On schedule, the 2018 Legislative session is up and running. While this short (35 day) session is unlikely to produce any serious fireworks, several of the usual cast of soul-sucking Rs - my own Representative Julie Parrish, and the dynamio trio from Central Oregon - continue to try to exact pounds of flesh from active PERS members None of these proposals is likely to go anywhere, but they offer a glimpse into what the 2019 session could offer, unless we are able to unseat some of these clowns in November. My opinion of Julie Parrish is unprintable, even on my own, uncensored blog. Suffice it to say that she is as strong as an ox, half as smart, and mean as a junkyard dog. (How is that for a string of mixed metaphors?)
On the better news front. All PERS investments did well in 2017, and Tier 2 and IAP accounts will be credited with 15%+. Those with variable accounts and are not retired will see closer to 20%. Tier 1 members will still get the 2017 Guarantee of 7.5%. The 2017 CPI-U for the Portland-Salem metro area was up 4.19%, which means that the COLA for pre-October 2013 retirees will be the maximum 2% with an additional 2.19% heading into the COLA bank. Those retiring later will see a lesser COLA, but the surplus will still go into their COLA banks to be applied against their pre-October 2013 maximum 2% COLAs. In more news, the first retiree monthly check to be affected by the withholding tables resuting from the December 2017 Tax Reform will be issued on March 1, 2018. This should result in less Federal withholding, possibly less State withholding, and higher net benefits. For some, this really represents a tax cut; for others, me included, this is going to result in us having to completely rethink withholding strategies as it is unlikely that our taxes will really go down when they are due in April 2019. The IRS has constructed their new withholding tables with an eye towards underwithholding, which means you might be in for a surprise in April 2019, unless you plan ahead. As soon as you finish your 2017 taxes, you ought to start planning for 2018. There is little room for error during 2018, to avoid unpleasant surprises in 2019.
The stock market correction that began the week before last has many people freaking out. I am not one of them. History and statistics show that drops of 10% or more occur, on average, about every two years. I have no idea how this has affected the PERS Portfolio, but expect the media and Legislative wags’ hair is on fire far more than the OIC. Remember that part of the reason for lowering the assumed rate every two years since 2013 is the result of the Oregon Investment Council’s de-risking strategy. The time to be concerned is October 2018, not now. Me, I’m looking for bargains and keeping the faith in my own portfolio.
Finally, Executive PERS Director Steve Rodeman has announced his retirement effective June 1, 2018. I don’t know whether Steve will be retiring his shingle, or simply taking his PERS Benefit and moving on to a private sector posting. Steve is the last senior manager I know personally (since 2003), and his departure completely breaks all my ties with PERS staff since 2000. Getting direct information and advanced copies of documents will be more challenging than ever now.
Since I will be in town for most of the short session, I will be following PERS-related developments as they arise. So far, the main action is a move to take judges and legislators out of PERS, a move to bring back some investment options in the IAP, after PERS' ill-conceived and poorly received move to target-date funds based on age, and a move to allow retirees receiving the tax remedy to lose it if they move out of state, or restore it if they move back, on a much quicker schedule that is current practice. More from Soul Sucker U (SSU) as it happens.
19 comments:
She's my Rep too, and from my frustrated communications with her echo-chamber, I think your mixed metaphors insulted oxen and junkyards. Now, if only your metaphor had included old-fashion penny-pinching coupon hoarder... after all, she STILL refers to herself as the HotCouponMama on Twitter, as of six hours ago.
The New IRS Payroll 2018 Withholding Tables can be viewed at
https://www.irs.gov/pub/irs-pdf/n1036.pdf
That document is a wake up call for us to do some serious revisiting of our withholding strategy. Things could be ugly when actual 2018 taxes are due in April 2019.
HB 4112 is designed to help those caught by the deadline to notify PERS you are an Oregon Resident each year for the tax remedy (Tier 1). If you file your Oregon taxes on time ODR should include you in their list. If anything goes haywire you loose your tax remedy for the entire next year. The bill is hung in committee right now. It would have to have a work session to progress. It needs a -1 amendment that on the second appeal PERS would have the statutory authority to honor the appeal. The present rules do not give PERS authority to honor appeals if the paperwork is filed past the deadline. This is a technical correction that is needed. Watch the hearing testimony on OLIS as it is very insightful. As it stands now PERS does not correct the tax remedy until the next year. Mr. Rodman shared that PERS won all the additional appeals. That is because they do not have to honor them! They will send a letter that tells people they can appeal the appeal, but PERS has no statutory to do so. They just deny, deny, deny, etc. until someone gives up, no matter if the person is an Oregon resident subject to the tax and they even prove it with signed under perjury tax filings. I recommend filing the PERS residency form every year at least once and maybe twice to be sure they have it.
DD, Licensed Tax Consultant
I came across this podcast about the PERS system and potential ways to reform it—“fire all the Tier 1’s” is one suggestion. It’s from August 2017, but interesting listening.
https://www.mercatus.org/podcasts/08032017/scott-shepard-kmed-radio-oregon
Be prepared for your 2018 taxes at the link below--
http://www.oregon.gov/pers/RET/Pages/Tax-Withholding-Calculators.aspx
Is there a link to an updated Cola Bank. What I find is several years old.
Not that I am aware of.
Not sure what a Cola Bank is. Is this related?
2018 COLA Increase Starts with August 1 Payments
The 2018 cost-of-living adjustment (COLA) for PERS benefit recipients receiving a monthly benefit will be effective July 1, 2018, and will be part of your August 1, 2018 benefit payment.
The COLA amount—up to 2 percent each year—is based on the Consumer Price Index (CPI) for the Portland area. The 2017 CPI was 4.17 percent.
Benefit recipients who retired before October 1, 2013, will receive a 2 percent COLA for 2018.
If you earned some service credit before October 1, 2013, and some after that date, you will have a “blended” COLA for 2018, including:
2 percent on service credit earned up to October 1, 2013; plus,
1.25 percent on service credit earned after October 1, 2013. If your annual benefit is more than $60,000, the portion above $60,000 receives a 0.15 percent COLA for service credit earned after October 1, 2013.
If you are an OPSRP member whose effective retirement date was on or after August 1, 2017, your COLA will be pro-rated based on the number of months you receive a benefit before July 1, 2018.
http://www.oregon.gov/pers/ret/pages/2018-cola-increase.aspx
The COLA bank is where the excess Cost-of-living adjustments based on the CPI-U for the Portland-Salem Metro area get stored whenever the annual CPI-U exceeds 2%. So, for example, the CPI-U for 2017, which is the basis for the 2018 COLA described in your post, was well over 3%. As a result, Tier 1 and Tier 2 members who retired prior to October 2013 get the excess over 2% “banked” in a special account that gets drawn upon whenever the CPI-U for any given year is less than 2%. All of the excess is accumulated and drawn down dynamically depending on the actual CPI-U is less than or greater than 2%. For recent retirees, the COLA bank is used for the portion of the benefit earned prior to October 2013. I retired in late 2002. My COLA bank exceeds about 6%, which means that it is unlikely that my annual COLA will be less than 2% in the coming years. Hope that clarifies.
Good Day mrfearless47, I retired January 1 this year after 30 years in law enforcement. I rolled my 75% variable into fixed rate right before I retired, so that means I get to reap the substantial returns for 2017. What I can't seem to find or figure out is when the proceeds (aka raise) will appear in my monthly retirement check? Do you know?
I truly appreciate your knowledge and help. It has helped to calm me at times and then at times get myself and my still working Tier 1 colleagues fired up to protect what we have all worked so hard to earn. Thank you in advance for your time.
If you rolled them at retirement, you already have the proceeds figured in your monthly benefir. If you haven’t received your first check, then something is wrong. Hope this helps.
April 14 NY Times has large article about OPERS.
https://www.nytimes.com/2018/04/14/business/pension-finance-oregon.html
I can't understand how outside income gets included in PERS calculations for benefits. Does the outside source have to pay into PERS?
@rob baur. I’ve not only read the article, but have posted numerous comments that are up for review. As for the outside income, the money passes directly through the University, as outside income. The overhead the University charges on that outside income includes money to cover PERS costs on the outside income.
I'm going to ask what may seem to be a really dumb question. Are PERS retirement benefits funded by Oregon state tax dollars? I ask this because this is what I keep hearing on the news, reading in the papers. My understanding was that my contributions, and my employer's contributions, plus what they are invested in, fund the benefits. My employer is not the state of Oregon and hasn't been in 20 years or so. Thanks!
@stinek. The source of your original income thatmade up your contributions and employers are arguably tax dollars. (The exception might be agencies that charge fee-for+service, such as the OUS and community colles, which have rceived decreasing amounts of state support or any other taxpayer support for at least the past 30 years. They have replaced paltry state support with grants and contracts, rental income, ticket sales, and, of course, tuition). But even if this doesn’t describe your agency or employer, there are some tax dollars from some taxpayer sources. But my response has always been, so what? The pension is deferred compensation for work performed in real time, funded in real time, and what you are collecting today is simply the inested proceeds from all those contributions and rge amazing power of compound interest. If the employers didn’t contribute their portion at the appropriate time, the your agency is on the hook for rectifying that now, but that isn’t a problem you had, or have any control over then or now. If your agency doesn’t receive a dime of state income tax revenue, then the “state” and its taxpayers are not paying anything now for your retirement.
Hi, hope you are well and greatly appreciate your blog. I would like to ask how you feel about our PERS system in light of California's impending insolvency. Is it something that could affect those of us about to retire? I am 58 and a bit scared my pets won't be there when I need it. Sigh...
My employer is OHSU, thanks!
@VENABLE. CalPERS and CalSTRS are far from insolvency. There may be municipalities within CA that are in financial difficulty, but they don’t escape their pension bligations just because their bills are inconvenient. Maybe they (municipalities) can declare bankruptcy, but most bankruptcy judges take a very hard look at assets and liabilities, and can force the sale of assets to retire liabilities. Oregon PERS is over 80% funded and has $73 billion in assets, and pays put just jorth of $4 billion annually. I don’t think you have anything to be concerned about, although I have a very long post about to go up later today or early tomorrow that you might want to read.
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