Whatever you do. At least that's the way it felt after attending the PERS Board meeting today. It turned out to be more interesting than I expected, though for none of the reasons I thought it might be. I posted an earlier version after I returned from the meeting, but some gremlin in the bit bucket ate my homework and it didn't appear. Consequently, I'm posting another account that will probably be slightly different than my earlier report because I've had a glass of wine with dinner. :-)
The interesting parts of the meeting involve two handouts that were not in the initial Board packet. Speaking of Board packets, Executive Director Paul Cleary more or less apologized to Board members and stakeholders for the confusion over the reserving memo that appeared in the initial packet and was "pulled" (his term this time) from the packet by Tuesday. I explained the genesis of the document in an earlier post (see "Desperadoes under the Eaves") and won't repeat it here. Suffice it to say that at the March meeting, the Board had questions about their statutory authority and responsibility for the various reserves. They directed PERS staff to prepare a report about these things for a future meeting. The staff did as directed and prepared a draft document that was included as an agenda item for discussion at today's Board meeting. Apparently, shortly after the Board's agenda and packet were first made available, Greg Hartman sent Mr. Cleary and PERS a letter that caused PERS to revisit the agenda item and to withdraw the memo from the agenda. While I have no direct information about what Mr. Hartman said in his letter, Mr. Cleary made a remark that allowed me to infer its contents. He noted that much of the memo was a fairly straightforward recitation of the relevant statutes under which each reserve exists, but he then noted that there could be differences of interpretation of what the Board's authority and responsibility are with respect to funding those reserves (and presumably using the proceeds of those reserves). So, at the moment, I stand by my earlier assertion that PERS "pulled" the memo and agenda item deliberately; it wasn't included by accident, but its contents concerned Mr. Hartman and PERS decided to withdraw the memo for the time being.
The first new item was a memo from PERS staff describing how they planned to estimate retirement benefits for that subset of members who retire between now and the time a decision is reached in the Lipscomb "City of Eugene" appeal. PERS has decided that the most economical approach is to estimate benefits based on one known fact and one assumption - Strunk is the fact and Lipscomb is the assumption. PERS is going to calculate benefits for new retirees with Strunk implemented (8% 2003, 8% 2004) and on the assumption that Lipscomb is upheld (11.33% in 1999 instead of 20%). This methodology will result in the least variation between estimated benefits and actual benefits and will be guaranteed to not OVERESTIMATE benefits for any, may turn out to be correct and require no further changes to those accounts, and in the worst case will require PERS to calculate adjustments to recent retiree accounts at the same time every other account affected by these decisions will be affected. I have the memo but I'm hoping that PERS will post it. I don't have time to scan it in and assemble a 4 page document.
The other significant items of business were dealing with the legislatively mandated mortality comparison of P & F with General Service Members. This was Mark Johnson's swan song and his report is part of the published PERS packet. I'll spare the details of this relatively lengthy discussion, but did enjoy watching the PERS Board squirm when they had to make a tough decision. In the end, the Board voted 4 - 1 to accept Mark Johnson's recommendation that the differences in P & F mortality relative to General Services were not significant enough to warrant developing a separate set of actuarial tables. Pat West, representing the Oregon Firefighters, made a compelling argument in favor of separate tables, but in the end the Board held with the actuary.
The most interesting item - for me at least - was the presentation by Marcia Chapman and Bill Hallmark, the Mercer actuaries assigned to PERS (Chapman is the Principal Actuary; Hallmark is the Principal Financial Modeller) entitled: "Oregon PERS: Recent Benefit Changes & Future Employer Rates". This was a 35 minute Powerpoint Presentation (20 pages long; I have the handout, but no electronic copy) covering a broad area of topics. To save my hands right now, I'll post a separate summary of that presentation tomorrow. However, I do want to make one point that emerged during their presentation because it isn't obvious from reading the document. At several points during the presentation and during questions and answers both by PERS Board members, PERS Staff, and by stakeholders, it became obvious that everyone is operating on the principle that in the Strunk decision, the Supreme Court determined that 8% was the minimum rate that can be used as the "assumed interest rate". I listened very carefully during this back and forth discussion and heard 8% referred to in lots of different ways, but someone (perhaps one of the actuaries, perhaps someone else) plainly said that Strunk established 8% as the floor, and not a soul in the audience challenged the assertion. That I heard it doesn't make it so. But it does, at least for the moment, offer a small bit of good news. Use this information at your own risk. (It will be amusing to see how long it takes for someone to try to correct my memory).
I'll post my thoughts on the Mercer presentation over the weekend. Perhaps PERS will be kind enough to post it electronically as it will be an interesting read for those willing to invest the time and energy. I'll close with a final story. Near the end of the meeting, there was a brief discussion of HB 2001 and its implications for earnings crediting in the future. Jim Green of the Oregon School Boards Association (OSBA) reminded the Board that future discussions of earnings crediting must take into account the restrictions of HB 2001. Greg Hartman was asked to comment. He reported that HB 2001 was drafted as a cooperative effort and that Mr. Green was correct. As he was walking back to his seat, Mr. Hartman looked over at Mr. Green, who was sitting near me, clutched his hand to his heart, and mouthed with a big smile "this really hurts me to agree with you".
Adios, until another day. Off to my Friday night orgy of CSI reruns.
The interesting parts of the meeting involve two handouts that were not in the initial Board packet. Speaking of Board packets, Executive Director Paul Cleary more or less apologized to Board members and stakeholders for the confusion over the reserving memo that appeared in the initial packet and was "pulled" (his term this time) from the packet by Tuesday. I explained the genesis of the document in an earlier post (see "Desperadoes under the Eaves") and won't repeat it here. Suffice it to say that at the March meeting, the Board had questions about their statutory authority and responsibility for the various reserves. They directed PERS staff to prepare a report about these things for a future meeting. The staff did as directed and prepared a draft document that was included as an agenda item for discussion at today's Board meeting. Apparently, shortly after the Board's agenda and packet were first made available, Greg Hartman sent Mr. Cleary and PERS a letter that caused PERS to revisit the agenda item and to withdraw the memo from the agenda. While I have no direct information about what Mr. Hartman said in his letter, Mr. Cleary made a remark that allowed me to infer its contents. He noted that much of the memo was a fairly straightforward recitation of the relevant statutes under which each reserve exists, but he then noted that there could be differences of interpretation of what the Board's authority and responsibility are with respect to funding those reserves (and presumably using the proceeds of those reserves). So, at the moment, I stand by my earlier assertion that PERS "pulled" the memo and agenda item deliberately; it wasn't included by accident, but its contents concerned Mr. Hartman and PERS decided to withdraw the memo for the time being.
The first new item was a memo from PERS staff describing how they planned to estimate retirement benefits for that subset of members who retire between now and the time a decision is reached in the Lipscomb "City of Eugene" appeal. PERS has decided that the most economical approach is to estimate benefits based on one known fact and one assumption - Strunk is the fact and Lipscomb is the assumption. PERS is going to calculate benefits for new retirees with Strunk implemented (8% 2003, 8% 2004) and on the assumption that Lipscomb is upheld (11.33% in 1999 instead of 20%). This methodology will result in the least variation between estimated benefits and actual benefits and will be guaranteed to not OVERESTIMATE benefits for any, may turn out to be correct and require no further changes to those accounts, and in the worst case will require PERS to calculate adjustments to recent retiree accounts at the same time every other account affected by these decisions will be affected. I have the memo but I'm hoping that PERS will post it. I don't have time to scan it in and assemble a 4 page document.
The other significant items of business were dealing with the legislatively mandated mortality comparison of P & F with General Service Members. This was Mark Johnson's swan song and his report is part of the published PERS packet. I'll spare the details of this relatively lengthy discussion, but did enjoy watching the PERS Board squirm when they had to make a tough decision. In the end, the Board voted 4 - 1 to accept Mark Johnson's recommendation that the differences in P & F mortality relative to General Services were not significant enough to warrant developing a separate set of actuarial tables. Pat West, representing the Oregon Firefighters, made a compelling argument in favor of separate tables, but in the end the Board held with the actuary.
The most interesting item - for me at least - was the presentation by Marcia Chapman and Bill Hallmark, the Mercer actuaries assigned to PERS (Chapman is the Principal Actuary; Hallmark is the Principal Financial Modeller) entitled: "Oregon PERS: Recent Benefit Changes & Future Employer Rates". This was a 35 minute Powerpoint Presentation (20 pages long; I have the handout, but no electronic copy) covering a broad area of topics. To save my hands right now, I'll post a separate summary of that presentation tomorrow. However, I do want to make one point that emerged during their presentation because it isn't obvious from reading the document. At several points during the presentation and during questions and answers both by PERS Board members, PERS Staff, and by stakeholders, it became obvious that everyone is operating on the principle that in the Strunk decision, the Supreme Court determined that 8% was the minimum rate that can be used as the "assumed interest rate". I listened very carefully during this back and forth discussion and heard 8% referred to in lots of different ways, but someone (perhaps one of the actuaries, perhaps someone else) plainly said that Strunk established 8% as the floor, and not a soul in the audience challenged the assertion. That I heard it doesn't make it so. But it does, at least for the moment, offer a small bit of good news. Use this information at your own risk. (It will be amusing to see how long it takes for someone to try to correct my memory).
I'll post my thoughts on the Mercer presentation over the weekend. Perhaps PERS will be kind enough to post it electronically as it will be an interesting read for those willing to invest the time and energy. I'll close with a final story. Near the end of the meeting, there was a brief discussion of HB 2001 and its implications for earnings crediting in the future. Jim Green of the Oregon School Boards Association (OSBA) reminded the Board that future discussions of earnings crediting must take into account the restrictions of HB 2001. Greg Hartman was asked to comment. He reported that HB 2001 was drafted as a cooperative effort and that Mr. Green was correct. As he was walking back to his seat, Mr. Hartman looked over at Mr. Green, who was sitting near me, clutched his hand to his heart, and mouthed with a big smile "this really hurts me to agree with you".
Adios, until another day. Off to my Friday night orgy of CSI reruns.
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