Things I Don't Need

This should be treated as an open letter to PERS and to OPRI:

Dear All:

I've been spending a lot of time these past few weeks thinking deeply about the upcoming attempt by PERS to collect overpayments from PERS retirees from the period between April 1, 2000 and April 1, 2004.  Since I retired during that window of time, I am one of the people who will be tagged during the collections for about $14,000 in received overpayments.  And I'm really, really, really angry about the methods that PERS has put in place to recover the money.  One way is a hoax and the other way is an income tax nightmare.

During the recovery period that Judge Kantor stopped back in 2008, PERS offered affected retirees two ways -- and only two ways -- to repay money that was given to them THROUGH NO FAULT OF THE RETIREE.  PERS failed to warn any member considering retirement from April 2000 to mid-2003 that there was ANY possibility or likelihood that their benefit might be subject to change because of a (then) little-known and not-very-well publicized case involving the City of Eugene and other employers versus the PERS Board over the earnings crediting for 1999.  PERS provided estimates and benefits that noted NOTHING about this case, and counselors did nothing to warn retirees that benefits might have to be reduced because the 1999 earnings had been challenged and were not yet final.  So, many members retired in complete and total ignorance of this case, and were stunned in 2003 when the Legislature, following Judge Lipscomb's ruling, codified the earnings as 11.33% instead of 20% and provided mechanisms for collecting the amounts overpaid.

PERS, deciding to be generous, came up with a "friendly" (to whom?) way to repay the benefits.  They created the utter hoax called "actuarial recovery".  In this method, retiree overpayments would be divided by the number of months remaining in their actuarial life, and benefits would be reduced by that amount.  Seems simple, fair, and appealing.  They weren't planning to charge interest - kinda hard to do when the mistake is their fault, not ours anyway - and so this looked like one of the most friendly, least punitive ways to repay the amount owed.  UNFORTUNATELY, this description leaves out one of the unsavory aspects of the method that turns this seemingly user-friendly approach into a financial windfall for PERS.  The catch in all of this is that the payments continue for as long as the retiree and a beneficiary (if there is one) live, not when the bill is fully paid.  Thus, anyone who beats the actuarial odds will be paying considerably more than what he/she owes and PERS gets to keep and invest this bonanza along with all the other funds.  PERS' rationale for this is that not everyone would live as long as their actuarial life expectancy and so the ongoing reductions in benefits are needed to subsidize the benefits not repaid from those who die early.

The alternative to this unappealing choice is to repay PERS in a lump sum, which guarantees that you won't pay a nickel more than what you owe, although there are some tax implications that would require a CPA to untangle for you.

And, when you receive the final invoice, you'll have a grand total of 60 days to decide which poison you want to take.

I am deeply offended that PERS thinks I'm that stupid that I don't see the hidden costs of the actuarial recovery method.  It doesn't charge interest, but it charges payments for money you don't owe if you live long enough.  How is that different from charging interest?  Why can't PERS shut off the payments when the balance is paid in full?  Believe me, as a computer programmer, I know that it isn't difficult to do programmatically unless PERS' computer system is written in Sanskrit or Hebrew.  This is a trivial programming task.  What about the losses from people who die young?  Well, there is a simple answer to that question.  What about all the earnings from the people who decide to pay in a lump sum?  All of that money will be turned in within 60 days of billing and PERS has the rest of our actuarial life to invest that money and more than cover the losses from people who don't make it to fully repay their debt.

Furthermore, why aren't there more repayment options? The actuarial reduction method is a punishment to people who simply lack the funds to pay in a lump sum.   They are subjected to a lifetime reduction in benefits solely because they cannot pay all at once.  For the poorer of our brethren, there is NO choice on how they repay PERS.  This is akin to loan sharking because, as usual, the poor will get stuck paying more and for longer than the more affluent who can afford to pay the lump sum and be done.  Talk about economic discrimination.

PERS has methods on the books now to allow individuals to accelerate their repayments but only for the length of time it takes to repay the bill.  For example, ORS 238.715 offers the possibility that PERS can reduce member benefits by as much as 10% per month to repay a debt.  At this rate, most people would have repaid their debt in 3 or 4 years, rather than 20 or 30.  I suspect some people would take this option if it were available.

What about a 5 year payment plan where individuals who can't afford the lump sum could repay the benefit in 5 equal installments over 5 years (or 60 equal installments over 5 years).

There are many options that would lighten the burden on the less affluent, or encourage some of us to consider a shorter time payment plan than the lump sum.  In any of these cases, PERS would get its money back sooner, be able to invest it in securities that would more than indemnify against any losses due to early death and failure to complete repayment.

The bottom line is that PERS must consider some alternative repayment methods to the ones it offered the first group.  It is clear that if PERS continues to collect payments in perpetuity, it must be in violation of the Fair Credit Standards and Practices in a way that would make a loan shark blush, not to mention invite scrutiny from the same agency.

This whole issue needs careful input from legal advisors and those who are not thinking of taking the easy way out.  It would be nice if OPRI would get off its hind end and take an active role in pursuing alternatives to the ones available now.  When the first round of repayments began, OPRI was nowhere to be found except through the actions of the PERS Coalition in the courtroom trying to prevent repayment at all.  That's all noble and good, but now it is crunch time and most of us will be facing the invoice in a few months.  At this point, we need some legal hardball.  What I don't need is someone telling me how generous PERS has been.  That's bullshit and we all know it.