Stories We Could Tell

Oh the stories we could tell.... Attended the PERS Board meeting today. No fireworks at all, despite my predictions earlier this week. The meeting was sparsely attended and was actually pretty boring. The Board unanimously adopted the "Final Order" concerning the repayment methods in the Strunk/Eugene cases. There were no questions and no discussion. The Board also unanimously adopted OAR 459-005-0610, which relates to recovery of overpayments. PERS Staff took two items off the table for discussion today. The first was its recommendation to NOT recalculate the "one time variable transfer" for members who failed the test in 2000, 2001, 2002, and 2003. PERS determined that 313 members would be affected by the decision. Staff asked that stakeholders be permitted until the next Board meeting to comment on the recommended course of action. PERS staff also took the question of lump sum rollovers back to PERS off the table for the same reason. While PERS staff could find no legal or IRS support for making this transfer possible (to facilitate repayment for the alleged 1999 overcredit), staff was willing to allow stakeholders a chance to help PERS find a way to achieve this. Staff is not fundamentally opposed to this; in fact, it would make life easier for everyone, but absent any statutory or IRS authority to do this, PERS feels its hands are tied.

Concerning the notification of overpayments, the Board and staff both took pains to emphasize that there will be two different notifications. The first concerns the fact of an overpayment situation and the methods of recovery PERS will allow. This notice will contain appeal information and it is PERS' intent to seek a single unified legal ruling that establishes whether or not their approach is legal and to provide a consistent way of handling all future claims arising from such notices. While individuals will be permitted to appeal the notice, there will probably NOT be individual contested cases over this element of the recovery plan. PERS plans to send out a SECOND notice -- a detailed invoice -- that will contain all the information an individual would need to check PERS' calculation of revised account balances, revised pension benefits, and application of appropriate COLA increases. That notice will also have appeal rights and it is THIS notice that individuals will be allowed to appeal as individuals.

Other issues of note. Tier 1 regular fund earned 13.19% in 2005 (8% will be credited, pending preliminary approval by the Board in February and the legislative eBoard), while the variable account earned 7.49%. For the first time, there was an explanation offered for the significant discrepancy in the earnings between the regular account and the variable. The regular fund is widely diversified and includes domestic equities, foreign and international equities, alternative equities, and real estate. The variable is solely invested in domestic equities. Domestic equity returns were very close in both regular and variable accounts; however, the returns on alternative equities, international equities, and real estate were 44%, 39%, and 28% respectively, dramatically increasing the return on the regular side of the ledger. This is an unusual circumstance, but 2005 turned out to be an unusual year.

Finally, in a pre-meeting conversation, I learned that the PERS Coalition has amended its class action lawsuit (Arken et al v. City of Portland et al) to include actions taken by the PERS Board at today's meeting. The amended complaint will be filed on Monday January 30, 2006.

This will be my last post for the next week. I'm off to San Francisco to accompany my wife through another surgery (her last). We hope to return to a semi-normal life by the end of next week. Stay tuned for more PERS news.

Put Ya Hands Up

OK. My hands are on my head and I'm facin' the wall. I think the mugging is about to begin. Friday (tomorrow), the PERS Board will consider a final draft of the order "Final Order on Strunk/Eugene Repayment Recovery Method". In spite of all testimony and questions about the legality of certain aspects of PERS recovery method", PERS staff is recommending a final package that includes some very questionable passages. First, in the explanatory memo justifying the final order is a passage "If the Board adopts the Final Order, each recipient of an overpayment would be served a copy of the Order by regular US mail. Serving this Order on the recipient (with added information like appeal rights to constitute notice under ORS 238.715) most likely stops the six-year statute of limitations on collecting the overpayment." COMMENT: Clearly PERS *thinks* that the mere serving of the notice stops the statutory clock from ticking, but there is no statutory citation or case law backing up PERS blatant attempt to make an end-run around what is clearly spelled out in the ORS. PERS' position may be defensible, but they offer the Board no legal justification for the position and, if fact, as much as admit that they don't really know if this is true or not - "most likely" is not a comforting phrase.

The second issue pertains to the first. The memo goes on to state: "The notice would include the recipient's appeal rights to challenge the matters covered by the Order. Specifically, the recipient would be informed that they are entitled to seek judicial review of this Order pursuant to ORS 183.484 by filing a petition for review within 60 days from service in the Circuit Court for Marion County or the Circuit Court in the county in which the recipient resides." (emphasis added). This is, of course, the issue that triggered a pretty strongly worded letter from OPRI when the whole question of notification arose back in November. The issue is that ORS 238.715 anticipates that an invoice is to be included (so that the member actually has the necessary information to make an informed decision about whether and what to appeal!). During discussion, PERS assured the Board that the invoice was part of the notice, but that the invoice would be sent separately. The wording of the final order makes absolutely no mention of the invoice, leaving me with the very uncomfortable feeling that we will be forced to appeal on the basis of PERS merely asserting that we owe money, but without knowing how much we owe. If I were a cynical person, I'd think that PERS was just trying to drop this turkey from a high altitude and daring us to shoot it down. This brings to mind that indelible episode from the old TV sitcom "WKRP in Cincinnati" where Mr. Carlson is promoting his station by throwing live turkeys out of an airplane. When the turkeys all splatter to the ground, Mr. Carlson wanders away mumbling: "...as god is my witness, I thought turkeys could fly".

Jailhouse Rock

For those of you who like to be "jailhouse lawyers", I've posted a copy of the class action lawsuit on my website here. The case is officially captioned as "Arken et al v City of Portland et al". The complaint is relatively short (15 pages) and succinct. This is the case described in my posting yesterday. You can also find a copy of the same document at the OPRI website.

Stackin' Paper

As predicted, the PERS Coalition filed its class action lawsuit in Multnomah County on behalf of "window" retirees on Tuesday, January 17. Rather than summarize information that is already out there, let me simply quote from an AFSCME e-lert from Don Loving:

"On Jan. 17, the PERS Coalition filed a class action complaint in Multnomah County Circuit Court on behalf of Tier 1 PERS members who retired between April 1, 2000 and April 1, 2004, commonly referred to as the "window period."

The class action complaint alleges that the withholding of cost-of-living adjustments for the years 2003 to 2006 from these Tier 1 PERS members constitutes both a breach of their PERS contract and a violation of the Oregon wage and hour laws, in light of the Oregon Supreme Court's decision in the Strunk case," said Aruna Masih, the top assistant counsel to PERS Coalition attorney Greg Hartman.

In addition, Masih says the complaint alleges that the PERS Board's intent to pursue collection actions against such retirees for alleged overpayment of 1999 earnings would also constitute a breach of their PERS contract, would be without probable cause and would cause irreparable harm.

Hartman's firm is optimistic this case can be resolved by summary judgment. It is, says Masih, a simple factual case that gives Hartman the opportunity to request that the judge grant an injunction through summary judgment, which is akin to taking a shortcut through the legal system's lengthy timelines.

"We can request summary judgment anytime 20 days after the suit has been filed, which means we could enter that request in early February," says Masih. "Once the request is made, we can expect a decision on the request within three months -- which is not long for the legal system, as we've come to understand with our PERS cases. Our request for summary judgment would specifically ask the trial judge to halt the process that PERS has commenced to collect alleged overpayments by retirees. Again, we believe Strunk made clear they cannot do that."

The judge could refuse to grant summary judgment and allow the case to take its full course; that, of course, would add several months to the process."

Two Ways to Play

Rumors I've been hearing for the past two months have finally been publicly confirmed. On Friday, a small blog entry on the Bennett, Hartman, Morris, and Kaplan web site reports that the PERS Coalition has served notice that a class action lawsuit will be filed against the PERS Board on behalf of "window retirees" (those who retired between 4/1/00 and 4/1/04) for violations of Oregon Wage and Hour laws. While I've never seen or heard the details or basis for the claim, this novel approach was used successfully by BHMK representing the Association of Oregon Faculties against the Oregon University System when they attempted to alter the contribution levels for Tier 1 and Tier 2 members who were participating in the OUS "Optional Retirement Plan" (an alternative to PERS). More details on this case will be forthcoming as soon as the case is formally filed. It isn't filed yet because there are certain notification details that the plaintiffs must meet and other legal requirements before the case can be certified as a "class action" and served on the defendants. To the best of my knowledge, the case is fully ready to go. You can read the blog entry that describes the case at the BHMK blogsite .

Hurricane

This is my last post of 2005 - a year of hurricanes of epic proportions. This post is about a different type of "hurricane" - the type Bob Dylan sang about in his 1976 song of the same title. While the object of the song is "Hurricane" Carter - a black boxer accused of a crime he allegedly did not commit - the subject of the song is broader - racism and injustice. It has some strident lyrics that lash out in not-very-subtle ways against a system that puts legal and judicial convenience ahead of justice and equality. I would be the last to suggest that what PERS members have been subjected to qualifies as the "hurricane" about which Dylan sings. Nevertheless, what PERS members - active, inactive, and retired - have experienced over the past several years is a new "ism" - PERSism, which I describe simply as discrimination against Oregon public employees merely for being public employees - a "hurricane" of different proportions. The general public neither knows nor cares what public employees do. The general public has no interest in the facts except when the facts support their already low opinion of public employees (about whom they neither know anything or care?). I could go on, but for regular readers, I'm preaching to the choir. If you want to see what's inspiring this "dark" post, listen to Dylan's "Hurricane" (http://bobdylan.com/songs/hurricane.html).

Shine it all around

I definitely feel "shined on" dealing with PERS and the PERS Board trying to get some clarity and some resolution of all the Strunk/Lipscomb implementation issues. Before we go there, you might notice that the IAP remediation discussion has completely vanished from the "forward-looking calendar". This means that this issue, so important to any still-active or recently-retired member, is now being put on the back-burner until the more profitable "recovery" effort takes place. Instead of having this matter resolved before the 2005 member statements come out, it appears that the Board and staff will delay this ............ perhaps indefinitely. (In fairness, there has been no discussion of a delay; just the fact that the item is plain gone from the forward-looking calendar and suggests it won't be addressed at any of the next 3 Board meetings).

In other news, the discussion of the question of recomputing the "one time variable transfer" for retirees and other eligible members has also vanished from December's agenda. For more information on this, please see the previous two blog entries. Instead, PERS Staff issued a report on the "staging" of the Lipscomb/Strunk adjustments. This report is included in the Board Agenda packet for Friday's (Dec 16) meeting. PERS Staff is asking for Board approval to prioritize the processing so that retirees to whom PERS OWES money will be processed ahead of retirees to whom PERS is OWED money. Moreover, the timing of the recovery will be staged over a several year period and is expected to coincide more closely with the restoration of the COLA. Within the group of retirees who owe money, those who owe a lot will be hit first, while those who owe less will drop in priority. In practical terms, no one knows what this really means except that the actual determination of amounts owed may not occur until very close to the point when COLAs are again due. Finally, in response to a great deal of confusion and contest, PERS has modified the proposed rule concerning the recovery and makes clearer the fact that the "notice", which will come in late March/early April does NOT start the contested case clock; the actual invoice, which may not come until some months, or possibly a year, later is what triggers the clock. It still isn't clear how PERS is in compliance with the 6-year statute of limitations on notification of the error, except that it obviously believes it has the legal upper hand in this matter. The PERS timeline lowers the priority recovery for lump sum recipients not receiving any form of monthly payment -- they still intend to collect, just not immediately -- and also lowers the priority for those cases where research and analysis must be done before determining amounts owed. I presume this means people who retired under the "lookback" and who might now be eligible to retire under a different method after the simultaneous lowering of 1999 and the increases for 2003 and, possibly, 2004.

It appears to me that PERS will continue to shake the tree for every nickel it can find, but seems to be shining everyone on as it uses the "throw it against the wall to see what sticks" method for sorting everything out.

I'll be out of town all next week and I don't expect to post more than once more before Christmas.

Autour de Rocher

At its next meeting (date TBA), the PERS Board will take up the question of whether to authorize (recommend, order) PERS Staff to recalculate the "one time variable transfer" test for retirees (and members) who were unable to get out of the variable before retiring (or within the past few years). PERS staff knows there will be winners, but also believes there will be losers. The question staff was asked to answer was if the staff recalculated the variable test, would they only increase the benefits for the winners, but ignore the losers, or would they also have to concurrently reduce the losers too?

I've been playing around with numbers and have formed some opinions about who the winners and losers are likely to be. At issue is the 1999 regular earnings crediting. Prior to the "settlement", 1999 had been credited at 20%, while the variable for that year was credited at 28.83% (an 8.83% spread between variable and regular). The variable "test" requires that PERS compare the contributions and earnings on the variable account as if they had been invested solely in the regular account the whole time. If the variable contributions at regular earnings was greater than the variable at variable earnings, the test fails and PERS didn't let you effect the "one-time variable transfer". People who applied in 1999 for 1/1/2000 typically passed the test; people who waited until 2000 for 1/1/2001 *may* have passed the test or not; I haven't encountered many people who successfully got out effective 1/1/2002 or 1/1/2003. My back of the envelope calculations show that no one who already got out of the variable at any time prior to 1/1/2003 could possibly end up with a reversal of fortune under the revised regular calculation. In fact, the people already out would only be further out. For those who failed the test, there is a chance that a recalculation would produce a *winning* result and an increased benefit. At worst, those who failed before might still fail again. The tricky area - where a winner might turn into a loser comes from those people who retired after 4/1/04, when the regular was credited at 0%. Recall that between the settlement and the Strunk ruling, PERS will have to recredit 1999 at 11.33 (down from 20%) and recredit 2003 (and 2004) at 8% (UP from 0%). Both 2003 and 2004 were winning years in the variable and the spread between the actual variable and what PERS credited to regular (0%) was significant. If all of sudden 2003 and 2004 are credited with 8%, there is a measurable probability that the variable at regular will suddenly overtake variable at variable and a "winner" is converted to a "loser". I've run examples here as well and the likelihood isn't as high as it might seem (it reduces the variable - regular spread in 2003 from 34.68% to 26.68%, and the variable - regular spread in 2004 from 13% to 5%). There is a tangible risk of a small number of reversals of fortune, but a higher prospect of more than a few significant winners.

Given this, it is anybody's guess what the PERS Board will do. I can see real litigation risk if the PERS Board doesn't do it since there is real money involved and a statutory requirement and appeal process for challenging the "one time variable transfer test" results (I know this from personal experience). On the other hand, I can't possibly see how PERS could only adjust the benefits of the "winners" while ignoring the "losers". But, since the reform legislation and the settlement are rife with examples of inequitable treatment of different classes of retirees, this places PERS and retirees (and some still-active Tier 1 members) between the proverbial rock and a hard place.

Get on the Natch - Part V (Catch 22)

In my continuing effort to expose the many ways PERS tries to shoot itself in the foot by pointing the gun at its head and watching the bullet travel through its entire body, I offer yet another real story from yet another real PERS retiree. All the changes PERS and the Legislature have made are bad enough, but stupid, inept, and timewasting mistakes are unconscionable. PERS should be stoned for this one.

=================================================

"If anyone has seen the movie "Brazil", about a society evolved to the point where it becomes locked in immobility due to excessive and inflexible bureaucratic paperwork, one can easily appreciate how Brazil-like PERS has become.

For example: My request to withdraw my IAP was rejected for improperly completing the Effective Retirement Date field. The form says: "I am applying for an effective date of retirement the [bold] FIRST DAY OF_____________(month)_____________(year). So I put "August" and "2005) in the two blanks. WRONG!! My application was returned and the form stamped "INVALID". Confused, as I retired effective August 1st. 2005, I called PERS to ask what I should have put in the two blanks to complete it correctly. The answer: "August 1st 2005". Yup, Even though there is NO blank for the DAY, and even though the blank is proceeded with the words "..the first day of" in bold, no less, you apparently STILL have to put in the Month and the DAY in the "month" blank.

So I must complete an entirely new application packet because I didn't know that the words "first day of" on the PERS form are actually meaningless to them unless you actually write in that the first day of August is August 1st. After all, possible in the PERS world, the first day of August may indeed be August 3rd.

I will probably need to include a form 47/b and send the whole thing back to "Central Services" attention "Information Retrieval" department, which as we all know, does not give out information (That's, of course, "Information Disbursal").

Hmmm, I can't imagine why their workload is so high??"

Cannonball

For those of you who don't follow every sinuous move of the PERS Board, here is an update on the "plan" to recover overpayments from retirees in the "window". As you probably know, the PERS Board instructed the PERS Staff to take suggestions and questions from stakeholders about implementing their plan. PERS opened the comment period via a link on their website and both retirees and others asked implementation questions and for consideration of alternatives to the recovery mechanism. It appears that the PERS Staff and PERS Board have disposed of all but three issues, which will be taken up at the December Board meeting. For now, we know that PERS is NOT going to allow any repayment schedule other than the options initially presented - one lump sum payment, or the actuarial reduction method over the retiree and (if applicable) beneficiary lifetime. We also know that PERS will NOT stop repayment once the member or beneficiary has repaid the amount owed. Moreover, PERS will NOT offer tax advice or even assistance to members who choose to repay in a lump sum. For those with lump sum bills in excess of $3,000, the tax ramifications are quite significant and non-trivial. Unless you're really skilled at doing your own taxes, a repayment of a lump sum in excess of $3,000 will send you on your merry way recomputing your taxes for EVERY YEAR since you retired. PERS will NOT permit a retiree already receiving "correct" benefits (i.e. not *estimated* benefits) to change the payment option once the repayment is triggered. There will be NO revised Notice of Entitlement for members who've already received their initial NOE. Furthermore, there will be no option for retirees to purchase additional service credit that may have been declined at initial retirement.

What remains to be answered are several fairly significant -- to many anyway -- issues. The first is the question of whether PERS will recompute the "test" for the "one-time variable transfer" for retirees who attempted this before retirement and "failed" the test. It is quite likely that many people who failed when 1999 was figured at 20%, would "pass" the test once 1999 is refigured at 11.33%. For many people, like me for example, being stuck in variable for a year longer than I wanted to be cost me significant money. If that action could be reversed, my repayment amount would be significantly reduced by the earlier transfer of my variable account balance to my regular account. The second important matter affects a smaller, but still significant, number of people who took a lump sum settlement of some sort and rolled the money into some tax-advantaged investment (e.g. an IRA). The question is whether PERS will *facilitate* (with the member's permission, of course) the direct recovery of the overpayment from the IRA-holding company so that no taxable event is triggered.

Given the cannonballs dropping from the sky lately, I'm not real optimistic that PERS will do anything that might actually benefit retirees, but the recalculation of the variable test is probably one area where they'll have to tread carefully. This has significant litigation potential. I doubt they'll do much else to make life easier, cheaper, or better for the people whose money they hold in TRUST.

Chinese Arithmetic

Those folks over at PERS are on some of that funny stuff again, doing their best to sow a little FUD. Seems they've discovered that the current wording of ORS 238.715 needs to be revised a bit to accomodate their little shell game for recovering money from retirees. But before they can even begin to recover the money, they've got that small matter of notification of retirees that there's been an "error". By law, PERS has 6 years from the date of the error to notify a member; otherwise, they lose the right to collect. Well, with all PERS' computer problems and with all the multiple court rulings to implement, the 6 year limit is approaching fast - April 1, 2006 is the best guess. So PERS is busy promulgating a new administrative rule that has more than a few folks in a lather. The OPRI people www.opri.org have written PERS a letter outlining their concerns with the proposed rule. In short, what PERS is proposing to do is to comply with the law by simply NOTIFYING a retiree of their intent to change the benefit, without including the invoice explaining the error and how PERS is proposing to fix it. In other words, PERS wants to separate the notice from the invoice. However, the current ORS 238.715 triggers the contest period with the receipt of the NOTICE and never contemplates a separate invoice sent months or even years later. So, if this rule change were allowed to go unchallenged, members would have to file a contested benefit notice in the absence of knowing what they were contesting. This has all the hallmarks of Chinese arithmetic. If you want to protest, go to the PERS site and follow the links to proposed rulemaking. You can send an email to the rules coordinator right from the PERS site.

I've been a bit slowed the last week or so by multiple attacks of bad karma (an emergency root canal, a nasty case of hip bursitis, and a badly cut index finger). Hopefully the old axiom that bad luck comes in threes has already applied and I can soon look forward to a dose of some good karma. In the meantime, don't be on the road at the same time I'm out there. :-)

Old Habits Die Hard

And the harder PERS tries to change, the worse the muddle they seem to create. Several weeks ago I shared an email I received from an irate active PERS member who was trying to get an accurate estimate on which to base a retirement decision. This letter was the most articulate of those flooding my mailbox, so I posted the letter. I also forwarded copies to the PERB, Mr. Cleary, and others in positions of PERS management. On November 1, PERS posted an announcement on their website that they would henceforth be producing retirement estimates using the Strunk/City of Eugene implementation (I take no credit for the announcement, but the timing wasn't lost on me). Members were concerned that previous estimates (1) did NOT reflect any of the crediting/recrediting adjustments for 1999, 2003, and 2004 and so the estimates were based on very outdated and wrong account balances, and (2) that the variable "match" was still being computed in the "old" (pre-settlement) way also resulting in highly inaccurate variable match estimates. Both of these conspired to seriously mislead (too high, too low, rarely 'just right') members about benefits at retirement.

So, it was with some relief that I read PERS' posting on November 1. Hopefully, PERS would supply reasonably accurate estimates so members could start making INFORMED retirement decisions. Alas, my relief was premature. I'm starting to get the first reports from people who've availed themselves of PERS' new estimates. While PERS seems to have solved the crediting issue, the variable match still remains unsolved and members are still getting estimates with their employee variable balance DOUBLED. From some of the communications that members have shared, this doesn't seem to be problem that PERS either intends to fix. PERS' recommended solution is for members to wait until after they submit their retirement application and get their "Notice of Entitlement", which will then have the variable match correctly calculated. You have got to be kidding!!!!! PERS is asking members to separate from service (because, they can't calculate actual retirement benefits until the separation papers are received from one's employer), and then trust their fate to PERS getting an accurate estimate in a timely fashion. Gee, I think I'll quit my job on the promise that PERS hasn't screwed up my estimate too much and my benefits will be within 80% of what PERS' new, customer-friendly, estimates are. Fat chance! Apparently, PERS is now making administrative policy decisions at the Joseph Heller Catch-22 school of business.

Boom Like That

Just a brief note to thank the thousands of readers who have made this blog so popular. It is hard to believe that in just a few days, this site will have recorded its 250,000th visitor - a quarter of million page views. I want to thank all the various people, named and unnamed, who continue to provide me with the information to post, the answers to all my (and your) questions, and who feel that this is a worthwhile place to recommend for people interested in PERS. There doesn't seem to be any end of the PERS assault in sight; I expect to be reporting on PERS issues for several more years, at least. Stay tuned.

Your Mother Should Know

The answer to the following question. I've been asked fairly frequently why PERS members and retirees can't sue the old PERS Board for damages arising from their actions in 2000 that are causing so much pain today. The answer to this question is actually pretty straightforward. The City of Eugene case was filed under the Administrative Procedures Act (APA); it was not a simple civil case where issues of tort and negligence apply. The PERS Board's actions are governed by the APA and for that reason the members of the Board are insulated from personal responsibility for their acts so long as the acts are within the scope of their administrative mandate. The Board perpetrated no fraud, did not embezzle funds, and made their decisions in open meetings. Their only "crime", according to Judge Lipscomb was an "abuse of discretion" (bad judgement). (The APA also protects the current PERS Board from personal liability for their decision to enter into the settlement agreement with the City of Eugene plaintiffs. The Board can be charged under the APA with breach of fiduciary responsibility -- see the White case -- but individual members are held harmless).

Changing Times

PERS distributed a document at Friday's Board meeting entitled "PERS By the Numbers". This is essential FACTUAL information about membership, members, and retirees that should quiet some of the criticism (or not) about benefits received and the system's financial health. I've scanned in a copy and have posted it on my website. You can download it here (note added 10/24. This link is now to the PERS official copy posted on their website).

Get on the Natch - Part IV

For newcomers, I periodically use this blog to run copies of letters I've received from readers. A few days ago I got this email from a member nearing retirement. It expresses the frustrations of those trying to get accurate information from PERS before making this momentous decision. I've forwarded this to the management and Board of PERS, but wanted to share it more widely. I've removed the sender's name as I always do. If your experiences match this reader's, please let me know. The only way PERS is likely to do anything about it is if the matter gets bigger publicity and more pressure is put on PERS staff to figure out how to address this problem. (And by the way, current retirements have been treated as IF the City of Eugene Settlement and Strunk were already in effect, so it is absolutely not true that PERS doesn't know how this will play out. It has been this way since 4/1/05.)

Hello Marc,

Thanks for all your efforts on your blog. Have been avidly reading it for months now, ever since the Oregonian bit on your blog.

Here's my gripe: No one seems to be dealing with the question of accurate estimates for people soon to retire. My husband plans to retire the end of this year, and in an effort to understand what we're dealing with, we've recalculated his account from 1982 forward to:

1. take into account what his account would have earned had it all been in regular,
2. 11.33% interest for 1999 rather than 20%,
3. 8% interest for the whole account in 2003, 2004 and 2005 (he switched over from 75% variable to 100% regular at the end of 2000), and
4. that his contributions for 2004 and 2005 went into IAP and not into PERS.

We then created a little table that figured out what the variable discount was (difference between the account all being regular and part being variable), multiplied Item 1 above by 2 and added to that the variable discount. Upshot of all this blather is that we think we actually have a fairly good idea of the amount of money that should be in his account by the end of 2005 and how much PERS will have total counting the money match to base a retirement figure on. BUT!! Because apparently the PERS Board hasn't authorized PERS to do all this stuff, we are still stuck with an online Benefit calculator that is basically useless. When we requested another estimate, we were told that our limit was reached and that we had to pay $60 for a new estimate, which, by the way will be figured out USING THE ONLINE BENEFIT CALCULATOR! As I pointed out to the PERS folks, is it right to limit us if our previous estimates were useless?

When I mentioned to a woman at PERS that it seemed like the only thing we could do is put in the retirement papers and if we didn't like the results, stop the retirement process, she seemed upset at the idea of that workaround, then said it would still only be an estimate based on the fact that changes have not yet been made to how they are making their calculations. Aaaaaggghhhhh!!!!!!! How is anyone supposed to be making a cogent decision with inadequate information? At one point, she mentioned that there should have been a prompt on the benefit calculator that would have asked for a dollar amount (to be obtained from PERS and which we had already gotten) that would be the Variable Discount. I told her that I had seen no prompt. She went out and checked and came back and said that apparently someone had taken it off and made no reference to its removal on the site. Why would someone take it off and NOT TELL THE PEOPLE ANSWERING THE PHONES????!!! Ridiculous!!!

We are willing to accept 11.33% interest on 1999, we are willing to accept the IAPs, we are willing to accept the variable discount when it comes to Money Match, so why can't we get a good number, even if someone there has to hand-calculate it? While I can understand them not wanting to hand-calculate for everyone wanting an estimate for the next two years, why not at least accommodate the people looking to retire SOON, like within six months?

I've emailed Customer Service and gotten zero response. I emailed the Suggestion line and a nice man from there has played telephone tag with me for a few days, saying he would help me use the Benefit Calculator (we finally both gave up trying to reach each other), and I talked to a woman yesterday who wasn't anywhere near as helpful as I would have liked, who basically said "this is the way it is, we can't change it."

Can someone PLEASE give this issue some visibility? The window retirees are NOT the only ones who need answers.

The Squid Jigging Ground

I attended part of today's PERS Board meeting. (I confess that it was getting so tedious and boring that I left after about 105 minutes when it was apparent that there was still one long and boring report to go). There weren't too many surprises to report. Paul Cleary handed out a new document called "PERS by the numbers", which was intended to pull together all the disparate statistics PERS has given out over the years. It is a really useful document that PERS intends to post on its web site after the State finishes its maintenance early next week. Many of the facts will surprise people and will, hopefully, disabuse some of the system critics of ideas they have that retirees are getting fat and rich. The statistics simply don't bear that conclusion out. (I have asked for my own electronic copy, but haven't received one yet).

It is clear that the Strunk/Eugene implementation project will take a long time. The first order of business is to get 2004 Member Statements completed for still-active and inactive members. That will involve recrediting for 1999, adjusting 2003 and then crediting 2004. The goal is to have those statements out by the end of January 2006. To follow will be the 2005 member annual statements at close to the usual time in 2006 (mid May). The retiree piece is expected to consume the lion's share of time and resources. While the short-term deadline is April 1, 2006, it is obvious from comments and observations that this is expected to be a multi-YEAR project (it might have been Paul Cleary who remarked, somewhat off-the-cuff, that it would probably be 2008 before they'd be able to 'close the books' on the Strunk/Eugene implementation). One new fact emerged today. In terms of the actuarial reduction method, Craig Stroud confirmed that if the member took an option that involved joint survivorship (2, 2A, 3, 3A), the actuarial reduction *would* be based on joint life expectancies IF both parties were still alive. Otherwise, the reduction would be based on single life expectancy of the surviving recipient. The planning group and the Board are still open to alternative payment options and heard again today from someone advocating that PERS agree to an installment plan that allowed the member to repay the exact amount owed in something other than a lump sum. The Board was receptive to the idea, but there was no committment made to implementing such a method. The Strunk/Eugene implementation plan is still short on many details and it is expected that it will continue to evolve for 3 more months (and 3 more meetings) before a final plan emerges.

There was a lengthy and tedious discussion over the 2004 crediting order, which has never been finalized. PERS Staff asked for finality today so that the Strunk/Eugene implementation could proceed. As I was leaving, virtually everything about 2004 had been settled except for the matter of whether or not to fund the Capital Preservation Reserve (henceforth CPR). The Board struggled with the concept of taking money from Tier 2 members to put into the CPR. Staff had recommended that the CPR be funded at 0% for 2004; the Board wanted something more than 0% and something less than 7.5%. The discussion centered on 0.75%, but the real debate was whether Tier 2 members should have their earnings diverted to the CPR when there was no clear plan to repay Tier 2 members in down markets. Greg Hartman argued against putting money in the CPR, PERS Staff discouraged putting 2004 money into the CPR, Tom Grimsley wanted 0% to go into the CPR, while other Board members wanted something more than 0% to go in. Since this discussion seemed to be going nowhere quickly, I decided to leave. The main message is that Tier 2 members have been losing earnings to the CPR since 2003, even though they're supposed to "earn what they earn". That's another discussion for another time.

One other final note. Marsha Chapman, one of the two local Mercer actuaries assigned to PERS, has already resigned to "pursue other opportunities".

If I get a copy of the "PERS By the Numbers" presentation in electronic form, I'll post it here. Have a good weekend.

Mix up, Mix up

In yesterday's entry "Clampdown", I misrepresented an important piece of the proposed OAR pertaining to the recovery of overpayments. I remarked that PERS used the term "payee" in a very restrictive sense, which I interpreted as being only the retiree. Mea culpa. I should have taken the time to read the "definitions", which form the preamble to the rule. Had I done so, I would have discovered that PERS is defining - for the purpose of this rule - "payee" to mean anyone who could possibly be receiving (or have received) a benefit from PERS that included (includes) the 1999 earnings distribution of 20%. This means, among others, retirees, their beneficiaries, a divorced spouse and, presumably, the humane society. This significantly broadens the scope of recovery efforts and continues to impinge on the question of whether PERS intends to use "joint life expectancy" tables to determine the actuarial recovery period. So far, PERS has not answered that question, which I've now asked multiple times. Hopefully they'll give me an answer soon since it bears on the calculator output. [Note added at 11:30. Just heard back from PERS. While they "think" they know the answer to my question, they're waiting for more direction from the actuary before making their answer public. The actuary has to report on which table(s) to use, whether there are any "holes" in the tables, and what the policy implications are for the actuary's recommendation. So, it may be awhile longer before I can finalize the calculator or answer the question about "joint mortality"].

Clampdown

The PERS Board packet for the October 21, 2005 meeting is now posted on the PERS web site. As expected, the Board will be asked to take up issues pertaining to the implementation of the Strunk ruling and the City of Eugene "settlement". The packet contains a 15 page memo from Craig Stroud, head of the Benefits Processing Division, describing the basic method and timetable for implementing the ruling. For "window" retirees who've been using my calculator, the method should come as no surprise. Within the memo is a reasonably well-documented illustration of how the method would be implemented. The benefit recalculation method, application of COLAs, and the actuarial reduction method follow nearly identically to what I had worked out from their previous documents. In short, if you want to figure out how all of this will affect you, get hold of my latest calculator (left link) and enter the appropriate data.

There is a second document in the packet that describes and details a proposed administrative rule that covers "recovery of overpayments". This is a worthwhile read as it explains the lengths to which PERS is going to go to recover 100% of the overpayments. A couple of things to note. First, the proposed OAR refers exclusively to "payees" (and doesn't not, unless I missed it, refer to "beneficiaries" or "alternate payees"). This implies that PERS does not intend to hold beneficiaries or alternate payees responsible for overpayments made to the primary retiree. Don't quote me on this yet because the OAR doesn't say it. It is an inference by omission. Second - a minor piece of good news in an otherwise dismal post. The "actuarial reduction" in monthly benefits will NOT affect the COLA base. In other words, when a COLA is due, it is applied to the actual benefit, not the benefit diminished by the actuarial recovery amount.

The Board doesn't appear to be poised to "adopt" anything at this meeting; that probably awaits even more detail at the November meeting. The longer the Board delays adopting its methodology, the longer it is before any potential litigation will be triggered. It is clear that recovery efforts - initiated by a notice of an overpayment and a description of its computation - MUST begin before April 1, 2006. The statute of limitations for errors and overpayments is set in statute to be 6 years from the date of the error. This means that PERS must initiate the process AT THE INDIVIDUAL LEVEL not later than 6 years from the date the 1999 earnings were credited - approximately on April 1, 2000. The clampdown will start soon.

Fixing a Hole

I posted a new version of the Lipscomb Calculator over the weekend. This version fixes a "hole" in the previous iterations by adding the "actuarial" reduction calculation for "window" retirees. I based the reduction on the most current PERS tables (2001, effective 7/1/03) for life-expectancy of retirees. The new actuarial firm - Mercer & Co - has undertaken a newer study, but it is hard for me to imagine that the results will be too significantly different from the tables now used. In any case, the results should be a close approximation to final implementation. I've simultaneously released the Windows and the Mac OS X versions. It is labelled 1.0.2. You can obtain either version by following the link to the left of this blog labelled "Lipscomb Alpha Software".

Please keep in mind that the question of "joint mortality" has not yet been addressed by PERS Staff. At the moment, the Calculator assumes that the payback is over the RETIREE's life expectancy and does not carry forward to a beneficiary with joint survivor benefits. This may prove to be wrong, but joint mortality figures are not currently available and PERS has given no indication that it would extend the repayment period over a beneficiary's life expectancy too. So, until I have reasons to change the calculator, I'm not inviting trouble by making assumptions I can't currently justify.

The PERS Board meets this coming Friday (October 21) to take up further details of implementing the settlement and the Strunk case. I have no indication of whether the Board will finalize implementation details at this meeting, or wait until the November meeting. There will again be an opportunity for some public testimony, and members who are interested/affected should attend. It is again at the PERS Headquarters at 1:00 p.m.