Over The Rainbow

There might be a pot of gold, or at least some sense of "wholeness". The PERS Board met today and listened to Steve Rodeman's report on the issues with the IAP as were outlined in his memo (see my Monday entry) to the Board. Rodeman's group will be studying the various remedies further and reporting on them at the August board meeting, where PERS Staff will make recommendations for the Board to consider at its September meeting. There will be a public commenting period before the Board makes any final decisions on the IAP. Rodeman tipped his hand today in suggesting that the PERS Staff would be recommending that IAP members be made "whole" for 2004/2005 in the sense that they be credited with what they would have gotten if the system had worked correctly from 1/1/04. This will probably mean adjustments for most IAP members and settlement adjustments for all members who retired after the IAP was implemented. Rodeman also intimated, and the PERB seemed to concur, that going forward -- starting on 1/1/2006 -- the plan would change so that crediting was done annually rather than monthly. This would obviate the need for purchasing "units" and would render irrelevant the whole issue of when the employer actually got the money to PERS. The consequence of this change would be that there would be no obvious need for a 3rd Party (Citistreet) to handle the recordkeeping, but also no possibility -- at least in the short term -- of IAP members having any self-direction of their money. As I understand what is being floated, the IAP would simply become the equivalent of what currently is Tier 2, but without the employer match. Down the road, the question of self-direction, 3rd party management, and the conversion to something obviously more like a 401-K would have to be raised.

I suppose this is good news insofar as the staff and the PERB Board have actually stated, in public, that the only innocent parties here are the members -- they did the work, contributed the money, and the system responsible for getting their money to PERS to invest in a timely manner simply failed to work as members and other stakeholders expected. It was also important for the Board to acknowledge, as several did during the discussion, that PERS cannot ever function like a single company 401-K because there are 775 different entities that report monthly contributions. It is easy to talk the talk about converting PERS to a 401-K, but administratively it is a nightmare to have 775 different reporting entities trying to funnel money so that all public employee funds are treated equally. This seemed to be a revelation to some of the private-sector Board members.

There will be a combined July/August board meeting on August 5th, and nothing after that until mid-September.