Everything Must Go

Not unexpectedly, PERS was hit with another lawsuit filed today in Multnomah County Circuit Court. This is the class action mentioned in an earlier post and is filed by the PERS Coalition. It alleges that the PERB, in adopting the Board Order of January 27, 2006 and then notifying "window retirees" of their intent to recover "overpayments" in a letter dated May 8, 2006, breached the statutes governing such issues. The suit asks the Court to order PERS to collect the overcredits via the mechanism statutorily adopted by the Oregon Legislature in HB 2003, while enjoining them from any other method. This method, known around among friends as the "14b" rule, is named after the section of House Bill 2003 enacted during the 2003 legislature to provide an "exclusive remedy" in the City of Eugene case (this was before the case was 'settled' and before the Supreme Court mooted the appeal). The attorney of record in this case is Gene Mechanic, another Portland labor lawyer with PERS litigation history. The case will be referred to as the "Robinson" case. It joins the "Arken" case as legal tests of the current PERS Board's authority to go forward with plans to recover from retirees.

This lawsuit could still be followed by several more before May 9th, the official end to the 60-day period surrounding the "official" notification "window retirees" received.

P.S. A copy of the petition is posted on the OPRI website for those interested in reading it. The OPRI site also has exerpted section 14b of the statute enacted by the legislature in 2003 to highlight the area of law addressed by this suit. The Robinson case basically asks the Court to order PERS to charge the expenses of the retirees off to administrative expenses as the court already ruled that the COLA freeze was an improper way to recover the money.

Pretzel Logic

Awhile back, after receiving the first part of the "actuarial reduction tables" Mercer developed for PERS, I questioned various PERS senior officials about them. In the main, my query involved the "life expectancies" implied by the tables. In my reading of the tables, it appeared that Mercer was assuming extraordinarily long lives and, that by so assuming, PERS would never collect the full amount. I was quite skeptical that this was the intent, and raised a hypothetical with PERS. In one response, PERS told me that "...when you factor the impact of COLAs on the reduced benefit, it brings the payback period in line with current longevity assumptions". I responded: "...how do COLAs on the revised benefit factor into anything related to the payback since the payback is based on amounts allegedly paid illegally, frozen on a date certain, and to be repaid based on actuarial life expectancies." I further wrote: "...if Joe Blow owes PERS $5000...is 60 years old, and .... will live to 80 years old, then Joe would pay back $5000/240 [$20.83] per month no matter how long he lives." And finally I concluded: "...the revised tables suggest that Joe is going to live to 98, virtually guaranteeing that he will never repay the full amount (unless the $5000 which is owed is actually inflated by a 2% COLA that he isn't receiving and, according to PERS, isn't entitled to receive.)"

I've waited patiently for PERS to get back to me on this. Earlier this week, I received an email from PERS which contained "the" answer to my question, direct from Mercer. I'm going to quote it directly in italics to set it off from the rest of the text: "The overpayment is a fixed amount that is collected over the expected lifetime of the retiree and his or her beneficiary with no interest charge. The method of collection is to reduce the benefit the retiree would otherwise be entitled to. Because this benefit amount is entitled to an annual COLA, by reducing it, we are also reducing future COLAs. By including an assumption of a 2% COLA in the development of the reduction factor, we are taking into account the reduced future COLAs as a part of the repayment so that we do not collect too much from the retiree. So, the retiree is not making level payments on the overpayment, but is making payments that are assumed to increase 2% per year. Using your example of a retiree who owes $5000 and is expected to live 20 more years, monthly payments would start at about $17 per month, but would be expected to increase 2% each year. The starting payment is less than the method you proposed ($5000 / 240 = $20.83), but with the 2% increases becomes about the same after 10 years and collects the same $5000 after 20 years."

It took me quite a bit of time to parse carefully what Mercer is saying, but I finally think I understand it. The actuarial repayment tables are an artifact of the 2% COLA. What Mercer has proposed is that we will be paying back a fixed amount each month, determined by the actuarial factor at the time repayment begins. Although we will not "see" this, the repayment amount is "assumed" to increase by 2% annually, although it will not, in fact, increase. By "assuming" a 2% annual COLA on the payment, it is also assumed that by the time we reach our TRUE actuarial life expectancy, the original amount we owed would be paid back. I suppose one could view this as good news because the actuarial reduction is smaller than common sense and simple math suggest, but it actually changes nothing significant. If you die early, you pay back less; if you reach an older age than actuarially expected, you pay back more. The only consolation is that you pay back in dollars that are deflating by the true cost-of-living less the 2% COLA assumption, and your monthly amount is fixed at a lower amount from the beginning.

Addendum: If you are concerned about the implications of this explanation, you should definitely express them to PERS, to its Board, and to the PERS Coalition. I plan to make a portion of the Actuarial Repayment Factors available shortly. I have only those for Option 1, 2, and 3 retirements. I don't have those for Option 0, 2A, 3A, or 4. You can use my "Lipscomb Calculator" to get some rough idea of how much PERS thinks you'll owe (use this as a guide, not as a statement of fact), and what your adjusted benefit will be (without actuarial reduction). Then use the actuarial reduction factor table for your retirement option to determine the "factor". That will tell you what your monthly repayment amount will be. The hard part (for some) is to take that starting amount and increment it by 2% annually for as long as YOU expect to live based on your known history. That will tell you how much you're actually repaying over your lifetime.

Gallows Pole

The wait is over. Today I went to the post office (the gallows pole) to mail my 2005 Federal Taxes and my Multnomah County I-Tax (hooray, this is the last year, ever!). Now that I've climbed and survived that pole, the next pole awaiting us is May 9th. That is the drop-dead date for PERS retirees to file appeals of the METHOD used to recover alleged overpayments resulting from the Strunk/City of Eugene litigation/settlement. This deadline has generated a huge amount of angst as retirees debate the merits of filing individual appeals, group appeals, PERS Coalition appeals, and/or OPRI appeals. Loosely organized groups of individuals, fed up with the lack of information from the PERS Coalition and, especially OPRI, are considering filing their own appeals based on the language of section 14b of HB 2003, passed by the Oregon Legislature in 2003. For those unfamiliar with that section, it decribes the "exclusive" remedy for the City of Eugene case in the event the court upheld Judge Lipscomb's decision. The exclusive remedy consisted of freezing COLAS and/or charging off retiree overpayments to PERS administrative expenses. The Supreme Court held that freezing COLAs was a breach of contract, while it declined to rule on the "administrative expense" petition by the PERS Coalition during the Strunk case. In considering its options, the PERS Board declined (some say refused) to use the "exclusive remedy" because they felt that taking the funds from administrative expenses (off the top of earnings) would disadvantage active Tier 1 and Tier 2 members. The concern over active Tier 1 members is entirely bogus and misplaced - Tier 1 members will never have access to earnings in excess of 8% again. The issue with Tier 2 may also be misplaced, although the concern might well be genuine depending on the Board's future actions and the system's earnings.

Driving much of the angst is the refusal of the PERS Coalition and OPRI to offer even a smidgen of advice to members other than to suggest consulting an attorney of the member's choice. The Coalition and OPRI have declined to comment on the entire 14b argument, although it is well-known that many of the unions in the Coalition are pressing for a separate 14b lawsuit to be filed before May 9th. I'm reasonably confident that something will be filed on 14b on or before the drop-dead date. I've even heard back-channel rumors about who might be involved. But the rumors are vague and amorphous. I'm not certain who will be filing it - a group of retirees pursuing it on their own (I know of such a group) - OPRI, the PERS Coalition, or a separate organization apart from the Coalition. I can't imagine letting this opportunity go by - section 14b is a very ripe fruit begging to be picked. Whether the Courts would find any merit in the argument that the Legislature compelled PERS to use this remedy and PERS chose to defy the Legislature remains to be seen. But it strikes me that to NOT challenge the legality of what PERS is doing, in light of section 14b, would be a travesty of justice.

Kiss & Tell

Just heard back from PERS. The definitive answer is that NO invoices for Strunk/Eugene have gone out to any retiree. Invoices won't start until Fall. A few retirees may have received notices of adjusted benefits along with a listed "overpayment" amount. But, that isn't the official invoice and the retiree owes nothing until the actual invoice is sent and received in Fall (???August for September 1 due date). So, whatever reports I've been getting, PERS denies they represent official invoices for the Strunk/Eugene settlement.

Always Look on the Bright Side of Life

Don't let the title of this post fool you. Read Bruce Cockburn's lyrics and you'll see why. Just a quick note to say that I've heard from two correspondents who have "window retiree" friends that have recently (as in last week) received "invoices" from PERS for their alleged overpayments due to the Strunk/Eugene settlement. None of these invoices has been confirmed, nor has PERS responded yet to my inquiries about their authenticity. Nevertheless, if you look closely as the PERS timetable for recovery, the very first invoices were to go to "window retirees" who took some form of lump sum settlement at the time of retirement. Those invoices were scheduled (on the timetable) to go out during the April - July timeframe of 2006. If confirmed, PERS is keeping to its schedule. As soon as I have confirmation, I will post. I'd really like to see a copy of an actual invoice to find out what information PERS is providing to retirees and whether it is sufficient for the member to reconstruct the amount accurately. Stay tuned.

Concrete Jungle

I just returned from a vacation in San Diego. To be fair, I lived in San Diego for 18 months from early 1989 until mid-1990. I became extremely familiar with the politics and local issues that were "hot" back then. Imagine my surprise when I returned for a week almost 17 years later and found that the "hot" issues now were exactly the same as they were when I left. The San Diego City Council is still a stinkpot of corruption and panderer to special interests (for Portland residents, this may sound achingly familiar). Despite this, the City Council did manage to figure out a way to corrupt the public employee's pension system (of which the Council is a part). Now, faced with a voter revolt, the newly elected Mayor managed to finesse through two ballot measures for November 2006 that will try to undo some of the pension mess. Although the Mayor and Council negotiated with the labor unions to get them to "buy in" to the ballot measures, the unions refused and expected "labor friendly" city councilmen to support them. Alas, the mayor sandbagged the unions as he already had the votes to put this on the ballot. The measures were referred out by a vote of 6 - 1. Moreover, to rub salt in the unions' faces, neither the Mayor nor the City Council offered any explanation of how these measures would be implemented if they passed. One measure requires that the Council look towards outsourcing *many* of the City jobs (again, not a clue which ones). The second measure would require that voters in the City of San Diego approve ANY changes to the current public employee pension system. This means that added benefits (unlikely) or decreased benefits (highly likely) would be decided by a vote of the people. The council did make one small concession to the unions and active employees. Employees with at least 15 years of public service in the system, or those who are already vested and within 15 years of normal retirement age (60), would be exempt from voter-approved changes. All this would be "news" if the same kind of stuff weren't under discussion in 1989. The more things change, the more they stay the same.

Other non-news. San Diego is still searching for a place to site a new airport. This discussion has been going on since about 1984. They've narrowed the search down to 9 possible locations, at least 4 of which are so preposterous as to not deserve comment. When the Pentagon announced the latest round of Base Closures, the Port Commission in San Diego prayed that either the Mirimar base, or the San Diego Marine Corps recruiting depot would close. Alas, neither did. As it happens, those two sites are the most logical place to relocate or expand the existing airport. The Marine Corps Depot sits immediately adjacent to and North of the current airport. Its size would allow the current airport to remain and build at least two new runways. San Diego is the largest big city airport to have only 1 active runway - and their passenger volume is about 3 million more than PDX.

More non-news. San Diego continues to fill its coffers from overtime parking fines. I'm convinced that overtime parking is the biggest revenue source outside property tax. In 1989, parking past the meter time was a death-penalty offense; now they've dropped the death penalty in favor of a fine that will cost anyone $60 minimum for the first offense, and $120 and "booting" for the second offense. They use collection agencies to recover unpaid parking fines and they don't give a damn whether you're visiting or permanent.

The one astounding fact is that San Diego has grown more than Portland since 1989. In itself, this is no surprise. The surprise is that San Diego's traffic situation has not changed since then. We were able to drive at all times of the day, over dozens of freeways and in all directions and never once encountered a traffic jam that would rival a normal mid-day on any of Portland's freeways. I can't figure out how they've managed that feat of incredible traffic engineering. I do know that CalTrans - the agency responsible for building and maintaining freeways - can lay 5 miles of driveable concrete freeway in a day, once all the preparations are done. In Oregon, we have Highway 26 (the Sunset Highway), which has been under construction since about 1974 and shows no sign of completion. Were it in California, the Sunset would have been widened, repaved, widened again, and repaved multiple times and would be 8 lines by now.

Oh well, in the absense of any significant PERS news this week, I thought I'd share these thoughts on how things are elsewhere in the concrete jungle of California. The PERS Board meets today, but I'm not in any condition to go -- too much unpacking and bill paying to escape. Hopefully, one of my friends will send me a shout out about what happened so I can post it here over the weekend.

Nobody's Home

That's gonna be my story for the next week. We're gonna spend a week in the sun (we hope) and get away from the insanity that has overtaken Oregon. I'm not expecting to update this blog until I return on March 30.

The Ghost of Tom Joad

May be visiting a lot more than just "window retirees". I've had a peek at some of the "actuarial reduction factors" that Mercer developed for PERS to implement the Strunk/Eugene decisions. Recall that under these decisions, PERS alleges that the benefit "window retirees" have been receiving (heretofore, the "fixed" benefit) has been too high since they retired. The reason, according to PERS, is that the 1999 earnings crediting decision of 20% was challenged by employers and vacated by Judge Lipscomb. As a result of PERS "settlement agreement", the PERS Board changed the 1999 earnings rate to 11.33% and agreed to recover the excess payments from "window retirees". HB 2003 (2003 legislature) contained a provision that would have recovered these payments from "window retirees" by withholding the COLA on the "fixed" benefit, until such time as the "revised benefit" (which included a COLA) overtook the "fixed" benefit. The Supreme Court, in its Strunk decision, ruled that neither the legislature nor PERS had the authority to violate a contract by paying a retirement benefit (the "fixed") to which no COLA attached. The "settlement" anticipated this and basically ordered PERS to recover the "overpayment" by regular mechanisms spelled out in ORS 238.715. PERS, realizing the financial hardship this could cause many "window retirees", came up with a "kinder and gentler" way to recover from "window retirees" and has offered this method (the "actuarial reduction" method) as a way to minimize the hurt on "window retirees" while still recovering the money owed over the remainder of a retiree (and beneficiary) life expectancy. This was spelled out in the "Notice of Board Order" that PERS sent to "window retirees" about a week and a half ago (see previous entries for more discussion).

Without getting into a discussion about "actuarial recovery", I do want to talk about the "factors" that PERS plans on using to compute the monthly reduction of benefits due to this "actuarial recovery". For me, these tables are more than an academic interest. I've been preparing a "calculator" that will help retirees figure more closely what their net benefits will be after such a reduction scheme. The calculator works in two stages - first it figures out what the "revised" benefit would be as of a date certain (now 9/1/07) and how that benefit is smaller than or greater than the current "fixed" benefit. This stage also determines the extent to which the member has been allegedly overpaid and computes the invoice amount due PERS. The second stage is to determine how the invoiced amount will be repaid over one's actuarial lifetime according to the retirement Option (i.e. 0, 1, 2, 2A, 3, 3A, 4) selected at retirement. Here is where the TABLES come in handy. Without them, there is no way to determine with any precision, how much any specific PERS window retiree will be affected by the actuarial reduction method.

At my request, PERS has provided me with the Actuarial Recovery Factors for the Strunk/Eugene implementation. I now have the tables for Option 1, Option 2, and Option 3 retirements, but do not yet have the tables for Option 0, Option 2A, Option 3A, or Option 4. In perusing these tables, I was struck by the expected mortality implied by the recovery "factors". In one instance, for example, an Option 1 benefit for a 15 year old (not sure how that works, but the factor is there) translates into a life expectancy of 147 additional years - to age 162!!!!! In another case - my own - my wife's and my joint life expectancy work out to be that PERS thinks that it will be paying us a revenue stream until the last of us reaches about 103 years old. As I considered this, I began to have all sorts of good and evil thoughts. The good thoughts were that for "window retirees" the repayment schedule is considerably longer than any of us had imagined and that, for most "window retirees", the worry about overpaying beyond actuarial life expectancy is probably a moot point. But then my mind began to wander to not-yet-retired PERS members (Tier 1 & Tier 2). If this was Mercer's first salvo into the mortality factor arena, could this be a harbinger of more evil deeds to come as the actuarial tables are revised every two years. Could this portend a lowering of benefits for future retirees by using much more "generous" life expectancy tables? To be fair, I wrote of my concerns to Paul Cleary and to David Crosley, Executive Director and Communications Director, respectively, of PERS. David wrote back to assure me that the "actuarial reduction factors" were nothing more than the 2003 (Milliman) mortality tables adjusted (by Mercer) to reflect the 2% cola over the retiree's life expectancy. This results in a longer repayment period. He also disabused me of any suggestion that Mercer uses any different methodology for mortality factors than did Milliman, and while the 2007 mortality tables may change, the change will be based on experience data as they have in the past.

So, at this point I'm satisfied with the explanations offered. There appears to be nothing sinister going on and current (non-retired) PERS members don't have anything NEW to worry about. I truly had visions of the ghost of Tom Joad when I first encountered these factors. Now all I'm stuck with is trying to figure out whether Audrey Raines is just another example of poor personnel screening by the US Government or whether she turned bad after she was hired. (hint: if you don't watch '24', you won't have a clue what I'm talking about here. If you don't, what's wrong with you?).

Private Investigations

In yesterday's post "Purple Haze" I gave examples of PERS retirees who got (or didn't get) the "letter" when, according to PERS' own listed criteria, they shouldn't have received them. Oregon AFSCME is particularly interested in hearing directly from retirees who retired BEFORE April 1, 2000, did NOT receive a lump sum settlement, and who received a "Notice of Board Action" late last week or early next week. If you meet all these criteria, please send an email to Mary Botkin (botkin@oregonafscme.com) or Don Loving (dloving@oregonafscme.com) detailing your receipt of this letter. If you received the same "letter" *and* you retired after 4/1/05, you should also notify either Mary or Don.

By the time most read this post, the "hit counter" will have crossed the 300,000 mark -- an amazing feat for a blog in existence for 11 months. Thank you again for your faithful readership, and for your continued communication of your stories to me. While I occasionally get access to public information before it is made public, the most interesting stories right now are those that come from readers.

Purple Haze

Man. I feel like I'm back in the 1960's listening to Jimi Hendrix. My email box is hopping with stories from PERS retirees who received "the letter" late last week or early this week. Besides the usual assortment of people who expected to get this notice, are the ever-increasing numbers of people who have absolutely no idea why they've received them because they meet none of the criteria to have received one. I have emails from four people who retired during 1999 who simply receive a monthly benefit, never had a lump sum settlement of any kind, never had a divorce decree, and simply should not be included in the group of notice receipients. Each of these correspondents describes a similar interaction with PERS. "We have no idea why you received one of these notices. If you wish to appeal the notice, the appeal process is described in the notice and our web site. Thanks for calling PERS". What should we advise these people to do? Hire a lawyer to appeal a notice they shouldn't have received? Get a judge to rule that they aren't included? When PERS loses, do they compensate for legal expenses? Or should these people just "hang loose" and gamble that the next three years will come and go without any further notice? If these people weren't bad enough, then we have the group who've gotten the notices and who've retired after 3/1/05. According to PERS information, these people had their benefits adjusted for both the Strunk and City of Eugene cases before they received their first benefit check. Why in heaven's name would they receive a notice? They seem to get the same canned answer from the PERS Customer Service drones. I've also heard from members who retired under Full Formula and who got one of these notices.

If I were charitable, I'd say this was a computer screw up? Or, in one of my less charitable thoughts, PERS simply picked arbitrary beginning and end dates and had the computer spew out as many of these notices as there were retirees in that particular time frame. Let's do a perp-sweep. Computers make this easy. Of course, computers also make it easy to exclude people, but that would require that the programming be done in something other than a purple haze.

P.S. And speaking of purple hazes, I just got a notice from another retiree whose husband received his "Notice of Board Order" last week (a pure "window retiree") while the spouse, also a retiree from the "window" but under Formula + Annuity did not get a notice as of today's mail delivery.

The Rockafeller Skank

The sleaze just keeps oozing. On Friday, PERS put up new information about the Strunk/City of Eugene process. This was supposed to enlighten us about the significance of the "letter" that some of us received Friday or Saturday (or maybe today or not at all). If you follow all the links on the PERS website carefully they lead you to some interesting information. First, you will learn about *what* you can appeal within the next 60 days as a result of "the letter". According to PERS, the only judicial review you can petition for is one that reviews the "method" of repayment. Excuse me? It strikes me as more than a bit transparent that if you choose to appeal the "method" of repayment outlined in "the letter", that whether you "win" or "lose" will be immaterial (except, perhaps, to your wallet). Because, IF you appeal, it would seem to me that you are acknowledging to PERS that you accept the more fundamental fact that you "owe" something. Why would I appeal the "method" of repayment if I didn't think I owed anything? So, in making a decision whether or not to appeal this letter, be certain that you check with your legal adviser (and believe me you'll need one) to see whether this little "GOTCHA!!" is lurking in the shadows behind your actions. The second interesting "factoid" to be gleaned from the PERS posting is the more detailed timeline for benefit adjustments. If you're like me, when you retired, you transferred whatever variable balance you had to fixed and were done with it. Well, if that's the case, sayonara to any COLA on any benefit before summer 2007. That looks to me like the point at which the "window" retirees would see any changes to their current benefit.

In related news, many have reported to me that PERS customer service was without a clue on how to handle the myriad of questions that landed on them today. My favorite question: "when does the 60-day appeal period begin" Answer: when you get your "invoice". At least a dozen people reported that one to me. Push the fool button and dump those Customer Service reps and the people who trained right into the dunk tank. No mercy here.

I'm sure there'll be more entertaining news as the week moves on. PERS seems to thrive on ways to infuriate, anger, and plain piss-off the people whose money they are supposed to be managing "in trust". Smell something unwholesome? Don't worry, it's just the skank emanating out of Tigard and Salem.

P.S. And true to my prediction on Friday, at least 4 people emailed me to tell me that they had not recognized the "mail" sent to them by PERS as anything meaningful, and so recycled the letters. Several successfully extracted the "letter" from the trash. At least two report that their recycling had been picked up and the letters were gone. Very small sample, but not a really good scorecard for PERS' method of making the letter scream "OPEN ME NOW".

The Letter

I guess I won't be able to argue that I never received the "letter" from PERS. You can see what the whole shebang looks like here. After you've had a chance to look it over (in case you're feeling left out 'cause you didn't get your own today), please note several things: 1) the envelope. I can't say I was overwhelmed by the "notification" on the envelope. For all I knew, it could have been a notice for a Board meeting and simply tossed. The name printed on the envelope is not the same as the way my PERS benefit checks are made out (missing my middle initial). The postage rate smacks of bulk rate and might have led me to toss it out on that basis itself. 2) the letter. It isn't personally addressed to anyone. It's truly a form letter without any salutation at all. The text is boilerplate and contains no surprises.

I'm completely baffled that PERS would choose such a half-assed, cheap, and sleazy way to notify recipients of an impending legal action that could cost recipients, in toto, about $800 million in lifetime losses of benefits. This is just so shabby and impersonal. I wanted them to go to the trouble to actual mail ME a letter, addressed to ME, which then could have had the boilerplate. I'd be hard-pressed to understand how a court could consider this an "official", "legal" notification that is required to satisfy a provision of the Oregon Revised Statutes. This has all the earmarks of the slimy marketing tactics used by vendors processing rebates for products. Offer a rebate, require a zillion forms to be filled out, and then send the rebate on a miniature postcard that they hope will get thrown out without reading/cashing. I wonder how many of these "notices" will simply get tossed by the unsuspecting PERS retirees? Ah, PERS - the trustees of MY retirement benefits - not! I do have to give PERS extra-credit points for their "emulate the White House" (*any White House, not necessarily the current one*) approach. Drop the bad news on a Friday and then run like hell for the hills of the weekend. That's high class! They didn't have the organizational backbone to send the letters out on Monday and then brace for the storm that hits for the rest of the week. Well, what you reap, you sow. I hope PERS is prepared to have its phones, its email system, and its offices overwhelmed by 10 a.m. on Monday morning and for at least the rest of the week.

P.S. Legal question of the day: how does sending a form letter (unaddressed on the inside) via bulk mail and a not-very-clearly marked envelope constitute "service" for purposes of ORS 183.484? And, what is the date of "service" - date of the order (Jan 27), date of letter (March 8), date of postmark (March 9), date of receipt (March 10)? And, for extra credit: how can PERS prove that it sent a letter TO ME and that I received it? (Yes, I know that the actual postage meter reads "Presorted First Class" but that misses my larger point above).

P.P.S. Due to overwhelming email responses to "The Letter", no doubt triggered by the receipt of somewhere in the neighborhood of 37,000 of these ?notices? today, I will probably not be able to respond personally to many of your questions and comments. Please continue to send them and I will try to answer them as best I can in future blogs. And for the record, I don't have a clue what I'm going to do, if anything, about this notice. I promise to continue to use this forum as a "bully pulpit" to rage against the machine, but when it comes to enlightened self-interest, I'm just as bewildered as the next person.

Candle in the Wind

AFSCME has some information apropos to my earlier post today "Burn Down the Mission." Mr. Hartman responded to my inquiries, noting that he is not in a position to offer advice to individual members, but suggests that should any recipient of this letter want to appeal it, they would be very wise to consult an attorney of their choosing. At the same time, finding an attorney knowledgeable enough with the intricacies of PERS and the particular laws governing this process will be difficult indeed. Mr. Hartman assures me that while he sees no likelihood of the Arken case NOT being certified as a class action, he also notes that even if it weren't, all window retirees will benefit from the legal outcome of the case.

Burn Down the Mission

The posts of the last several days have provoked many more questions than they seem to have answered. The paramount concern seems to be how "window" retirees should respond to the notification letter they are about to receive sometime this month. For those just tuning in, the notification letter is the official start of PERS' efforts to "recover" the earnings allegedly overcredited by the PERS Board in 2000 for the 1999 earnings year. This letter will notify "window" retirees of the overpayment and provide retirees with a copy of the Board order authorizing PERS to begin recovery proceedings. The letter will not contain any individual details, but is a generic letter describing the process and the timetable. Members will have 60 days to file an appeal to this notice in either Marion County Circuit Court or in the Circuit Court of the County in which they reside. On the face of things, it seems straightfoward -- somewhere between 23,000 and 37,000 "window" retirees flooding the legal system with appeals to their local circuit court. While that may seem to be the logical thing to do, most of us would like some advice on what we ought to do in the face of a pending class action lawsuit challenging PERS' actions in this very matter. At the present time, the lawsuit has been filed and served and is awaiting certification as a class-action. Without class-action certification, it is difficult to see how the Arken case can do anyone except the specific plaintiffs in that case any good. So, in digesting all this information, my readers and I have come up with the following list of possible options/questions. I am attempting to get some guidance from PERS Coalition members and attorneys on these, and will post redacted versions of any responses I get:

• When does the 60-day "clock" begin? January 27th (the date of the PERS Board order authorizing the process to move forward)? The date of the PERS letter? The postmark date of the PERS letter? The receipt date of the letter? And, how come PERS is sending these letters by ordinary first class mail? Shouldn't they be sent via certified mail since the matter is quite time sensitive?
• Should all recipients of the letter automatically appeal to preserve their appeal rights under the law? If so, is there some boilerplate language that could be recommended since few of us are lawyers?
• Should all recipients hang back and wait to see whether the Multnomah County Circuit Court certifies Arken et al v. City of Portland et al as a class action suit before the 60-day window expires? If it does, should we not file separate appeals? If it doesn't, should we file separate appeals?
• Should recipients bombard the PERS Board and PERS senior staff with protests and appeals directly? The OPRI website has a list of the email addresses and phone numbers of all PERS Board members and senior staff for those recipients who'd like to use this approach. Is this a good idea? A practical idea? A prudent idea? What do recipients actually expect to accomplish by this other than to disrupt PERS' day-to-day operations significantly?

There are lots of other questions unrelated to the specifics of the Arken case. Non-window retirees want to know how Mr. Hartman's claims that the revised 1999 earnings is a fait accompli affects their situation. It is clear that the natives are growing very restless and it would be really helpful if potential recipients of this letter contact their representatives on the PERS Coalition (AFSCME, AEEO, OPRI, SEIU, OEA, AOF, AAUP, AFT and others) to start getting some helpful answers. Once that letter arrives, all of us are playing beat the 60-day clock. If we want to avoid everyone trying to burn down the mission at the same time, answers would be most welcomed and helpful.

Have Mercy on the Criminal

Greg Hartman's email, posted yesterday on the AAEO website (and linked to here in yesterday's entry), contains some interesting language, especially pertaining to deployment of the reserves and, more importantly, to the treatment of the "window" retirees in the Arken class action case (note: Hartman incorrectly refers to that case as the 'Akers' case; that is a typo in the email). First, the good news is that the actual deployment of the reserves, while benefitting employers in a positive way, also benefits all other groups of PERS members equally. Initially, the PERS Board was intending to deploy the reserves so as to benefit the employers over the members. The final distribution of the reserves - as shown in the Board's own plan, and reaffirmed by Mr. Hartman - is entirely consistent with the past actions of the Board and follows an equal distribution model. Thus, while the apparent "winners" were the employers, the fact is there are no "losers". The Board has plowed no new ground in this reallocation. Hence, the improper distribution of the reserves - a subject of the White case - is no longer an issue as the Board is no longer attempting to blaze a new financial trail.

The second area is a bit more confusing. In the email, Hartman suggests that the attempt to challenge the PERS Board's revised distribution of 1999 earnings from 20% to 11.33% is, itself, probably a dead legal issue since the Supreme Court in Strunk did not preclude the Board from doing that, nor did they intervene in the appeal of the Lipscomb ruling. But, the Arken case is making a different and more subtle legal argument, which requires careful reading of the actual revised complaint (see later in this entry for the link). The Arken case does not take issue with the recalculation of the 1999 rate order to 11.33%. Instead, it makes the argument that PERS retirees relied on the representations of PERS when they calculated their original benefits (which used the 20% for 1999), and that the members played no part in whatever errors may have been made. Moreover, Hartman argues that the Supreme Court, in its Strunk opinion, clearly ruled that the Legislature trumped the PERS Board in legislating that the statutes clearly define a "fixed benefit" that cannot be said to transfer to retirees with errors (i.e. there is no basis to argue that PERS made an error in calculating the original benefit). The Strunk court also concluded that the Legislature had no statutory or legal authority to define a retirement benefit to which no COLA attached. As a result, the class action argues that PERS violates wage and hour laws in trying to lower a wage (the benefit) because of an error the Supreme Court denies exists, and that PERS violates the Supreme Court ruling in withholding the COLA for 2003, 2004, 2005, and 2006. The class action therefore asks the court for 3 things: 1) award window retirees damages equivalent to the amount of the difference between the revised benefit and the fixed benefit (which we've already been receiving), 2) restore the COLA on the fixed benefit from 2003 forward, and 3) to invalidate the January 27, 2006 PERS Board order that authorizes the PERS staff to begin collection efforts for the "overpaid" benefits (as there are none). There is no question that Hartman believes that the recrediting of 1999 earnings from 20% to 11.33% is a "done deal", but the important point is the "breach of contract" and "promissory estoppel" claims that simply argue that while the Board may have the authority to change the earnings retroactively, they nevertheless made a promise that the Supreme Court says they must honor. So even if they don't "restore" the 20%, they will have to pay "damages" that make up the difference between the 11.33% and 20%. So, a rose by any other name is still a rose.

There are some other tricky details buried in between the lines of the email, particularly when they're viewed in the context of the actual revised complaint. I strongly suggest reading the memo very carefully, but only in the context of the revised complaint.

I doubt that all will agree with my assessment. Some have already seen nothing but bad news in the Hartman email. I confess that I wasn't as enthusiastic about the email as I thought I should be. Nevertheless, with some helpful pointers and useful background chatter, I've come to the conclusion that for "window retirees", there is more good news than bad in the email.

Something Real

Note: 4 pm. Several emailed me to note that the link below was broken. It was then, but now it is fixed. I miscopied the information sent to me. Nothing sinister is going on. Everything should be fine now.

A friend passed on this link to an email from Greg Hartman to one of the member groups in the PERS Coalition. I'm sure it went to other members, but it has not been posted elsewhere yet. This offers, for the first time, the PERS Coalition's more formal views on the deployment of the PERS reserves and attempt to put to rest the employers "poor pitiful pearl, we are in a crisis" argument. The third item should be read and studied carefully as it pertains to all of the "window retirees" who are about to receive the PERS notification of error letter. After I've had a chance to think about this and chat with others "in the know", I *may* post back here with some thoughts. In the meantime, this is the first "real" information I've gotten for awhile. Thanks to the AEEO for posting this.

Know Your Rights

OPRI has some new information/advice for "window retirees" posted on its web site. If you fall into the group of PERS retirees who retired between 4/1/2000 and 4/1/2004, you are a "window retiree" and actions taken by the PERS Board at its January meeting will have a significant impact on you. Spend a few minutes perusing this latest information.

The Harlem Shuffle

I'm writing this post from my new MacBook Pro, the first Apple computer developed from an Intel chip. My first impressions are positive. The machine screams, the display is awesome, and the notion that I might someday have a computer that runs Unix, OS X, and Windows natively is positively intoxicating. Don't have a clue what this has to do with PERS, but I felt like posting it anyway.

Shakedown Street

OK. I know it is a recycled title, but it is appropriate for today's entry. The PERS Board is locked and loaded. It will be sending out the first (of two) letters to "window retirees" sometime in March. This letter will notify the window retiree of the "error" in the 1999 earnings, the correction, and PERS' intent to collect the money allegedly overpaid to window retirees. This letter, which will not have details on what PERS alleges the recipient owes, will be accompanied by a notice that gives a 60-day time limit for appealing the notice. Note here that the appeal will be over the process, whether PERS has a claimable error, and whether they have any right to collect. The second letter -- the detailed calculation letter involving the specifics of the recipient's benefits - will be sent starting in the beginning of the summer. PERS expects that these letters ("invoices") will take nearly 3 years to get out. They will start with the earliest window retirees and move forward in time with later window retirees. Thus, it may be several years before the first notice goes out, and the actual invoice letter gets set. PERS assured all stakeholders that the invoice letter WILL contain appeal language that will allow window retirees 60 days to challenge the specifics of the computations.

In other action, the Board authorized drawing down the capital preservation reserve to $0, and the contingency reserve to $250 million (up from $100 million at the last meeting). The rate guarantee reserve will end up with a surplus of approximately $1 billion.

The PERS Coalition and OPRI will be posting updated information on their web sites next week. In particular, there may be some suggestions on how individual members should respond to the PERS notification letter coming next month. In the meantime, the legal actions continue apace with the White case, the Arken case, and the Robertson case all starting to cause stirs in various halls of justice.

Many thanks to friends and colleagues at OPDG for posting the information about yesterday's Board meeting so quickly. Unfortunately, I was unable to go myself.

In The Rough

The propaganda machines are heating up again. First we have the filing of an amended complaint in the class action suit (Arken et al vs City of Portland et al) on January 30, 2006. In the complaint, the PERS Coalition alleges additional wrongdoing by the PERS Board and the employers in its plan, finalized at the January 27, 2006 Board Meeting, to begin the "recovery" process from "window retirees". You can read a copy of the amended complaint on the OPRI website. Next, we have the PERS Board considering a proposal by PERS staff to "redeploy" nearly $2 billion dollars in reserves, taking the contingency reserve from its current $1.9 billion balance to something around $100 million, to liquidate the capital preservation reserve (about $0.5 billion) and bulk up the "rate guarantee reserve" to nearly $1.0 billion. The purpose of this reallocation of resources appears to be to move funds that aren't currently part of the system valuation into places where the assets would be counted. The system valuation affects many things, not the least of which is the unfunded actuarial liability, the employer liability for the UAL, and the employer normal contribution rate. For employers, the upside is that this will have, as a result, the effect of lowering contribution rates. At the same time, lawyers for the PERS Board and lawyers for the employers have been attacking on two fronts: the first is to feign concern that the reserves might be taken down a little too much, while warning active members that if the PERS Coalition "wins" the class action suit on behalf of "window retirees", the estimated $800 million bill will have to come out of potential earnings of active members -- a clear attempt to foment FUD among active PERS members. What the PERB and employer lawyers forget to mention is that the Strunk decision guaranteed Tier 1 actives "no less than the assumed rate" (currently 8%) on Tier 1 regular account balances, and that the end result of the financial reshuffling will also result in a fully funded Tier 1 rate guarantee reserve, and that by statute Tier 2 members are guaranteed "market returns" less administrative expenses. Unless the lawyers are suggesting that the cost of losing the class action suit would be charged off to administrative expenses and then deducted from Tier 2 earnings, there is no way that active members could be affected by the outcome of the class action suit. What the employers and PERB lawyers also fail to discuss is why they ought to adamantly opposed to draining the contingency reserve, when a previous PERB Board was found to "abuse its discretion" for failing to fund the same reserve. So why did the same bunch of lawyers sue the previous PERS Board for its "abuse of discretion" for not funding the contingency reserve, while celebrating draining the very same fund after the current PERS Board fully funded it in compliance with a court order and a settlement agreement. I guess I'm a bit confused. It seems to me that it is one thing for these "wide boys" to be worrying to the point of blustering about the effects on members of the class action lawsuit, while simultaneously laughing all the way to the bank as the PERB prepares to plunder the very reserves that might be needed to pay for the loss. I don't get it. I'm playing golf and my ball keeps landing into the rough. The lawyers seem to have a problem with getting their stories straight - an example of what Jimmy Buffett used to worry about when he remarked that "indecision may or may not be my problem."

P.S. Thanks to all who called and emailed their best wishes for my wife's successful surgery and speedy recovery. The surgery went well and we were home quickly. I'm happy to report that my wife's recovery appears to be right on schedule. She's starting to feel well again and is anxious to return to all her pre-surgery activities plus more.