you want more information, the PERS website is your friend.  It is now there in black and white at the above link, which appears to be updated as new questions and answers arise.

Who'll Stop the Rain?

I know, I'm on a CCR kick this week.  Can't help it.  The bad news just keeps coming.  Yesterday - a day when I was out of pocket nearly the whole day - PERS posted a FAQ on their web site following yesterday's meeting, which I was unable to attend.  The FAQ pertains to the Assumed Interest Rate change, which we've been assuming, based on past history, to take place on 1/1/14.  Apparently, the statutes give PERS the authority to change the assumed rate any time other than just the timing of the annual valuation and the boys and girls in Tigard have been busy trying to figure out how to avoid a landslide of business on 12/1/2013.  So, they are proposing a new Administrative Rule that gives them some cover to initiate calculations using the new assumed rate in the month following the adoption of the rate change, if any.  So, what that means is that instead of having a leisurely wait until November 30, 2013 to retire effective December 1, 2013, the Board and PERS appear to be trying to avoid all of that hassle by letting the assumed rate take effect as early as August 1, following adoption at the July 26, 2013.  This, in turn means, that if you wish to avoid the double whammy of revised actuarial factors and a lowered earnings crediting, you'll have to be out of the system no later than July 1 - a new drop date.

There is a small sliver of hope here.  From reports I got from the meeting, the Board and PERS may not have the appetite to go all the way to 7.5% in a single pass.  They may, instead, adopt a slightly higher assumption at 7.75% to ease the transition, primarily for employers, but secondarily benefiting members.  The earnings cut would then be relatively insignificant in the larger scheme of things, but there is increasing evidence that longer longevity in the PERS pool may force the actuary to increase mortality factors at the same time they lower the assumed rate.  This would result in a more notable decrease in benefits than would be suggested by the lower assumed rate all by itself.  Since the 7.75% rate only showed up yesterday, the Board instructed the actuary to come back with projections of how this would affect new retirement benefits and employer contribution rates for 2015-17.  The Board is taking the unusual step of adding a second public hearing on the rule change (see PERS website for the Assumed Rate FAQ and new rule), because they know it will be controversial (and certainly a surprise to me!).  The second hearing will be in the Salem office, and I will post the dates as soon as I know them.

Obviously there is enormous political pressure coming from everywhere for the Board and PERS to do something quickly.  I think this rule change, which appears to be allowed by statute, was something the wide boys at PERS thought up over lunch one day when they were thinking about how to avoid the retirement stampede.  Obviously the best way to do it is to move up the effective date from its expected date to 4 days after you approve a brand new rule.  This is, of course, when there are no guidelines or clear policies in place since the last change nearly three decades ago.

A couple of other things.  Two employers complained publicly to the Board about what we've all known for many, many years.  They complained about the Legislative action to push back part of the rate increases into 2015-17.  They argued, what I've been complaining about publicly and privately in every forum I have been allowed to speak, that the reason employer rates are rising is because the employers have never been required to pay their full share.  Most have just been content to push the ball down the road until another day, until that day comes and then they go screaming to places like the OSBA, OBA, and other titans of industry who act like they care (but are in it for purely selfish reasons) that the sky is falling.  Congratulations to the Cities of Roseburg and Corvallis for telling it like it is.  Unfortunately, as the snarky and fairly nasty new Chair of the PERB said, "we can only do what the Legislature instructs us to do".  By the way, if you are looking for a really ugly description of the qualifications of the new PERS Board chair, you might wander over to a site I enjoy a great deal, www.uomatters.com , written by a UO colleague Bill Harbaugh.  Harbaugh minces words even less than I do.  The remark about the PERS Board Chair is in a comment to a Harbaugh post, not from Harbaugh himself and it is pretty savage and at least nominally accurate.

The other takeaway is that IF (and right now, that's a big if) the rate change goes to 7.75% for now, it is destined to go down further, but the Board is considering doing the reductions in stages and letting the market forces inform changes beyond the immediate term.

If you weren't paying attention to the rest of this, the important message is that to avoid any impact by rate changes, the new retirement date would have to be July 1, 2013.  Don't say you weren't informed.