I'm hearing from a whole bunch of people that Oregonian reporter Betsy Hammond is blaming my blog entry on October 26 ("One Track Mind") for the spate of nasty phone calls and emails she's gotten about the piece she wrote earlier in the week about a PERS legal case. In writing about the latest news on the Robertson case (the PERS Coalition appeal was denied by a 3-member panel of the US 9th Circuit Court), Ms. Hammond could not resist repeating the correct, but highly irrelevant, fact about 30-year retiree benefits under PERS. PERS retirees rightly take umbrage with the continued repetition of that fact, not because it is incorrect, but because it isn't really very meaningful when the group of retirees about whom Ms. Hammond writes represents a very small fraction of all retirees in that period. They resent this characterization because the Oregonian has been reporting that same fact since 2002, but never placing it in its proper context. To be honest, I retired after 32 years of public service and I receive considerably less than 100% of my Final Average Salary. And the vast majority of PERS retirees I know receive less than 100% of their Final Average salary. Yet, each of us has been accused by god knows how many people of ripping off taxpayers for more than our salaries when we worked. It ain't true, but the Oregonian's continued repetition of this same isolated fact has persuaded the typical Oregon taxpayer that "the typical PERS retiree earns more in retirement than he/she did while working". I understand quite clearly that the Oregonian has chosen its words carefully and I've not accused Ms. Hammond or anyone else of incorrectly reporting the fact. But biased reporting is, among other things, when reporters write correct facts but fail to put them in their proper context. By failing to point out that 30+ year retirees represent only 8.9% of the retiree pool, and that the average retiree pension from PERS is considerably less than the amount she reports for this one cohort, she effectively distorts the picture and leaves readers with the impression that her isolated fact has more importance than it really does.
As for Ms. Hammond's source of angst, I'm flattered that she thinks my blog is so influential that it inspired all those not nice emails and phone calls. To be honest, I don't know when Ms. Hammond's article appeared in the Oregonian as I refuse to read its coverage of PERS issues any more. I learned about it on Wednesday and saw an emailed copy of it the same day. I started getting copies of other people's emails to Ms. Hammond long before I wrote my blog entry so it is hard for me to connect the two. Nevertheless, I'll take it as a compliment that Ms. Hammond is perturbed by my blog. The purpose of my blog is to inform and to piss people off. One of my agendas is to call out the media every time I think they distort issues. And I think the Oregonian is the worst offender of all the papers, followed closely by the Salem Statesman Journal. The Oregonian has had a particular chip on its shoulder about this small group of PERS retirees for a long time. I've lost count of the number of times this one fact has been inserted into a story about PERS. The Oregonian has repeated it so many times that it has become a catechism for the electorate and a flash point for me. Let me say this one more time: approximately 9% of ALL PERS retirees between 2000 and November 2004 retired with 30 or more years of public service. The average member of that particular cohort does, in fact, earn a pension greater than their salary. But the fact omitted is that 91% of all PERS retirees between 2000 and November 2004 retired with less than 30 years of service and earn a pension significantly less than their salary. The fact that the Oregonian continues to report is quite irrelevant in the larger scheme of things - it didn't drive the PERS crisis, which, by the way, has long passed.
If Betsy Hammond is upset with my pointing out that the Oregonian has no clothes, tough beans. If she repeats this fact again without properly contextualizing it, the next blog post will be far less temperate than "One Track Mind" was.
P.S. The Associated Press report that was fed to other papers around the state doesn't bother to include the canard in Hammond's article. Since it was irrelevant to the content of the article, they obviously and correctly omitted it.
P.P.S. I'm also aware that Ms. Hammond has actually confounded two different elements of the PERS report to write what she wrote. In fact, the number of 30+ year retirees is less than the number of retirees earning more than 100% of FAS. Ms. Hammond has equated 100%+ with 30+ year retirees. This just makes an even greater mess than reporting the data correctly. But I don't even want to bother going there. I'm willing to accept Ms. Hammond's "fact" as correct even though, as reported, it isn't technically true.
Saturday, October 28, 2006
Thursday, October 26, 2006
One Track Mind
The Oregonian's Betsy Hammond continues in classic Oregonian (one track mind) tradition of repeating the misleading canard that the "typical PERS retiree" with 30 years of service retired between 2000 - 2004 with a monthly benefit of 106% of Final Average Salary. I don't dispute the statistic, but would object strongly about its relevance to anything. Ms. Hammond claims that her conclusions derive from the 2005 Replacement Ratio Study commissioned by PERS. If you wish to read this document, you can download it from my web site here. Ms. Hammond told retirees, who complained about her misleading statistics, that this document was more thorough than the more widely circulated "PERS By The Numbers", which PERS staff distributed widely and is posted on PERS' own website. Its purpose, according to PERS, is to provide accurate numbers for the media and others who write, speak, and litigate about the PERS system. I don't want to quibble with an esteemed Oregonian reporter, but the idea that the bigger document is somehow better or more comprehensive is hogwash. The abridged "PERS By The Numbers" contains precisely the same information less the pretty colored graphs. Perhaps Ms. Hammond is unable to see the patters in numbers and so, for her, a picture converts into more than a thousand words. If pictures work for you then by all means use them. But the raw numbers tell a much broader story and give the reader a very different picture than the concatenation of information from 4 bars on a single graph.
The source is really a distraction. More important is the fact that Ms. Hammond repeats this same piece of information in nearly every PERS article, and she carefully (conveniently?) leaves out the rest of the picture. By doing so, she leaves the uninformed reader with a generalization that isn't borne out by the facts themselves. Ms Hammond writes: "...Oregon's expensive public pension system, which allowed the typical 30-year public employee who retired between 2000 and 2004 to make slightly more money in retirement than while working...." (italics not in original). Let's clarify a few things that Ms. Hammond failed to mention. First, between 2000 and November 2004, 17466 PERS members retired. Of these, 1556 (8.9%) had 30+ years of service. So the first observation one can make is that the cohort Ms. Hammond chooses to focus on represents less than 1/11 of the ENTIRE RETIREE POPULATION during the period in question. It may be an interesting fact that a typical member of this group earned more than 100% of final average salary (FAS). However, to focus on that fact to the exclusion of the OTHER 91% of the retiree cohort is journalistic malpractice IN MY OPINION. Why is this one fact, out of dozens of other facts in the same report, interesting? What conclusion or inference does Ms. Hammond want the reader to draw? It isn't hard to connect the dots. If you keep mentioning this fact, and only this fact, the average reader would conclude that all other retirees in the same time period must be receiving some scandalously high benefit. Of course, this is untrue as any careful analysis of the entire report would show you.
PERS published these reports and let the world in on them for a reason: so much misinformation was floating around about what PERS retirees were receiving (or not receiving) that PERS felt an obligation to publish the data and let those interested in them pick and choose pieces of interest. And pick and choose they do. The ONLY fact the Oregonian, in particular, seems to be interested in is the one Betsy Hammond wrote about in her most recent piece on PERS. I'm convinced that the Oregonian is willfully distorting reader perceptions by selective reporting of facts. I'm willing to bet that if you were to survey a truly random group of Oregonians about PERS, the ONLY thing they could tell you is that the "typical PERS retiree makes more in retirement than when they worked". This isn't what the Oregonian wrote, but by repeating the same isolated fact exclusively, the only conclusion that the average reader could possibly draw is that the average PERS retiree is living "la vida loca". Untrue! False! Deceptive! Misleading! Biased! -- all signs of a one track mind.
The source is really a distraction. More important is the fact that Ms. Hammond repeats this same piece of information in nearly every PERS article, and she carefully (conveniently?) leaves out the rest of the picture. By doing so, she leaves the uninformed reader with a generalization that isn't borne out by the facts themselves. Ms Hammond writes: "...Oregon's expensive public pension system, which allowed the typical 30-year public employee who retired between 2000 and 2004 to make slightly more money in retirement than while working...." (italics not in original). Let's clarify a few things that Ms. Hammond failed to mention. First, between 2000 and November 2004, 17466 PERS members retired. Of these, 1556 (8.9%) had 30+ years of service. So the first observation one can make is that the cohort Ms. Hammond chooses to focus on represents less than 1/11 of the ENTIRE RETIREE POPULATION during the period in question. It may be an interesting fact that a typical member of this group earned more than 100% of final average salary (FAS). However, to focus on that fact to the exclusion of the OTHER 91% of the retiree cohort is journalistic malpractice IN MY OPINION. Why is this one fact, out of dozens of other facts in the same report, interesting? What conclusion or inference does Ms. Hammond want the reader to draw? It isn't hard to connect the dots. If you keep mentioning this fact, and only this fact, the average reader would conclude that all other retirees in the same time period must be receiving some scandalously high benefit. Of course, this is untrue as any careful analysis of the entire report would show you.
PERS published these reports and let the world in on them for a reason: so much misinformation was floating around about what PERS retirees were receiving (or not receiving) that PERS felt an obligation to publish the data and let those interested in them pick and choose pieces of interest. And pick and choose they do. The ONLY fact the Oregonian, in particular, seems to be interested in is the one Betsy Hammond wrote about in her most recent piece on PERS. I'm convinced that the Oregonian is willfully distorting reader perceptions by selective reporting of facts. I'm willing to bet that if you were to survey a truly random group of Oregonians about PERS, the ONLY thing they could tell you is that the "typical PERS retiree makes more in retirement than when they worked". This isn't what the Oregonian wrote, but by repeating the same isolated fact exclusively, the only conclusion that the average reader could possibly draw is that the average PERS retiree is living "la vida loca". Untrue! False! Deceptive! Misleading! Biased! -- all signs of a one track mind.
Monday, October 23, 2006
Lowdown
I've finally gotten information that settles the question of how PERS will implement the recovery after year one. This is explained and confirmed in this document from the actuarial firm contracting with PERS - Mercer. You can read the explanation here. The Mercer explanation matches almost exactly with how I interpreted the implementation method in my Lipscomb calculator. The most important "bullet" point is the last one on the page. I think it is self-explanatory. My thanks to David Crosley and Mercer for supplying this needed clarification.
Saturday, October 21, 2006
Dirt and Dead Ends
During the week, I spent a lot of time wrestling with stupid compiler tricks trying to get my Lipscomb program to compile so it would run on several flavors of Macs. Thanks to a couple of persistent testers and one particular Mac expert and PERS retiree, I solved the problem and learned a lot in the process. Thanks Dick! The program now available is the penultimate version. I still haven't added the wider age range (sorry Peg). That is on hold right now until I complete a backlog of other work. Give me a week or two and the Lipscomb project will be as complete as I can make it.
Apropos of Lipscomb, the wide boys representing PERS were busy assuring Judge Kantor (in Robinson) that they weren't invoicing anyone yet. That was only a small prevarication as I'm in possession of a real invoice carrying the date of 9/26/2006. Rather than quibble over the PERB lawyers' bending of the truth, I'll focus today's angst on the invoice itself. Despite repeated assurances from PERS that the recipient would be able to see clearly how PERS arrived at the adjusted benefit, that too is an even larger prevarication. The invoice is a 5 page document consisting of a two page 'explanatory' letter, which cuts to the chase (what you owe, when the payment is due, and how much the actuarial reduction in the benefit will be). They include a phone number for Strunk Eugene questions and a number of other pieces of helpful information. The other 3 pages are of numbers, but none truly useful. One curious page is a revised Notice of Entitlement (yep, one of those) with the new benefit. Its most curious feature is a Notice of Entitlement just like the one we got when we retired. It even includes the SAME statutory right to change benefit options within 60 days and the right to appeal the calculation over 240 days. Since the PERB specifically disallowed changes to benefit options this time around and they limited the contest period to 60 days, this is yet another small distortion that may have legal ramifications for PERS. Surely they didn't intend to offer these options to people again. Perhaps they just had a lot of extra old Notices of Entitlement laying around and were trying their hand at sustainability. The truly pissy thing is that anyone trying to challenge PERS (within 60 days or 240 days) wouldn't have enough information from this 5 page "invoice" to do it. That flatly contradicts what PERS told the assembled masses at their 9/23/05 meeting that would happen. Not there in any form.
During the 2005 and early 2006 discussions of the implementation method, PERS staff recommended against allowing retirees who wanted to pay the full lump sum of the "invoice" by rolling over tax sheltered assets (e.g. IRA, 401-K, 457, 403-B, etc) directly to PERS. PERS claimed there was no IRS basis to permit them to do this. Well, now there may be. A newly passed Federal law trumps PERS on this matter and may require PERS to permit this kind of payback. It was discussed at Friday's PERB meeting, but no decision was made. Before long, however, this option may be forced on PERS over its own objections. It will certainly make their bookkeeping a headache. Poor things.
On the labor front, Gene Mechanic, the lawyer handling the Robinson case will be leaving his firm at the end of December. In fact, the entire firm is disbanding with the principals going in different directions. One of the partners will continue to handle the outstanding labor cases, which presumably is the Robinson case, but Gene himself is taking a position in Miami with the SEIU. I have no idea what the ramifications of this will be.
Finally - at least for today - I'm now officially a voting member of Clackamas County. We got our property tax bill last Thursday and our ballots today. I'm still studying many of the ballot measures (I tend to follow the motto that if it takes me a long time to read and to understand a measure, there are too many unintended consequences and so I vote NO. It is a principle that has served me well through many initiatives. I don't care how much I agree with the ballot title or the central intent of the measure, if it takes me long to read it and longer to try to understand it, it is too complex to be enshrined in the Oregon Constitution and too difficult to remove). I will vote for Governor Kulongoski (with my nose pinched); I will proudly vote for Virginia Linder for the Supreme Court vacancy; and I will also vote for my two representatives - Richard Devlin (happily) and Greg MacPherson (grumblingly). I can't wait for election season to be over. Am I the only one who simply can't stand the sleazeballs any longer? If I see one more smarmy and distorted Ron Saxton ad I'm gonna puke.
Apropos of Lipscomb, the wide boys representing PERS were busy assuring Judge Kantor (in Robinson) that they weren't invoicing anyone yet. That was only a small prevarication as I'm in possession of a real invoice carrying the date of 9/26/2006. Rather than quibble over the PERB lawyers' bending of the truth, I'll focus today's angst on the invoice itself. Despite repeated assurances from PERS that the recipient would be able to see clearly how PERS arrived at the adjusted benefit, that too is an even larger prevarication. The invoice is a 5 page document consisting of a two page 'explanatory' letter, which cuts to the chase (what you owe, when the payment is due, and how much the actuarial reduction in the benefit will be). They include a phone number for Strunk Eugene questions and a number of other pieces of helpful information. The other 3 pages are of numbers, but none truly useful. One curious page is a revised Notice of Entitlement (yep, one of those) with the new benefit. Its most curious feature is a Notice of Entitlement just like the one we got when we retired. It even includes the SAME statutory right to change benefit options within 60 days and the right to appeal the calculation over 240 days. Since the PERB specifically disallowed changes to benefit options this time around and they limited the contest period to 60 days, this is yet another small distortion that may have legal ramifications for PERS. Surely they didn't intend to offer these options to people again. Perhaps they just had a lot of extra old Notices of Entitlement laying around and were trying their hand at sustainability. The truly pissy thing is that anyone trying to challenge PERS (within 60 days or 240 days) wouldn't have enough information from this 5 page "invoice" to do it. That flatly contradicts what PERS told the assembled masses at their 9/23/05 meeting that would happen. Not there in any form.
During the 2005 and early 2006 discussions of the implementation method, PERS staff recommended against allowing retirees who wanted to pay the full lump sum of the "invoice" by rolling over tax sheltered assets (e.g. IRA, 401-K, 457, 403-B, etc) directly to PERS. PERS claimed there was no IRS basis to permit them to do this. Well, now there may be. A newly passed Federal law trumps PERS on this matter and may require PERS to permit this kind of payback. It was discussed at Friday's PERB meeting, but no decision was made. Before long, however, this option may be forced on PERS over its own objections. It will certainly make their bookkeeping a headache. Poor things.
On the labor front, Gene Mechanic, the lawyer handling the Robinson case will be leaving his firm at the end of December. In fact, the entire firm is disbanding with the principals going in different directions. One of the partners will continue to handle the outstanding labor cases, which presumably is the Robinson case, but Gene himself is taking a position in Miami with the SEIU. I have no idea what the ramifications of this will be.
Finally - at least for today - I'm now officially a voting member of Clackamas County. We got our property tax bill last Thursday and our ballots today. I'm still studying many of the ballot measures (I tend to follow the motto that if it takes me a long time to read and to understand a measure, there are too many unintended consequences and so I vote NO. It is a principle that has served me well through many initiatives. I don't care how much I agree with the ballot title or the central intent of the measure, if it takes me long to read it and longer to try to understand it, it is too complex to be enshrined in the Oregon Constitution and too difficult to remove). I will vote for Governor Kulongoski (with my nose pinched); I will proudly vote for Virginia Linder for the Supreme Court vacancy; and I will also vote for my two representatives - Richard Devlin (happily) and Greg MacPherson (grumblingly). I can't wait for election season to be over. Am I the only one who simply can't stand the sleazeballs any longer? If I see one more smarmy and distorted Ron Saxton ad I'm gonna puke.
Friday, October 20, 2006
Universal soldier
For users reporting problems running the Mac version of the Lipscomb Calculator, I am happy to report that I've identified the problem, and fixed it for some people. The version I uploaded today (as in 10 minutes ago) is a "Universal" binary. This means that it will run happily on an older Mac or a new Intel Mac. The only limitation is that you MUST (no exceptions) be running OS X 10.3 or OS X 10.4 (Tiger). Earlier versions of OS X and OS 9 will not run the program. If you have problems please let me know. If you have success, please let me know.
Wednesday, October 18, 2006
Party At The End Of The World
Time to find out what the end of the world might look like. In case you missed the notice yesterday (buried in the bottom of a lengthy post), I have released OSX and Windows versions of my Strunk Eugene calculator. It has been tested extensively by people who have independently validated the results. I'm confident that I've captured PERS' methodology correctly (at least as it has been publicly explained) and the results should give you a picture of what your situation could look like next July 1. In later versions I am going to try to give the user the choice of implementation date, although there will be constraints as I cannot forecast COLAs out too far. You can download the program by clicking on the link to the left of the blog screen, below the "About Me" section. PLEASE, PLEASE, PLEASE (did I say it often and loud enough) read the posted "Read Me" before downloading and, especially, before coming to me about problems. Thanks to Martha and Peg for their unflagging help in getting out some gnarly bugs and for data entry, and to Dick for some OS X suggestions and help.
Tuesday, October 17, 2006
Seen it All Before
My sources at PERS remind me that I've "seen it all before". I posed this question to them earlier this year, as they remind me, and they claim to have settled the matter of my question in the last post. They report that the method that will be use to adjust benefits after year 1 of the Strunk Eugene plan, follows the description I give in method number 2. This means that your year 1 "net gross" benefit (adjusted minus actuarial recovery amount) becomes the new base for the COLA in the next year. This is the entire assumption of the actuarial recovery tables used to construct my program. See "Gimme Some Truth" for more details about the differences in methodology.
The more I think about this and discuss it with mathematicians, business people, and engineers, the more I'm thinking there may be a difference of interpretation between the approached intended by the actuaries in using these actuarial recovery factors, and PERS' implementation of the recovery mechanism for producing the monthly benefit check. In the main, my question lies with Option 2 -- the mechanism that PERS has multiply told me is the way they plan to apply the reductions. What still isn't clear in PERS' answer, and what makes a really big difference is how the benefit is figured beyond the first year. We all agree that the first year benefit is computed as: take the revised benefit with all COLAS and subtract some amount representing the proper actuarial recovery factor for your retirement option and your single (Option 1) life expectancy. From this, we come up with the net gross benefit - an amount that has de facto been subjected to the actuarial recovery factors. From this point further, there is no actuarial reduction remaining as the benefit has been reduced by the flat amount in perpetuity. It should be this simple. Future COLAS should be applied to the "net gross benefit" starting after year 1 and should continue to grow without further reduction thereafter. If this is what PERS is planning to do, they should acknowledge it. Perhaps I haven't been clear enough in formulating my question, but I understand the ramifications much more clearly now than I did when I first asked the questions. Watch this space for a more definitive answer.
Speaking of programs, I released version 1.0PR (release candidate 1) for Windows and OS X early this afternoon. You can visit the link over on the left, which will take you to the web page where the program links can be found. Please do read the instructions. They will save you (and me) a lot of time later.
The more I think about this and discuss it with mathematicians, business people, and engineers, the more I'm thinking there may be a difference of interpretation between the approached intended by the actuaries in using these actuarial recovery factors, and PERS' implementation of the recovery mechanism for producing the monthly benefit check. In the main, my question lies with Option 2 -- the mechanism that PERS has multiply told me is the way they plan to apply the reductions. What still isn't clear in PERS' answer, and what makes a really big difference is how the benefit is figured beyond the first year. We all agree that the first year benefit is computed as: take the revised benefit with all COLAS and subtract some amount representing the proper actuarial recovery factor for your retirement option and your single (Option 1) life expectancy. From this, we come up with the net gross benefit - an amount that has de facto been subjected to the actuarial recovery factors. From this point further, there is no actuarial reduction remaining as the benefit has been reduced by the flat amount in perpetuity. It should be this simple. Future COLAS should be applied to the "net gross benefit" starting after year 1 and should continue to grow without further reduction thereafter. If this is what PERS is planning to do, they should acknowledge it. Perhaps I haven't been clear enough in formulating my question, but I understand the ramifications much more clearly now than I did when I first asked the questions. Watch this space for a more definitive answer.
Speaking of programs, I released version 1.0PR (release candidate 1) for Windows and OS X early this afternoon. You can visit the link over on the left, which will take you to the web page where the program links can be found. Please do read the instructions. They will save you (and me) a lot of time later.
Sunday, October 15, 2006
Gimme Some Truth
A number of readers have inquired about the same issue I've been trying to clarify since late 2005. It concerns what happens after the actuarial recovery plan starts and the member is eligible for the next COLA and thereafter. It is easier to explain with an illustration than simple words. I combine both to show you the areas of where a fair number of us have been devoting some free "worry" time.
Suppose Adams (a made-up name) owes PERS $10000 as of July 1, 2007 after all COLAs have been applied to the "revised" benefit and used to offset any "overpayments". On that date, PERS implements the "recovery plan" and begins collecting from Adams' monthly check. Further suppose that Adams' revised benefit is, for simplicity, $4000 per month (Option 1, but it doesn't matter) with an actuarial reduction of $40 per month. So, effective July 1, 2007 (with the August 1, 2007 payment), Adams receives a monthly benefit check for a gross amount of $4000 minus the repayment amount of $40 and the net gross (I like that term) is a monthly benefit gross $3960 (less any normal taxes) [This is another interesting area. Does the actuarial reduction come out pre-tax or post-tax?]. Adams continues to receive this benefit until until July 1, 2008, at which time he will be due another 2% cost of living increase. It's right here where questions start to arise and where PERS members could be in for a rude surprise. I have heard two completely different (and utterly contradictory) explanations of what happens next. One makes a certain degree of sense, but is inconsistent with an assumption outlined in the recovery tables, while the other is consistent with the tables, but against the statutes as I understand them.
So: Year 2, 7/1/2008 we have a 2% cola. The methodology PERS has published clearly states that the actuarial recovery amount assumes a 2% COLA (to the repayment amount) but the methodology outlined in the Powerpoint Craig Stroud showed to the Board implies a level payback amount over a member (beneficiary) lifetime.
Interpretation 1: 2008 benefit = 2007 gross benefit ($4000 * 1.02) = $4080
minus actuarial recovery factor $40, leaving a net gross benefit of $4040
Version 2: 2008 benefit = 2007 net gross benefit ($3960 *1.02) = $4039.20 - actuarial recovery factor $40, leaving a net gross benefit of $3999.20
or
Version 3: 2008 = 2007 gross benefit ($4000 * 1.02) = $4080 minus the actuarial recovery factor ($40 * 1.02) = $40.80, resulting in a net gross benefit of $4039.20.
Version 1 is implied by the explanations I've heard; version 2 relates to a discussion I heard at a PERS Board meeting, and explanation 3 derives from reading the footnotes to the actuarial recovery factors but flatly contradicts the assurances I and others have received that the repayment amount would remain flat. As you can see, version 2 is significantly different than version 1 and is, I believe, illegal (it is not supported by statute or by the Strunk ruling). Version 3 is what a literal interpretation of the recovery table footnotes would mean, but is inconsistent with the argument that the recovery amount is "flat" over an individual's lifetime. One might argue that Version 1 and Version 3 give close results, which is true in this case. But, imagine living 25 or 30 years and each year having the repayment amount grow by 2%. While the relative difference between the net gross benefit and the repayment amount remain the same, the repayment amount does not remain flat, for more than a year. We've all be led, I believe, to think that PERS plans to implement version 1. It is the expectation we've had from everything PERS has said. While none of us is rooting for PERS to win the various legal battles ongoing, if PERS begins recovery, we expect to see Version 1 be the way this happens. But, I don't know for sure anymore and I'm hoping that PERS will settle this matter for me once and for all. We've had enough surprises that I have no patience or tolerance for any more.
P.S. The calculator tests are going well. Some minor bugs have been located and fixed and I'm about to embark on correcting a thinking error on my part (fortunately this isn't computational and should have affected none of the testers' results). The program works well on Windows, but needs some clearer instructions to run on the Mac. I'm hoping that I can get all the fixes and cosmetic changes done this coming week and get a version for everyone to play with by the end of this week or early the following week. I'll announce it in a blog entry and the link to the left will be replaced with an updated link to the new program. Watch carefully.
Suppose Adams (a made-up name) owes PERS $10000 as of July 1, 2007 after all COLAs have been applied to the "revised" benefit and used to offset any "overpayments". On that date, PERS implements the "recovery plan" and begins collecting from Adams' monthly check. Further suppose that Adams' revised benefit is, for simplicity, $4000 per month (Option 1, but it doesn't matter) with an actuarial reduction of $40 per month. So, effective July 1, 2007 (with the August 1, 2007 payment), Adams receives a monthly benefit check for a gross amount of $4000 minus the repayment amount of $40 and the net gross (I like that term) is a monthly benefit gross $3960 (less any normal taxes) [This is another interesting area. Does the actuarial reduction come out pre-tax or post-tax?]. Adams continues to receive this benefit until until July 1, 2008, at which time he will be due another 2% cost of living increase. It's right here where questions start to arise and where PERS members could be in for a rude surprise. I have heard two completely different (and utterly contradictory) explanations of what happens next. One makes a certain degree of sense, but is inconsistent with an assumption outlined in the recovery tables, while the other is consistent with the tables, but against the statutes as I understand them.
So: Year 2, 7/1/2008 we have a 2% cola. The methodology PERS has published clearly states that the actuarial recovery amount assumes a 2% COLA (to the repayment amount) but the methodology outlined in the Powerpoint Craig Stroud showed to the Board implies a level payback amount over a member (beneficiary) lifetime.
Interpretation 1: 2008 benefit = 2007 gross benefit ($4000 * 1.02) = $4080
minus actuarial recovery factor $40, leaving a net gross benefit of $4040
Version 2: 2008 benefit = 2007 net gross benefit ($3960 *1.02) = $4039.20 - actuarial recovery factor $40, leaving a net gross benefit of $3999.20
or
Version 3: 2008 = 2007 gross benefit ($4000 * 1.02) = $4080 minus the actuarial recovery factor ($40 * 1.02) = $40.80, resulting in a net gross benefit of $4039.20.
Version 1 is implied by the explanations I've heard; version 2 relates to a discussion I heard at a PERS Board meeting, and explanation 3 derives from reading the footnotes to the actuarial recovery factors but flatly contradicts the assurances I and others have received that the repayment amount would remain flat. As you can see, version 2 is significantly different than version 1 and is, I believe, illegal (it is not supported by statute or by the Strunk ruling). Version 3 is what a literal interpretation of the recovery table footnotes would mean, but is inconsistent with the argument that the recovery amount is "flat" over an individual's lifetime. One might argue that Version 1 and Version 3 give close results, which is true in this case. But, imagine living 25 or 30 years and each year having the repayment amount grow by 2%. While the relative difference between the net gross benefit and the repayment amount remain the same, the repayment amount does not remain flat, for more than a year. We've all be led, I believe, to think that PERS plans to implement version 1. It is the expectation we've had from everything PERS has said. While none of us is rooting for PERS to win the various legal battles ongoing, if PERS begins recovery, we expect to see Version 1 be the way this happens. But, I don't know for sure anymore and I'm hoping that PERS will settle this matter for me once and for all. We've had enough surprises that I have no patience or tolerance for any more.
P.S. The calculator tests are going well. Some minor bugs have been located and fixed and I'm about to embark on correcting a thinking error on my part (fortunately this isn't computational and should have affected none of the testers' results). The program works well on Windows, but needs some clearer instructions to run on the Mac. I'm hoping that I can get all the fixes and cosmetic changes done this coming week and get a version for everyone to play with by the end of this week or early the following week. I'll announce it in a blog entry and the link to the left will be replaced with an updated link to the new program. Watch carefully.
Wednesday, October 11, 2006
Supply and Demand
Are currently saturated. I've had many responses to my plea for testers and probably have enough copies out there to determine whether/if there are computational bugs. I have only a few Mac testers, so if you still want to test the program (same conditions as in my earlier request), but run a reasonably new Mac under either Panther (OSX 10.3) or Tiger (OSX 10.4), please drop me a note. Please indicate that you want the OSX version as I'm so used to sending the Windows version that I might do so in error.
Thanks again to all those who volunteered to test the Windows version. I'll post updates when I've heard back from some of the testers.
P.S. added 10/12/06. Early reports are quite positive. Those who've done the calculations by hand report program results to within a few dollars of hand calculations. Since there is no way to guarantee accuracy greater than that, I regard these results as confirming my hope that the program captures the methodology correctly. There are more reports coming and another version will be available very soon. If you are testing the program, please get your reports to me soon: feldesmanm at pdx dot edu (do the conversion for yourself please). If reports continue to be positive and my time proves to be as profitable as it's been so far, I am anticipating a public release of the program by Hallowe'en.
Thanks again to all those who volunteered to test the Windows version. I'll post updates when I've heard back from some of the testers.
P.S. added 10/12/06. Early reports are quite positive. Those who've done the calculations by hand report program results to within a few dollars of hand calculations. Since there is no way to guarantee accuracy greater than that, I regard these results as confirming my hope that the program captures the methodology correctly. There are more reports coming and another version will be available very soon. If you are testing the program, please get your reports to me soon: feldesmanm at pdx dot edu (do the conversion for yourself please). If reports continue to be positive and my time proves to be as profitable as it's been so far, I am anticipating a public release of the program by Hallowe'en.
Tuesday, October 10, 2006
Long Line of Pain
I've just finished and tested an early version of the revised Lipscomb/Strunk calculator. Many of you have downloaded and used the earlier version (see link at left), and the comments have been favorable. PERS has given me the actuarial recovery factors they plan to use in "invoicing" retirees for the benefits they allege you have received in error. We know the COLA increases that members have NOT received. With generous help of Peg - a fellow PERS retiree who did the tedious entry of all the actuarial recovery factors - I have been able to program in the new factors, reconstruct the PERS methodology for using them, and can now reasonably confidently compute how a typical PERS retiree will fare under PERS' proposed implementation plan at the implementation date (7/1/07). As a result, I am looking for people to test the program before it starts to circulate widely. If you meet most of the following criteria and you wish to be an early guinea pig, please contact me via email at the link on this site:
(1) "window" retiree (retired between 4/1/00 and before 4/1/04).
(2) are receiving a monthly benefit check from PERS.
(3) retired under "Money Match"
(4) have 100% of retirement money now in "fixed" account (i.e. did not retain a variable account into retirement)
(5) selected Option 1, 2, 2A, 3, or 3A as the payment option
(6) are between 50 and 80 years old with a beneficiary no younger than 50 nor older than 80.
(7) agree to NOT share the program (yet)
I'm anxious to get this program tested, debugged, and circulating so that people will not be surprised by anything PERS does next year. Contact me if you're interested.
P.S. Some have criticized me for jumping the gun here and assuming that PERS will win the litigation ongoing currently. That is untrue. However, in the event that happens, I want all to be prepared and to understand what is about to occur. It might even affect how you vote in November.
(1) "window" retiree (retired between 4/1/00 and before 4/1/04).
(2) are receiving a monthly benefit check from PERS.
(3) retired under "Money Match"
(4) have 100% of retirement money now in "fixed" account (i.e. did not retain a variable account into retirement)
(5) selected Option 1, 2, 2A, 3, or 3A as the payment option
(6) are between 50 and 80 years old with a beneficiary no younger than 50 nor older than 80.
(7) agree to NOT share the program (yet)
I'm anxious to get this program tested, debugged, and circulating so that people will not be surprised by anything PERS does next year. Contact me if you're interested.
P.S. Some have criticized me for jumping the gun here and assuming that PERS will win the litigation ongoing currently. That is untrue. However, in the event that happens, I want all to be prepared and to understand what is about to occur. It might even affect how you vote in November.
Monday, October 02, 2006
Tangled Up in Blue
The wedding is over. The bride and groom looked spectacular (dad and mom didn't look so bad either); the wedding was a roaring success and the bride and groom are busy making final preparations for their honeymoon. Thanks to all who offered words of congratulations and encouragement.
Prior to the weekend's festivities, I had the opportunity to attend the first of two hearings on PERS retiree cases. These cases were heard before Judge Henry Kantor of the Multnomah County Circuit. I was able to attend the Arken case but had to miss the arguments in the Robinson case. My comments apply primarily to Arken.
From the moment the Arken hearing started, it was clear we were in a different courtroom at a different time. The reporters were gone but 30+ intretrepid PERS retirees plus assorted PERS staff attended to watch Greg Hartman and Aruna Masih square off against Joseph Malkin and Bill Gary representing the PERS Board and the non-state employers, respectively.
The Arken case appears to be deceptively simple. It relies on the language of ORS 238.715 (the collection statute), ORS 238.360 (the COLA statute) and the wording of the Supreme Court in the Strunk decision. All parties agree that its outcome will be based on a straightforward legal principle and nothing else. Basically, Hartman is arguing that the Legislature, by drawing a distinction between a "fixed" benefit to which no COLA was attached and a "revised" benefit that received a COLA, left itself no way out when the Supreme Court struck down the COLA freeze language of section 10 of HB 2003. By doing so, the court left the "fixed" account and the "revised" account intact, associated the "fixed" account with a class of retirees called "window retirees" and left PERS with no alternative but to pay COLA on the benefit the member was receiving on July 1, 2003 or the actual date of retirement - the "fixed" benefit.
Neither the state nor the non-State employers agree with Mr. Hartman's representation of the case. They've called his position preposterous, outrageous and a host of other things.
From the beginning of the hearing, the Judge focused on "big picture" issues, leaving the smaller issues to the briefs themselves. The Judge was concerned how the "class" of retirees in Arken differed from the "class" of retirees covered by Robinson. Both "classes" cover the "window" retirees, but Robinson includes a group of retirees outside the "window". The Judge posed hypotheticals to all the principal attorneys asking what their clients might do in the event that he (the judge) ruled for plaintiffs in one case and for defendants in the other. The importance of this cannot be overstated. A plaintiff victory in either case would have the effect -- at least for the time being -- of stopping PERS from implementing its current recovery plan. What is different about the cases is who would pay for the costs of implementing the Court's decision. It is clear that if the court decides for the Plaintiffs in Robinson -- using the language of Section 14b of HB 2003 -- the employers could *not* be held liable for the restoration of the COLA; section 14b expressly forbids PERS from collecting these costs from employers. On the other hand, if the plaintiffs win in Arken but not Robinson, it is anyone's guess who will pay since the PERS Coalition expressly sued the employers as a class.
I was heartened to hear Judge Kantor announce that he regarded the cases as legally separable, that he will issue separate decisions in Arken and Robinson, but he plans to issue them relatively quickly and simultaneously. The hope is that these decisions will come down before the end of the year. It is clear that the Judge is mindful of the upcoming legislative session and asked all the attorneys several times whether problems arising from these cases could be "fixed" by a subsequent legislature. All the attorneys felt that the legislature could propose a fix, although Mr. Gary claimed that Hartman would be back in court the next day if the Legislature ever did anything to "fix" the system. It was good theatre, but not much else.
My informants who stayed for the Robinson hearings said the theme didn't change, although the defendant in Robinson is PERB, not the other employers. Again, Judge Kantor's efforts focused on defining how the Robinson class differs from the Arken class and on how each party might respond to a split decision on the two cases.
I'm not prone to be a legal optimist, especially knowing that these cases won't be decided until the Supreme Court finally acts in a couple of years. That said, I was more comfortable with Judge Kantor's line of questioning than I was with Lipscomb, Judge Brewer, or any of the SC justices. Only time will tell whether my comfort with Judge Kantor was merited.
Prior to the weekend's festivities, I had the opportunity to attend the first of two hearings on PERS retiree cases. These cases were heard before Judge Henry Kantor of the Multnomah County Circuit. I was able to attend the Arken case but had to miss the arguments in the Robinson case. My comments apply primarily to Arken.
From the moment the Arken hearing started, it was clear we were in a different courtroom at a different time. The reporters were gone but 30+ intretrepid PERS retirees plus assorted PERS staff attended to watch Greg Hartman and Aruna Masih square off against Joseph Malkin and Bill Gary representing the PERS Board and the non-state employers, respectively.
The Arken case appears to be deceptively simple. It relies on the language of ORS 238.715 (the collection statute), ORS 238.360 (the COLA statute) and the wording of the Supreme Court in the Strunk decision. All parties agree that its outcome will be based on a straightforward legal principle and nothing else. Basically, Hartman is arguing that the Legislature, by drawing a distinction between a "fixed" benefit to which no COLA was attached and a "revised" benefit that received a COLA, left itself no way out when the Supreme Court struck down the COLA freeze language of section 10 of HB 2003. By doing so, the court left the "fixed" account and the "revised" account intact, associated the "fixed" account with a class of retirees called "window retirees" and left PERS with no alternative but to pay COLA on the benefit the member was receiving on July 1, 2003 or the actual date of retirement - the "fixed" benefit.
Neither the state nor the non-State employers agree with Mr. Hartman's representation of the case. They've called his position preposterous, outrageous and a host of other things.
From the beginning of the hearing, the Judge focused on "big picture" issues, leaving the smaller issues to the briefs themselves. The Judge was concerned how the "class" of retirees in Arken differed from the "class" of retirees covered by Robinson. Both "classes" cover the "window" retirees, but Robinson includes a group of retirees outside the "window". The Judge posed hypotheticals to all the principal attorneys asking what their clients might do in the event that he (the judge) ruled for plaintiffs in one case and for defendants in the other. The importance of this cannot be overstated. A plaintiff victory in either case would have the effect -- at least for the time being -- of stopping PERS from implementing its current recovery plan. What is different about the cases is who would pay for the costs of implementing the Court's decision. It is clear that if the court decides for the Plaintiffs in Robinson -- using the language of Section 14b of HB 2003 -- the employers could *not* be held liable for the restoration of the COLA; section 14b expressly forbids PERS from collecting these costs from employers. On the other hand, if the plaintiffs win in Arken but not Robinson, it is anyone's guess who will pay since the PERS Coalition expressly sued the employers as a class.
I was heartened to hear Judge Kantor announce that he regarded the cases as legally separable, that he will issue separate decisions in Arken and Robinson, but he plans to issue them relatively quickly and simultaneously. The hope is that these decisions will come down before the end of the year. It is clear that the Judge is mindful of the upcoming legislative session and asked all the attorneys several times whether problems arising from these cases could be "fixed" by a subsequent legislature. All the attorneys felt that the legislature could propose a fix, although Mr. Gary claimed that Hartman would be back in court the next day if the Legislature ever did anything to "fix" the system. It was good theatre, but not much else.
My informants who stayed for the Robinson hearings said the theme didn't change, although the defendant in Robinson is PERB, not the other employers. Again, Judge Kantor's efforts focused on defining how the Robinson class differs from the Arken class and on how each party might respond to a split decision on the two cases.
I'm not prone to be a legal optimist, especially knowing that these cases won't be decided until the Supreme Court finally acts in a couple of years. That said, I was more comfortable with Judge Kantor's line of questioning than I was with Lipscomb, Judge Brewer, or any of the SC justices. Only time will tell whether my comfort with Judge Kantor was merited.
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