High Hopes and Heartache

As luck would have it, I will be unable to attend today's PERB meeting. The primary reason for attending was to listen to the actuary (Mercer) present the second part of the economic assumptions for the 2008 experience study. Fortunately for all of us, the PERS website has already posted the study, and it contains enough information for us to catch the feel of what is recommended. The only element of interest to most actives and near retirees is what Mercer would recommend in terms of the Assumed Interest Rate. On pages 5 and 23 of the report, they make their recommendation. If the PERB sticks to the Mercer recommendation alone, the Assumed Interest Rate would decrease to 7.5%. However, Mercer presents other data from other investment managers and actuarial firms that would recommend the assumed rate at anywhere from 7.5% to 8.5%. The median, modal, and mean of assumed rates for 125 large public sector funds remains at 8%. This leads me to believe, as I did after the May meeting, that the Board will probably elect to do nothing about the assumed rate and leave it at 8%. This isn't a guarantee, of course. Today's meeting will probably seal the deal on the rate for the next two years. Whatever decision is made today will have an impact on the new actuarial equivalency factors (AEF) that will be adopted at the Board's November meeting. For anyone wanting to beat any changes, retirement would have to occur before the end of the 2009 calendar year. Of course, if the Board doesn't change the assumed rate, then there would be no compelling reason to retire before the end of the year unless you were already planning to do so. My advice, pending additional information, would be to plan for high hopes and prepare for heartache. I will update this post tonight after someone at the meeting confirms for me what the Board actually decides to do today.