Tuesday, March 07, 2006

Have Mercy on the Criminal

Greg Hartman's email, posted yesterday on the AAEO website (and linked to here in yesterday's entry), contains some interesting language, especially pertaining to deployment of the reserves and, more importantly, to the treatment of the "window" retirees in the Arken class action case (note: Hartman incorrectly refers to that case as the 'Akers' case; that is a typo in the email). First, the good news is that the actual deployment of the reserves, while benefitting employers in a positive way, also benefits all other groups of PERS members equally. Initially, the PERS Board was intending to deploy the reserves so as to benefit the employers over the members. The final distribution of the reserves - as shown in the Board's own plan, and reaffirmed by Mr. Hartman - is entirely consistent with the past actions of the Board and follows an equal distribution model. Thus, while the apparent "winners" were the employers, the fact is there are no "losers". The Board has plowed no new ground in this reallocation. Hence, the improper distribution of the reserves - a subject of the White case - is no longer an issue as the Board is no longer attempting to blaze a new financial trail.

The second area is a bit more confusing. In the email, Hartman suggests that the attempt to challenge the PERS Board's revised distribution of 1999 earnings from 20% to 11.33% is, itself, probably a dead legal issue since the Supreme Court in Strunk did not preclude the Board from doing that, nor did they intervene in the appeal of the Lipscomb ruling. But, the Arken case is making a different and more subtle legal argument, which requires careful reading of the actual revised complaint (see later in this entry for the link). The Arken case does not take issue with the recalculation of the 1999 rate order to 11.33%. Instead, it makes the argument that PERS retirees relied on the representations of PERS when they calculated their original benefits (which used the 20% for 1999), and that the members played no part in whatever errors may have been made. Moreover, Hartman argues that the Supreme Court, in its Strunk opinion, clearly ruled that the Legislature trumped the PERS Board in legislating that the statutes clearly define a "fixed benefit" that cannot be said to transfer to retirees with errors (i.e. there is no basis to argue that PERS made an error in calculating the original benefit). The Strunk court also concluded that the Legislature had no statutory or legal authority to define a retirement benefit to which no COLA attached. As a result, the class action argues that PERS violates wage and hour laws in trying to lower a wage (the benefit) because of an error the Supreme Court denies exists, and that PERS violates the Supreme Court ruling in withholding the COLA for 2003, 2004, 2005, and 2006. The class action therefore asks the court for 3 things: 1) award window retirees damages equivalent to the amount of the difference between the revised benefit and the fixed benefit (which we've already been receiving), 2) restore the COLA on the fixed benefit from 2003 forward, and 3) to invalidate the January 27, 2006 PERS Board order that authorizes the PERS staff to begin collection efforts for the "overpaid" benefits (as there are none). There is no question that Hartman believes that the recrediting of 1999 earnings from 20% to 11.33% is a "done deal", but the important point is the "breach of contract" and "promissory estoppel" claims that simply argue that while the Board may have the authority to change the earnings retroactively, they nevertheless made a promise that the Supreme Court says they must honor. So even if they don't "restore" the 20%, they will have to pay "damages" that make up the difference between the 11.33% and 20%. So, a rose by any other name is still a rose.

There are some other tricky details buried in between the lines of the email, particularly when they're viewed in the context of the actual revised complaint. I strongly suggest reading the memo very carefully, but only in the context of the revised complaint.

I doubt that all will agree with my assessment. Some have already seen nothing but bad news in the Hartman email. I confess that I wasn't as enthusiastic about the email as I thought I should be. Nevertheless, with some helpful pointers and useful background chatter, I've come to the conclusion that for "window retirees", there is more good news than bad in the email.

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