Isn't It Ironic?

In 2003, the Legislature passed a bunch of reforms that affected PERS members and retirees in a series of negative ways. Much litigation followed and preceded the Legislature's actions. One of the changes that resulted primarily from the City of Eugene case and the "settlement" of said case, involved a change in the way PERS computed the employer match to variable account earnings at retirement. The bottom line is that when this passed, many members who were expecting dollar for dollar matches of their variable accounts discovered that the new rules required the employers only to match the variable accounts to the extent that the earnings had been in the regular account. During the 90's and again for the past three or four years, members were losing money at retirement due to this change in the matching requirements. Fast forward to 2008. In 2008, the variable accounts posted a -43% loss - a staggering loss by any criteria. While this is really bad news, it actually turns out that this loss won't be realized at retirement, especially if you retire in 2009 or 2010. Why? Because the shoe is on the other foot this time. Because the employers are required to match the variable earnings with the earnings only on the regular, members retiring shortly will receive an employer match on 2008 earnings of +8% - a 51% gain compared to actual earnings. This means that the net effect of employee earnings (-43%) and employer match (8%) will produce a slight net gain for members in the variable for 2008. So instead of having to match a -43% loss (a bonus for the employers), the employers now get hoist on their own petards and have to pony up an 8% gain for the variable accounts in 2008. Somehow, I think that the savings to the employers over the past few years will be completely wiped out by 2008.

This irony amuses me no end. The cleverness of Judge Lipscomb and Bill Gary have come back big-time to bite the employers on the butt at a time when they can least afford to have this happen. It tickles me to see these folks slowly twisting in the wind. Your cleverness, your brilliance, and your eagerness to sock it to PERS members and retirees has finally come back to haunt you. So sad.

Tomorrow Never Knows

The IRS is going to be required to clarify the potential conflict that arises from the Obama administration's "Making Work Pay" when it comes to retirement systems like PERS.

From PERS to me today:

"The new tax withholding tables incorporate the Making Work Pay credit. This new credit applies only to earned income. Under the Internal Revenue Code (IRC), pension income is specifically excluded from the definition of earned income. However, the IRC also indicates that withholding from pension payments is to be administered as if the pension payments were a payment of wages by an employer to an employee for the appropriate payroll period. This creates a potential conflict that has been presented to the IRS for clarification and direction on whether pension systems like PERS should implement the new withholding tables."

So until the IRS clarifies this further, it is not at all a given that PERS benefits will be affected by the new rules.

Creep!

Today one of our dumb-ass legislators made the suggestion that PERS retirees ought to forgo 8-10% of their retirement benefits to help the economy. This moron, Rep Wayne Krieger (R), District 1 had the audacity to comment:

"Krieger suggested that if all those receiving PERS government retirement gave up 8-10 percent, it would almost wipe out the deficit. Oregon is the only state in the union that pays 100 percent of insurance costs for employers. He states he is not against government workers at all, but thinks most folks would be willing to give up something in the recession to help so we can make it through this difficult period. "

I don't know what planet Mr. Krieger cruises on, but he is blowing smoke out his ass (forgive my language, but this just infuriates me no end). My advice to Mr. Krieger is to chat-up former Senator Greg Macpherson to find out what happens to legislators who decide to go up against PERS retirees and PERS active members. He isn't against government workers but then basically slams them against the wall with this comment that "Krieger has noticed the government does not do a good job when they have to make cuts. They go on as though things are OK. " I say bullshit Mr. Krieger! You don't know what you're talking about. Try being a government worker for a day, or two, or a week. We've got thousands of readers here who might want to correct your lying and dissembling anti-public employee attitude. Just remember Greg Macpherson when you come up for re-election in District 1. That's around Gold Beach in southern Oregon. You folks reading from down there ought to make sure you end this guy's legislative career on the grounds of gross stupidity.

I have to remind myself that we're into the second month of "silly season". This is the second month of the Oregon Legislature. Legislators with no intelligence and nothing to recommend them for future service usually come up with these dumb-ass ideas about now to gain some headlines. Fortunately, most of these guys end up in obliquoy. Sayonara Representive Krieger.

If I Had A Hammer

I'd use it. I'm starting to get some reports of members who retired after the formation of the IAP (1/1/2004). PERS has a number of ways that members who retire can receive their IAP balances. Of course there is the ubiquitous lump-sum. In this mechanism you can just roll your balance over into an IRA and be in total control of the balance. However, many people want to have PERS manage the money and distribute it in one of several methods available. The common method is quarterly distribution over a five year period. It is this category that seems to be biting retirees lately. The normal routine is that retirees get their quarterly installment plus (or minus) earnings between the 11th and 15th of every month. The IAP money seems to be managed by State Street Investors and the third party administrator seems to be ING - the Dutch financial enterprise. I've started to get emails from people who are claiming that the payments due between 11th and 15th of February are already late and PERS isn't sure when they will receive them. Do we have a case of ING holding on to the money? ING is having some liquidity problems? Or something purely coincidental? I hope it is the latter. I've got some chunk of savings in an ING online account and have earned a good chunk of interest. I hope that ING isn't starting to fiddle with IAP members' money. If they are, it will be time to use that hammer.

Lights In The Sky

Today we take a break from our usual litany of grievances against PERS to honor two of my heroes in the pantheon, both celebrating their 200th birthday today. It is probably no coincidence that both of these people were born on the same day in the same year several thousand miles away. Each profoundly influenced the world in different ways. One grew up to become the 16th President of the United States who was the first to recognize the malignancy of slavery and proposed emancipation of the slaves in the US. This was neither a popular view nor a dominant view, and it nearly resulted in the destruction of a relatively young United States. Ultimately he was assassinated for his "radical" views. Nevertheless he was one of the most progressive Presidents in United States history. Abraham Lincoln, born February 12, 1809.

On the other side of the Atlantic, my other great hero was born on the same day in 1809. He too was constitutionally opposed to slavery, but his upbringing taught him the folly of enslaving people. He was a quiet, pathologically shy person, who wrote extensively about nature. He eschewed his training as an country parson to go on to become the first naturalist to actually put together a theory based on hundreds of thousands of observations that would explain not only how all life forms were related, but also to develop a mechanism that would explain this. Contrary to popular belief, he never used the term "evolution" to explain his mechanism. This was not because he didn't believe in evolution, but because evolution didn't mean what it means today. He used the phrase "descent with modification". Charles Darwin, born February 12, 1809.

When I think about people who had profound influences on the way I think, the political stances I find myself taking, and my grab-bag collection of knowledge, I can identify no two more influential people in my life.

Happy birthday Chuck. Happy birthday Abe. You changed my life for the better.

Waiting In The Weeds

As a followup to my post yesterday, I've been able to glean the following from PERS. The assumed rate analysis is part of the actuarial studies that are required every two years. The last actuarial study reported was the 2006 study, published during 2007. The next actuarial study - for 2008 - will be presented to the PERS Board at the May 29, 2009 Board Meeting. As part of this study, it is normal for there to be a consideration of the assumed rate. The relevant sections of statute that cover this are contained in ORS 238.065, and in the Oregon Administrative Rules OAR 459-005-0060. I think I would be watching the next Board agenda pretty closely to see what sort of discussions are planned around the actuarial valuation and analysis.

The Path of Thorns

The Oregonian has the first glimpse of what the future might look like for active and inactive Tier 1 members. As reported here on multiple occasions spanning back to early 2004, the OIC has been pressing for a reduction in the "assumed interest rate" from 8% to something significantly less. The employers have squashed any discussion in the past, but now that the issue has become public again (recall Ballot Measure 8 in 1994), it is more likely that the discussion will carry some weight. Read the Oregonian's report here. It paints a sorry picture and begins the first salvo in the path of thorns. I hope I'm wrong, but methinks this will gain more traction as time goes on.