Stories We Could Tell

Oh the stories we could tell.... Attended the PERS Board meeting today. No fireworks at all, despite my predictions earlier this week. The meeting was sparsely attended and was actually pretty boring. The Board unanimously adopted the "Final Order" concerning the repayment methods in the Strunk/Eugene cases. There were no questions and no discussion. The Board also unanimously adopted OAR 459-005-0610, which relates to recovery of overpayments. PERS Staff took two items off the table for discussion today. The first was its recommendation to NOT recalculate the "one time variable transfer" for members who failed the test in 2000, 2001, 2002, and 2003. PERS determined that 313 members would be affected by the decision. Staff asked that stakeholders be permitted until the next Board meeting to comment on the recommended course of action. PERS staff also took the question of lump sum rollovers back to PERS off the table for the same reason. While PERS staff could find no legal or IRS support for making this transfer possible (to facilitate repayment for the alleged 1999 overcredit), staff was willing to allow stakeholders a chance to help PERS find a way to achieve this. Staff is not fundamentally opposed to this; in fact, it would make life easier for everyone, but absent any statutory or IRS authority to do this, PERS feels its hands are tied.

Concerning the notification of overpayments, the Board and staff both took pains to emphasize that there will be two different notifications. The first concerns the fact of an overpayment situation and the methods of recovery PERS will allow. This notice will contain appeal information and it is PERS' intent to seek a single unified legal ruling that establishes whether or not their approach is legal and to provide a consistent way of handling all future claims arising from such notices. While individuals will be permitted to appeal the notice, there will probably NOT be individual contested cases over this element of the recovery plan. PERS plans to send out a SECOND notice -- a detailed invoice -- that will contain all the information an individual would need to check PERS' calculation of revised account balances, revised pension benefits, and application of appropriate COLA increases. That notice will also have appeal rights and it is THIS notice that individuals will be allowed to appeal as individuals.

Other issues of note. Tier 1 regular fund earned 13.19% in 2005 (8% will be credited, pending preliminary approval by the Board in February and the legislative eBoard), while the variable account earned 7.49%. For the first time, there was an explanation offered for the significant discrepancy in the earnings between the regular account and the variable. The regular fund is widely diversified and includes domestic equities, foreign and international equities, alternative equities, and real estate. The variable is solely invested in domestic equities. Domestic equity returns were very close in both regular and variable accounts; however, the returns on alternative equities, international equities, and real estate were 44%, 39%, and 28% respectively, dramatically increasing the return on the regular side of the ledger. This is an unusual circumstance, but 2005 turned out to be an unusual year.

Finally, in a pre-meeting conversation, I learned that the PERS Coalition has amended its class action lawsuit (Arken et al v. City of Portland et al) to include actions taken by the PERS Board at today's meeting. The amended complaint will be filed on Monday January 30, 2006.

This will be my last post for the next week. I'm off to San Francisco to accompany my wife through another surgery (her last). We hope to return to a semi-normal life by the end of next week. Stay tuned for more PERS news.

Put Ya Hands Up

OK. My hands are on my head and I'm facin' the wall. I think the mugging is about to begin. Friday (tomorrow), the PERS Board will consider a final draft of the order "Final Order on Strunk/Eugene Repayment Recovery Method". In spite of all testimony and questions about the legality of certain aspects of PERS recovery method", PERS staff is recommending a final package that includes some very questionable passages. First, in the explanatory memo justifying the final order is a passage "If the Board adopts the Final Order, each recipient of an overpayment would be served a copy of the Order by regular US mail. Serving this Order on the recipient (with added information like appeal rights to constitute notice under ORS 238.715) most likely stops the six-year statute of limitations on collecting the overpayment." COMMENT: Clearly PERS *thinks* that the mere serving of the notice stops the statutory clock from ticking, but there is no statutory citation or case law backing up PERS blatant attempt to make an end-run around what is clearly spelled out in the ORS. PERS' position may be defensible, but they offer the Board no legal justification for the position and, if fact, as much as admit that they don't really know if this is true or not - "most likely" is not a comforting phrase.

The second issue pertains to the first. The memo goes on to state: "The notice would include the recipient's appeal rights to challenge the matters covered by the Order. Specifically, the recipient would be informed that they are entitled to seek judicial review of this Order pursuant to ORS 183.484 by filing a petition for review within 60 days from service in the Circuit Court for Marion County or the Circuit Court in the county in which the recipient resides." (emphasis added). This is, of course, the issue that triggered a pretty strongly worded letter from OPRI when the whole question of notification arose back in November. The issue is that ORS 238.715 anticipates that an invoice is to be included (so that the member actually has the necessary information to make an informed decision about whether and what to appeal!). During discussion, PERS assured the Board that the invoice was part of the notice, but that the invoice would be sent separately. The wording of the final order makes absolutely no mention of the invoice, leaving me with the very uncomfortable feeling that we will be forced to appeal on the basis of PERS merely asserting that we owe money, but without knowing how much we owe. If I were a cynical person, I'd think that PERS was just trying to drop this turkey from a high altitude and daring us to shoot it down. This brings to mind that indelible episode from the old TV sitcom "WKRP in Cincinnati" where Mr. Carlson is promoting his station by throwing live turkeys out of an airplane. When the turkeys all splatter to the ground, Mr. Carlson wanders away mumbling: "...as god is my witness, I thought turkeys could fly".

Jailhouse Rock

For those of you who like to be "jailhouse lawyers", I've posted a copy of the class action lawsuit on my website here. The case is officially captioned as "Arken et al v City of Portland et al". The complaint is relatively short (15 pages) and succinct. This is the case described in my posting yesterday. You can also find a copy of the same document at the OPRI website.

Stackin' Paper

As predicted, the PERS Coalition filed its class action lawsuit in Multnomah County on behalf of "window" retirees on Tuesday, January 17. Rather than summarize information that is already out there, let me simply quote from an AFSCME e-lert from Don Loving:

"On Jan. 17, the PERS Coalition filed a class action complaint in Multnomah County Circuit Court on behalf of Tier 1 PERS members who retired between April 1, 2000 and April 1, 2004, commonly referred to as the "window period."

The class action complaint alleges that the withholding of cost-of-living adjustments for the years 2003 to 2006 from these Tier 1 PERS members constitutes both a breach of their PERS contract and a violation of the Oregon wage and hour laws, in light of the Oregon Supreme Court's decision in the Strunk case," said Aruna Masih, the top assistant counsel to PERS Coalition attorney Greg Hartman.

In addition, Masih says the complaint alleges that the PERS Board's intent to pursue collection actions against such retirees for alleged overpayment of 1999 earnings would also constitute a breach of their PERS contract, would be without probable cause and would cause irreparable harm.

Hartman's firm is optimistic this case can be resolved by summary judgment. It is, says Masih, a simple factual case that gives Hartman the opportunity to request that the judge grant an injunction through summary judgment, which is akin to taking a shortcut through the legal system's lengthy timelines.

"We can request summary judgment anytime 20 days after the suit has been filed, which means we could enter that request in early February," says Masih. "Once the request is made, we can expect a decision on the request within three months -- which is not long for the legal system, as we've come to understand with our PERS cases. Our request for summary judgment would specifically ask the trial judge to halt the process that PERS has commenced to collect alleged overpayments by retirees. Again, we believe Strunk made clear they cannot do that."

The judge could refuse to grant summary judgment and allow the case to take its full course; that, of course, would add several months to the process."

Two Ways to Play

Rumors I've been hearing for the past two months have finally been publicly confirmed. On Friday, a small blog entry on the Bennett, Hartman, Morris, and Kaplan web site reports that the PERS Coalition has served notice that a class action lawsuit will be filed against the PERS Board on behalf of "window retirees" (those who retired between 4/1/00 and 4/1/04) for violations of Oregon Wage and Hour laws. While I've never seen or heard the details or basis for the claim, this novel approach was used successfully by BHMK representing the Association of Oregon Faculties against the Oregon University System when they attempted to alter the contribution levels for Tier 1 and Tier 2 members who were participating in the OUS "Optional Retirement Plan" (an alternative to PERS). More details on this case will be forthcoming as soon as the case is formally filed. It isn't filed yet because there are certain notification details that the plaintiffs must meet and other legal requirements before the case can be certified as a "class action" and served on the defendants. To the best of my knowledge, the case is fully ready to go. You can read the blog entry that describes the case at the BHMK blogsite .