None of Us Are Free

It's been a long summer. We've fully moved and have completed a long, fun-filled, and exhausting vacation. We're now steeling ourselves for our daughter's wedding at the end of September and the onslaught of relatives and friends that will bring. Thankfully my daughter is organizing the entire wedding and all we've been called on to do is be the human ATM - but we love her and think her future husband is terrific.

Since my last post lots of little details about PERS-related subjects have surfaced. None of this is "new" information and many of you probably know most of it. Nevertheless, for those of you who spent the last month actually taking a vacation from PERS-related news, here is the brief 4-1-1. First, PERS has delayed for at least a month invoicing the first batch of double-lump summers until October. The speculation is that this is because hearings in two significant lawsuits are scheduled for September 28th and a negative outcome for PERS in either of those cases might delay implementation of collection efforts even further. In that regard, both the Robinson case (concerning section 14b of the PERS Reform Bill HB 2003), and the Arken case (concerning the breach of contract and promissory estoppel claims of "window retirees") will be heard in Judge Henry Kantor's Multnomah County Circuit Court on the morning and afternoon of September 28th, respectively. In the meantime, the hearings on the legal fee reimbursements have taken a rather bizarre (and unfortunate) turn. A closer reading of the Supreme Court's decision to award legal fees to the "winners" in the Strunk case has pundits suggesting that the "winning" attorneys will get to recover their fees from PERS, which will, in turn, pass these recovery charges on to the people who "won" - retirees and actives. Whether this is true or not depends on how the next conference goes on October 19th, but it is clear that the reports from the previous conference (August 15th) did not seem to provide any hope that the losers would pay much "out of pocket" for attorney fees. The costs will just be passed on to members and retirees.

That's the peanut summary so far. Just remember the title of today's post - none of us are free.

P.S. It is no longer simple to full justify these entries. So today's post is simply printed in its native format, not prettified. I know how to do it in html but I'm too lazy to edit the html code.

Money

Today, in Salem, the Special Master Henry Breithaupt, will hear fee motions filed in the Strunk/Sartain case. For those wondering what this is about, the Supreme Court did not award legal expenses to the "winners" in the Strunk Case - the PERS Coalition on the "rate guarantee" matter for Tier 1 members, and the OPRI Plaintiff Sartain in the COLA freeze matter. Now, 18 months after the court issued its ruling, the Supreme Court has directed Judge Breithaupt to collect motions and evidence and hear the appeals of the attorneys for the PERS Coalition and for OPRI present their arguments in support of recovering legal expenses in the cases. I'm not sure what amount the PERS Coalition will claim, but I know that OPRI's legal defense fund is claiming expenses in excess of $300,000. The Supreme Court finally ruled (a few months ago) that these plaintiffs are entitled to recovery of some (all?) legal fees BUT has referred the determination of the appropriate amount to a Special Master's recommendation. (THIS Supreme Court really seems to like punting to Special Masters instead of "just doing it").

This strikes me as another example of this court's lockstep politicization. Instead of providing clear and unambiguous guidance, it provides ambiguous rulings that the losers are free to ignore and the winners are forced to take additional legal action to get enforced. Even the unambiguous rulings are ignored at will or trumped by sleasy backroom deals that seem only marginally, if that, legal. To add insult to injury, even when the Court issues a clear ruling - the plaintiffs are entitled to legal fees - it makes the parties go through yet another special master and incur more legal expenses just to get some determination of *what* fees are to be awarded. I *suppose* that if the Special Master decided to award $1 to both the PERS Coalition and to OPRI, it would meet the Supreme Court's mandate. Some justice, eh?

Mamas don't let your babies grow up to be cowboys

Or Tier 1 PERS retirees either (too late, I guess). It's been pretty boring out in PERS-land lately. The only real news has come in the past week or so. PERS announced the 2006 COLA increase today (2% for everyone EXCEPT the window retirees) - so what else is new? The Supreme Court issued its way too long awaited decision in the petition for an award of attorneys' fees to the plaintiffs in the Strunk Case. The Court agreed that the plaintiffs were entitled to something, but then punted to a special master to duke it out with the plaintiffs and the defendants on how much the award should be. The Sartain (COLA freeze) piece of the Strunk case cost more than $350,000 to litigate. Wonder how much the special master will see fit to award. The legal systems continues to grind along at a snail's pace. A hearing is set for September 28th in the Arken case (Window retiree) to consider the motion of summary judgement. The Robinson case is also buzzing along at about the same speed (slowly). For those of you holding out hope for a quick resolution of any of this, I'm laying my personal odds that the current cases won't run out their legal string until about 2008, with some final resolution around 2010. More optimistic predictions focus on 2009. What's one year at this point? AFSCME is holding a Q&A session on PERS this coming Monday night (July 24th at their Portland headquarters). Call AFSCME if you're interested in attending.

Here We Go Again

A repeat title to clarify. Yesterday's post ended up as a mass of corrections and additions. My original first paragraph was the only thing that should have been published. The second paragraph is dead wrong and results from a transposition of numbers. The third paragraph tries to correct the errors of the second paragraph. It is probably easier to just repeat, in different words, the key point.

In 2005, the variable simple earned less than the regular Tier 1 or Tier 2 accounts. This is because the variable is invested in a different pool than the other accounts. The variable pool is a more aggressive mix of equities. In a good year - as last year was - the variable *usually* does better than the regular, which is why there is so much confusion. Unfortunately, while last year was a good year, it was also an unusual year. It parallels a few earlier years in the mid-1980's when the regular outperformed the variable on a pure earnings basis. PERS is not holding back any earnings from the variable. It distributes what is earned. Read PERS' financial pages carefully. You won't find a shred of evidence that the variable earned any amount other than 8.29%. But if you read the summary page, you can be misled into thinking it SHOULD have earned more. You're reading more into the page than is there. Read it carefully.

The Other Side of the Coin

Last week PERS started sending out 2005 statements to active and inactive members. Since those have gone out, I've seen a real increase in my email from Tier 1 members with variable accounts. The question is exactly the same each time. How come the regular Tier 1 earnings were 13+% (only 8% actually paid on Tier 1 Regular accounts), while the variable earnings were only 8.39%? I'm a bit perplexed why PERS has been unable to answer this question for members inquiring. The answer is simple. It is the other side of the coin of aggressive investing. The Tier 1 regular account is invested more conservatively than the Variable account, which is more aggressively managed. In really good times, the variable *should* earn more than the regular and historically this has been true. But, last year was not a "typical" year and the more conservative investment style did better than the more aggressive style. Consequently, the variable actually earned less than the regular. There isn't anything sinister happening here; PERS isn't creaming off variable earnings to stick into reserves. The variable earns what it earns and in 2005 it earned less than the regular. End of story.

Note added at 7 p.m. Not so fast is this the end of the story. Apparently the problem is a bit more complex and requires a clear statement from PERS about what is going on. According to PERS' website, the 2005 financials include the December earnings rate for the variable at 13+%. Since the December earnings are typically within a fraction of a percent of the earnings paid out after end of year accounting, it is somewhat disconcerting to see a 5% difference between the stated December penultimate earnings figure and the actual figure of 8.39%. While I'm certain there is an explanation for this huge divergence, PERS has some big explaining to do. My note above still stands - the variable earnings are supposed to be actual earnings on funds more aggressively invested than the regular Tier 1 fixed account. This year something doesn't add up. Hopefully my contacts at PERS can provide some guidance on this disparity.

Note added even later: My bad. The original statement stands. PERS shows at its variable listing that the 2005 December earnings are indeed 8.29%, not the 13+ I reported earning. I apologize for the confusion. The variable really *did* earn less in 2005 than the regular for the reasons noted above.

Don't Give Up on Me

Every once in awhile some small piece of good news comes along. It's the "don't give up on me" news. Today's good news comes in the form of a Supreme Court ruling that vacates the judgement of January 16, 2003 in the City of Eugene case ("Lipscomb"). While this doesn't undo the effect of the case, it removes the case as legal precedent and may not be cited in future PERS litigation. This is a result of the Supreme Court's ruling last August that mooted the City of Eugene appeal itself by the PERS Coalition. For those interested in reading the Court's ruling, a copy will be posted on my web site later today and an addendum made to this post providing the link.

To be a bit more precise on the effect, normally when the Supreme Court "moots" a legal case, it vacates the underlying case rendering it of no further legal significance. When the Oregon Supreme Court mooted the PERS Coalition's appeal of the City of Eugene judgement, the SC failed to vacate the underlying judgement. This was seen as a glaring omission and legally problematic as it left in force a judgement that itself had been superceded by Legislative action and a settlement agreement. However, as long as the judgement itself wasn't vacated, the case remained as a legal precedent that precluded any further litigation. As I understand it, the City of Eugene ruling simply no longer exists.

I'm Back

It was touch and go there for awhile. I didn't think we'd ever get everything moved. After nearly 17 years of living in the same house, we picked up everything we could and transported humans, cats, frogs, and multitudes of stuff and landed safely in our new digs - in a new county, a new school district, a new zip code, new phone numbers, and one hell of a lot of junk mail that seems to follow us no matter where we go. How do they find us even *before* we filed a change of address? In any case, after of week of being offline I have some of the computers running and connected to the net. My hope is that regular reporting of PERS-related happenings will resume by next week when the dust settles - literally. There isn't a whole lot going on right now. Current members and inactives have started to receive their 2005 account statements. There are many reports that the statements contain "no surprises", and the occasional "WTF is going on with my account". In short, it looks like PERS may have finally ironed out many of its IT problems. The legal front continues to baffle and confuse. By next week I hope to have a summary of the status of the major cases - Arken et al, Robinson et al, and Robertson. If you hear any good gossip or rumors, my email address remains the same.

When I'm Sixty-Four

Is about when the Arken case will be heard. The latest word is that the case has been assigned to Judge Kantor of the Multnomah County Circuit. On May 16, 2006 he scheduled the hearing for Arken et al for May 9, 2008. While one could argue that the basis of the Arken case will not finally affect all the window retirees until sometime after 2007, this insures that *all* "window retirees" will have their benefits adjusted by PERS before Arken is heard. In the meantime, we can wait for the Robinson case to be decided. Lots of speculation about that one. I'd like to be optimistic, but justice delayed is justice denied.

On The Road Again

For the next several months I will be involved in a massive move from our old house to a new house. After living in the same abode for 17 years, the amount of accumulated stuff is just staggering. The move will take place in stages over the month of June and for many periods during the move I will be without internet access until I'm able to set things up at the new house. In addition, once the move is finished, the combination of "moving in" as well as prepping our old house for sale will consume much of July. Finally, we're pretty much taking August off to recover from this ordeal and will spend much of the time at our vacation home in the Bend area. (BTW, we're only moving from Portland to a close-by suburb, not more than about 5 miles from our current location.)

The takehome message is that if you're expecting a regular monologue here, you'd be wrong. I'll try to post as often as needed, but I can't say I'm likely to be as prompt about responding to email. Don't take it personally if I don't answer you immediately.

P.S. (added 5/30). Posting will continue to this blog - I'm not taking the whole summer off from posting as some have misinterpreted. It is just that my posting will probably be limited to significant events rather than the interspersed interesting observations that have no practical bearing on the immediate PERS issues. I hope this clarifies any confusion.

Message in a Bottle

PERS has kindly sent me the "actuarial reduction factors" that will be used in the Strunk/Eugene recovery process. These apply to "window retirees" and serve to represent the repayment factors to be applied to amounts PERS deems to have "overpaid" such retirees. These are *not* mortality factors; instead they combine existing mortality expectations with an assumed 2% COLA on the money being repaid. This has the effect of spreading out the repayment over a longer period of time than mortality tables would suggest but insure that at the expected age of demise (joint or individual), the owed money would be repaid by including the lost interest. It is more complicated, but this method insures that retirees will have less money taken out monthly than they would if PERS simply took the amount owed and divided it by the number of months of single or joint life expectancy remaining. PERS still does not have "actuarial reduction factors" for members who elected "refund" options. Hopefully soon. In the meantime, check back to this post later for a link to the "actuarial recovery factors" I have. I will post them soon.

On an unrelated topic, I have, apparently, overstayed my welcome on Robert Gourley's SEIU retiree's mailing list. Although I never belonged to SEIU or any union (I was unclassified), Robert let me have "guest" status on his list. I had the temerity to suggest that Dawn Morgan did not testify before the Strunk Special Master hearings in a way that favored PERS members (either she wasn't permitted to do so, wasn't asked, or chose not to do so. The reason remains unclear.), Mr. Gourley decided that I no longer deserved "guest" status and he "unsubscribed" me from his list. Strangely, Mr. Gourley continues to cc me on emails related to things I've posted here and elsewhere and so I'm still privy to his various rants about me and other members who post on the Oregon PERS Discussion Group. I want to thank Mr. Gourley for allowing me a window into the inner workings of SEIU politics while I had the opportunity to do so. For me, however, the loss of my occasional email from Mr. Gourley's list spares me from email whose noise to signal ratio was rapidly approaching 100:1.

6:00 pm. Here are the Option 2 & 2A Actuarial Reduction Factors and the Option 3 & 3A Actuarial Reduction Factors. Finally, here are the Option 1 Actuarial Reduction Factors. To use these "factors", you need to determine what you "owe" PERS (my calculator will give you a ballpark figure, but the collection date has changed and the amount you owe will be different. It's a good start though). To use the factors, find the appropriate "factor" in the tables. Then divide what you owe to PERS by this factor and the result is your monthly reduction in benefits or your monthly payback amount. Be sure to use your age and your beneficiary's exact age (in years only) as of 8/31/07. Hope this helps.

Hands Clean

Robert Gourley, of the SEIU retirees chapter, reported that he and others met with Dawn Morgan this morning in Albany (see "Tell Me Why?"). Robert specifically asked Dawn my question about the 1999 Board and the 1999 earnings crediting decision. According to Robert, Dawn said: "I don't remember getting any specific advice about how to distribute the earnings. What we did get advice about was about putting anything into the contingency reserve account. We spent a lot of time trying to figure out whether to put money into this account, and if so, how much. In the end the attorneys advised against funding the account. The PERS statute, which had been in place since near the beginning of the fund, states that the contingency reserve could only be used if the fund was unable to pay benefits. Because the fund is now so large that it is inconceivable that it would be unable to pay benefits, the lawyers said that any money put into the reserve could not be taken out. Interestingly enough, this information was never allowed into the court record. Had it been allowed, I'm confident that Judge Lipscomb would not have found that the Board had breached its fiduciary duty. That would have meant that they couldn't ask for the 1999 earnings back from retirees. Because the new PERS Board was prevented from having any contact with the old Board, they didn't have any way of knowing that this was the case. The settlement that was struck prohibited the information entering the record at the appeal level, too. This should be of interest to anyone trying to understand the Board's actions, or anyway that's what I think. Dawn"

This is very helpful piece of the historical record that has been missing from the discussions up-to-now. Many of us suspected that the Board's actions in crediting the 20% for 1999 was completely within the Board's discretion and that they acted in accordance with legal advice given at the time. Dawn's information indicates that there was virtually no discussion of the earnings crediting rate, but instead a discussion of the need to, or not, fund the contingency reserve. This puts the Board's actions in a slightly different perspective, but also reinforce the claim that there was nothing inappropriate about their actions in 2000. It's nice to see this information out in some form. The state, the employers, and PERS have been working double-overtime to prevent this information from reaching the courts. In so doing, they've permitted a legal travesty. Hopefully, we'll eventually get what we were promised. I'm not holding my breath. Blue is not a good color for me.

Magical Mystery Tour

For PERS members, the Fall elections present some interesting conundrums. As local pundit Jack Bog noted on his blog this morning, "welcome to Neil Goldschmidt's third term as Governor." Jack was referring to the fact that either the Democrat Kulongoski or the Republican Saxton are pretty much creatures of Neil Goldschmidt, and no matter who wins it will simply be another Goldschmidt term. Whatever. What concerns me is that voting this fall will be, for me, a choice between Tweedledum and Dr. Evil. Kulongoski's position on PERS is well-known and hard-felt by any of us in the "favored" group. Saxton's animus toward PERS and PERS members has been just about as in-your-face and public as any politician's position - he is, indeed, the Lars Larson of realpolitik. People will confuse you with Saxton's "moderate" views, but I've heard nothing from Saxton that separates him from Rush Limbaugh. Of course, few PERS retirees can stomach voting for Ted. This leaves, who? Ben Westlund? Pundits are already trying to figure out who Ben Westlund really benefits and hurts. Some say that newly independent Ben is still a Republican in sheep's clothing; hence, a vote for him hurts Saxton. Others point out that union members and PERS retirees - a sizeable group of people - will be hard-pressed to support Kulongoski and so a vote for Westlund helps Saxton. For me, the gubernatorial choice comes down to which weapon I'd like to use to kill myself - a 9 mm Glock or an Uzi. No matter who I end up voting for, I'm gonna hate myself in the morning. Not a comfortable position to be to be sure. More mushrooms please. Time for that magical mystery tour.

Tell Me Why?

Dawn Morgan, former PERS Board Chair, is scheduled to speak about PERS on Thursday May 18, 2006 at 9:30 a.m. at Novak's Restaurant (across from Heritage Mall) in Albany, OR. As I've noted elsewhere, I wouldn't give Ms. Morgan the time of day, but since this is the first time I'm aware of her talking publicly about PERS since she ransacked the PERS membership during her testimony in the Strunk case, I'd be interested in hearing her side of the story. I'd go to Albany myself and ask her in person, but I have other things to do Thursday morning. If any of you go, feel free to ask her MY question: what advice did the AG's office give you in early 2000 before you credited the 20% to Tier 1 PERS member regular accounts? This has been the flash point for a number of legal motions, and the AG's office has always declined to provide this evidence on attorney-client privilege grounds. Since Ms. Morgan seems to be neither attorney nor client, she has no special obligation to keep that information private. I'd be fascinated by her answer, especially if it is what I think it is. So Dawn, tell me why????

Crossroads

I had to miss last Friday's OPRI meeting in Salem. I was partying in California with relatives as my nephew Matt got married. I was especially delighted to see my nephew Adam (Matt's brother) and his new bride. Adam just returned from an 18 month tour of duty in Iraq and a 6 month post combat deployment in Germany. He's now busy training new recruits in Kentucky. (While we're not big fans of the Iraq circus, we're damn proud of Adam's service to his country, and extremely thankful that he returned with both mind and body in tact).

On the PERS front, I'm still trying to get a summary of the OPRI meeting from one of the organizers. I do know that 150 people attended to hear Paul Cleary from PERS speak. In addition attendees heard from Greg Hartman who provided some legal updates on the Arken case (Multnomah County) and the Robertson case (federal case awaiting an en banc hearing in the US 9th Circuit), and from Gene Mechanic, who represents the PERS Coalition in the newly filed Robinson case. Currently, I have no specifics on what either Hartman or Mechanic told the crowd, but Paul Cleary generously provided the complete Powerpoint he gave to the group. It is available for viewing and download at the OPRI website. Worth noting is the very revised timeline for invoicing "window" retirees. It appears that the earliest anyone with a "normal" retirement can expect to see an invoice accompanied by a change in benefits is September 2007, at which point a large number of retirees will experience a benefit increase. The reason for this is that the "revised" benefit will have accumulated enough withheld cost-of-living increases that it will actually exceed the current benefit. Whether net benefits increase at this time depends largely on the amount PERS believes you owe and how long they expect you to live.

Funny How Time Slips Away

Ole Willie was right. Here it is May 8, 2006. At 5 p.m. tonight, the clock runs out on all those "window" retirees who wish to appeal that notice PERS sent them in early March. It only seems like yesterday that I got my "Notice of Board Action" and here I'm out of time to appeal it. Fortunately, the PERS Coalition (including OPRI and AOF - groups to which I belong and contribute) has my back with two different lawsuits filed. These cases are the Arken case (lead attorney, Greg Hartman) and the Robinson case (lead attorney, Gene Mechanic). Both cases have been filed as class actions in Multnomah County. To date, there has been no ruling on class action status. Nevertheless, if you want to help the cause, OPRI represents *all* retirees, regardless of former employer. They have a legal defense fund to which you can contribute. They are also having a general meeting of members and other interested parties on Friday May 12, 2006 in Salem. Wander over to the OPRI web site for more information about the legal defense fund and about Friday's meeting. Alas, I'll be in California attending my nephew's wedding and won't be at the OPRI meeting. But invited speakers include Greg Hartman from the PERS Coalition and Paul Cleary, Executive Director of PERS. It ought to be both informative and enlivening. I highly recommend that those who can get to Salem for this meeting attend.

Several have emailed me about my judge comments in a previous post. There are two interesting statewide judicial races and one interesting local race. The most important statewide race is for the Supreme Court. It pits Jack Roberts, Virginia Lindner, and Gene Hallman against one another for the position vacated by former Chief Justice Wallace Carson. The Oregonian has endorsed Virginia Lindner and she's rumored to be Gov Ted's favorite. Gene Hallman has been widely endorsed by the labor unions involved with the PERS Coalition. To my knowledge, Jack Roberts hasn't any significant endorsements. The second statewide races pits Court of Appeals Justice David Brewer (author of the PERS Special Master's Report used in the Strunk case) in a brutal battle against himself. The only choice there would be a write-in to send a message. Final, the local race drawing the most interest is in Marion County where Judge Paul Lipscomb (yep, that one!) is running against Ross Day. This is a tough race because, in my opinion, the opponent could be worse than the incumbent. The major issue in that race seems to be Measure 37, while PERS has received relatively little notice. Nevertheless...... Finally, keep in mind that all of the current PERS litigation has been filed in Multnomah County, so watching the Multnomah County Circuit court elections might be more than a spectator sport this year. My limited experience in/with the Multnomah County Circuit Court system hasn't given me to strong opinions about any of the judges running for re-election. If others have more information, pass it along.

Here We Go Again

In my haste to post new information on the Robinson case (see yesterday's missive), I forgot one detail of the Robinson complaint. In addition to alleging that PERS effectively has ignored the statutory "exclusive remedy" (section 14b) of HB 2003, the suit also alleges that the "Notification" sent out to "window retirees" on March 8, 2006 does not constitute proper notice under the statute ORS 238.715. I'm no lawyer - and don't pretend to be - but I'm guessing that the court won't be too persuaded by this claim. At worst, the court might find that the notice was incomplete, but PERS would be the first to acknowledge that the recovery provisions of ORS 238.715 aren't complete until the member actually is invoiced. Anyway, to me the strongest argument is the section 14b claim, especially since the Legislature passed HB 2003 with this "exclusive remedy" for the City of Eugene case. That language seems pretty clear and unambiguous to me. Guess we'll let the courts sort that out. [In that regard, let me encourage each of you reading this to think very carefully about the judicial elections on the May primary ballot. In the ongoing battle over PERS, the courts are the arbiters of our fate. Judges do make a huge difference, as we've all learned in the past three years.]

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.