January 2004 - August 2004

August 27, 2004.  This will be my last post here until at least after Labor Day (see August 14, 2004 entry for details).  I remain in contact with many sources of information and will endeavor, if at all possible, to email members of the list (see above) if any compelling news arises.  For those interested in my wife's condition following this latest round of surgery, feel free to email me at one of my many email addresses.

As most of you know, Judge Michael Mosman of the US 9th Circuit has ruled against PERS members in the case Robertson v. PERS.  In effect, Judge Mosman has concluded that the Oregon State Legislature did nothing to breach PERS members' or retirees' contracts under Federal Law in enacting HB 2003 and HB 2004.  While the PERS Coalition says it will appeal this to the full 9th Circuit Court, this is likely to occur only if the Oregon Supreme Court comes to the same conclusions as did Judge Mosman.  The appeal of the City of Eugene case was delayed until November 3, 2004 at the request of non-State attorney Bill Gary.  Undoubtedly, he either knew about or anticipated Judge Mosman's ruling since the Oregon Supreme Court calendar was reset at almost the same time as Judge Mosman's decision was first made available to the attorneys.  Moreover, the State's attorney in the Strunk case has petitioned the Oregon Supreme Court to permit introducing Judge Mosman's decision into evidence for its decision on the Strunk case.  The name of the game seems to be to cite Lipscomb as supporting evidence in all trials, but stall and delay the actual appeal/review of Lipscomb until all the other cases that appear to depend on Lipscomb's original ruling are decided.

August 19, 2004.  The Supreme Court's hearing of the PERS Coalition's appeal of the City of Eugene case (Lipscomb decision), originally set for September 10, then rescheduled for September 21, has now been reset yet again to November 3, 2004.  Makes one wonder what's going on.

August 14, 2004.  Updates to this site will be sporadic for the period beginning August 20 and ending the week after Labor Day.  We'll be on vacation from August 20 - 27.  When we return, we leave again for San Francisco on August 29th where my wife has to undergo more surgery on her back on August 31.  We expect to be in San Francisco until Labor Day.  Once we return, I'll probably be spending most of my time for a week or so attending to my wife's recuperation.  The surgery is to repair an area of her spine that didn't heal properly after last year's two surgeries.  In any case, during the period of her surgery and recuperation, PERS reporting will not be my highest priority.  Nevertheless, I will still have email contact during the entire period and,  if anything really significant comes my way, I'll figure out a way to let people know.

August 13, 2004.  Please read the July 28, 2004 entry for details of the contest to win a $25 Borders gift card for being the person to come closest to guessing the date this site records its 100,000th visitor.  Contest closes soon.  Don't miss out.

August 11, 2004.  Awhile back the PERS Board and the City of Eugene plaintiffs filed a motion with the Oregon Supreme Court to dismiss the PERS Coalition's appeal of the Lipscomb decision because the matter had been "settled".   The PERS Coalition argued that they had been a party to the Lipscomb decision but had been excluded from any involvement in the settlement.  Today the Oregon Supreme Court sided with PERS Coalition and denied the motion to dismiss.  To give both sides time to file written briefs, the Supreme Court has rescheduled the final oral arguments in the City of Eugene appeal to September 21, 2004.   This is a small, but significant, procedural victory for the PERS Coalition.  According to AFSCME, the Lipscomb appeal challenges the terms of HB 2003 and HB 2004 directly, while the Strunk case (argued before the Court on July 30th), challenged the effects of HB 2003 and HB 2004.  For those interested, here is a copy of the actual order.
August 10, 2004.  In yesterday's entry, I described a situation where the wrong answer to PERS could end up coming back to haunt retirees in the very near future.  Our real retiree received a letter from PERS telling him that the August 1, 2004 COLA included with his July benefit check was in error because he was not eligible for it.  They then provided an invoice and demanded an immediate return of the amount of the overpayment.  This member retired on July 1, 2003.  According to both HB 2003 and the City of Eugene case, PERS is not authorized to provide COLA increases for members who retired between April 1, 2000 and before April 1, 2004.  The question is mostly how the member should respond to the demand for payment.  The catch here is that merely sending a check in would (in the eyes of PERS' lawyers) be tantamount to admitting that the member WASN'T entitled to the COLA.  Since all of this is still up in the air legally, it would not be prudent to merely send in a check.  If I were in this situation I would do several things:  1) I would notify OPRI's legal team immediately.  OPRI is the organization specifically representing retiree interests in all the current litigations.  They should be aware of this.  2)  If I were to decide to pay back the COLA, I would include a letter and a notation to the letter right on the check.  My letter would say something like:  "The enclosed check is sent to you under protest.  I do not believe that the 2003 Legislation pertaining to the so-called "COLA freeze" is legal (it impairs my retirement contract), nor do I believe that the City of Eugene vs PERS case judgement mandates a constitutional impairment of my retirement contract.  Since both of these matters are either under review presently by the Oregon Supreme Court, or will be reviewed by the Oregon Supreme Court in the immediate future, I remain unswerving in my belief that I am both eligible for and due an annual COLA on my current retirement benefit."   This represents my best opinion/advice.  I'm not a lawyer and I've had NO legal input on this and won't seek any.  Nevertheless, I am absolutely convinced that the PERS outside counsel would not hesitate to turn this matter around and use it to support his case were a member to be even slightly ambiguous in responding to this demand. 

August 9, 2004.  We've returned from a most relaxing vacation cruise up the Inside Passage to Alaska.  The weather was glorious, the accomodations were excellent, and we made some new friends. 

The arguments lasted almost exactly 2 hours, with each presentation timed closely by the Court clerk.  No one was given much latitude to go over the time limit.

Supreme Court cases are very different from anything I've experienced before and so my impressions are governed exclusively by what I saw and heard, most of which is probably irrelevant and immaterial.  All the lawyers involved agree that the written arguments and the evidentiary record is largely what the court will go on.  Since I have limited time in which to write this, I'll simply report my salient observations and conclusions and leave further discussion until after I return on August 8th.   If I were a betting person, I would conclude from the tenor of the hearings today that the OPRI suit (Sartain v PERS) involving the COLA freeze will emerge victorious (sorry if I left a misimpression earlier.  It happened in haste).  In other words, I would predict based on the final arguments today that the Justices will overturn the Legislative COLA freeze.  (In this context, the "settlement" itself came in for some scorn by Justice Gillette, who just didn't seem to be the least bit persuaded by the defense's argument that the PERB did what is was required to do by Judge Lipscomb.  If I recall, Judge Gillette came very close to saying something to the effect that just because some county judged ordered the PERB to do something doesn't mean they have to follow the order.  Please don't quote me on this.  I'm merely doing a "memory dump" here). Justice Gillette was unmerciful in his questions of the defense attorneys over this, and appeared not to be the least persuaded that abuse of discretion (if it occurred at all) is by itself illegal and the various attorneys representing the defendants had a hard time with Justice Gillette's (and Justice de Muniz's) questions concerning this matter.  The attorney representing PERB - James Baker - was simply outnumbered and outgunned by the Supreme Court.  At the end of his oral presentation, he appeared to be shaken and shaking from the vigor of the questions.   It is much harder to read the Justices on the rest of the cases.  The Justices (Gillette in particular) seemed to engage in spirited questioning of plaintiff and defense attorneys with no clear compass reading on how they might be leaning.  Justice DeMuniz asked Bill Gary a question that seemed to fluster him, in part because it seemed a bit "off the wall".  Gary responded that he really didn't expect the question and seemed to have trouble answering it.  The exchange began when Gary was asserting the defense theory that the Legislature had the authority to make prospective changes to the PERS system.  Justice De Muniz then asked a question about "vesting".  To paraphase the question, Justice De Muniz asked Mr Gary whether, under his theory, the Legislature could alter the vesting requirements for PERS membership to say, 10 years, 15 years, 20 years, 30 years, or even 40 years for members who were already employed but not yet vested.  While Mr Gary didn't lose his composure - he is a daunting attorney - he did have to think carefully before answering.  His response was that he didn't believe that would be a permissible change.

In the end, it is anyone's call how the Supreme Court will rule.  The whole issue may come down to deciding the extent to which the changes made affect benefits for work already performed as opposed to those benefits for work yet to be performed.  As the parties made clear, this is not a simple cut and dried issue, although there is ample precedent for the Court to decide.  

All the justices asked intelligent, if argumentative questions.  Chief Justice Carson chose to spend his time listening to the Q&A, while not himself asking a single question.  Justice Gillette seemed to be enjoying himself immensely and is clearly the dominant questioner during oral arguments.   Several times he reminded the attorneys that "...I get to crack the jokes, not you".  It was both good natured and deadly serious.

At this point, I have no more time to add details.  I'd be happy to supply additional details when I return.  Have a great first week in August.

July 28, 2004.  I continue to be astounded by the number of people reading this page.  I took note of the "hit" count earlier today and realized that it won't be all that long before this page gets its 100,000th hit.  Obviously PERS-related issues continue to attract interest and galvanize people.  In that spirit, I'm offering a $25 Borders gift certificate to the person who comes closest to predicting the date when the site records its 100,000th "hit".  Please email me your predicted date and I will enter you in the contest.  For what it's worth, the site averages about 150 "hits" per day in a slow news week, and upwards of 500 "hits" per day in a busy news week.  Since I never know when a busy news week will arise, your guess is as good as mine.  In case of a tie, the earliest time-stamp wins.   Closing date for entries is August 15, 2004.  (Note to Tim:  no prize for being the 100,000th visitor <g>).

July 27, 2004.  A number of new documents relevant to the upcoming final arguments before the Oregon Supreme Court are now posted on the Association of Oregon Faculties website (http://www.oregonfaculties.org, see "Breaking News").  The first document is a draft copy of the petitioner Sartain's response to the respondents' brief.  Martha Sartain is the member of  OPRI (http://www.opri.org) that OPRI is using to contest the retiree COLA suspension contained within HB 2003. The second document is a brief email from Greg Hartman outlining the current status of all cases filed by the PERS Coalition. 

Finally, I'm getting reports that the oral arguments before the Supreme Court are going to be broadcast to spectators in another part of the Supreme Court building.  The Supreme Court has limited seating and there are so many "suits" representing so many people in these consolidated cases that there won't be room in the actual courtroom for visitors.  Nevertheless, I urge everyone who can to attend and see how this process works.  The Supreme Court is at 12th & State Street in Salem.  The proceedings begin at 9:00 a.m. and are expected to last for 2+ hours.

July 22, 2004.  For those interested, the petitioners (the PERS Coalition, OPRI and others) have put together a joint response to the defendants' opening arguments in the Strunk case.  You can read the entire response on Greg Hartman's website (here).

July 15, 2004.  In an AFSCME e-Lert, Don Loving posted this request on behalf of PERS Coalition attorney Greg Hartman:  "Money Match Variable. To date we have not been able to identify plaintiffs that meet our parameters, though that should change pretty quickly now that we're beyond the July 1 deadline for applying the new OREGON PERS rule. Again we are looking for plaintiffs who have been adversely affected by the money match variable rule, which most likely impacts anybody who retires who had a variable account. We need at least one Multnomah County participant, though we'd be happy to have individuals from other counties as well."

July 14, 2004.  Believe it or not, there is virtually nothing to report right now.  The plaintiffs and the defendants are busily preparing for their date with the Oregon Supreme Court on Friday July 30, 2004.  The court will hear final arguments beginning at 9:00 a.m. in the Supreme Court building in Salem.  Barring anything unforseen, I plan to sit in on the oral arguments.  I encourage as many members as possible to show up.  Otherwise, the scene will be dominated by the 25 or 30 "suits" who are involved in arguing this case for the plaintiffs and for the defendants.  You can watch for press reports of the case by late July 30 or in July 31st editions of local papers.  If I have time, I'll post my impressions on July 30th.  On July 31st, I leave for Vancouver, BC to pick up a cruise ship on the Inside Passage.  I'll be gone and out of both email and web contact from July 31 to August 8.

July 8, 2004.  I've gotten quite a few emails from inactive (unretired) PERS members who, following a prolonged break in service and for a variety of reasons, have either started back to work for a PERS employer or are considering doing so.  Virtually all these inquiries are from inactive Tier 1 members and the common question is how the difference in normal retirement ages between PERS Tier 1 (or Tier 2 for that matter) and the OPSRP will be reconciled.  Under Tier 1, a PERS member can retire at age 58 without regard for years of service and at any age with 30 years of service.  Under the OPSRP, 65 is the normal retirement age and 58 is the age of eligibility with 30 years of service.   Under all systems, the earliest age one can retire without 30 years of service is 55.   

The simple answer is that the retirement systems function independently.  A 58-year old Tier 1 member who also belonged to the OPSRP (because of a break in service), could draw full Tier 1 pension benefits, and also draw actuarially reduced OPSRP benefits (or delay taking the OPSRP benefits until age 65).  A 55 year old Tier 1 member with 30 years of service could draw full Tier 1 benefits plus a reduced OPSRP benefit (although I'm not clear on how the service time accumulations affect the 30 year question.  Suppose 25 years Tier 1, break in service, 5 years OPSRP.  Does this member have 30 years eligibility for Tier 1, or only 25 years?).

The answer for younger members with 30 years is still a bit murky to me.  I'll report back when I have some clarifying answers.

July 1, 2004.  The last of the 2003 Legislative and litigation changes took effect today.  As of today, inactive members since before 1/1/2000 are eligible for the one-time 50% bonus (50% of employer "match") if they withdraw their entire PERS balance before 6/30/06.  As noted before, this doesn't strike me as a good deal, especially if you are within striking distance of the PERS earliest retirement age.  Also, today marks the day that the first of the retirements under the revised Lipscomb variable match takes effect. 

There remains some confusion about the IAP.  To the best of my knowledge, IAP funds are being invested like regular PERS funds and will earn returns like Tier 2 funds do now.  At some point in the future, PERS *may* offer members the opportunity to invest in a more diverse basket of securities, much like the OSGP, but this is by no means certain.  Several have inquired about the "loss" of the employer match for the IAP.  Members have not lost the employer match, but will not receive it on IAP funds.  If I recall correctly, when the IAP was approved last year, the employer match was still required to fund the old PERS system.  Although members are no longer contributing to that fund, the fund will - one hopes - continue to grow following investment performance.  Employer contributions are still required to maintain the old system until the last of the Tier 1 and Tier 2 beneficiaries dies.

June 30, 2004.  If you haven't taken the time to read some of the documents on the Bennett/Hartman website (see link below, June 26), you really should.  In particular, you should read the "Respondent's Joint Answering Brief - Strunk", and the "Amicus Brief".  <sarcasm ON>  After reading both these briefs, I can't stop thanking the State of Oregon who blessed me with 30+ years of below-market wages and always promised that my loyalty would be taken care of in retirement.  I guess I wasn't smart enough to figure out that "taking care of" means something different to the architects of this wave of Legislation.  I'm deeply privileged to have been allowed to toil in your fields for so long.  My cup runneth over with gratitude.  Moreover, I am eternally grateful to the Governor and the Legislature, as well as to all the other helpful folks out there, who set me on the path of righteousness and salvation and who, by their acts of good will and fellowship exacted only 450 grams of my flesh instead of the full pound that the law allows. </sarcasm OFF>.   Seriously, you *should* read these briefs to understand exactly where the parties are coming from as we cruise into the last 30 days before the Oregon Supreme Court hears final arguments in the Strunk case.  If you had any doubts that the State, the Governor, the Legislature, the business community, and the employers weren't deadly serious, these briefs demonstrate that the parties are sparing no expense, pulling out all the stops, and taking no prisoners.

June 29, 2004.  PERS officials have confirmed that my understanding of the variable match, articulated below (June 26), is correct.  If you were able to effect the "one time variable transfer", the Lipscomb adjustment to the variable match will have a negative effect on your employer match.  The extent of the effect is determined by the difference between your variable account earnings under the variable return rate (since 1/1/1982) and the variable earnings computed as if you had never been in variable (i.e. at "regular").  When you made the transfer, the variable at variable earnings exceeded variable at regular by some amount.  It is that amount by which your variable match will be reduced, with the attendant reduction in your final benefit.

June 26, 2004.  I'm back from one vacation and won't be leaving again for a few weeks.  There is still not much going on.  Members retiring on or after July 1, 2004 will be faced with the continuing saga of the Lipcomb adjustment to the variable match.  Confusion still reigns on exactly how PERS will compute the variable match for members who took advantage of the "one-time variable transfer".  The basic message, as I understand it, is that if you were able to effect this transfer prior to 2003, you will be negatively affected by the Lipscomb adjustment, but the extent of the "hit" still is determined by when you entered variable and when you exited.  You are not subject to the "hit" for the period of time after you left the variable. 

A bunch of new legal documents are posted on the Bennett Hartman website concerning the Oregon Supreme Court case (the "Strunk" case) contesting HB 2003 and HB 2004, as well as the appeal of the Lipscomb decision.  You can read this at www.bennetthartman.com.

June 17, 2004.  I will be out of town from the evening of June 18 until the evening of June 25.  Nothing much is going on right now and I'll be unable to update this site during that period.  If anything "of the moment" occurs, I will post a note of some sort over on the "PERS Discussion Group" (see left bottom for link), and will send an email to list subscribers. 

June 15, 2004.  Federal Judge Michael Mosman ruled against the PERS Coalition (Henderson Case) in their attempt to bring suit against the PERS Board for failing to follow a 1979 Federal injunction against PERS.  "That injunction requires the PERS Board to use topped-up or male-only actuarial tables for all PERS members retiring after the date of the injunction order. The case alleges that the new actuarial equivalency factors adopted by the PERS Board violate this permanent injunction."  (from Bennett-Hartman web page).  Judge Mosman found the injunction sufficiently ambiguous that he felt there was insufficient evidence to indicate that the PERS Board had violated it.  The PERS Coalition anticipates an appeal to the US 9th Circuit Court of Appeals.

June 14, 2004.  For PERS members who haven't been employed in a PERS-covered position since before January 1, 2000, note that SB 258 becomes effective on July 1, 2004 and expires June 30, 2006.  SB 258 provides a one-time opportunity for inactive PERS members (again, note the dates) who are fully vested to withdraw their account balances and receive a 50% "bonus" (half the employer "match") for doing so within this 2 year time frame.  To be perfectly honest, this is *not* a path I'd advise many to consider, especially if you are close to age 55.  Keep in mind that if you hold out until your 55th birthday, you can retire under the Money Match option or withdraw your entire account balance *and* the full employer match without SB 258.  Taking the "one time offer" of SB 258 means, in effect, that you are giving up (a) 50% of the employer match; (b) the opportunity to be guaranteed a lifetime pension.  Given the Legislative changes "b" may seem like a dim prospect, but consider that if you choose to manage your own money, it becomes your responsibility to manage this entire corpus (often a large sum of money) to ensure it lasts over your (and possibly your spouse's) lifetime.  If PERS manages it, the ordinary pension options (2, 2A, 3, 3A, and to some degree 4) guarantee lifetime pensions to you with some residue (all or part) to your spouse.

I'm not sure who should consider this option.  If you are in your mid-40's and have a competent and trustworthy financial advisor, you *might* be able to make up the lost 50% before you turned age 55.  At the same time, PERS will eventually have to start paying earnings again on Tier 1 accounts (probably in 2005), so even if your stellar financial advisor is really good, he/she'd have to not only make up the 50% loss, but also make up any earnings that start to accrue again on the PERS Tier 1 accounts. 

Before considering this option, you would be well-advised to speak with a financial planner as well as with a CPA.  If you choose this offer, be absolutely and positively certain you understand what the tax consequences might be if you fail to roll the money into an IRA or equivalent tax-advantaged retirement account.   Also be very aware that *some* financial advisers have an active and vested interest in getting their hands on YOUR money.  If the financial adviser wants to sell you some investment product, then, in my opinion, you're not getting unbiased advice. 

June 12, 2004.  PERS members should begin to see their 2003 account statements between now and the end of June.  PERS started mailing the reports to employers on June 9 and expects all to be in the mail by June 18.  After that, it is the employers' responsibility to distribute them to employees.  Presumably inactive members will get their statements directly from PERS.  The new forms look quite a bit different than previous forms.  You can see a sample of the new version on the PERS website.

I've started to "dink" around with a revised calculator for members who never had a variable account with PERS.  My initial thought was to simply bypass (make read-only) the fields that gathered information on the variable account.  The early version will probably use that shortcut; however eventually (before the summer's end) I want to release a version that has no trace of a variable account entry.  The new version needs a bit more work because the 2003 statements are now available, whereas the previous version used solid estimates of the rates PERS was going to pay in 2003.  I hope to have something posted within the next several weeks.

June 10, 2004.  No word yet from PERS or anyone else concerning the 92-day window snafu (catch-22) at PERS.  I think the issue involving the interest crediting flows from a literal reading of the statute pertaining to the 92-day rule.  It says that if PERS can't meet the deadline, it is supposed to credit interest to the member at last year's regular rate (or something very close to that - I certainly read the statute, but I'm NOT quoting it directly here).  Of course, last year's regular rate is officially 0% because of the legislation enacted by the Legislature.  Consequently, when PERS says it can't pay interest by statute, they mean something a bit different (I think) than what members are interpreting.  The CAN pay interest by statute and are supposed to pay interest by statute, but when the rate they're supposed to use is 0%, then the point is pretty much moot.

June 7, 2004.  I've gotten several reports from PERS members who retired on March 1, 2004.  By now and by statute they should have received their first benefit check (the statutes require that the first check be issued no later than 92 days from the date of retirement).  At least two members have gotten calls from PERS telling them that PERS would not be able to meet the 92 day deadline.  When asked whether interest would accrue on the late payments, PERS representatives told them that statute does not allow them to pay interest on late payments.  Moreover, PERS is unable to give these members any time frame in which they might expect their first benefit check.  This is not a happy situation.  It appears that there is a double standard here.  PERS has the legal authority to strip you of money it decides it has paid you "in error".  This is codified in statute.  PERS also has the statutory requirement to pay benefits within 92 days of the effective retirement date, but apparently the statutes don't include any sort of penalty to PERS or inurement for the member.  The legal mess just gets worse.  Be sure to thank your legislator for this fiasco.

If you have been affected by the failure of PERS to meet the 92-day deadline (i.e. you retired on or before March 1, 2004 and haven't received your first benefit check), please contact me via email (feldesmanm@pdx.edu).  At least one reporter is interested in pursuing this further, but needs real stories.

I just heard that OPRI (Oregon PERS Retirees Inc - www.opri.org) has been permitted amicus status in the upcoming appeal of the Lipscomb decision, scheduled for the Oregon Supreme Court on September 10, 2004.  While retirees are part of the PERS Coalition, OPRI has some specific legal issues with the Lipscomb decision that would be better raised coming directly from them.  

June 4, 2004.  The PERS Board met today and adopted the permanent rule implementing the revised variable match calculation as per the City of Eugene settlement.  All members with variable accounts who retire on or after July 1, 2004 will be affected by this rule change.  For almost anyone who started in the variable during the 1980's, the effect will be negative but the magnitude is entirely dependent on individual circumstances; for those who started in variable in the 1990's, the effect could be a small positive, again magnitude indeterminate.

 The City of Eugene case appeal is docketed for the Oregon Supreme Court hearing on September 10, 2004.  I'm not clear on whether this is the Intervenor's appeal (the PERS Coalition) or simply the hearing requested by PERS and the plaintiffs in the City of Eugene case to dismiss the appeal. 

Both the plaintiffs and the defendants in the Robertson case - the Federal court case appealing the 2003 Legislative reforms - still wait for Judge Mosman to issue a ruling on several motions filed by both sides in the case.  Judge Mosman promised a quick ruling, but according to Greg Hartman, lead attorney for the plaintiffs, this could mean almost anything.

May 28, 2004.  PERS is holding a "Turn in Forms Day" today from 2 - 5 at PERS Headquarters in Tigard.  For those still puzzling out whether to retire June 1 or not, keep in mind that to effect a June 1 retirement date, you CANNOT be working in a PERS-covered position after May 31, 2004.  You must officially resign your position (you may go back to work on contract subject to the usual rules covering such contracts and PERS) and notify your employer.  Your retirement papers cannot be processed until PERS has the official "Notice of Separation" from your employer showing your last day of work to be on or before May 31, 2004. 

For those who absolutely cannot get to PERS offices in Tigard or Salem today, you can drop the forms in one of the lockboxes outside either the Tigard or Salem offices before those offices open again on June 1.  (Do it before midnight on May 31st).  Applications in those boxes when PERS opens on June 1st will be considered in before the deadline.  Also, members who can mail their applications in *and get them postmarked on or before May 31* will also be considered to have filed their applications in a timely manner.  Since few post offices will be working over this long weekend, it might be hard to be assured a postmark if you drop it in a mailbox on a holiday schedule.   (If I wanted to be sure, I'd personally get the application in to PERS before 5 pm today, but I realize this isn't possible for those of you who live distant from either office).

Finally, there is ONE circumstance where a PERS member could wait until after June 1 and still retire effective June 1.  In this circumstance the member (a) HAS TO BE NO LONGER WORKING FOR A PERS EMPLOYER *and* (b) cannot purchase any form of waiting time, service credit, or military time.  In this limited circumstance, the member may turn in papers before July 1 and have the retirement be effective retroactive to June 1.  (I also don't recommend this strategy either.  If you want to retire on June 1, then turn the papers in before June 1.  Your separation notice has long been filed).

May 27, 2004.  Members eligible to retire either June 1 or July 1, 2004 and who haven't yet decided what to do are faced with a particularly difficult conundrum.  And you only have until tomorrow at 5 p.m. to get your application in for a June 1 retirement.  Variable earnings rates through April 30th (which apply to June 1 retirements) has been posted at 0.16%.  This is down significantly from the February and March rates.  So those still contemplating this decision have to decide whether to accept a genuinely small (but positive) rate of return in exchange for some certainty in their pension benefit by getting out on June 1, or decide to play "Lipscomb roulette" and "Wall Street bingo" by waiting to retire on or after July 1, 2004. 

May 26, 2004.  Mostly nothing new to report.  Members are frantically trying to decide whether the retire on June 1 or play roulette with a post-June 1 retirement. 

The Strunk case (the consolidated cases that the Supreme Court hears on July 30) is moving into high gear.  The plaintiffs (PERS Coalition and others) have filed their opening brief.  You can read it (88 pages) here.  I *may* comment after I've had a chance to read it.

May 21, 2004.  The Cascade Policy Institute, a libertarian "think tank" based in Portland, has weighed in on the legal cases before the Oregon Supreme Court that challenge the 2003 Legislature's PERS reform measure.  You can read the brief here.  Of particular note is the last paragraph of this two page essay where its author, Steve Buckstein argues that one of the best outcomes of the current litigation would be for the PERS Coalition to win (i.e. that the reform legislation is completely overturned) and for the Legislature to then follow up with terminating PERS completely and developing a replacement system that is cheaper.   (For a contrasting opinion on the likelihood of this occurring, see my notes on Greg Hartman's presentation to AOF posted on May 8th).

May 19, 2004.  One of my list subscribers sent me some information she received from PERS concerning the problem I described in yesterday's entry.  Apparently, after PERS set up the email request line for getting the revised variable match estimates, the Attorney General's office weighed in that PERS should not be providing them unless the member makes the request in writing (i.e. by mail or fax) with a signature.  I'm not sure why this is such a big production, but it certainly places a major burden on members faced with the excruciatingly short timeline for making a decision between a June 1 and July 1 retirement date.  In any event, PERS has not (as of a few minutes ago) changed its website to reflect this requirement. 

UPDATE (2:40 pm)  I finally heard back from someone at PERS about this problem.  The variable match adjustment estimates will be processed without needing a signed, written request.  PERS will email members who erroneously got the notice telling them that a signed, written benefit estimate was required.  Members will be told that they will get the variable match adjustment without needing to submit a formal, signed, benefit estimate request.  The problem, I believe, stems from an internal confusion between an estimate of benefits (which members have always had to submit in writing), and the simpler re-calculation of the size of the adjustment to benefits resulting from the revised variable match procedure. 

I'm hearing several rumors that the lead attorney in the City of Eugene v PERS case (Bill Gary) filed a motion with the Supreme Court to dismiss the appeal of the City of Eugene case.  If true, it must be the PERS Coalition's appeal he's trying to get dismissed; the PERS Board's appeal has already been dismissed as part of the settlement. 

May 18, 2004.  Where were you on this day in 1980?  Amazingly, today is the 24th anniversary of the first big eruption of Mount St Helens.  I watched it blow from the banks of the Willamette River at 8:30 a.m. 

I continue to get reports from PERS members about problems they've encountered with the revised variable match estimator that is accessible via email from PERS' website.  The latest wrinkle in the story is that a member was told that to get the estimate of the Lipscomb "hit", he had to apply in writing, not by email.  I know there must be more to this story than is being related, but it seems to me that there continues to be disconnect between the theory of how this is going to work and the actual implementation.  Unfortunately, there are only 8 business days left for members to decide between a June 1 and July 1 retirement date. 

May 17, 2004.  A representative from PERS contacted me today about the May 16th (below) entry.  He was concerned with my remark about "...the only discrepancy...".  He noted that PERS uses the rate supplied by the member, not its own rate.  Thus, the 7.5% imputed rate *must* have been member-entered.  As I explained in a return email, I *know* that the member used a 3% rate and that there must be some sort of disconnect between what the user enters on screen and what the PERS program uses.  PERS is checking into the matter further.  If any of you have requested an estimate of the benefit "hit" from the Lipscomb revised variable match, please let me know whether the imputed variable interest rate matches what you submitted. 

May 16, 2004.  A list subscriber sent me a copy of the form he received from PERS detailing how the revised variable match adjustment would affect his retirement benefit. The form is colorful and easy to read. The calculation details are not shown, but the way the calculation is done mirrors what has been described earlier both in PERS examples and in the spreadsheet I posted on February 14th. The only discrepancy we noted was in the assumptions PERS used to determine how variable would perform over the first half of 2004. We tried to be realistic and used between 3-4%, while PERS used 7.5%. This resulted in PERS' estimating his benefit reduction at $10 less than we did. For interest, the difference to him would be $149 per month between a June 1, 2004 date (better) and a July 1, 2004 (worse) date.

May 12, 2004.  Paul Cleary was officially appointed as PERS' new Executive Director at yesterday's Board meeting.  He will assume command on or about June 1, 2004.  The Board also announced that Jeff Marecic has been appointed the permanent ISD Director.

May 11, 2004.  PERS has posted an update to its website here (take note of the NOTE) for people on the cusp of a June 1/July 1 retirement date.  If you are eligible to retire on either date, PERS will provide you with numbers you can use along with a regular benefit estimate to determine the increase or decrease in your benefit that would result from the revised variable match.  

May 10, 2004.  There is some (unconfirmed) information floating around right now that PERS will now (or very soon) begin providing benefit estimates that include the revised variable match for members on the cusp of a before/after July 1 retirement.  I hope to have confirmation of this later today.  While this is good news, for those who might experience a heavy "hit" by retiring after June 1, 2004, the new benefit estimates are going to have to arrive really quickly and members prepared to act even more quickly to avoid missing the deadline.  Only two weeks remain for this decision.

Over the past few weeks I've been able to look at about a dozen sets of data from members with variable accounts stretching back into the 1980's.  Some have sent me the data with the Lipscomb adjustment prefigured; others have sent the data and have asked for my help in trying to compute the adjustment.  In addition, PERS has posted example data on its website for a very hypothetical member under a very unrealistic salary scenario.  Nevertheless, all of these data - real and hypothetical - seem to be saying the same thing.  The factor that affects the size and the direction of the Lipscomb adjustment to the variable match is the YEAR that you first started in variable.  It doesn't seem to matter whether you put in 25%, 50%, 75% or changed allocations over time.  Because the comparison is between what the contributions earned in variable with what those SAME contributions would have earned if they had been in the regular account, the difference between the compounded regular return rate and the compounded variable return rate seems to be determinative of whether your benefit is reduced or raised and by what amount.  In this regard then, a trip here would help.  People who started in variable between 1982 - 1991 will almost certainly see a reduction in their benefit over the current matching methodology.  The size of the reduction will depend on the contributions over the years and variable account balance at retirement.  People who started into the variable between 1992 and 2000 will see benefit increases, the size of which also depends on the contribution level and final variable account balance, while members who entered variable after 2000 will again see benefit reductions.  One useful thing to note is that members who started in variable BEFORE 1982 will see lesser reductions than those who joined later.  This is because the pre-1982 contributions will be matched using the current methodology.

I would never generalize broadly from these limited observations, but the fact that they hold in every case I've seen or have been told about suggests that it is a pretty good rule of thumb to use.  (I'd welcome a counter-example, by the way). There is NO way to draw any further inferences.  It is not possible to determine the magnitude of the adjustment without having precise contribution information.  If you have the contribution information, it is pretty simple to figure out both the dollar value of the reduction/increase and the monthly reduction under any of the PERS options. 

Two other observations.  It isn't clear to me exactly how (or if) people who took the one-time variable transfer will be affected by this.  Certainly the observations above don't generalize to those circumstances.  It is also the case that at June 30, 2003 - the date of the "lookback" - the revised variable match would probably be higher than under the current method - this has been the case in all the examples I've been able to look at.  The difference is relatively small in most cases, but it is positive rather than negative in the examples.   

May 8, 2004.  I just returned from the Association of Oregon Faculty's annual meeting in Corvallis.  As part of the meeting, Greg Hartman gave a brief update on the status of the litigation against the Legislative reforms, the City of Eugene appeals, and the breach of fiduciary duty suit filed against the current PERS Board.  He also indicated that additional litigation was possible, including action challenging the Board's decision to place $1 billion into reserves that have no clear function - in short, for keeping money out of members' hands.  Mr. Hartman explained that one of the reasons for filing the federal case was, in addition to getting a "second bite at the apple", to de-politicize (federal judges are lifetime appointments) the issues and put the federal judiciary in the position of looking over the shoulder at the Oregon Supreme Court.  Mr. Hartman feels that the Federal lawsuit will probably wind up in the full US 9th Circuit Court of Appeals, where a decision is unlikely before about 2006.

     At the state level, he gave a fairly clear assessment of the Oregon Supreme Court cases now before the court.  He explained that the defense is pushing four different avenues of attack, giving the court a number of ways in which it might rule.  He regards two of the approaches to be unlikely directions for the court to take.  He doubts that the Supreme will overturn the OSPOA (Measure 8) decisions, for to do so would require them to unwind nearly 30 years of previous Oregon Supreme Court rulings covering PERS and the "contract".  He feels that with 4 new justices on the court, they would be unlikely to sweep aside that legal history.  At the same time, Mr. Hartman believes that the "financial exigency" defense will also fail.  To accept that defense, he argues, would jeopardize the bonding capability of the State of Oregon by communicating to the financial community that if the State can't meet its obligations it will simply claim a financial defense and bail out.  This leaves two possible lines of attack, both of which are the focus of the plaintiffs' briefing plans.  The first is that PERS is hopelessly broken and that the Legislature had no other choice but to come in and fix it.  The second is that the PERS Board failed to follow the statutes in place and, by so doing, made a series of bad decisions that the Legislature had to fix.  While the attorneys are not discounting the overturn of OSPOA or the financial exigency defense, clearly the energy is focused on convincing the Court that the system is not broken, that there *is* a binding contract, and that the PERS Board followed the statute, the contract, and the law in its decision-making.

Mr. Hartman also believes that if the plaintiffs win (i.e. the Legislative fixes are overturned in the Oregon Supreme Court), that it will take several Legislative sessions and possibly more litigation to achieve a final remedy (much like the case involving the taxation of PERS benefits, which took 4 legislative sessions to resolve finally).  He does not believe that terminating PERS would be an outcome of the 2005 Legislature, because a plaintiff victory in the litigation would establish the contract and make it difficult for them to then break it again in a different way.  He did suggest that if the Legislative reforms are overturned, the Legislature (and presumably the Governor) will be very unhappy (actually he used a different word) and could seek other types of legislation that would be viewed as harmful to public employees (e.g. legislation to overturn collective bargaining for public employees).  He made it clear that he thought the 2005 session would be brutal regardless of the outcome of the current litigation.  (This was echoed by AOF's two lobbyists, Mark Nelson and Bill Linden).

     Mr. Hartman spoke briefly about the composition of the Oregon Supreme Court (which includes two of his former law partners) and corrected some factual errors about the current court.  Only 3 members of the current court were involved in OSPOA in 1996.  Of these, Carson and Gillette voted in the minority on one of the three OSPOA rulings (which would have ended the 6% "pickup"), with Gillette writing the dissenting opinion. The other two cases were decided unanimously.  He reminded the audience that the vote count on a previous case is irrelevant - the majority rules and it mandates the legal finding.   He also responded to a question that Justice Kistler, while on the AG's staff at the time, did *not* argue the Measure 8 case for the AG's office before the court, and his prior record on Measure 8 isn't known.  Hartman said that the Court wants to decide the case before the end of calendar 2004 or very early in 2005. 

May 7, 2004.  According to PERS' website, members who elect the total lump sum (member plus employer match) option on or after July 1, 2004 will *not* be subject to the revised variable match adjustment called for in the City of Eugene settlement.

I've heard rumors that PERS is developing software to calculate the revised variable match and this software will be tested out next week.  It is not clear whether this is software available to members or is to be used by PERS staff for the purpose of preparing benefit estimates.  The revised variable match adjustment is relatively simple to figure out if you have access to all your statements back to the point at which you first started participating in variable.  Several of us are working on a "fill in the blank" spreadsheet for people with the relevant data.  Don't know when it will be available, but you can check back here in a week or two. 

May 5, 2004.  My contacts at PERS have told me that "...for the purpose of calculating the "variable at regular" for 1999 under the revised variable match, we will use 20 percent."  This has important ramifications for calculating both the "lookback" under the revised variable match and for calculating the true benefit at retirement under the revised variable match. 

For those who effected the "one time variable transfer" prior to 2004 (say in 1999 for 2000), and who continue to work, the question of whether the Lipscomb adjustment applies and, if so, how will be discussed at the May 11, 2004 Board meeting.  Whatever recommendations the Board makes will become part of the permanent rule that the Board expects to adopt at its June meeting.     

May 4, 2004.  As I was reading through the minutes of the April 12, 2004 PERS Board meeting today a thought occurred to me than I hadn't considered.  The Board "reset" the 1999 earnings rate for the regular Tier 1 accounts from 20.00% to 11.33% on April 12th.  In calculating the Lipscomb adjustment to the variable match, all of us have been using the higher (20%) figure, which typically has resulted in a higher "lookback" benefit (at least for those cases I've examined).  All bets are off if PERS decides to use the 11.33% to do the 1999 calculation.  I'm trying to get an answer from PERS on this right now. 

May 3, 2004.  PERS representatives have gotten back to me about my concerns of May 1, 2004 (see below).  PERS is unable to provide estimates using the new variable match methodology; they simply cannot handle the workload.  PERS Counselors are also unable to discuss how the variable match change will affect people individually; however they are willing to discuss its effects in general terms.  As for pre-1982 variable matches, the Lipscomb adjustment does not affect them.  Members will receive the match for those earnings (pre-1982) on a dollar for dollar basis.

The PERS Board has named Paul Cleary, Director of the Oregon Water Resources Department since 2000, as the new Executive Director to replace Jim Voytko, who resigned last October.  Before serving with the Water Resources Department, Mr. Cleary directed the Oregon Department of State Lands. 

May 2, 2004.  I've had the opportunity (?) to help out a few members with complete PERS records figure out the revised variable match under the "lookback".  Recall that the revised variable match rule (ORS 459-013-0280) currently under public review requires that employers only match the variable earnings as if the money had been in regular the whole time.  For parity, this calculation is done on the account balance at retirement and on the account balance "frozen" as of the date of the "lookback" (June 30, 2003).  The few members who I've helped out have variable contributions that started during the early 1980's and either stopped in 2001 or continued to 12/31/03.  The results have been uniform so far.  Under the "lookback", the Lipscomb calculation has resulted in every case in members receiving a HIGHER benefit than they would have received under the old mechanism at the "lookback".    By contrast, in all but one case, the member would receive a slightly smaller benefit after the Lipscomb adjustment than under the old mechanism when the final variable account balance (ca. sometime in 2004).  The reason is simple:  members with variable account at the end of 2003 will be credited with earnings of 34.77% on the variable portion and 0% on the regular.  At June 30, 2003, members would have been credited with 4% regular and 11.77% variable.  The small spread at June 30, 2003 (preceded by 3 negative years) isn't enough to do better than the member would have done if the money had simply been left in the regular the whole time.  On the other hand, for the whole 2003 calendar year, there is a nearly 35% spread between the regular and variable, and in most cases that is sufficient to keep the variable at variable (actual earnings) slightly greater than the variable at regular earnings.  Under Lipscomb, employers only have to match the latter, not the former. 

While I wouldn't want to generalize from these results, they do have some interesting inferences.  If you have a variable account *and* the "lookback" is the winning method, the chances seem pretty good that it will actually cost employers more at your retirement than it would have if nothing had changed (i.e. your benefit will be slightly higher). This is short-term however.  The likelihood of the "lookback" being the winning method will diminish with service time.  In addition, if the stock market continues to do well (which we all hope it does), the spread between the variable and regular will grow (especially if the regular continues at 0% for another year).  This will make it harder for the variable at regular to outpace the variable at variable.  Consequently, the employer match will be smaller on the variable side and benefits reduced accordingly.

The real examples I've seen suggest that the effects of the Lipscomb adjustment will be relatively small in the very near term (within the next 6 months or so).  The effects will become greater with time and stock market performance.

May 1, 2004.  PERS seems to be making life extremely difficult for members who are confronted with the July 1, 2004 date for the variable match recalculation method (per Lipscomb).  At least 3 members have told me that PERS is *NOT* providing estimates for retirement dates on or after July 1, 2004 that include the variable match recalculation.  Members have been told that to get these numbers, they actually have to apply for retirement and can cancel their applications if "...they don't like the figures".  Alas, this is the ultimate catch-22 for members.  To get accurate numbers for a retirement benefit calculation - NOT AN ESTIMATE  - PERS needs to have the separation notice from the member's employer.  In other words, to find out whether you want to retire, you have to file separation papers with your employer and these papers have to be sent to PERS.  This suggests that many people will have to quit to get final estimates and then try to "unquit" if the estimates aren't satisfactory.  Moreover, these actual calculations don't get run until after the actual retirement date because the separation papers don't typically show up before the member has actually separated. Since PERS has 92 days from your actual retirement date to get everything finished up, you could be unemployed for a month or two, discover you don't like the calculation, and then try to be reemployed.   I'd hate to be in human resources at any public agency right now.

Also, apropos to the variable match recalculation, be aware that the administrative rule covering this (459-013-0280) requires that the recalculation include the "lookback" as well.  This means that PERS will have to recompute the "variable at regular" as of June 30, 2003 in addition to the actual retirement date.

PERS Counselors are adding to the confusion by providing conflicting information about the fate of variable contributions made prior to 1982.  The Lipscomb adjustment only applies to variable contributions made since 1/1/1982.  It does not apply to contributions before 1982.  When asked about this, PERS Counselors are telling members that either (a) they will receive no match on variable contributions and earnings for the pre-1982 period OR (b) they will receive the match as per the old mechanism.  Both (a) and (b) cannot be right.  Either members will receive a full match for their pre-1982 contributions or they won't.  Since Lipscomb clearly applies only to the post 1/1/82 money (see the decision itself for verification), it must be the case that the match is unchanged for earlier monies.  PERS would be well-advised to clarify.  

April 28, 2004.  All Tier 1 and Tier 2 PERS members entered the IAP (Individual Account Program) of the OPSRP on January 1, 2004.  Member contributions are now directed to this defined contribution program rather than to "old" PERS.  Because the IAP is a different plan, members (active and inactive) must fill out beneficiary forms for the new program.  The beneficiary in force for the PERS program doesn't *necessarily* become the beneficiary of the IAP, especially if this isn't a "standard designation" (i.e. your spouse).  You can find the forms on the PERS website.

April 27, 2004.  On April 22nd, the PERS Coalition filed a lawsuit against the PERS Board and the State of Oregon to block implementation of the City of Eugene Settlement.  The suit alleges a breach of fiduciary duty on the part of the current PERS Board.  You can read the full text of the court filing on the Association of Oregon Faculties website (see link below).

April 26, 2004.  Greg Hartman, lead attorney for the PERS Coalition, will be speaking at Oregon State University on Saturday May 8, 2004 from 9:50 a.m. to 11:00 a.m. as part of the Association of Oregon Faculties' Annual Meeting.  For more information, visit the AOF website (http://www.oregonfaculties.org).

Update (PM 4/26/04).  The following memo/letter (Hartman letter) appeared on the Association of Oregon Faculties website today.  This represents a potentially interesting development in the Roberston (federal) case.  Read Mr. Hartman's letter and draw your own conclusions.  Perhaps a sliver of light in a long dark tunnel. 

April 25, 2004.  Just a quick note that the entries from September 2003 to December 31, 2003 have now been moved to their own page.  There are links to these entries at the bottom of the current site, or to the left under links.  This should make the site load faster for those on dialup connections.

April 23, 2004.  I've been trying to reconcile the differences of opinion between PERS Coalition Attorney Greg Hartman's brief message about Judge Brewer's "Findings of Fact" and the more pessimistic assessment of the same report offered by another plaintiff's Attorney (John Hoag) (see below April 16, 2004 entry).  Greg Hartman kindly replied to my inquiry and noted that there was really no difference between the two assessments.  He (Hartman) was providing an overview of the whole report rather than commenting on specific factual findings, while Hoag focused on one particular finding that both Hartman and Hoag find "troublesome".  Hartman hopes that his comments weren't construed to mean that he was pleased with everything Judge Brewer wrote. 

I went back and read the AFSCME e-lert that was sent out on April 13.  Mr. Hartman's comments were fairly upbeat and it is hard to read much pessimism into them.  By contrast, Mr. Hoag's comments, while indeed focusing on "one particular finding", were very discouraging.  At the risk of belaboring the point, it seems to me that "one particular finding" somewhat minimizes the nature of the particular finding.  That "troublesome" finding, in my opinion, undermines a significant part of the argument concerning the PERS Board's 1999 earnings distribution.  If Judge Brewer's "finding" is sustained by the Court, then the Legislature's actions against active and inactive Tier 1 members as well as retirees leaving between 4/1/00 and 3/1/04 will be found to be legal.  "Troublesome" indeed!

April 21, 2004.  Attorneys for the plaintiffs and the defendants in the Robertson case (the Federal case involving the PERS Legislation) argued Monday before Judge Michael Mosman.  At issue were both parties' motions for summary judgment in the case.  The defendants are asking for a summary judgment in their favor, effectively dismissing the case, while the plaintiffs are asking for a summary judgment that declares the Legislation to be in violation of the US Constitution.  According to sources, Judge Mosman asked thoughtful questions and seemed well-prepared for the case.  He will issue a ruling within a few weeks on the motions. 

I never cease to be amazed at the response to this web page.  The tracking software that keeps track of the number of hits to this site has just started giving me more detailed statistics.  The site is now tracking almost 7000 hits per month.  At the current rate, we'll probably have our 70,000th visitor before early next week (Tim:  you wanna try for the second pony?).  I continue to be grateful to all those who share information with me and who make it possible for this site to continuously have "new" information. 

April 20, 2004.  PERS has revised and reposted the document on earnings crediting and the document on the variable "match" under the Lipscomb settlement.  The earnings crediting document is much clearer now in explaining the order in which the various reserves were funded.  Unfortunately, the variable "match" document, while clearer than before, is almost a caricature of the effects on a single isolated (not-very-representative or realistic) example.  Suffice it to say that the only way you'll be able to make an informed decision about the timing of retirement under this set of prospective changes is to get a benefit estimate from PERS for June 1, 2004 and for July 1, 2004.  The former will use the current calculation methodology, while the latter will use the revised matching protocol described in the Lipscomb settlement.  If you have ALL your PERS statements you could compute the amount of the adjusted match easily, but without them, you're at the mercy of timely estimates.

April 16, 2004.  I hope you all survived April 15th.  I really enjoyed sending my entire Bush tax cut back to the IRS because the AMT bit me even harder this year than last.  Oh well.  With all my bounty from PERS, you probably won't find my picture on any milk carton <g>.

Busy day over at PERS.  Three new postings appear on their website.  One deals with the Lipscomb adjustment to the variable match, a second deals with total lump sums and returning to work, and the third deals with how 2003 earnings were distributed to various reserve accounts.  The Lipscomb adjustment information is baffling.  While the mechanism that PERS plans to use to make this adjustment is pretty straightforward (see example spreadsheet I worked up and posted on February 14th - below), PERS' rendering of various examples following the Board's Monday meeting frankly make little or no sense.  If you're seriously considering retiring around the July 1 effective date, get a benefit estimate request into PERS immediately.  The "Lipscomb adjustment" affects every person differently and there is no simple way to develop a "one stop" answer for everyone.  PERS' examples, in my opinion, actually confuse rather than help.  Moreover, just to add to the confusion, PERS claims that the "Lipscomb adjustment" won't apply to members opting for a "total lump sum" settlement or a "partial lump sum" settlement, or to members who successfully effected a "one time variable transfer".  Since the rules for making a one-time variable transfer changed as of 1/1/04, it isn't clear that this is necessarily a bonus for members who take the "one time transfer" during 2004 to be effective on 1/1/2005.  Other members who have already done the one-time transfer have "paid" in numerous other ways.

The 2003 earnings crediting decisions are equally befuddling.  PERS reports that the Board distributed 7.5% of earnings to the contingency reserve and 7.5% of earnings to the capital preservation reserve.  Having said that, they then tell readers that the first reserve got $570 million, while the second got $420 million.  PERS must have invented some new math here to come up with these numbers.  (Of course, it is what they omitted from their explanation that provides the explanation for how both numbers can be 7.5% of "something", but they are obviously not 7.5% of the SAME earnings).

As always, read these advisory pieces carefully and ask lots of questions.  Caveat reader.  In many instances, they are not what they appear, or there is much more information needed to make an informed decision. 

Three of the main lawyers involved with the Strunk case (consolidated PERS cases now before the Supreme Court) have weighed in with opinions on Judge Brewer's findings.  Greg Hartman, lead lawyer for the PERS Coalition, has issued a fairly optimistic assessment of the Special Master's report (this was issued as an AFSCME e-lert, but not posted publicly yet, as far as I know).  Bill Gary, lead lawyer for the non-state defendants in the case, has published a detailed analysis of Judge Brewer's findings (see Oregon School Boards Association website - www.osba.org - for more information) and concludes that the defendants "won" on most major "factual" issues.  A third opinion is offered by John Hoag, an attorney representing the various law enforcement unions on the plaintiffs' side of the case.  Hoag's opinion differs markedly from Greg Hartman's.  Hoag plainly admits that the plaintiffs face an "uphill battle" in the Supreme Court, and that the Supreme Court would have to be very courageous to strike down the Legislature, faced with Judge Brewer's findings.  You can read Hoag's opinion at www.lawofficeofjohnhoag.com. 

April 14, 2004.  The PERS Board met on 4/12 and made some earnings crediting decisions.  In addition to crediting Tier 1 regular accounts with 0%, the Board decided to place over almost $2.5 billion into 3 different reserves - the gain/loss, the contingency, and new capital preservation fund.  The gain/loss reserve was in significant deficit at the beginning of 2003; after applying $1.7 billion from 2003 earnings, the gain/loss reserve has only a small (about $200 million) deficit remaining.  Variable accounts will be credited with 34.7%, Tier 2 accounts will receive 21.5%

The Board also adopted a temporary rule (retroactive to 1/1/2004) that applies to all members who elect(ed) the total lump sum settlement option.  This rule permits workers to continue working in a non-qualified position for less than 600 hours in the first six months following retirement.  The temporary rule takes effect in late May.  In addition, the Board plans to adopt a permanent rule that would make this policy retroactive to January 1, 2003 - the day the total lump sum became effective.  IF YOU TOOK THE TOTAL LUMP SUM DURING 2003 AND WORKED MORE THAN 599 HOURS IN YOUR FIRST 6 MONTHS AFTER RETIRING, DO NOT CALL PERS AND ASK THEM QUESTIONS ABOUT IT.   They have no easy way of finding this out, but once you've identified yourself, you put yourself in jeopardy.  You've been warned.

The Board meeting was long and complex.  I'll report more as I have time to peruse information that I have.

April 12, 2004.  The May primary isn't too far off to be starting to think about all those 60 members of the Oregon House of Representatives and those 15 members of the Oregon Senate up for election/re-election.  Many are running unopposed, but there are some running against an organized opposition.  Those PERS members who feel they were mistreated by the Legislature in 2003 may want to consider how and where to air their feelings in the upcoming primary.  By some recent calculations, PERS touches the lives of about 28% of the entire voting population -- that is a formidable political force to deal with if it is unleashed on unsympathetic politicians.  While various legal challenges continue to wend their way through the state and federal court systems, political payback sends a more immediate message.   For help figuring out how various legislators voted on PERS-related issues during the 2003 Legislative session, you can go to the OSEA's website here. 

April 9, 2004.  I've finished my first pass through Judge Brewer's report.  I think it fair to say that the report is more favorably disposed towards the defendants' rendition of the facts than the plaintiffs' version.  There are a number of phrases that Judge Brewer uses, especially with respect to the 1999 earnings crediting decision, that are decidedly biased in favor of Judge Lipscomb's conclusions - i.e. that the PERS Board acted imprudently in its decisions.  I believe the expression Judge Brewer used in at least three places was "...benefits credited, but not lawfully creditable".  You'll have to read the report fully (it isn't a typical legal document, as Judge Brewer frankly admits in his introduction) to get the flavor of what he makes of the facts.  This report, along with all 22 volumes of exhibits entered into the record, will form the corpus of "facts" upon which the Supreme Court will make its ruling (along with, of course, the oral arguments and questioning to take place on July 30, 2004).

April 8, 2004.  For those actively interested in the PERS Litigation, here is a copy of Judge Brewer's report to the Supreme Court.  It is a very large document and I haven't read any of it yet.  All I know is that the person who sent it to me remarked "...it isn't very encouraging".

April 2, 2004.  At its April 12, 2004 Board Meeting, the PERS Board will take up some policy issues pertaining to the Double (or Total) Lump Sum retirement and returning to work.  The issue is quite complex and will probably involve approving first a temporary rule and then a permanent rule.  At the heart of the issue is whether the rule should apply to retirements only on or after 1/1/2004, or be retroactive to retirements taking place on or after 1/1/03.  You can read more about this at PERS' website (here). 

March 31, 2004.  The PERS Board abruptly cancelled today's meeting and has rescheduled the discussion item on the agenda to its regular April 12, 2004 meeting.  No reason was given, but rumors are floating around that Greg Hartman may have had something to do with the Board's decision to hold off deciding on a new rate order for 1999.

Other rumors floating around are that the AG has weighed in on the "double lump sum" and "returning to work", but there are some issues still remaining.  I've heard from two different sources that the AG's Office is saying that it would be OK to work in a "non-qualified" position (i.e. < 600 hours), but that working more than 600 hours puts the member in violation of statute and would require the member to repay the "double lump sum".  The problem is more complicated than it first appeared to be.  The question unanswered is what to do about the people who took the "double lump sum" beginning in January 2003 and who went back to work under the 1039-rule, long before this issue came to anyone's attention.  A strict reading of the statute would require them to repay ALL their double lump sum.  Of course, none of these people can be identified easily at this point and so it would require a fairly significant effort to identify and track them down.  Employers do not know what settlement option their retirees took and it is kind of hard to go to each retired employee and ask without revealing the reason for the question.  About the only way to do this would be to ask every employer in the state to send in a list of all retirees currently on their workforce.  PERS would then have to search through the list to find all the double-lump summers and then go back and determine how many hours that employee had worked after retirement, when the began after retirement, and decide whether this met or didn't meet the 600 hour test.  With all of PERS' other problems, plus the potential for massive litigation and expensive litigation, this seems like a rather unproductive waste of time, money, and staff. 

I've been plowing through the CD of last Friday's closing arguments in the evidentiary phase of the Special Master hearings.  So far there haven't been many surprises except, so far, the extent to which Judge Brewer has been actively involved in peppering both sides with factual questions, hypothetical questions, and more.  He did say right at the beginning that he believed that as a whole, both sides would find reasons to be unhappy with some of his findings.  If I hear anything new or notable, I'll report it here. 

March 28, 2004.  The CD of Friday's closing arguments should be in my mailbox tomorrow.  As I've learned, the closings were much longer than anyone anticipated, lasting well into Friday afternoon.  I know some of the issues that were raised, but would prefer to listen to the audio before reporting or commenting.  In the meantime, Oregon AFSCME has a brief report on its website (here).  Both the Oregonian (here) the Statesman Journal (here) also have reports.  I'll try to post comments on Monday night or Tuesday.

March 26, 2004.  Not much happened while I was on vacation.  The much-awaited Attorney General's advice to PERS on remaining with a PERS employer in a non-qualified position (< 600 hours) after taking a double-lump sum is still not out.  Double-lump summers are still very much hanging out right now, and the AG's office, while promising a response on or before March 19, 2004, has let the date go by without so much a comment.

Today is the day for final oral arguments before the Supreme Court's Special Master (Judge David Brewer) in the consolidated cases against HB 2003 and HB 2004.  The arguments begin at 9:30 a.m. today in the Supreme Court's court in Salem.  Unfortunately, I'll not be able to attend, but I will have a CD of the proceedings relatively quickly. 

There's a bit of noise going on in the background from disgruntled PERS members and retirees about mounting a write-in campaign against Supreme Court Justice Rives Kistler - a recent Kulongoski appointee to the the court (and, from past roles with PERS, not a strong PERS member advocate) - who is running against Lon Mabon's attorney for re-election.  Many are unhappy with being forced to choose between those two candidates and are considering an active write-in of a 3rd candidate to unsettle the outcome of that election.  Probably wouldn't have any bearing on the current Supreme Court cases as they would be settled before the new term of office, but it could bear on the outcome of the City of Eugene appeal if the Court allows it to go forward. 

March 20 - 25, 2004.  I will be out of town and no updates will be posted.  I'll bring the site up-to-date upon my return.

March 19, 2004.  The PERS Board meeting for 3/31/04 will be devoted exclusively to discussing and possibly making a decision on reallocating the 1999 earnings per Judge Lipscomb's order.  Allocation of 2003 earnings have (apparently) been delayed to April 12, 2004.  I wonder if this means that retirements on 4/1/04 will still be credited for 2003 at 8%?  Here is the announcement of the 3/31/04 Board meeting.

With all the problems PERS and employers are having getting the IAP (individual investment accounts) setup, there remain several questions about who is responsible for the earnings lost on those funds during this period.  The Legislature ordered PERS to create these accounts for all Tier 1 and Tier 2 employees as well as for those in the OPSRP as of January 1, 2004.  The 6% employee contribution (whether employee paid or "picked up") is supposed to go into the IAP, where it will be invested and credited with earnings/losses regularly.  Unfortunately, PERS' computer system is so antiquated that it can't cope with the demands of the new program, and less than a third of the employers have been able to successfully transmit funds to PERS for investment.  While PERS says it will have the accounts fully operational by Fall, the question of lost earnings lingers.  Who is responsible for earnings or losses in the absence of actual cash to invest?  The employers insist it isn't their problem, while the employees insist it isn't their problem either.  So this leaves PERS holding the bag.  The question remains unanswered as of now.  My question is:  those who retire anytime during 2004 or later are entitled to the balance in their IAP as well as the regular PERS benefit earned prior to 2004.  If a member retires before PERS can figure out how to create the IAP and credit the employee account, what exactly does that employee get from the (non-existent) IAP upon retirement?  We have the Oregon Legislature to thank for this fiasco.  Despite being warned by PERS that the timetable was way too short to get the program operational, the Legislature pressed forward and essentially told PERS to "figure it out." 

The Oregon University System (OUS) has been duking it out with the Association of Oregon Faculties (AOF) since mid-November when OUS significantly reduced its employer contribution rate to the Optional Retirement Plan following passage of Ballot Measure 29.  Earlier this month, AOF filed a legal complaint against OUS for failing to pay wages and benefits in a timely manner.  On March 17, 2004, it appears that OUS has tossed in the towel and has decided that it really does owe all those ORP members their retirement contributions.  This is spelled out in a letter sent to ORP members on March 17, 2004.  You can read the letter here.

March 17, 2004.  The Association of Oregon Faculties has filed a complaint against the Oregon University System for its November 2003 decision to reduce the funding for the Optional Retirement Plan for Tier 1 and Tier 2 employees.  You can read the complaint here.

March 16, 2004.  As you've probably noticed, things are pretty quiet right now.  I don't expect much interesting news until March 19, 2004 (when the AG's office is supposed to issue an opinion on the question of post-retirement working for retirees who take the "double-lump sum"), March 26, 2004 (closing arguments before Supreme Court's Special Master) and again March 31, 2004 (next PERS Board meeting).  I will be out-of-town from March 20 to March 25 and won't be posting anything during that time.  I hope to be able to get to Salem on March 26th to hear the closing arguments.  If not, I have plenty of Salem acquaintences who'll be there and will happily report back on their impressions of the proceedings.   

March 12, 2004.  The PERS Board has issued two items of note.  One concerns Board actions taken at yesterday's meeting concerning the implementation issues surrounding the IAP/OPSRP plan.  The second is an "update" (or non-update depending on your point of view) on the total lump sum distribution and the 1039-rule.  Both documents are self-explanatory.  The first one is here, while the second one is here. 

March 10, 2004.  Judge Brewer denied the plaintiffs' "Motion to Compel" release of the AG's written opinions to the PERS Board.  Here is Judge Brewer's order for those interested in reading the legal reasoning behind it.  I keep hearing rumors of a PERS Board meeting tomorrow, but nothing is posted on PERS' website about this and I haven't received any official announcement of either a meeting or an agenda.  The next PERS Board meeting is supposed to be March 31.  Stay tuned.  More information *might* follow.  Followup.  The PERS Board does have a meeting tomorrow to take up contingency planning for implementation issues arising out of HB 2020 and getting employer reporting compliance and prompt transmittal of money.  The agenda and PERS Staff report is available (at this link).

March 6, 2004.  More thoughts.  Much has been made of the impact of the Supreme Court's makeup at the time of various PERS rulings.  Over the years, the Oregon Supreme Court has consistently ruled in favor of PERS members.  However, the most recent high-profile case was the Measure 8 decision (sometimes referred to as the "OSPOA" decision).  This case was decided by a 4-3 vote, the closest vote in PERS litigation history.  Of note then is that two of the three dissenting Justices remain on the Oregon Supreme Court.  Furthermore, Justice Balmer was elected to the Court in 2001.  Before that, he served as Ted Kulongoski's Deputy Attorney General during the period when the AG's office was defending Ballot Measure 8.  Moreover, in mid 2003, Governor Kulongoski appointed Judge Rives Kistler to fill the balance of former Justice Susan Leeson's term.  Justice Kistler also served in the Oregon Attorney General's office and was one of the principal AG's arguing FOR Ballot Measure 8.  Thus, when you put all this together, Governor Kulongoski has about the "friendliest" Supreme Court he could have under the current circumstances, with 4 (of 7) Supreme Court Justices essentially opposed to the last favorable PERS decision rendered by the Oregon Supreme Court.  This may all be completely meaningless, but it certainly underscores why Governor Kulongoski may be so confident that the Supreme Court will sustain the 2003 Legislation. 

March 5, 2004.  <Ruminations on>.  The Evidentiary Hearings are over and all parties are waiting for Judge Brewer issue a ruling on the plaintiff's "Motion to Compel" the admission into evidence of certain communications from the Oregon Attorney General's Office and the PERS Board, which were later shared with some Legislators during the 2003 Legislature.  The documents were turned over to the Judge under seal.  On Tuesday night, Judge Brewer broke the seal and read the documents.  Near the end of Wednesday's testimony, the Judge took up the motion in open court.  He had observations for both sides.  To the plaintiffs he noted that he saw no "smoking gun", while to the defendants he commented that he couldn't figure out "what the big deal" was.  There are a variety of theories posited on why the defense has been so reluctant to release these documents, especially if, according to Judge Brewer, there is no "smoking gun".  Nevertheless, the defense is adamant that to release the documents breaks the attorney-client privilege.  Judge Brewer was going to issue a final ruling later this week (maybe even before today is out).

Now that all the evidence gathering is over, it is hard to handicap the outcome.  I spent a fair amount of time listening to all the testimony - 8 days' worth - either in person or on audio CD.  There is no question of a number of points:  1)  the problems in PERS are historical and structural; 2) virtually no one saw the problems coming and thus no significant effort was made to prevent them; 3) the problems couldn't have been envisioned when the plan was created and they couldn't have been envisioned as each piece of the plan evolved; 4) the problems were inevitable in 20/20 hindsight; 5) PERS is not sustainable without some changes; 6) a rising stock market would lessen the problems, but would not solve the fundamental structural instabilities.  Beyond this, the parties disagree on just about everything else - 1) whether the PERS Board behaved illegally or improperly in its earnings crediting policy; 2) whether the Legislature has the power to break longstanding agreements (?contracts) with PERS members over the pension plan in effect when they were hired; 3) whether retirees have a "contract" when they accept the terms of their pensions; 4)  whether "replacement ratios" are relevant; 5) what the Legislative intent of almost every aspect of PERS was; 6) how the IRS views changes made to plan; 7) who the PERS Board represents; 8) what a trustee's responsibility is, and much, much more.  There were 22 volumes of dueling exhibits; dueling actuary reports; dueling economic analyses.  The list goes on.

My overall reaction to everything so far is oddly reminiscent of Mr. Carlson's classic line in an old episode of WKRP in Cincinnati:  "As god is my witness, I thought turkeys could fly!".  If you figure out what that means, let me know <g>.</ruminations off>

March 4, 2004.  Nothing significant to report.  There is a new Q&A on "Breaks in Service" just posted on the PERS website (here). 

March 3, 2004.  I attended the Evidentiary Hearings yesterday morning for about an hour.  Defense witnesses from various public employers testified about the financial harm PERS costs create for their organizations.  The testimony was pretty dry, but the defense continued to bring out the "doom and gloom" scenarios if the legislation is overturned.  There were a series of exchanges on Monday afternoon and late Tuesday morning concerning a "motion to compel" filed by a plaintiff group ("the Dahlin group", represented by Mr Birmingham).  It was never revealed clearly what this was actually about, but it appears (from overheard lawyer conversations at breaks) to relate to the continuing quest to get PERS to turn over legal advice given the PERB by the Oregon Attorney General's office concerning the City of Eugene "settlement" and in various earnings crediting decisions made in the past.  Judge Brewer planned to review relevant submissions "in camera" and then make a ruling on whether the defense should be compelled to turn over these opinions.  The defense strenuously objects to releasing this information, claiming "attorney-client" privilege, while the plaintiffs assert that without this information, there is no way for the court to rule on whether the PERB "erred" in distributing 1999 earnings.  If they followed the AG's advice, it is hard to figure out how they could have erred.  If they ignored the AG's advice, there is a different conclusion that could be drawn.  Without this information, it is impossible to make any inference.

The attorneys representing the PERS Coalition have advised the coalition to file suit against the current PERS Board for "violation of fiduciary duty".  The matter is explained in a letter posted on the Association of Oregon Faculties website here.  In the same website, the AOF has announced its intent to sue the Oregon University System over its decision to reduce the contribution rate for the Optional Retirement Plan. 

Judge Brewer announced that final oral arguments in the Special Master phase of the Supreme Court case would be held on March 26, 2004 in the Supreme Court courtroom (in Salem).  The time hasn't been set.  The Evidentiary Hearings concluded this afternoon.  I didn't attend any of today's hearings, but have CD's of the entire 8 days coming.  I don't know what transpired on the "motion to compel", but I should know tomorrow if there is anything useful to report.

PERS has finally posted some information here about the total lump sum payout and the 1039-hour rule. 

March 1, 2004.  I spent a pretty dreary morning listening to yet another defense actuary (YADA), Mr Stonewall, heap abuse on the design of PERS ("Money Match" in particular) and the actions of the PERS Board in causing the system to be as unstable as it appears to be.  Several critical points during the discussion.  This actuary argued that the IRS regulations and the PERS submission to the IRS are consistent on the definition of the "accrued benefit".  Stonewall sees the only benefit that is "definitely determinable" is the Full Formula benefit.  Moreover, he showed where the PERS Board, in its 1999 submission to the IRS - apparently the latest one - described the "definitely determinable" portion of the benefit as the "Full Formula".  The actuary conceded that the "account balance" on the date of the effective account freeze (June 30, 2003 for the sake of the discussion) is also an "accrued benefit" that cannot go down.  This led to a discussion of whether the "accrued benefit" does or does not include interest earned on the frozen balance at 6/30/03.  The actuary argued that it doesn't and shouldn't according to the IRS rules.  Judge Brewer asked a number of good questions that pertained to the matter of "accrued benefits".  He wondered whether if, by using new mortality tables, that members retiring some years from now, after the "lookback" ran its course, really had their "accrued benefit" preserved.  The actuary argued that it did because at the point the "lookback" expired, the benefit would be higher than the "lookback" benefit and that the employee would be getting "at least the 'accrued benefit'".  The actuary also explained that by diverting the 6% employee contribution to a different account, it would be impossible to ever get to the new actuarial tables if the interest accruals continued on the "lookback" benefit.  Moreover, for inactive members, a "lookback with interest" would also guarantee that new mortality tables would never take effect as the account balance would be the same at retirement under the "lookback with interest" and the account balance plus accrued interest.  Hence, the new tables would always produce a smaller benefit.

The actuary also presented a study indicating that during the period from 1978 - 2002 (25 years), the PERS Board credited a compound 11.95% to Tier 1 member accounts, while the fund itself earned a compound 11.59%.  In other words, he claims that the PERS Board actually paid out more in earnings to Tier 1 Regular Account members than it actually earned.  When asked why they might have done this, his answer was revealing:  "they didn't know what they were doing". (The discrepancy is explained by the years in which the fund earned less than 8%, but paid out 8% anyway.  The small amount 'reserved' only prevented the two numbers from diverging even more than they did).   The actuary also did a "Sharpe analysis" comparing the variable account risk/return ratio to the regular account risk/return ratio.  He concluded that the variable account was 2.5 times as risky as the regular for the 1% improvement in returns.  He concluded that the variable was a "terrible" deal for employees, since they assumed enormous risks for only a tiny incremental benefit in return.  

In terms of the Money Match, the actuary showed that even if the PERS Board had only paid out the assumed rate in every year since 1978, Money Match still would have been the dominant driver of the system today; however, he did argue that had the PERB done so, employer contribution rates would have remained stable within a narrow band.  He also argued that the employer "match" required that, at a member's retirement, employers had to contribute between $1.50 and $1.60 for every dollar in the retiree's account.  When asked to account for this, he attributed $0.20 to the COLA (all employer paid), about $0.06 (currently to the HB 3349 benefit adjustment), and $0.05 (from the use of "currently outdated" mortality tables).  I only accounted for $0.31; I'm not sure where the other $0.19 to $0.31 came from. 

Mr. Stonewall also evaluated the Governor's goal, articulated last week by Dr. Margaret Hallock in her testimony.  The Governor's goal was to drive the employer contribution rate down to 15% of payroll (not including the pickup) over the next 10 - 15 years and ultimately down to the historic rate of about 10.5% after that.  When asked about it, Mr. Stonewall had a hard time seeing how anything in the Legislation would drive the rates much below their forecast level under the realistic circumstances - 17% ("undulating around 17%" was the term used).  When pressed on this point by Mr. Gary, Mr. Stonewall argued that the best long-term estimates for market returns were in the 8-9% range and that the returns for the past 25 years could not, according to all the economists and market analysts, be sustained.  A few years of solid returns (e.g. 2003) would have only a negligible effect on employer contribution rates.  According to Mr. Stonewall, the "buy down" of employer rates by lump-sum payments distorts the true costs to employers.  While the PERS costs may be down around 17%, the actual costs of repaying the bonds drives the effective employer rate up well over 20%.  In short, Mr. Stonewall felt that the Governor's goal of 15% for employer contribution rates was an unrealistic expectation from the current legislation, and that he didn't think it very likely that employer contribution rates would ever return to their historic levels. 

There was also a discussion of whether the current legislation (i.e. HB 2003) would recover equally from retirees and from active/inactive members for the 1999 "overcredit".  The actuary argued that the COLA freeze would never recover the full "overcredit" from retirees and that employers and to some degree current members would subsidize the residual loss.  By contrast, the 1999 "overcredit" would be recovered quickly from current members.

During one particular exchange, Mr Gary asked an important question.  Mr Gary:  "Mr. Stonewall.  If some court decides that the Legislative Reforms were wrong and also that Judge Lipscomb 'got it wrong', would the IRS regulations permit recovery for the 1999 earnings that both the Legislation and Judge Lipsomb claim were in error?"  Mr. Stonewall:  "No".

I had to leave before the plaintiffs' attorneys had a chance to cross-examine the witness.  I overheard several attorneys talking at the break.  The consensus is that this phase of the process will probably be over by Wednesday.  Several lawyers (different conversation), said that they weren't even mildly surprised by anything going on.

After sitting in on testimony for parts of 4 (of 6) days, listening to audio transcripts of some of the other days, and chatting briefly with several attorneys, I've been struck by the defense strategy.  They are holding firm to (a) design flaws of PERS + (b) bad Board decisions = (c) financial catastrophe.  The plaintiffs, on the other hand, are sticking to the impairment of contract argument, while refuting the defense where it is either necessary or relevant.  I have not heard a single defense witness so much as mention the word "contract."  Finally, I have to agree with one of the plaintiff's lawyers that NO one will be able to handicap the outcome of this phase of the litigation.     

February 28, 2004.  According to the PERS Board, retirees electing to take the "double lump sum" (employee account balance and employer match) are NOT allowed to work under the 1039-rule (ORS 238.082) within the first 6 months after retirement unless they repay all benefits received.  ORS 238.082 only applies to retirees receiving a "service retirement allowance" (a monthly benefit of some sort).  Double lump sum recipients come under ORS 238.078, which was amended by the 2001 Legislature with the amendments effective on 1/1/2003.  Recall that the "double lump sum" was authorized by the 2001 Legislature and became effective on 1/1/2003 as well.  So, please be aware of this in finalizing any retirement plans you have.  More information on this can be found at the Oregon Education Association's website (www.oregoned.org).

February 27, 2004.  Just a quick reminder that if you're planning to retire on March 1, 2004, TODAY is the last day to turn in your forms to PERS. 

February 26, 2004.  Busy day today.  Not much time to post.  Just got wind that David Bailey, Deputy Director of PERS, has resigned.  His last day is tomorrow. 

Attended the Evidentiary Hearings for 2 hours early this afternoon.  Testimony was from one of the actuaries hired by the State to evaluate PERS after the 2003 Legislation passed.  While some might view his testimony as quite damning, it actually seemed to me that the testimony was pretty harmless.  He had lots of bad things to say about PERS, but his conclusion was that the plan was flawed in design.  He also allowed that it was clear to him that "no one saw this coming", although it should have been evident from the plan's operation. The plaintiffs tried to get him to answer the question of whether he thought the PERS Board was irresponsible in its management of the fund, but the defendants objected to the question and the Judge sustained the objection.  I had to leave just as Dawn Morgan was to begin her testimony.  After her, the state planned to call my former PSU colleague, Tom Potiowsky, who is Oregon's chief economist

February 25, 2004.  I have no plans to attend today's evidentiary hearings so unless I hear from others I know who are attending, I won't post anything about testimony today.  I will probably attend for awhile tomorrow afternoon.

Several people have asked me the significance of the word "DRAFT" on the settlement document I posted yesterday.  I have no idea whether this document has been signed or not.  I do know that the "protective order" on the "settlement" was lifted on Monday at the start of the Special Master Evidentiary Hearings.  Aside from making the document public, I have no idea whether this means that the "settlement" is a "done deal".  I also don't know what plans (if any) the PERS Coalition has to pursue the appeal other than their statement that they expect the appeal to continue.  Some legal body has to rule that can happen and I've seen nothing to indicate that either the appeal will or won't continue.  If it does, the settlement document clearly takes PERS "out of the appeal loop" and places the burden on the City of Eugene petitioners to continue.  How this will all play out in the context of the litigation over the 2003 Legislation is an open question.  The entire City of Eugene trial record has been admitted into evidence as part of the ongoing Supreme Court case, so it is pretty hard for me to see how the Lipscomb record won't play a role in the final Supreme Court decision. 

For those of you still considering retirement soon, do read the settlement closely to see how it might affect your benefit.  If you EVER had money in the variable program (anytime since 1/1/82), your benefit *will be* affected, although the effects will vary (positively or negatively) by the length of time you were in variable, the amount invested, whether/when you effected the "one time variable transfer", when you retire, and the "spread" between actual variable and actual regular earnings rates.  The crucial point to keep in mind here is that in addition to the March 1, 2004 retirement date, there APPEARS to be a second date - June 1, 2004 to watch for.  Retirements by March 1, 2004 allow you to get the full 2003 "guaranteed interest rate" (8%) and the 8% pro-rate for January and February 2004.  The price you pay for this is the loss of your COLA for at least several years, possibly as many as 5.  (This isn't a trivial loss.  If I live 30 years, my total loss due to a 5-year suspension of my COLA will be approximately $280,000).  Retirements on April 1, May 1, and June 1 appear outside the COLA loss window, but lose the 2003 earnings credit and the 2004 pro-rate.  However, these retirements *appear* to be before the change in the variable match methodology contained in the "settlement" of Eugene v PERS (see below 2/24 and also 2/14 spreadsheet).  If you've never been in variable, this is a NON issue.  Once July 1, 2004 rolls around retirements on or after that date are subject to the loss of 2003 crediting, the loss of the 2004 pro-rate, the change in variable match methodology, and the variable match adjustment to the "lookback". 

February 24, 2004.  I obtained a copy of the proposed "settlement" between PERS and the City of Eugene plaintiffs.  You can read it here and decide for yourself what it means.  It contains relatively few surprises from the press release issued by PERS late last month.  It confirms that the change to the variable match will be prospective only, but at the same time it clearly states that if the Court overturns the key sections of the 2003 legislation,  PERS will collect the 1999 overcredit within 30 days.  It appears that both parties - PERS and the "petitioners" - are supposed to convince the courts to not allow the Intervenors (the PERS Coalition) to continue their appeal, but if the courts do allow the appeal to continue, the petitioners have agreed to carry on (?without PERS) at their own expense, having first been reimbursed for the legal expenses in the initial case. 

I attended the evidentiary hearings again today for about 4 hours.  Greg Hartman finished examining PERS Actuary Mark Johnson late this morning.  Defense Attorney Bill Gary began his cross-examination of Mark Johnson before lunch and continued well into the afternoon.  I left before Gary had finished with Mr. Johnson.  Both Dale Orr and Steve Delaney from PERS were waiting "in the wings" and were presumably the next witnesses the plaintiffs plan to call.  I don't know whether either began their testimony today.  This makes it fairly likely that Jim Voytko's testimony won't be until late tomorrow afternoon or Thursday morning at the earliest.  Thus far, Mark Johnson's testimony has been pretty pedantic and offered no surprises.  Mr. Gary spent a bit of time exploring the role of actuarially assumed interest rates on employer contributions, and drew a distinction between the actuarial assumed rates and the rate guarantees afforded to Tier 1 members.  Again, there were no surprises.  I doubt that any evidence presented in these hearings will be novel; much of it plows ground covered either in the Legislative hearings or in the City of Eugene v PERS case, or both.  It is principally offered to provide a detailed evidentiary record for the Supreme Court to consider when it finally hears the case on July 30th. 

February 23, 2004.  I attended the first morning of the Special Master's Evidentiary Hearings today. Both sides asked that the Supreme Court itself "fix" the date for final oral arguments at July 30, 2004.  Neither side wanted the date changed in either direction.  The Judge directed the liaison to the Supreme Court to communicate the request and report back.  The Justices are supposed to be meeting tomorrow and it is possible that the docketing can be finalized before the week's end. The first half hour was mostly procedural and rather boring.  In the second half hour, each side made a 15 minute opening statement, something both sides requested on Friday.  Nothing particularly surprising about either opening statement, although I was a bit puzzled by the Lemony Snickett ("a series of unfortunate events", or "for want of a nail") tactic the defendants seem to be taking in this case.  "A badly designed system through no fault of anyone's", "discretionary decisions made by the PERS Board, whether illegal or not, led to unsustainable benefit levels and obligations", etc.  While the PERS Coalition is making the case for contract impairments, the defendants are arguing something akin to "financial exigency".  Greg Hartman was moved to ask the court to consider whether there were any required "threshold tests" for determining whether adverse financial circumstances could be used to justify impairing contracts.  For a parallel observation, see this website where a lawyer, who is clearly assisting the plaintiffs in the consolidated PERS cases, offers his own take on how things are going. 

The second hour of the morning (and probably most of the afternoon) was given over to testimony from Mark Johnson, who was to take the court through the orientation presentation he gave to the new PERS Board in September 2003.  Mr. Johnson used the same Powerpoint presentation and covered what actuaries do, who audits the actuaries, who Milliman is, how benefits are funded, what role the actuary plays in determining employer contribution rates, and other actuarial functions.  If you've heard Mark Johnson before, there really wasn't anything new in this presentation.  He did allow that the outgoing PERS Board had extended Milliman's contract through the end of 2005, but that the new PERS Board revoked the extension and offered Milliman a contract only through the end of 2004, after which the contract would be out for open bidding.

The Oregon Education Association's website has a detailed explanation of the "Break In Service" rule adopted by the PERS Board at its February 13, 2004 meeting.  Go here for more information.

I posed a question (see Feb 20th entry) to my PERS sources about the "Lipscomb adjustment" to the variable and the "lookback".  My sources have responded that if the City of Eugene "settlement" is adopted and the PERS Board implements the variable adjustment as part of the settlement, it WOULD also apply to the "lookback" balance.  If this occurs, my calculator will disappear as neither I nor most users have the information needed to recalculate variable contributions as though they had been in the regular account from the beginning (or January 1, 1982, whichever is later).  So, if you are planning to retire on or after July 1, 2004, do be aware of the possibility that if you ever had a "variable account" (it doesn't matter whether you've done the 'one time transfer' or not), that my calculator cannot give you a correct "lookback" balance or benefit. 

I've now received a copy of the Plaintiff's "Proposed Findings of Fact" in the consolidated PERS cases.  You can read them here.

February 20, 2004.  Some questions have arisen about the Lipscomb "adjustment" to the variable match (see Feb 14 note & spreadsheet).  The dominant question right now is whether the refiguring of the variable match will also be done on the "lookback" balance frozen as of June 30, 2003.  If so, the "lookback" balance could be higher or lower than it currently is figured, with the attendant effect that the "lookback" benefit could be different than either I compute it with my calculator (see above) or PERS is currently figuring it.  The Lipscomb variable adjustment isn't covered by the legislation under litigation right now; it is part of the "settlement" between PERS and the City of Eugene et al.  According to informed sources, this adjustment to the variable match will be applied prospectively to retirements on or after July 1, 2004 if all parties and the courts agree to the settlement.  I am chasing down an answer to the question of whether the "variable match" adjustment will apply to the "lookback balance".  Hopefully I'll have one soon.

Some readers (and emailers) who retired between April 2000 and July 1, 2003 have asked why they didn't receive a COLA on the variable portion of their PERS benefit with their PERS benefit check on August 1, 2003.  Most have assumed that the COLA freeze only applied to the people receiving a fixed benefit, and that anyone receiving a portion of the monthly benefit computed as "variable" would receive a COLA on at least that part.  Unfortunately, HB 3020 contains technical fixes to HB 2003 (where the COLA freeze is enacted) that include clear language withholding the COLA freeze from *all* members who retired from April 1, 2000 to March 1, 2004 with a monthly benefit based on Money Match. 

February 18, 2004.  I've just received a copy of a memorandum filed with the Supreme Court Special Master late last week in re the consolidated cases (Strunk et al v State of Oregon).  The memo is from the outside counsel working on behalf of the PERS Board ("PERB") in defending the consolidated cases now before the Supreme Court.  It is clear from reading this memorandum the direction that the current PERS Board intends to take during the evidentiary phase of the Special Master's hearings.  It makes for interesting reading and is not particularly dense legally.  If you're following the hearings closely and want to peer into one defense strategy during this litigation, read this memo (PERB Memo).

You may also want to read the Defendants (State and non-State) Joint Proposed findings of fact, which outlines some elements of the Lipscomb settlement as well as what the Defendants want the Supreme Court to hold (Defendants' Joint Proposed Findings of Fact).

February 17, 2004.  The Special Master evidentiary hearings are set for 2 full weeks beginning next Monday in Portland.  Hearings start at 9:00 a.m. every day except February 23rd (10 a.m.) and run until 5 p.m.  (1 hour lunch schedule).  Rumor has it that the State and Employers plan to call 30 witnesses to testify in their cause. 

For those of you either already retired or on the verge of retiring, you should read the ACH document used to authorize PERS to make electronic deposits to your bank account.  This is NOT anything like the document you sign to have your employer deposit your check.  In particular, pay attention to item #2 on the authorization.  After you read it, you may want to think twice about making this authorization.  If you've already authorized direct deposit, you can revoke it and get paper checks, but just remember that if you're having PERS debit your check for health insurance premiums before depositing your check, you'll may now need to send paper checks to the carrier.  I understand that PERS deducts this from the check, so they may send it whether you get electronic deposit or paper check.  Either way, it would be wise to check it out.  As for me, I loathe and despise having to deal with paper checks, but I have to confess that I hadn't read that form closely until very recently.  It gives PERS, in my opinion, far too much access to my bank account.  You can look the form over here.

February 14, 2004.  Happy Valentine's Day.  I've read as much as I can find on the adjustment Judge Lipscomb *seems* to be asking for in the City of Eugene v PERS case.  Several different sources have sent me exploratory spreadsheets that try to explain how this recalculation would be done.  I'm not sure I have it right yet - indeed no one really knows the *correct* answer - but a number of people agree that my understanding (evidenced in this spreadsheet) tracks with their current understanding of the adjustment.  Do note that your mileage may vary and this is *my* interpretation, not PERS'.  There are still a few questions whose answers may change the way the calculation gets done. 

One pertinent document to read on the variable "adjustment" is the actual Lipscomb decision (here).  A very relevant piece of information is contained in Footnote 7, beginning on page 7.  While the PERS Coalition asserts that this is a very incorrect reading of the statute, the "settlement" being discussed isn't about the "correctness" of Lipscomb.  If you read Footnote 7, you'll probably have a clearer idea of what the spreadsheet above means.  Moreover, a strict reading of Footnote 7 makes it clear that anyone who had a variable account after 1981 *and* who retires on or after the effective date of the settlement (?July 1, 2004), will be subject to this adjustment.   (The prospective nature of the adjustment is not part of Footnote 7; it is simply the way I understand the adjustment will work.  A literal reading of the footnote would require its application to everyone who had a variable account on or after 1981, retired or not.  But the nature of the Legislative actions and Judge Lipscomb's own cautions make it unlikely that the changes will be retroactive to members already retired -- at least not until the Court rules).

February 13, 2004.  Special Master David Brewer has decided that the Evidentiary hearings scheduled to begin on February 23 and run to March 5 will be held in the Multnomah County Courthouse, 6th Floor Courtroom.  From personal experience, I know this courtroom is larger and better set up for the audiences expected to observe the hearings.  I certainly hope to attend as many of these as possible. 

With a bit of time, I hope to post a spreadsheet later today or tomorrow - more likely tomorrow FYI - detailing my best understanding of how the changes to the variable match calculation will work if the Lipscomb "settlement" is eventually approved.  I don't have such a spreadsheet now, but I've been combing all my resources and communicating with various knowledgeable people and *think* I have a better handle on what is being proposed.  Whatever I post is simply an effort to explain the adjustment, which isn't as hard (at least not to me) as it seems when you first read the "explanations" floating around.

February 12, 2004.  A reliable PERS source has confirmed that retirees (4/1/00 through 3/1/04) who elect the half (or single) lump sum settlement as part of a Money Match retirement, will see a COLA freeze only on the monthly retirement benefit.  The COLA freeze will not involve any element of the lump sum settlement.  (See February 9 entry.  This is option 1).

February 11, 2004.  The PERS Coalition continues to be concerned about the proposed "Break in service" language contained in HB 2020.  The PERS Board is expected to adopt the rules defining the crucial terms of the "break in service", but the PERS Coalition remains wary of the rule.  According to the AFSCME website, Greg Hartman is keeping a close watch on what the PERS Board does and is contemplating next steps should the decisions adversely affect members.  In the meantime, Tom Doyle, of Bennett, Hartman, Morris, and Kaplan has prepared a matrix that tries to answer questions about the "break in service" definitions expected to be adopted by the PERS Board on February 13th.  You can read this matrix here.  It will be changed as needed after the Board acts.

February 10, 2004.  Many people (including me) have wondered exactly what we can expect from the Special Master in the PERS cases now before the Supreme Court.  I asked Greg Hartman what we could expect.  He wrote me that the Special Master will report on proposed "findings of fact" in the cases.  His findings will be agnostic to the law (i.e. he won't present any legal opinions on the cases), and the Supreme Court is not bound by anything he reports.  Nevertheless, one would expect that the Supreme Court would place some weight in his report since the Court appointed Judge Brewer in the first place.

February 9, 2004.  There is an amazing amount of confusion still circulating about what is subject to the COLA freeze and what isn't.  Over the past three or four days, I've gotten reports from readers who tell me that during various PERS workshops held at their worksites, PERS representatives seem to be giving three conflicting answers to the same question:  Is there any COLA freeze applied to persons electing the half (or single) lump sum settlement (Option 12) under Money Match?  The answer seems to be either (1) COLA freeze applied to monthly benefit portion; (2) COLA freeze applied to monthly benefit portion but also takes into account lump sum settlement; (3) no COLA freeze applies to Option 12 settlements.  Obviously, these all can't be correct, yet all are answers reported to questions asked of PERS reps at workshops.  I'm trying to get a definitive answer to the question from someone in PERS who actually knows the answer.  The only answer I seriously doubt is #2, which makes no sense at all.  I have claims from readers than #1 has already occurred, but I won't be satisfied until I hear from a particular source at PERS.  Stay tuned....

February 7, 2004.  I get advanced copies of the PERS Board agenda via email.  The next Board meeting is February 13, 2004 at 2 pm.  The agenda is extensive and involves action on a number of significant items, not the least of which is the rule concerning "breaks in service".  The proposed changes are included in the agenda pack, which is available here until it is posted on the PERS website.  (Be aware that the agenda and handouts are 98 pages long).  The proposed changes to the "break in service" language are limited to resolving concerns about education employees who may not normally be on the payroll during the summer. 

February 6, 2004.  For those interested, I've obtained a copy of the OPRI separate case filing to the Supreme Court (Sartain v PERS).  This case addresses the COLA freeze for retirees (Sartain Petition).  The PERS Coalition cases are posted at the Bennett, Hartman, Morris, and Kaplan website (http://www.bennetthartman.com). 

February 5, 2004.  I've now confirmed that members who retire under Money Match and take the "double lump sum" (employee account balance + employer match) will not be subjected to any "penalty" for the alleged "overcrediting" by the PERS Board in 2000 for the year 1999.  This is another example of the way HB 2003 differentially (some might say, inequitably) treats different classes of retirees.  Please, please, please don't use this as a basis for jumping into a double lump sum settlement.  In my opinion (and there is some evidence to substantiate this), this is a really bad idea for many (if not most) retirees.  

February 4, 2004.  The clock is ticking for public employees eligible to retire.  Several frequent questions recur in my email bag.  In perusing the impact of HB 2003 and HB 2004, I had totally missed the fact that members whose "best" benefit is the Formula + Annuity (F+A) elude the COLA freeze even if they retire on or before March 1.  I've confirmed this with PERS.  This strikes me as yet another inequity in the way members are treated in these bills.  The only folks affected by the COLA freeze are people who retire under Money Match *and* who choose a payout option that involves a monthly benefit.  People who elect the half lump sum will see the COLA freeze apply to the monthly portion of their retirement benefit, but it does not appear that members who elect the double lump sum (employee account balance plus employer match) will be subjected to any penalty for the alleged "overcrediting" from 1999.  (Caveat:  there are some potential "hits" to lump sum payments taken in installments, but these take the form of the earnings rate on the balance remaining with PERS before all installments have been paid.  Lump sum retirements between 7/1/03 and 3/1/04, which are paid in installments will receive the Tier 2 actual rate of return on installments.  This differs from past practice where installments were credited with the Tier 1 assumed rate.  Interestingly, I don't yet know the answer to the question of installment earnings for lump sum settlement retirements that take place *after* 3/1/04)  Although the "A" portion of the F+A benefit is constructed from the member account balance - which was "overcredited" in 1999 - this is also not subject to the retiree COLA freeze.  (In fairness, I've only heard from one member whose retirement benefit in the past 3 years was computed as F+A).

Another Special Master Status Conference took place today.  I didn't attend, although I had planned to.  Another reader posted his impressions of the conference on the PERS Discussion Group (see link on bottom of left column).  He reports that the most interesting thing to happens was an exchange between Greg Hartman, PERS Coalition Attorney, and James Baker, PERS' outside counsel.  Hartman is reported to have "chided" Baker for a copy of the proposed settlement between PERS and the plaintiffs in the "Lipscomb" case.  Hartman wondered how it was possible to have a settlement without all parties agreeing to it, especially since one of the parties (the PERS Coalition) hasn't even seen a copy of the proposed agreement.  Apparently, Baker grudgingly agreed that Hartman and the Coalition would get a copy.  Not sure when.  Still not sure what the PERS Coalition's precise legal standing is.  Stay tuned.

February 2, 2004.  All the organizations representing public employees are imploring their members and co-workers to DOCUMENT carefully every contact with PERS.  Keep track of dates, times, and persons who you talk/email with.  Keep copies of every piece of paper submitted to PERS (with timestamps on them).  Given the fluidity of circumstances right now, the need to document exactly when you initiated contact and when you submitted paperwork may prove essential later if disputes arise over eligibility for certain benefit computation methods.  I personally recommend that you either deliver all paperwork IN PERSON to PERS (and get it stamped at the front desk), or send it to PERS by certified mail (with signature proof of receipt). 

February 1, 2004.  For those playing "beat the dealer" with PERS, this is the last month in which you can retire and "potentially" lock-in the 8% assumed rate for 2003 and the 1.3% pro-rate for January and February 2004.  For those considering retiring this month, do keep in mind that there is no guarantee that you'll actually see the 8% that everyone keeps writing about.  The *only* way you'll get the full 8% for 2003 as well as the member contributions from July 1, 2003 to December 31, 2003 is IF (read carefully) your actual account balance combined with the NEW actuarial tables produces a HIGHER benefit than you would receive under the "lookback", which freezes your balance on June 30, 2003.  There are a considerable number of variables that come into play here.  It is impossible to predict, in advance, who will benefit.  Be sure to run the numbers very carefully before making a precipitous decision.

According to several readers, PERS' Information Line is telling callers that the Lipscomb "settlement" changes (presumably to the way the "variable match" is calculated) won't take effect until July 1, 2004.  I haven't verified the recording, but do point out that this isn't really much of a surprise.   Since the "settlement" hasn't been signed off by anyone, the Supreme Court hasn't agreed to it, and the Lipscomb intervenors (the PERS Coalition) are adamantly opposed to it (and no one has actually figured out what role they'll have in the final settlement), this is anything but a fait accompli.   Even if everything is approved, PERS will still have to go through some rule-making to implement the changes.  This involves PERS staff developing the rule, publicly noticing it, holding public hearings and taking testimony.  There will be some time before the PERS Board can adopt the rules and PERS can implement them.  While remaining vigilant is important, there is no need to go into panic mode.   

January 30, 2004.  There are several different alerts out to members of different groups concerning the "settlement" proposed between PERS and the plaintiffs in Eugene v PERS.  A common concern expressed in these alerts is the issue of PERS having to change the way the "variable match" will work.  There is no clear information on how this all will work, but I resurrected a document that PERS put out during the waning days of the Legislature that pertains to the recalculation of the variable match under Lipscomb.  This might prove helpful to those trying to figure out what this proposed settlement means.  This document carries an August 19, 2003 file date and should be understandable to anyone who can read a spreadsheet.  Note that the document contains some specific implementation questions that were not answered at the time it was prepared, but it does illustrate the alternatives PERS was considering. 

January 29, 2004.  The following letter (Hartman letter) from Greg Hartman to PERS' Independent counsel turned up on the Association of Oregon Faculties (AOF) website.  This is an interesting window into some of the behind-the-scenes legal maneuvering going on right now. 

AFSCME has just posted an update on the Lipscomb "settlement" on its website.  You can read the update here.

January 28, 2004.  I assure everyone that I don't have any more information about the "settlement" of the "Lipscomb" decision than you have.  I've emailed a few of my contacts hoping to get more details, but I'm not optimistic that I'll see anything relevant soon.  I know that OPRI plans no changes in its legal challenge of HB 2003 and the PERS Coalition still has very vigorous legal battle ongoing with the HB 2003 and HB 2004 cases, all of which remain in the hands of the Supreme Court's Special Master.  It doesn't appear to me that this "settlement" really changes anything except to remove it from the Supreme Court's docket.  Many of the Lipscomb findings are codified in HB 2003 and HB 2004, the fate of which rests with the Oregon Supreme Court.  Aside from the perplexing issue raised in PERS' own press release (see link below - concentrate on paragraph 4), the Lipscomb "settlement" merely means that 8 plaintiffs will have their employer rates recalculated downward, the overall employers' fund will be reduced by $339 million and redistributed to a contingency reserve, the rest of the employers will probably have to make up the loss of the $339 million with nominally higher employer rates, the various remedies (COLA freeze, 0% crediting, new mortality tables, etc) will be sufficient to satisfy the judgment for the plaintiffs, and PERS has to reimburse the plaintiffs $750,000 for legal expenses.  There's certainly more, but without a copy of the settlement agreement, that's about all one can glean from the various news reports and email responses. 

January 27, 2004.  The PERS Board has reached a "settlement" with the plaintiffs in the City of Eugene v PERS decision.  As I understand it, the both parties have agreed that the legislative reforms (still under litigation) are sufficient to address the issues raised in the "Lipscomb" case.  This means that, unless the Unions want to continue appealing a decision that appears to be settled (remember, the unions are "intervenors" in the case), Lipscomb is pretty much out of the picture for further Supreme Court action.  More to follow.  In related news, Multnomah County has agreed to *not* tax PERS benefits.

Later.  If you navigate to the PERS website (http://www.pers.state.or.us/) there is a press release that outlines some key terms of the settlement.  The fourth paragraph of the news release contains some puzzling language stating that IF the Legislative reforms are overturned, PERS will then go back in and directly take back the "excess earnings" credited in 1999.  I don't know whether this is the precise language of the actual settlement, but the words on the PERS news release seem pretty clear and leave me scratching my head.  If this is a correct statement, then IF the Supreme Court overturns any part of the Legislative reforms pertaining to the earnings crediting, PERS will go back in and take the money, leaving the members in the position of having to sue PERS for doing this.  I'm left somewhat perplexed as to how this will happen if the Supreme Court says that the Legislature can't order PERS to do what the settlement seems to be agreeing to do?   (The cynical side of me thinks that maybe the part of the "settlement" that may be unpublicized *might be* [I don't know this as a fact, I'm just guessing here] a part where the current PERS Board and the State admit that the 1999 earnings decision was an "error".  If this "stipulation" exists in the settlement, then statutes already exist for PERS to recover the money.  This is the "heads we win, tails you lose" outcome.)  It is worthwhile to read the press release, Steve Law's article in today's Salem Statesman Journal, the Eugene Register Guard's  story, KVAL in Eugene's brief news blurb, and the piece in today's Oregonian.  Each provides a slightly different slant to the story.  As the old saw goes, "...the devil is in the details." 

I have no idea whether this "settlement" clarifies matters for members, retirees, the public, the lawyers, and the Supreme Court, or whether it just muddies them further.  It strikes me that the combination of the Lipscomb appeal and the Legislative reforms put the State in an awkward position - as a defender of the PERS Board in the Lipscomb case and as a representative for the State in the Legislative reforms that get to issues raised in the Lipscomb case.  The State seemed to be straddling the fence with the same body parts on each side of the fence (ouch!).  It feels oddly reminiscent of the old Firesign Theatre routine:  "how can you be in two places at once when you're not anywhere at all?". 

Several of us have tried, somewhat unsuccessfully, to get copies of the case Sartain v PERS, which is the OPRI case filed on behalf of recent retirees.  So far, the best we've been able to do is to get directions on how we can request a copy from the court, which we can then scan in and post.  I'm hoping that an electronic copy can be located somewhere.

January 23, 2004.  For those with the tenacity to read a dense legal document, the brief posted on the Bennett, Hartman, Morris, and Kaplan website within the last day or two (here) is an extremely interesting window into the appeal of the "Lipscomb" decision now before the Oregon Supreme Court.  The actual document begins on about page 15 and runs an additional 73 pages.  Because *I* like to read this stuff, I found it to be compelling. 

January 22, 2004.  Although this is not directly related to PERS, matters have come to a head between the Association of Oregon Faculties (AOF) and the Oregon University System (OUS).  In November, the OUS sent a letter to all faculty who belong to the Optional Retirement Plan (ORP) stating that because of the way employer contributions to the ORP are linked in statute to the PERS employer contribution rate (which dropped as a result of Measure 29) , that OUS was henceforth going to drop the employer contribution from 11.31% down to 3.72% for Tier 1 faculty in the ORP and down to 4.72% (don't quote me on these exact numbers - I'm writing only from memory) for Tier 2 faculty in ORP.  AOF subsequently asked Tom Doyle from the law firm of Bennett, Hartman, Morris and Kaplan to investigate whether OUS violated any statute in doing this.  Mr. Doyle's research found that OUS appears to be in violation of several relevant statutes and on January 20, 2004, served notice on OUS that it has 14 days to comply with its interpretation of the relevant statutes or else AOF (Mr. Doyle's client) will pursue legal channels to enforce the statute.  You can find all the relevant correspondence at the AOF website.

The next status conference held by the Oregon Supreme Court Special Master will be held February 4, 2004 at 10:00 a.m.  The location and room is presumably the same as today's conference.  Related to this, a number of documents in the proceedings are now posted on the Bennett-Hartman law firm website.  You can locate them here.  While these do not substitute for the actual transcripts of the conferences, these are actual orders and motions entered into the record so far. 

Also, PERS has reposted a number of documents previously available on its website.  Included are the current (2001) actuarial (mortality) tables as well as the "old" (1978) tables.  These are posted below, but the official version is now available at this link.

January 20, 2004.  See the link to the left (bottom) to the PERS Discussion Group on Yahoo.  This is a relatively new group that has some more "real time" discussion amongst PERS members and retirees.

January 18, 2004.  We received our Measure 30 ballots in the mail yesterday.  Yours should be coming soon.  I haven't decided how to vote on this measure.  I understand why I should vote "Yes", and am frankly unimpressed so far.  On the other hand, the arguments for voting "No" are mean-spirited and miss more compellingly non-mean-spirited reasons for voting "No".  Needless to say, I haven't made up my mind.  When I do, I won't share my decision here.  But I would encourage readers to think very carefully and read widely before casting a vote one way or the other.  So far I'm unpersuaded by the "knee-jerk" reasons to vote "Yes" and the equally "knee-jerk" reasons to vote "No". 

January 17, 2004.  In the update to the PERS Website, several documents have been taken down, perhaps only temporarily.  A number of people have asked me for copies of them and so I post them here until PERS gets them back on their site.  These documents contain the 1978 mortality factors (old tables) and the 2001 tables now in effect for retirements after July 1, 2003 (new mortality tables).  Do be aware that the file containing the new tables is quite large (1.8 MB), while the old tables file is rather small.  The difference is that the newer file has all the associated narrative, while the old file contains only the tables themselves.  You actually have to understand the various retirement option to make use of these tables.  Some are obvious, while others are less so.  However, if you use my Calculator, the option numbers I use correspond to the identically-numbered tables in the above documents.  Be aware that you will not get the same numbers as I report for the reasons I enumerate in my January 6 and January 7 entries as well as in the "ReadMe" file.  Both numbers are accurate, but neither the tables nor my program account for *all* possible variables in determining the final benefit.  In other words, both the tables and my program will give you more than enough information to make an informed decision about your retirement benefit, but the final benefit depends on a few other factors that are temporally contingent and constrained - or more simply, "your mileage may vary".   

The OPRI group (Oregon PERS Retirees Inc) has an updated newsletter out describing the current status of the Sartain case.  This case is one of the eight before the Oregon Supreme Court.  It specifically applies to retirees in the 2000 - 2004 range and addresses the issue of the COLA freeze.  If you are interested in more information on the legal proceedings, you can go to their website (http://www.opri.org) and read the January 2004 newsletter, which also contains information about membership and how to contribute to the OPRI legal defense fund.  (Note that retirees don't pay unions dues and therefore aren't now contributing to the legal expenses of the PERS coalition.  OPRI is mounting a legal case separate from, but in cooperation with, the PERS Coalition.  Its expenses are *not* being paid for from union dues.  It relies solely on contributions from OPRI members and other interested parties.)

  According to informed sources Judge David Brewer, the Special Master appointed by the Oregon Supreme Court, is adhering to a very tight time schedule and has set April 12, 2004 as the date by which he expects to issue his report to the Supreme Court.  Judge Brewer holds occasional "status conferences" that are public.  Anyone can attend.  The next one of these conferences will be Thursday, January 22, 2004 at 9 am.  It meets at the Oregon Tax Court, Robertson Building, 4th Floor, 1241 State Street, Salem.  These conferences are recorded and are available on CD or cassette (you don't get to choose) for $10 per session.  To order audio copies of these conferences, you can call Nancy Livermore, who works for the Special Master.  Her number is (503)-986-5662.  Be patient as she gets many such requests daily.  Finally, note that after each conference Judge Brewer (the Special Master) issues an order to deal with the resolution of issues that have been argued in conference.

This same source reports that the current timetable has the "Evidentiary Hearings" schedule for February 23 - March 5 and the "Final Arguments" set for March 26, 2004. This should allow Judge Brewer sufficient time to meet the April 12, 2004 deadline.  I do not know yet whether Judge Brewer's final report will be made public immediately, if at all.   
January 13, 2003.  Several recent newspaper articles have taken an interest in the "Break in Service" language of HB 2020.  This has led to a spate of emails and some potential misinformation.  The implementation of the "Break in Service" language is contained in a rule - ORS 459-070-0001, which was up for a vote at last Friday's PERS Board meeting.  If you took the time to read the Board packet, you would have seen lengthy written comments on the definitions proposed in ORS 459-070-0001 from many interested parties.  Interspersed in some of the lengthier comments was commentary from PERS Staff, which suggested that some of the proposals for changing the rule would run counter to the plain language of the law, while others had some potential for being implemented without necessarily conflicting with the law.  The news reports do not mention any vote on the proposed rule, or the important fact that the PERS Board delayed a decision on this rule until its February meeting.  The delay was to allow PERS Staff to expand the definition of "service" to include periods where the member receives salary or employer-paid benefits as long as an employer relationship is maintained.  This is in line with PERS Staff comments throughout the written testimony that teachers, for example, may not receive salary during summary periods, but maintain an employer-employee relationship and continue to receive benefits during these periods.  The Board will take up OAR 459-070-0001 next month.

Some are also suggesting that the "Break in Service" issue is part of the ongoing litigation before the Oregon Supreme Court.  This is not, to the best of my knowledge, true.  The cases before the Oregon Supreme Court pertain to HB 2003 and HB 2004, not to HB 2020, where the current controversy arises.  From what I've heard so far, there is no extant legal filing (yet) on this element of HB 2020.  (One could suppose that if the litigation against HB 2003 and HB 2004 went in favor of the plaintiffs, some elements of HB 2020 would become invalid by default.  Nevertheless, it would be incorrect to conclude that the current court cases encompass HB 2020's "break in service" provision).

January 10, 2004.  Not surprisingly, the PERS Board voted yesterday to credit Tier 1 Regular Accounts with 0% earnings for 2003.  This decision will be finalized at a Board meeting at the end of March.  The Board also decided to place about $950 million into two reserve accounts (presumably the Benefits-in-Force [retirees] and Contingency Reserves).  According to the Oregonian today, the PERS fund gain/loss reserve remains approximately $600 million in deficit after 2003, down from $1.9 billion at the start of 2003.  For those wondering how it is possible for the fund to gain more than $7 billion and remain in deficit, remember that the $7 billion in gains include earnings for all the members and retirees who not only are Tier 1 Regular, but also Tier 1 Variable who get market returns, Tier 2 members who get market returns, and retirees, whose fixed benefits are based on the assumed interest rate.  When those accounts are "settled", administrative expenses paid,  and the Benefits-in-Force and Contingency reserves funded at the levels authorized by the Board, the gain-loss reserve remains in the red.  If this distribution is ratified by the Board at its March meeting, the possibility exists that Tier 1 Regular Accounts might go another year (2004) without earnings, although this depends completely on Market conditions and the outcome of cases pending before the Oregon Supreme Court.  

As a followup to the article linked in yesterday's (see below) entry, just a quick comment.  The writer of the article is concerned about the investment fees and brokerage expenses PERS incurs on the funds invested by the Oregon Investment Council.  A quick bit of math might put the numbers in a slightly better context.  The fees of $198 million on a portfolio of $37.7 billion represents a total of 0.5% of assets.  The 2000 - 2002 fees are high relative to returns because the fund had low returns in those years, but the opposite relationship exists for 1996 - 1999, where the returns were quite high relative to the fees.   There are other issues the author misses, one of which is whether it would be prudent to save money on investment fees solely for the purpose of saving money on investment fees.  Saving $10 on investment fees but losing $50 on the investment isn't a particularly good strategy.  Looking at fees for possible economies isn't a bad idea, but it isn't likely that the savings will be the enormous windfall the author suggests might be found.

January 9, 2004.  Made it off the mountain today, but not soon enough to make it to the thrice postponed PERS Board meeting.  We'll have to wait for the Board summary to come out.  In the meantime, I ran across a fascinating article about the various brokerage and investment management fees the PERS fund pays out.  You can read about this here.  Unfortunately, there isn't much context to the article that permits the reader to compare the expenses PERS incurs with those incurred by other public employee retirement systems.  Nevertheless, the article raises some questions worth asking.

January 7, 2004.  Another snow day.  The new edition of the PERS Members' Handbook is out.  You can find it at this link.  It covers a lot of new ground since the 2001 Handbook came out several years ago.  It explains the "lookback" concept, the IAP, the OPSRP, and a variety of other things recently passed by the Legislature.  It is a must-read for those trying to gain some purchase on what is going on right now.

A few more questions have arisen on my "Lookback" Calculator.  For those not familiar with the way the various benefit payout options are number, here is a brief recap:  Option 0 is the "refund annuity".  Option 1 is the "non-refund annuity" (the highest annuitized benefit you can receive and is the basis for the survivorship options).  Options 2 and 2A are full survivorship benefits calculated from the Option 1 benefit and the age of your beneficiary.  The "A" suffix indicates that should your beneficiary predecease you, your benefit would "pop up" to the Option 1 benefit level for the remainder of your life.  Options 3 and 3A offer half survivorship benefits to the beneficiary, with the "A" suffix denoting a "pop up" to Option 1 should your beneficiary predecease you.  Finally, Option 4 is the 15 year "annuity certain".  All of these options, as well as the lump sum benefit options are clearly explained in the new PERS Handbook (see above paragraph).

January 6, 2004.  Hope you're all inside where it's warm.  The thermometer on my deck reads 6 degrees right now and snow is blowing pretty hard.

I checked PERS' Website again today.  The site is being modified in real-time and things that disappeared from view are slowly reappearing.  It takes a bit of patience to wander through the site, especially if you were accustomed to its previous layout and organization.  But *some* of the links below seem to be working again.  Hopefully, the rest will be restored in short order. 

Judging from questions I received yesterday, people are NOT reading the "ReadMe" with the Lookback Calculator.  PLEASE read it, as it should answer most of the questions you have.  My calculator adjusts monthly amounts for the taxability of PERS Benefits (addressed in HB 3349; codified in ORS 238.380); PERS' online calculator does NOT make this adjustment.  PERS' example (in "When should I retire?") includes a 2% COLA directly applied to the benefit for people retiring on 7/1/04; my calculation does not make this adjustment.  If you read the "ReadMe" file, it explains how to reconcile these differences and come up with numbers that are nearly identical to those published in PERS' example.  Finally, do remember that the "Lookback" calculation itself is based on the 1978 mortality factors, while the comparison calculation is based on the 2001 mortality factors, which took effect on 7/1/03.  This affects the monthly benefit amount for nearly all options.

The PERS Board meets tomorrow at 1 p.m.  I *may* be able to go to this meeting.  The agenda at this link contains a great deal of information (it is 167 pages long).  It is quite worthwhile to read all the written comments submitted to PERS on the proposed rule for the "Break in Service".  Clearly lots of people are concerned, and the PERS Staff and outside counsel responses are illuminating.  The issue concerning retroactive application of the law to breaks beginning before 8/29/03 and continuing after seems to be one on which PERS believes it has NO latitude.  Both outside counsel and PERS staff seem to agree that the plain language of the law is quite clear, and that there is no legal or administrative way around the retroactive clause.  However, there seems to be some flexibility in defining what constitutes a "break in service," and the sense I get from reading the comments from PERS Staff is that the recommendation could be to *not* consider the summer period for teachers as a "break in service."  This would *mostly* solve the problem in K - 12 and Higher Education, although there are other potential issues to consider.  The administrative rule is up for a vote tomorrow and the PERS Board will have to decide to accept the rule, as is, or modify (?and renotice) according to what is legally permissible.  I strongly suggest that if this topic is relevant to you, spend the time needed to read the documents at the link above.  There is much, much, much more contained in the information and agenda packet.  Go there to find out what other surprises might be lurking.

January 5, 2004.  The public release of the "Lookback" calculator is now available.  Many people have tested it and it seems to give sensible answers.  The file - see above in RED - is no longer passworded.  To distinguish between the current version and earlier versions, note that the code name (cutesy names programmers assign to versions of projects) has changed from "Rottweiler" to "Doberman".  I've tried to clarify some of the dialogs, have removed some unnecessary verbiage, and have included a README file (installed in the same directory as the program), which will initially display when you first install the program.  PLEASE READ IT!  As before, if you have problems or note results that don't seem quite right, do please let me know.  But please send me all the information needed to reproduce your problem.  I'm not willing to investigate problems without the data required to demonstrate their existence.

PERS has redone its website.  On January 1, 2004, the website underwent a major overhaul.  The result is a site so completely disorganized and difficult to follow that any longtime user of the site can expect to spend quite a bit of time trying to find information previously easy and obvious to find.  Much information either has been removed completely, or moved to some totally obscure and unobvious location, all-but-unfindable to any but the most persistent. Maybe people will simply call PERS Customer Service and overwhelm it with requests for information previously easy to find on the website.  This seems like a losing strategy for an agency already taxed beyond its capacity right now.  Virtually all of the links to the PERS website  contained in entries below this are now broken, and some documents have plain been removed from the site.  I can never understand why it is necessary to "fix" something that plainly isn't broken.  Must be the new motto:  If it works, break it; if it's broken, fix it and break something else.  Growl.... Snarl....

September to December 2003 Musings

Pre-September 3, 2003 Musings

Pre April 2003 Information

Last modified:  02/02/05