The Harlem Shuffle

I'm writing this post from my new MacBook Pro, the first Apple computer developed from an Intel chip. My first impressions are positive. The machine screams, the display is awesome, and the notion that I might someday have a computer that runs Unix, OS X, and Windows natively is positively intoxicating. Don't have a clue what this has to do with PERS, but I felt like posting it anyway.

Shakedown Street

OK. I know it is a recycled title, but it is appropriate for today's entry. The PERS Board is locked and loaded. It will be sending out the first (of two) letters to "window retirees" sometime in March. This letter will notify the window retiree of the "error" in the 1999 earnings, the correction, and PERS' intent to collect the money allegedly overpaid to window retirees. This letter, which will not have details on what PERS alleges the recipient owes, will be accompanied by a notice that gives a 60-day time limit for appealing the notice. Note here that the appeal will be over the process, whether PERS has a claimable error, and whether they have any right to collect. The second letter -- the detailed calculation letter involving the specifics of the recipient's benefits - will be sent starting in the beginning of the summer. PERS expects that these letters ("invoices") will take nearly 3 years to get out. They will start with the earliest window retirees and move forward in time with later window retirees. Thus, it may be several years before the first notice goes out, and the actual invoice letter gets set. PERS assured all stakeholders that the invoice letter WILL contain appeal language that will allow window retirees 60 days to challenge the specifics of the computations.

In other action, the Board authorized drawing down the capital preservation reserve to $0, and the contingency reserve to $250 million (up from $100 million at the last meeting). The rate guarantee reserve will end up with a surplus of approximately $1 billion.

The PERS Coalition and OPRI will be posting updated information on their web sites next week. In particular, there may be some suggestions on how individual members should respond to the PERS notification letter coming next month. In the meantime, the legal actions continue apace with the White case, the Arken case, and the Robertson case all starting to cause stirs in various halls of justice.

Many thanks to friends and colleagues at OPDG for posting the information about yesterday's Board meeting so quickly. Unfortunately, I was unable to go myself.

In The Rough

The propaganda machines are heating up again. First we have the filing of an amended complaint in the class action suit (Arken et al vs City of Portland et al) on January 30, 2006. In the complaint, the PERS Coalition alleges additional wrongdoing by the PERS Board and the employers in its plan, finalized at the January 27, 2006 Board Meeting, to begin the "recovery" process from "window retirees". You can read a copy of the amended complaint on the OPRI website. Next, we have the PERS Board considering a proposal by PERS staff to "redeploy" nearly $2 billion dollars in reserves, taking the contingency reserve from its current $1.9 billion balance to something around $100 million, to liquidate the capital preservation reserve (about $0.5 billion) and bulk up the "rate guarantee reserve" to nearly $1.0 billion. The purpose of this reallocation of resources appears to be to move funds that aren't currently part of the system valuation into places where the assets would be counted. The system valuation affects many things, not the least of which is the unfunded actuarial liability, the employer liability for the UAL, and the employer normal contribution rate. For employers, the upside is that this will have, as a result, the effect of lowering contribution rates. At the same time, lawyers for the PERS Board and lawyers for the employers have been attacking on two fronts: the first is to feign concern that the reserves might be taken down a little too much, while warning active members that if the PERS Coalition "wins" the class action suit on behalf of "window retirees", the estimated $800 million bill will have to come out of potential earnings of active members -- a clear attempt to foment FUD among active PERS members. What the PERB and employer lawyers forget to mention is that the Strunk decision guaranteed Tier 1 actives "no less than the assumed rate" (currently 8%) on Tier 1 regular account balances, and that the end result of the financial reshuffling will also result in a fully funded Tier 1 rate guarantee reserve, and that by statute Tier 2 members are guaranteed "market returns" less administrative expenses. Unless the lawyers are suggesting that the cost of losing the class action suit would be charged off to administrative expenses and then deducted from Tier 2 earnings, there is no way that active members could be affected by the outcome of the class action suit. What the employers and PERB lawyers also fail to discuss is why they ought to adamantly opposed to draining the contingency reserve, when a previous PERB Board was found to "abuse its discretion" for failing to fund the same reserve. So why did the same bunch of lawyers sue the previous PERS Board for its "abuse of discretion" for not funding the contingency reserve, while celebrating draining the very same fund after the current PERS Board fully funded it in compliance with a court order and a settlement agreement. I guess I'm a bit confused. It seems to me that it is one thing for these "wide boys" to be worrying to the point of blustering about the effects on members of the class action lawsuit, while simultaneously laughing all the way to the bank as the PERB prepares to plunder the very reserves that might be needed to pay for the loss. I don't get it. I'm playing golf and my ball keeps landing into the rough. The lawyers seem to have a problem with getting their stories straight - an example of what Jimmy Buffett used to worry about when he remarked that "indecision may or may not be my problem."

P.S. Thanks to all who called and emailed their best wishes for my wife's successful surgery and speedy recovery. The surgery went well and we were home quickly. I'm happy to report that my wife's recovery appears to be right on schedule. She's starting to feel well again and is anxious to return to all her pre-surgery activities plus more.