Monday, October 05, 2020
Confusion Wheel
There seems to be some confusion following the State Economist's report on September 23, 2020. The good news is that tax revenues for the 19-21 biennium are on target to hit needed revenue to finish out the current two year cycle. The bad news. This has led some of my correspondents to think that PERS won't be a target in the upcoming 2021 Legislative Session. While I'm not a seer, a forecaster, or witch, I think such thinking is foolish, especially when you look in the same document and see what revenue forecasts are, this far out, for 21-23. If you don't think those forecasts are worrisome, there is something seriously wrong with your thinking, or you believe in magical thinking. My advice. Look at those numbers carefully, and plan accordingly. If you think PERS isn't going to be a ripe target for the Legislature in 2021, you are fooling yourself into mass confusion. It will be, and while I am unable to speculate right now on what the targets will be, I can state with certainty that there will be PERS cuts proposed during the next full Legislative Session.
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16 comments:
Your absolutely correct ! Everyone is anxious to see 2020 pass for good reason but I believe 2021 we will feel deep financial pain. I retire In November at 30 years exactly. Thank you very much for information you share and pass on.
As of yesterday, the Governor is proposing a 3.5% cut to the base 2019-21 budget as a starting point for 21-23 biennium. While this is better than expected, most budgets grow from biennium to biennium, so 21-23 will start out in a hole from where the 2019-21 budgets began. Thus, while this seems minor, it will be more like a 6% cut when inflation, promotions and other salary increases, payroll costs, services and supplies and other costs get factored in.
The concern about potential changes in PERS during the upcoming legislative session is the main reason my wife is retiring from teaching special education on November 30th. We don't want to risk what we have gained by her teaching one more year.
@Joe. I don’t have any expectation for early retirement incentives.
Hello and thanks for all that you do. Quick comment question...I had a thought that the protection of contracts when it comes to Tier 1 folks was a comfort and would deflect from New legislation. I had also thought that judges and the courts (who also benefit from PERS) would be less likely to unravel PERS. Are my assumptions wrong? Just thinking.
@Unknown. Your assumptions are not entirely wrong. Courts, especially Supreme Courts, are very averse to overruling decisions made by previous Courts. We assume that the combination of rulings in Hughes (1991), OSPOA (1996), Strunk (2005), and Moro (2015) make it pretty clear that for at least Tier 1, PERS is a statutory contract protected by Contract Clause of the Oregon and US Constitution. All of those rulings depend in large measure on something called the “California Rule”, which defined the terms of what constitutes the terms of a pension contract. That noted, the “California Rule” has come under blistering attack in California (surprise) and California District and Appelate Courts have recently ruled that elements of this rule have been misinterpreted by previous courts, and several cases are before the California Supreme Court for review. Issues yp for review include terms of the contract, and certain aspects of the ability of Legislatures, local goverments or other public agencies to alter terms of contracts retroactively.
So, while your assumptions aren’t currently wrong, there is no guarantee of those assumptions being sustained if the “California rule” is overturned to a greater or lesser extend.
https://reason.org/commentary/california-supreme-court-upholds-pension-reform-twice-but-the-california-rule-persists/
@Bluezdancer. Thanks, we were on vacation when this ruling came down. I guess will have to await the Legislature to if the try to tease the dragon.
Hello! I was looking at the agenda for the Dec. 4, 2020 PERS Meeting. And I'm wondering if PERS is planning on changing the limits on how many hours a retiree can work for a state agency. Can you please take a look and let su know? Thanks!
I have looked and PERS is in process of doing several things. The first is writing administrative rules that both clarify and implement the SB 1049 legislation enacted in the 2019 Legislative session. There have been, as often happens with this mind of complicated legislation some hiccups and unintended consequences. The rule-making intends to clarify and describe the implementation process. The second area is in Legislative Concepts - items PERS Staff and/or the PERS Board need the Legislature to address in the upcoming session.
PERS has no legal authority to change the number of hours any retiree can or cannot work for any public agency (not just the State). That can only be altered by Legislation The issue to which you refer has to do with language that is tied to IRS and Social Security limits for people drawing Social Security benefits before they reach full retirement age (65-67 for the current cohorts), and clarifying the language regarding the separation and rehire rules (the 6 month rule). There is nothing PERS is doing that is even remotely concerning.
What limits on SS and Pers ? I'm retiring at 62 Please explain
The limits are set by SS, not PERS. If you take SS before your full SS retirement date (probably 67 for you), Then there is a maximum amount of W2 income you can earn (the amount is low) before you start to lose $1 for every $3 in SS benefits. At a point of about 2x the SS earnings limitation, you will lose $1 for every $2 in SS benefits. We (my wife) was bitten by this in a very painful way. The problem is that it doesn’t happen in real time. SS waits until it knows how much you earned in the previous year (usually October of the following year), and it adjusts your benefits going forward. My wife went nearly 18 months without a SS check while she effectively paid back what she wasn’t entitled to under the benefit formula. So, I strongly advise you to sit down with a financial planner before pulling the trigger on SS benefits if you intend to keep working after retirement. I know way too many people who don’t understand or don’t pay attention to SS limitations, and it can bite painfully.
Let me clarify two sentences that I wasn’t able to correct directly above. There exists a SS maximum W2 income you can earn while receiving SS benefits at an age earlier than your minimum full retirement age. If you exceed that earnings limit, you will lose $1 of SS benefits for every $2 of earnings above the limit. The 2020 earnings limit is $18480. It will rise slightly in 2021.
One more SS clarification. PERS income and other retirement income does NOT apply to the Social Security work after retirement rules. The only issue is how much income you earn that is reported on W2 forms or/and 1099 independent contractor forms. So, if you go back to work for a PERS employer after retirement, you elect to take social Sevurity benefits before your full retirement age, there are income limitations that come into play that can be quite punitiveon your SS income. SS decisions are largely irreversible once you start receiving benefits, so my advice is to think very carefully before electing to receive early SS benefits if you are considering working after retirement.
Can you clarify for me... are you saying our PERS pension does not count as income and therefore, will not affect the amount of SS we receive? Thank you
Pension income does not affect SS benefits.
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