March 31, 2003. The PERS Board finalized the variable earnings rate for 2002 at -21.51%, down slightly from the preliminary posting at the end of January. HB 2004-A is due for additional hearing and a possible work session in the Senate General Government Committee. There are several rumored amendments. One would "cap" the "Lookback" at no more than the member's final average salary. Another would prohibit the "lookback" from taking place if the Lipscomb decision is upheld in the Oregon Supreme Court (it isn't there yet, by the way, although two bills in the legislature, if approved, would send it directly to the Oregon Supreme Court).
The PERS Board also voted to make their AEF rule coincide with the current version of HB 2004 (7/1/03 implementation; "lookback" with no interest), thus bringing some degree of closure on the matter of the differences between the Legislative "solution" and the PERS Board "solution" to this problem. The PERS Board also agreed to pursue an "expedited" Supreme Court review of the Lipscomb decision, and to seek a "stay" of implementation until a final decision is rendered.
March 30, 2003. While I was away, the House PERS Committee unanimously voted HB 2407 out of committee with a "Do Pass" recommendation. HB 2407 takes new legislators out of PERS and puts them into their own 401-k type retirement plan. HB 2407 moves next to the full Oregon House, but no vote is yet scheduled. There are a couple of new articles posted at the left for those who continue to follow the media coverage of PERS issues.
The Senate General Government Committee will take up HB 2004-A (actuarial factors) and HB 2005-A (membership of PERS Board) tomorrow (3/31/03 at 3:00 p.m.).
March 24, 2003. The PERS Board meets at 8:30 a.m. on Monday 3/31/03. There is quite a lengthy agenda, which includes finalizing earnings for 2002, a legislative update, a first reading of the new actuarial equivalency factor rules, as well as a discussion of the Eugene v PERS case in executive session.
March 23, 2003. Over the weekend I received paper copies of various pieces of submitted testimony to the House PERS Committee. Unfortunately, I don't have the time to scan and clean these documents for posting electronically. The documents include Mr. Gary's written explanation of HB 2003, particularly some of the "Lipscomb adjustments", Mr. Hartman's observations on HB 2003, and a letter from Greg Chaimov, Legislative Counsel, to Senator Tony Corcoran (Chair, Senate General Government Committee) responding to a request for "informal response" to questions about HB 2003 and 2004-A. (I scanned Mr. Chaimov's letter in and you can read it by clicking here). In addition, there is a letter of "qualified support" for HB 2003 from Francis Charbonnier, McMinnville School Board (see below March 20 for summary), a letter from the Oregon State Firefighters' Association, and a letter from Ron Parker, representing Associated Oregon Industries.
I will be out-of-town again from 3/26 to 3/30 and will not update the site during that period, although I may send out email to the list if anything of the moment occurs.
March 21, 2003. The House PERS Committee will continue to take public and invited testimony on HB 2003 next week (3/25 and 3/27) at 3:00 in HR E. On 3/19/03, the Senate General Government Committee heard invited testimony from Greg Hartman concerning several aspects of HB 2004 (and indirectly, HB 2003 which is still in the House Committee). Mr. Hartman's testimony centered around the question of what the Legislature should do in light of the extant appeal of the "Lipscomb decision", and the "contract rights" issues surrounding HB 2004-A. Mr. Hartman acknowledged that discussions were ongoing among the Attorney General's Office, the PERS Coalition, and the plaintiffs in the "Lipscomb decision" concerning a "stay" of Judge Lipscomb's order pending the outcome of an appeal. Mr. Hartman did not predict whether the parties would agree to a stay, but agreed with Senator Minnis that it was important for the Legislature to be clear whether PERS bills now pending were dependent on or independent of the outcome of the "Lipscomb decision".
It is most definitely worthwhile listening to Mr. Hartman's testimony and response to questions from the Senate General Government Committee on 3/19/03. Mr. Hartman's testimony begins at about 25 minutes into the audio transcript and runs until about the 1 hour mark. Following Mr. Hartman, there is a short question and answer period with Mr. Jim Voytko, Executive Director of PERS, that is also both informative and insightful. If you're interested, go to the Legislature's audio site (need Real Audio to play).
March 20, 2003. I've been out of town for the past two days. For what it's worth, air travel right now is pretty strange. I don't think I've ever been at San Francisco International at mid-day when the airport was like a "ghost-town". I encountered more airport security than passengers.
This week, the PERS Committee has taken testimony on HB 2003 ("the employers' bill). This bill, among other things, proposes a statutory "fix" to all the problems Judge Lipscomb claims exist with the PERS Board decisions and practices over the past 7 years (since October 1996) from future earnings. Tuesday's testimony included a lengthy summary of the bill and advocacy of the bill by Mr. William Gary, lead attorney for the plaintiffs in the Eugene v. PERS case (the "Lipscomb decision"). Among other things, Mr. Gary acknowledged that the assumed interest rate would have to be reduced to 7% to cover the "Lipscomb administrative costs" described in HB 2003. Predictibly, Mr. Gary was followed by testimony against the bill by Mr. Greg Hartman, lead attorney for the PERS Coalition, who argued the legal defects in the bill that would result in major court challenges, and spent some time outlining why the cost-savings from HB 2003 were considerably less than the proponents argue. At some point, a memorandum from the Legislative Counsel Mr. Chaimoff (?) was introduced. This memo indicated that it was his - Mr. Chaimoff's - legal opinion that HB 2003 would not be upheld by the courts. This led Committee Chair Rep Knopp to ask Mr. Hartman why he (Mr. Hartman) thought that Governor Kulongoski, "...a former Supreme Court Justice" would tell him (Mr. Knopp) that he thought the "Lipscomb decision" would be upheld in the Supreme Court. Mr. Hartman admitted that he had no idea why the Governor would believe that. Rep. Knopp questioned Mr. Hartman on a number of areas, while Rep. Macpherson questioned Mr. Gary in some detail. Mr. Macpherson's questions were quite specific and bore in on areas of HB 2003 pertaining to the "6% solution", shifting the cost of the retirement entirely to employers, and the apparent disproportionate negative effects on Tier 2 members (in contradiction to Mr. Hartman's observation that Tier 2 members could receive a windfall).
Today brought testimony from Associated Oregon Industries, Oregon Business Association and the Oregon Business Alliance, all of which favored HB 2003, but urged even bolder changes including considering terminating PERS and replacing it with a new plan. The representative from the Oregon School Boards Association, gave lukewarm support to HB 2003, in large part because he was "disappointed" that the bill did not address the 8% guaranteed rate of return, which he believes is the real problem in driving up the UAL for employees with 20 or more years of service and the real source of savings. He did not believe that HB 2003 would yield the savings proposed. He asserts that it does nothing to protect Oregon public employers from "disastrous consequences" down the road, with little short-term savings and potentially extensive long-term consequences.
Doug Smith spoke as a retiree and OPRI member (but NOT representing OPRI) against the various sections of the bill deemed harmful to people who retired between October 1996 and December 31, 2002 - particularly COLAs.
March 17, 2003. The Senate Government Committee took up HB 2004-A, "dash 16" today. The "dash 14-16" amendments are purely housekeeping and correct typographic errors in "dash 13". There are no policy implications of any of the changes. A "dash 17" amendment is currently under discussion, but is not yet ready for public hearing. The House will take up HB 2003 ("the employer's bill") tomorrow at 3:00 p.m. I'll be out of town tomorrow and Wednesday; the site won't be updated again until Thursday afternoon March 20th.
March 16, 2003. I've reached a stumbling block with the "Lookback Calculator" and am soliciting opinions on how best to proceed. The short version is that I'm seriously considering waiting to release the program until after the 2002 Member's Annual Statement is sent sometime in late April. This would solve a significant problem that I'm struggling with right now. The current (unreleased) version assumes that the member has the 2001 Member's Annual Statement. It goes through some pretty serious contortions to come up with a preliminary 2002 balance that captures the published (but unaudited) 2002 final Variable Earnings Rate (-21.30%). The reason for this is that the variable balance is a moving target on a monthly basis and without fixing the 2002 variable balance, it is really hard to get an accurate handle on the "snapshot" balance taken on 6/30/03 (if HB 2004-A is adopted in its more-or-less latest form). By experimenting with the current (limited circulation) version of the "lookback" calculator, I know that it is possible to get some pretty misleading answers to the 6/30/03 balance depending on the (wrong) assumptions you want to make. Again, if the 2002 rate is -21.30% and the rate posted for January 2003 is -2.23%, what rate do you want to assume will be in effect on 6/30/03 (or is that really 5/31/03?). This problem is more tractable if I know that members are using the official 2002 statement because this limits the "guesses" to a rate on 6/30/03 without having to have this rate apply over an 18-month period of time.
I continue to work on a version that will handle the situation with either the 2001 or 2002 Member's Statement, but the error-checking and logic are decidedly more complex if I allow the member to use the 2001 balances. I have to do much more internal "fixing" to protect the member from him/herself.
If you have an opinion on this subject - wait until about May 1, 2003 to release when the 2002 Statements are out, or release early before the statements come out, please email me and let me know. I have about 30 people testing the 3/10/03 release of the "lookback" calculator, but there is no one testing the 3/21/03 version as it is not ready for prime-time. It would probably take another week (from today) for me to be confident that the newer version is reasonably error free before I'd let it out for testing.
March 14, 2003. The House Committee heard reports yesterday on progress made by employee and employer groups meeting to try to reach consensus on the details of a successor plan for new hires. It appears that the successor plan, as envisioned by the employee/employer negotiators, would have a significant (if not exclusive) "defined benefit" component but would not have a "Money Match" feature. You can read more about the details made public in the two news reports to the left. AFSCME has posted the areas of agreement between employers/employees who are negotiating elements of this possible successor plan for new hires. You can read the details by going to this AFSCME alert.
I'm in the last phases of cleaning up loose ends in the "lookback" calculator. Still of some concern is whether to provide a "suggested" variable interest rate based on the unaudited final variable rate for 2002, or simply to allow the member to pick any number he/she wants. Since the 2002 final rate is going to have a significant impact on the lookback balance, I'm leaning towards at least fixing that in code. If anyone has strong opinions - for or against - please let me know soon as I'd like to make a final decision before releasing the program on Thursday 3/20/03. Several have asked how the "dash-13" amendments to HB 2004-A would affect my calculator. The answer is - not at all. I wrote the program and the comparisons thinking that the "dash-13" amendments were what was actually approved in HB 2004-A (I was hardly alone in this assumption). As a result, the program makes its comparisons option-by-option and "scores" them individually. If there are changes to the "dash-13" amendments and to the concept of the "lookback" (e.g. "lookback with interest"), the program can be modified easily to handle this.
Next Tuesday (3/18/03) the PERS Committee will take up HB 2003, colloquially known as "the employer's bill". Tuesday's session is limited to invited testimony, not open and public testimony.
Next Monday (3/17/03), the Senate General Government Committee will consider several amendments to HB 2004-A13. One of these "dash 14" corrects a typo in the "dash 13" version, while there are two more amendments ("dash 15" and ? "dash 16") in the pipeline.
March 13, 2003. The Senate General Government Committee had its first day of public hearing on HB 2004-A. At the opening "bell", the whole issue of exactly what the "lookback" does came up, and very quickly there was a discussion of the "dash-13" amendments to the House-approved version of HB 2004-A. This amendment appears to fix the language in HB-2004A ("dash 11") and makes clear that the "lookback" is to be calculated on all optional payment forms for the "Money Match" method, not merely the "refund annuity". (This is, by the way, how my lookback calculator now works - it compares all optional payment forms and returns the "winner" of EACH comparison independent of other comparisons). The "dash-13" amendments are probably the first of a number of amendments to HB 2004-A. Many of the same witnesses testified yesterday as did before the House Committee and many of them continued to make the same cases for either "lookback with interest" or "immediate implementation with no lookback". Clearly the discussion will continue for awhile before any final decision is made, although several witnesses, and members of the Committee itself, acknowledged that there is some urgency in reaching Legislative closure soon so that people can make an informed decision whether to retire or to not, and legal challenges can be mounted and resolved in a timely manner. More detail can be found in my email to list members yesterday (see list archives to left).
For those of you interested in the proposed amendments to HB 2004-A (engrossed), here is a cleaned up copy of a scan of the "dash-13" amendments, kindly faxed to me by Senator Tony Corcoran's office. Here is HB 2004-A13. Be aware that these amendments do not make any sense except in the context of HB 2004-A itself, which you can read at the Legislature's web site (here). The line number references in HB 2004-A13 refer to the lines in HB 2004-A Engrossed.
March 12, 2003. The Senate Government Committee takes up HB 2004-A today. There are amendments to the bill rumored (and I've seen a draft of one significant amendment). For those interested in the testimony, the Legislature has audio clips available within hours after the hearings close. If you're interested - they are often quite helpful - you can check the Legislative archives at the Legislature's web site. Yesterday's House PERS Committee continued discussion of HB 2008 and HB 2020. The Committee may begin fleshing out the form of the successor plans as early as Thursday 3/13/03. There was an interesting discussion yesterday of HB 2421, which would allow retirees to work outside the 1039 hour limit subject to certain limitations - no more than 10% of an employer's work force allowed, salary cannot be higher than the lowest amount paid in that job classification, no PERS. There was lots of discussion (mostly against) HB 2421. Among other people, AFSMCE's Mary Botkin came out pretty strongly against the bill for a number of reasons. You can read about her testimony at AFSMCE's Legislative Alert site.
March 11, 2003. The "lookback" described in HB 2004-A continues to draw a lot of attention and sow considerable confusion. There seems to be a gulf between the legislative intent and the bill's language. I've seen a draft of one of the proposed amendments to HB 2004-A. Presumably this draft, or something close, will be introduced when the Senate Government Committee (Sen. Tony Corcoran, Chair) takes up HB 2004-A tomorrow (3 p.m. HR B). These amendments would remove all references to the "refund annuity" and would make the "lookback" comparison based on the method chosen by the member as the basis for receiving an optional payment method as described in ORS 238.300, ORS 238.305, ORS 238.320, or ORS 238.325. This would, *I think*, remove the ambiguity in the House-approved version of the bill that only directs that the comparison be done using the "refund annuity" and leaves open the question of what happens if a member chooses an optional payment method that isn't the "refund annuity".
March 10, 2003. Yesterday's Oregonian had a very short (and well-buried) article about the Oregon State Bar Association Board of Governor's recommendations for the current vacancy on the Oregon Supreme Court. Justice Susan Leeson resigned from her seat on the Oregon Supreme Court in January. Governor Kulongoski, himself a former Oregon Supreme Court Justice, will select Leeson's replacement to fill the balance of her term (which expires following the May 2004 primary). The Bar Association recommended 10 people as "highly qualified" for the position from a total of 20 applicants. Among those listed as highly qualified is Judge Paul Lipcomb. It is interesting to speculate on the fate of various PERS bills and PERS litigation were Judge Lipscomb to be elevated to the Oregon Supreme Court.
HB 2006 is currently under consideration by the House PERS Committee. HB 2006 makes for some interesting reading as well. HB 2006 would establish a separate deficit account for each year that PERS is required to pay out the assumed interest rate against earnings less than the assumed interest rate. It sets a time period (unspecified in the bill) at which point the deficit would be "called" and would have to be repaid jointly by employers and employees. There are a fair number of questions left unanswered by HB 2006, not the least of which is the time frame for the "call" and the method by which the deficit is to be repaid. Mr. James Voytko, Executive Director of PERS, raised some of these issues in his testimony to the House PERS Committee last Thursday. He summarizes these issues in his memo to the House PERS Committee.
For OUS employees, it is quite worthwhile to take a look at the AFSCME website (AFSMCE PERS Update) concerning testimony on HB 2008 - one of the two bills for "successor plans" for new employees. In particular, read the update carefully for discussions of amendments to this bill (and presumably to HB 2020) proposed by the OUS.
Tomorrow and Thursday the House PERS Committee continues discussion on HB 2008 and HB 2020, as well as a number of other PERS bills. Of interest, however, is HB 2421 which would allow PERS employees to hire a PERS retiree for up to 5 years past retirement without regard to the number of hours worked in a calendar year. This bill is fascinating in light of all the controversy surrounding "double dipping".
The Senate takes up HB 2004-A for public hearing on Wednesday March 12, 2003. It isn't clear from my research whether this hearing is in the General Government or Ways and Means Committee.
I just posted a new version of the "Lookback" calculator (bearing the date 3/12/03). The version changes the way interest is calculated on the regular account to a slightly more precise method. The results should be slightly higher than the results obtained in previous versions. I also located and repaired a very subtle bug in the final calculation of the "lookback" balance. Previous versions failed to credit interest for the month of June 2003 because of how date differences are computed. I've fixed the bug and now the "lookback" balance and the final account balance on 7/1/03 should be the same (they weren't before, and it took a tester to point it out to me). No other balances were effected, but the bug would have resulted in slight underestimates of the "lookback" benefits under the various 1978 actuarial scenarios.
March 7, 2003. For those testing the "Lookback" calculator, I've posted a new version today in the usual place with the same password. There are a couple of changes that may result in slightly different answers (probably not significant however). The major two changes are that the program will now allow Police and Fire people, who can retire at age 50, to use the calculator. All earlier versions limited the program to members who were at least 55 years old at retirement. The new version will NOT save you from yourself. If you enter a retirement date that computes your age as between 50 and 55 the program will issue a warning, but it will not stop you from computing results. SO BE FOREWARNED that unless you are P&F, you can't really retire before the age of 55 (unless you've got your 30 years in) and the results will be largely meaningless. I also changed the way the ORS 238.380 (HB 3349) adjustment is calculated. This shouldn't effect very many people, but for those folks who took the one-time irrevocable option to leave PERS on 12/31/96 to move to the ORP (and left money in PERS), I had been calculating the benefit increment adjustment wrong (actually too low). I've now fixed this so that the calculation is done correctly. There are numerous other minor computational tweaks and cosmetic fixes. So far, no one has reported any seriously weird results. The new version sports the date 03/09/03 (don't ask me why my versions always postdate their actual release date. It's an old habit of mine, hard to break).
I've also posted a new version of the regular calculator (see link above) that fixes the same bugs noted in the "Lookback" calculator. It also will allow Police & Fire members to estimate benefits down to age 50 at retirement (before it was 55). Please remember that just because the program will calculate a benefit doesn't mean you're eligible to retire.
HB 2003 ("the employer's bill") was introduced formally yesterday. You can read the full text of the bill (all 39 pages) here - HB 2003. While the bill has been cleaned up from the draft that appeared in testimony on February 12, 2003, all of the same features are present: elimination of the 6% employee contribution, immediate and retroactive implementation of the 2001 actuarial tables, suspension of COLAs for folks who retired between 10/96 and 1/1/03, charging off Lipscomb settlement costs as PERS Administrative expenses and amortizing them over 15 years, with the attendant effect that the assumed interest rate would need to be reduced in order to offset the large administrative costs. Read the bill carefully.
March 6, 2003. I've made a "beta" release of the Lookback Calculator available to a small number of users. If you meet the criteria above (see above, second paragraph), feel free to email me. The "beta" is not public and is password-protected to prevent it from circulating widely before I'm convinced it is working as designed. It will also stop working after 3/31/03, just to be certain that potentially broken copies don't find their way too widely. Once I'm satisfied that it is stable, I will release it for anyone to try. Since the entire concept of the "Lookback" remains in flux, I'm reluctant to "go to gold" with it before the Oregon Senate has its way with HB 2004-A.
I'm gratified that many of our Legislators find this site and my email list valuable enough to recommend to constituents. In the past 4 days, I've had emails from at least a dozen people whose local Legislator had given them my email address and the URL for this website.
There is an interesting feature in the Hillsboro Argus. You can read this article to the left. The short message is that things continue to be quite uncertain. According to the article, PERS officials have determined that for revised employer rates for 03-05 to take effect by 7/1/03, they would have to be finalized by May 1, 2003. This accelerates the pressure on the Legislature to reach rapid closure on bills that have a significant financial impact on the PERS system.
March 5, 2003. The last couple of days have been remarkably quiet. The PERS Committee continues to discuss and take testimony on HB 2008 and HB 2020 - the successor Defined Benefit and Defined Contribution plans for employees joining after 1/1/04. There is very little news coming out of the committee right now. TIAA-CREF made a presentation last week, suggesting that "privatization" of the successor plan has not been ruled out.
I've finished the first "rough" cut of the calculator that encapsulates the "lookback" computation as outlined in HB-2004A, now in the Oregon Senate. The results check with hand-calculated amounts using some test data and so I'm optimistic that I've got the hard part done. I was more than a bit surprised to discover that using Option 0 to determine which set of actuarial tables "wins" does not produce consistent results. That is, I have several instances showing that the Option 0 benefit under the 2001 tables is higher than the Option 0 benefit using the "lookback" balance and the 1978 tables. This does not, however, follow to Options 1, 2, 2A, 3, and 3A. In these cases, the 1978 tables produce a higher benefit. In the same example, the 2001 Option 4 benefit is higher than the Option 4 benefit under the 1978 tables. I'm investigating more examples to see whether this is a ubiquitous problem or whether it is limited to some special cases. I'm concerned about it because it showed up in the first two examples I threw at the revised calculator.
March 3, 2003. No significant news today. I continue to chip away at the "lookback" calculator, making progress slowly. I've decided to make the entire program "expire" on April 1, 2004. Because of the timing of the "lookback" there isn't any point in calculating it for the user after the information is known. That is, I expect that PERS will have the correct "lookback" balance at some point during 2003 and will, perhaps, include it on the 2003 Member Account Balance statement that will come out in April 2004. Once the "lookback" balance is fixed, an entire section of my program will become both unnecessary and obsolete. At that point, the program only needs the official amount recorded in PERS' system to compute the "lookback" benefit under the 1978 tables. The hard part of the current programming exercise is to compute the "lookback" balance at 6/30/03. Everything else is quite trivial. I'm hoping to have the first working version of the "lookback" done by Friday March 7, 2003. Please be reminded that the "lookback" feature is still in flux. Although HB 2004-A was approved overwhelmingly in the Oregon House, its fate is less certain in the Oregon Senate. It is hard to handicap its likelihood of passing, but at this point I'd rather have a working version of a "lookback" calculator than to continue to operate in the dark about how it will work if implemented.
March 2, 2003. An article and two editorial pieces appear in today's Oregonian that are relevant to the current PERS discussion. You can find them to the left. The "lookback" programming is progressing, although more slowly than I had hoped. The combination of an anticipated mid-year adoption and "freezing" the balance presents a couple of complex programming challenges to the current program architecture. The program wasn't organized with a mid-year implementation of the new tables in mind, and nothing in the PERS Board or PERS Staff discussions led me to believe that a mid-year implementation was possible. Nevertheless, I believe that a release of the "lookback" calculation is possible within a week. The released version will color code the "winning" output, making it easy to see which tables (old or new) produce the highest benefit. This will also allow the user to dynamically change retirement dates until the colors switch, indicating that the cross-over point has been reached.
March 1, 2003. I've spent quite a bit of time mulling and digesting Representative Macpherson's response to my questions concerning HB 2004-A. Mr. Macpherson's response was quite informative, and the first time I read it I said "...yes, that tracks with my understanding". When I read it the second and third time, I kept getting hung up on one particular phrase that seemed to be saying something different than either the previous paragraphs of his response or to my reading/understanding of the bill. The more I've thought about it, the more I believe that my initial reading was correct, and that the "confusing" language used in Representative Macpherson's email is nothing more than the very precise legal expression for the common-sense reading of the bill. Rather than share his email and create potential confusion where none may actually exist, I plan to wait until I get further clarification.
What follows is the gist of my reading of HB 2004-A and of Representative Macpherson's explanation of how HB 2004-A's "lookback" feature would work. I *think* it will operate as follows: (1) a balance is established for each member as of 6/30/03, which includes all member contributions and earnings in the Regular and Variable to that date. This balance will not change after 6/30/03 for the purposes of the "lookback" (i.e. it is "frozen"). (2) beginning 7/1/03 and thereafter member contributions (if the member is still working for a PERS agency) and earnings (and losses) will continue to accumulate as long as the member is not retired. (3) When the member applies for retirement, for the purposes of the "lookback", two calculations will be run. Calculation 1 will take the "frozen account balance", the member's age at retirement, and the mortality tables in effect on 6/30/03, and compute the Option 0 ("Refund Annuity") benefit (call this 'A'). Calculation 2 will take the "true account balance", the member's age at retirement, and the mortality tables in effect at retirement (after 7/1/03 and until 12/31/04, the '2001 Tables'), and will compute the Option 0 ("Refund Annuity") benefit (call this 'B'). If 'A' is greater than 'B', then all optional payment forms (Options 1, 2, 2A, 3, 3A, 4) will be calculated using the tables in effect on 6/30/03. If 'B' is greater than 'A', then all optional payment forms (Options 1, 2, 2A, 3, 3A, 4) will be calculated using the tables in effect at the time of retirement. This assumes that "Money Match" is the highest paying retirement benefit option.
Assuming that this is a correct reading of the bill and of Representative Macpherson's explanatory email to me, there are some conceptual and programming issues I have to deal with in the PERS Calculator. None are particularly difficult, but will take me a bit more time than I had anticipated. Once I verify whether this is a correct reading of the implementation of the "lookback", I will sit down and revise the program to handle the computations. It shouldn't take me more than a week; however, in the absence of any genuine "test" data, I'll have to rely on the made-up examples I use for testing to provide me with evidence of error. I will also rely on users to "test" the program for me and report back unusual instances that I can investigate.
February 28, 2003. The news today is mostly concerning the House vote yesterday that sends HB 2004-A on to the Senate for its consideration. It is expected that the bill will be taken up in that body within the next two weeks. Because of the volume of media reports - much of it duplicating information already summarized here - I'm planning to post fewer news links in the future. The Oregonian and the Salem Statesman Journal pretty much cover the landscape and so mostly I'll direct readers to articles there. If other local papers have different articles, I'll refer you to them. Both the Oregonian and Statesman Journal have articles on yesterday's vote; the Portland paper's is the more complete coverage. You can read it to the left. In addition, the Southwest Metro edition of today's Oregonian has a fascinating article on the issue of combining "double-dipping" and "volunteering" in the same capacity. You can read this piece as well.
The issue of the "lookback" calculation embodied in HB 2004-A continues to bring me lots of questions by email. At the present time, I don't know the answers to any of these questions (i.e. what interest rate will be applied on the Variable portion of the balance "frozen" at 6/30/03; what is the practical significance of the Legislature's use of the phrase "refund annuity" in the language of HB 2004-A). I'm trying to get answers to these questions and when I do, I'll try to provide the information. The answers to these questions will have an impact on how I program the calculator. The first question is a simple enough problem to solve. The second question has no bearing on the actual programming of the calculator, but it does have bearing on how to interpret the result. Until I know the answers, I'm going to hold off doing the programming. I am planning to update the calculator over the weekend to incorporate the Option 0 (Refund Annuity) as basic output for both 1978 and 2001 tables. This is a prelude to the "lookback" calculation, but for now merely offers another piece of information for calculator users.
[Note evening 2/28/03. Representative Greg Macpherson has responded to my inquiry about the significance of the phrase "refund annuity" in HB 2004-A. Rep Macpherson's answer clarified some things - the term "refund annuity" is the payment form specified in the ORS statutes and the bill necessarily follows the statutory language - while leaving other areas unclear. Rather than cloud the waters with potential misinformation, I will await further response from Rep Macpherson and others to whom I have directed my inquiries. Suffice it to say that the deeper I dig into HB 2004-A, the more complex it appears to be.]
I continue to be astounded by the "reach" of my webpage and email list. We now have about 1100 email subscribers from about 80 different public agencies, and the website is getting about 200 - 250 hits per day. The general wisdom about email lists such as the "PERSLIST" is that each email gets forwarded (on average) about 4 times. This means the readership is probably somewhere close to 4000 - a fairly sizeable number for something that began as a mechanism to inform a few of my age and service cohorts at PSU about changes coming in PERS. Sometime last night it appears that the 6000th visitor was recorded since January 5th when I changed the "counter" provider. I'm gratified by all the emails I get from folks seeking further information, to point out factual gaffes I've made either here or in my emails, to challenge my interpretations, to chide me for taking or for not taking a stand (my goal is to be an information source, not an advocate for one position or another) or to share information that has come from their employer, their union, or their local newspaper. Keep the information flowing. I can't possibly read everything or find everything. Contrary to popular belief, I *do* have other things to do - a computer consulting business, part-time teaching, some software design classes I'm taking, and some contract work related to my profession before retirement. I do this in my "spare" time.
February 27, 2003. This just in. The Oregon House voted 51 - 8 to pass HB 2004-A (the revision 11, engrossed). This bill now moves on to the Oregon Senate for consideration. HB 2004-A uses the term "refund annuity" as the basis for the 6/30/03 "lookback". I've been mulling this for about a week trying to decide what it means from a practical point of view. The "refund annuity" is, as far as I can tell, Option 0 - an Option that I don't currently calculate in my calculator (it is relatively easy to add, but it isn't anything I ever thought much about doing). Option 0 (refund annuity) pays less per month than Option 1 (non-refund) because there is the potential for a "refund" of any remaining account balance if the member dies before exhausting his/her portion of the balance (about 10 - 11 years or so according to my understanding). Furthermore, all of the options involving some sort of joint mortality estimate (Options 2, 2A, 3, 3A, and 4) depend on Option 1, not Option 0 so I'm not actually sure how this will really play out. This has an impact on what the "lookback" actually compares, which may be different than what any of us outside of PERS and the Legislature might have thought. From a purely practical point of view, I'm not sure whether it actually matters, but until I'm absolutely certain what the "lookback" basis is and how it will be applied, I'm not going to program for it.
The PERS Committee meets today to continue considering HB 2008 and HB 2020, the proposed "successor" plans for employees starting on or after 1/1/04. As usual, the Committee meets at 3:00 in Salem in HR E.
No news today. A spate of "letters to the editor" appear in the Oregonian either castigating the Oregonian for biased coverage against PERS members, or applauding them for exposing yet another "scam" perpetrated on the taxpaying public. All these letters are in response to the coverage of "double-dipping". You can go to the www.oregonlive.com (the Oregonian's web site) and read these if you aren't in the Metro area.
A small bug was fixed in the PERS Calculator yesterday. If you were among the first to download the program right after it was posted, you might want to re-download it. Most of you would never have found or noticed the bug, but an astute user caught it in a scenario I hadn't intended the calculator to handle. It now does.
February 26, 2003. Replacing the 1999 AEF tables with the 2001 AEF tables proved to be a "walk in the park" now that I have the new factors in electronic form. Replacing the 1999 factors with the 2001 factors for all currently programmed options - 1, 2, 2A, 3, 3A, and 4 - took about 4 hours of cutting, pasting, minor editing, and compiling. The "lookback" calculation will take considerably more programming effort and "bullet-proofing", and I'm not going to attempt that immediately (maybe next week). The current version *only* compares the benefit under the 1978 and 2001 factors.
Not much real news to report. The Salem Statesman Journal has an article today which summarizes Board actions yesterday. See left for 2/26/03 entry.
PERS has posted the 2001 Actuarial Equivalency Factors. You can get them from the PERS webpage.
February 25, 2003. The PERS Board met in teleconference today, voting to delay approval of the rule to implement the new actuarial equivalency factors. The delay is intended to see whether the Legislature approves HB 2004, which would render moot any Board decision on AEF's. If HB 2004 fails to gain either House or Senate approval, or is vetoed by Governor Kulongoski, the PERS Board will proceed with some plan to implement the new AEFs. The discussion at the Board meeting was on whether to amend the rule that was supposed to be adopted today to parallel or come close to the intent of HB 2004.
It is NOT my intent to post the full 42-page document of which the 2001 Actuarial Equivalence Factors are a substantial part. This would require too much bandwidth to make available to a group this large. After I've finished programming the revised calculator, I will discuss this with the administrators of the system on which this webpage resides. If they say "OK", then I'll post them.
February 24, 2003. Probably not much will happen for the next few days. The PERS Board meets tomorrow via teleconference to finalize the rule change that will result in their adopting new AEF's on January 1, 2004 with a "lookback". Bear in mind that the version of HB 2004 recommended by the House PERS Committee is less generous than the plan favored by the PERS Board. If the House plan is approved by the Legislature and signed by the Governor, it would override any plan adopted by the PERS Board. I hope to get the final and full Actuarial Equivalency Factors today or tomorrow and can begin to program them into my calculator. Now that the details of the HB 2004 "lookback" are clearer, I may try to program both the House and PERS Board versions. I *won't* have them in the initial release with the new tables, however.
For those of you who are faculty in the Oregon University System, the Association of Oregon Faculties now has a web page devoted to PERS issues. You can find it at www.oregonfaculties.org.
February 23, 2003. The PERS media feeding frenzy continues unabated. Several articles appear in newspapers around the state. Check to the left for articles dated February 22 and 23rd. The letter "Don't ignore PERS facts" is written by Jack Sollis, former Oregon Assistant Attorney General, and Secretary-Treasurer of the group OPRI (Oregon PERS Retirees Incorporated).
February 21, 2003. In an 8 - 1 vote, the House PERS Committee approved HB 2004 (revision 11) yesterday. The revision is pretty much as reported earlier, however, the issue concerning the way in which the "lookback" is calculated has been clarified. The rule, as it appears now, would calculate the "lookback" on a member's account balance as of 6/30/03 (including all contributions and earnings through that date), using the old actuarial factors (1978) and the member's age at retirement (not the member's age on 6/30/03). This results in the "lookback" amount being dominant for a slightly longer period of time as the benefit is paid out over an actuarially shorter time. I've revised the example posted yesterday (and removed yesterday's example). You can see the revision here.
If you are interested in media coverage of the PERS Committee vote, please check to the left for articles dated 2/21/03.
February 20, 2003. I've received lots of questions about HB 2004. I've now seen all the amendments through 2004-10, which was current as of yesterday. After reading the amendments several times and trying to clarify in my own mind how the PERS Committee defined the "lookback", I put together a simple spreadsheet example to illustrate how I "think" the "lookback" will work. There are two examples illustrated to give some idea of how this would work. Based on the language of the bill, it appears that for the purposes of the lookback, everything (age, account balance, service time, etc) is frozen as of 6/30/03. Both examples illustrate a "recovery" time of less than one-year. (Please note that this example makes lots of assumptions - "Money match only", no salary increases, no variable account, birthday on 7/1, no comparison to full formula or other options, no beneficiary). The bill's language in 4.3.c is quite clear that the lookback is "...calculated as though the member retired on July 1, 2003", which is what my examples assume. The bill is silent on the question of how to deal with members who aren't eligible to retire by any criterion on 7/1/03. It appears that a "lookback" will be calculated for all members whether they are eligible to retire or not. Because I don't really know exactly what point is served in calculating a lookback on someone who is 5-10 years from retirement, I don't figure it here. In both examples I use instances of workers who would be able to retire under normal circumstances on 7/1/03. If you're comfortable with this, then you may see the example by (example removed - 2/21/03 and replaced with revision on 2/21/03).
The issue of retirement eligibility on 7/1/03 continues to vex me. If a member isn't eligible to retire on 7/1/03 and it then turns out that the "lookback" to that date yields a higher benefit, it just isn't obvious how PERS could pay a benefit "...calculated as though a member retired on 7/1/03". I mean, it is obvious how they could do it mechanically, but it isn't obvious how they would resolve the statutory problem of paying a benefit based on a point in time when the member wasn't actually eligible to retire. I'm back to wondering whether the implementation of this will require that the "lookback" be calculated on the balance at 6/30/03 and the age at actual retirement. If this were the case, the "lookback" benefit at 7/1/04 would be somewhat higher than the examples show. In the first case, the newer factors would produce a higher benefit at 7/1/04, which in the end is all that really matters in the "lookback" test. In the second case, the "lookback" would yield a higher benefit at 7/1/04. This would change at approximately 10/1/04. I hope that the PERS Committee actually clarifies this because I'm getting conflicting answers from knowledgeable sources.
For those of you interested in nitty-gritty financial details, I have posted a copy of the document Mark Johnson, PERS Actuary with Milliman & Associates, prepared for the PERS Committee detailing the reduction in the Unfunded Actuarial Liability and attendant employer rates attributable to changes in HB 2004 (revision 6). View this document here (HB 2004-6 Actuarial Analysis).
February 19, 2003. HB 2001 (8% cap) was signed into law yesterday. The PERS Committee amended HB 2004 (AEF implementation) to have an effective date of 7/1/03 with a limited "lookback" (which is "freezing" the account balance as of 6/30/03 and comparing the retirement benefit calculated using THAT frozen balance, with the benefit calculated using the new AEFs and additional contributions and earnings post-7/1/03. This accelerates the implementation of the new mortality tables but takes a some pressure off employees to retire before 7/1/03 to lock in current benefit levels. AFSCME has a different explanation on their web site: Oregon AFSCME. The explanation of the amended HB 2004 that AFSCME offers isn't entirely consistent with what I understand the changes to be. I have to confess that their explanation does not make any sense to me. (NB: I've now seen the bill amendments and I still don't understand the AFSCME claim that the recovery time is 10 years. I've run calculations using my own PERS numbers and the recovery time for me is 11 months - i.e. I would have to work 11 months longer to have my benefits under the new factors exceed the frozen benefits under the old factors. I've also run "my" numbers assuming I were 10 years older just to see how much more punitive the new AEF's are. Alas, the recovery time is longer, but is still only 14 months. Nothing I throw at the problem gives me a 10 year recovery time. I suspect this is the case for almost anyone within 5 years of retirement. I haven't run numbers for someone who is 10 - 15 years from retirement, but that seems to me to be beside the point). The committee continues its work on HB 2004 tomorrow. Of course, HB 2004 also regularizes the implementation of actuarial factors on an every two-year cycle, which is intended to prevent the current large actuarial gap from occurring again in the future. The latest PERS-related articles include the Statesman Journal (left "House Committee to vote on new PERS tables", "Cap on PERS returns signed"), Oregonian ("Hazardous to our fiscal health"), Medford Mail Tribune (left "Bill signed to begin PERS reform"), Bend Bulletin ("Governor signs first PERS reform bill"), and Corvallis Gazette Times ("Governor signs PERS bill, hails compromise").
An interesting article appears in today's Fresno (California) Bee (left - "Pension costs take a huge toll"). Look closely at the article and notice that it ISN'T talking about Oregon's PERS, but California's PERS. Oregon acts like its system is somehow uniquely overburdened, but this article makes it clear that Oregon's pension problems are not unique.
February 18, 2003. Some alert readers directed me to several new PERS articles that didn't turn up in my usual daily scans. The Eugene Register Guard published their editorial support of HB 2003 on Saturday (left "A promising PERS plan"), while the Medford Mail Tribune wrote about PERS fixes (left "PERS fixes won't come easily") and about "double dipping" (see left - "PERS Double Dipping"). Another reader directed me to www.oregonwatchdog.com (Oregon Tax Research, Don McIntire, President) where I learned about a February 26, 2003 Oregon Tax Research breakfast meeting at the Portland Marriott featuring Rep. Tim Knopp discussing PERS.
February 17, 2003. I just returned from out-of-town. While I was gone, the usual spate of weekend PERS articles occurred. The Oregonian weighed in with a Sunday editorial supporting the to-be HB 2003 (left "Cutting PERS down to size"), while the Salem Statesman Journal and Bend Bulletin had identical AP wire stories on potential PERS litigation (left - "PERS debate may get litigious"). The Oregonian continues to miss some of the more objectionable features of HB 2003, either preferring that they remain unnoticed, expecting them to go unchallenged, or expecting them to be amended out of the bill. Moreover, the media, in general, seems to be seduced by the possibility of "solving" PERS' problems on the backs of PERS members while there are pending legal challenges to large chunks of the to-be HB 2003. In addition to all the obvious problems with HB 2003, it could make the PERS problem worse by yet again amending large chunks of Chapter 238 of the ORS (the "PERS Chapter") without a careful review of all the interconnected sets of statutes governing PERS. Many of the current problems stem from continuing to try to "fix" Chapter 238 rather than completely re-writing it. HB 2003 is a "selective" re-write of Chapter 238 that will have its own set of unintended consequences and attendant legal remedies. It will, in my opinion, spawn more legal challenges and create more problems than it solves.
Tomorrow the PERS Committee meets again at 3:00 p.m. to continue work on HB 2004 (actuarial factors), as well as on HB 2008 (successor defined benefit plan). There is also an open agenda spot for introduction of new bills, which suggests that one or more of the bills known to be "floating" may be introduced tomorrow.
February 13, 2003. Slow news day. The House PERS Committee meets again today at 3:00 p.m. in HR E in Salem. On the table today is further work on HB 2004 (the AEF measure) as well as the start of public testimony on HB 2008 (successor Defined Benefit plan) and HB 2020 (successor Defined Contribution plan). Keep in mind that HB 2008 and HB 2020 are each pieces of a puzzle that *could* lead to a termination of PERS for active employees. They are currently presented as a new system for employees entering the system after January 1, 2004, but could easily be amended to encompass active employees, especially taken in context with numerous other bills already introduced (e.g. HB 2400 - allows active or inactive PERS employees to transfer to new system; HB 2402 - allows employers to withdraw from PERS; HB 2408 - prohibits active membership in PERS after 12/31/03; SB 258 - allows inactive members to transfer 150% of member balance to new system within a certain period of time).
The news media is, in my opinion, only emphasizing one aspect of the "employer's proposal" (?HB 2003), while ignoring or minimizing the other elements of the proposal. The 6% solution is being treated as the centerpiece of the proposal, but it actually represents only about a third of the prospective savings. Look carefully at the "proposed savings" document (below 2/12/03), and you'll see the combined effect of the immediate (retroactive to 1/1/03) implementation of modern mortality tables, the recovery of 'excess' benefits paid into employee accounts in 1999, the "section 26 [of the proposal] adjustments to retiree accounts", the "suspension of retiree COLAs", and the "reduction in assumed interest rate" adjustment. This proposal has impacts on every PERS member - active, inactive, or retiree - except those who retired before October 14, 1996. I've tried to calculate what the impact would be on me - a recently retired PERS member. The 1999 mortality tables (currently programmed in my PERS Calculator) provide a useful starting point. The "employer's solution" would make (for me) the 1999 AEF's the starting point for my calculations. If the 1999 tables were in effect when I retired, my benefit would have been $500 per month lower than it actually is. Other things remaining the same, it would take 6 years of 2% cost-of-living increases applied to the *lower* benefit for me to be at the point I'm at now. So, the first impact would be that my cost-of-living increases would be suspended for 6 years. But, we haven't adjusted for the excess earnings for 1999, which this bill proposes to reduce from 20% to 8%. That would reduce (in theory) my final account balance by approximately $23,000, which would, in turn further reduce my benefit by another $300 per month, which would require approximately 4 years to recover via COLAs. So, without figuring in any other section 26 adjustments, the immediate impact of HB 2003 on me would be to prevent me from receiving cost-of-living increases for at least 10 years. It is harder to gauge the impact on people who retired earlier and who have already received cost-of-living increases. Suffice it to say that the recovery time could be longer.
February 12, 2003. Way too many newspaper articles today. Some summarize the Board's actions yesterday; others deal with testimony concerning HB 2003 ("the employer's proposal") yesterday. Still others deal with the impact of the uncertainty surrounding PERS on either agency budgets or staffing. Look to the left for all the articles that are dated February 12, 2003. From the sounds of things at the PERS Board meeting yesterday, and as a result of media interviews with the PERS Board Chair and another Board member, there is a hazy picture beginning to develop that leads to the speculation that terminating PERS and moving current members to a new plan might be the most prudent course of action available. Nothing I've seen suggests that this new plan would have any impact on current retirees - PERS would continue to exist to benefit retirees and would continue to collect contributions from employers for people who've already retired. However, terminating PERS for active members is not a prediction, an expectation, or an outcome. It is merely an idea that was once dismissed nearly out-of-hand, that is now gaining support from unlikely places, which means that it will be given more credibility and more thoughtful consideration.
In legislative action, the Oregon Senate approved HB 2001, which caps earnings at 8% for regular, Tier 1 PERS employees. This bill now moves on to Governor Kulongoski, who is expected to sign it quickly. This one was a no-brainer, given the current stock market, and the bill had no opposition from any contingent.
The 5 submissions and presentations by Mr. William Gary before the PERS Committee yesterday in support of the proposed HB 2003 are now available (all in Adobe Acrobat format) These are William Gary "backgrounder", HB 2003 Final Draft proposal, Gary - side by side comparison, HB 2003 proposed savings, Gary Letter to Rep Knopp. Note that the document I've named "Gary - side by side comparison" was submitted to demonstrate that the proposed plan meets the "... Governor's position". Please be reminded that there is currently NO HB 2003. The draft circulating as the proposed HB 2003 has been submitted to Legislative Counsel for drafting into proper language, but the information contained in the 5 documents above should provide sufficient "flavor" to get a sense of where this is going.
Several people have asked who represents retired PERS members in both litigation and with the Legislature. The group OPRI (Oregon PERS Retirees, Inc) (http://www.opri.org) is the group that has been responsible for lobbying, litigating, and communicating with retirees. I'm a member, as are 8,000 others PERS retirees. You don't need to be a PERS retiree to belong. The dues are cheap - $5 per year. I recommend that anyone who is near retirement join. You can get more information from their website.
February 11, 2003. The PERS Board meeting held few surprises. As expected, the Board ratified the new employer rates to be effective July 1, 2003. The preliminary earnings rate for 2002 was announced as -8.17% for Regular Tier 1 and Tier 2 members, while the Variables earned -21.3% for 2002. The final rates will be announced in March 2003. There isn't much likelihood that the earnings will differ too much from the preliminary reports. Steve Delaney gave a Legislative update. He noted that 28 bills related to PERS have been introduced so far and several more are in the pipeline. Yesterday (February 10th) was the last day to formally introduce a bill into this Legislative session. Among the bills not yet published is HB 2003, which is likely to be the number that is given to the "employer's proposed" revision cited in yesterday's entry. Steve Rodeman gave a rundown of the key features of ?HB 2003, which appears to have something in it to affect virtually every class of PERS citizen (active, inactive, and retired) except those who retired before October 14, 1996. The authorship of this proposal isn't formally acknowledged, but it is widely believed to be the work of Mr. William Gary, acting on behalf of his clients, the plaintiffs in Eugene et al v. PERS (City of Portland, Multnomah County, City of Eugene, and others). While the final bill may differ from the draft posted here, I urge everyone to read this document. While it is long and tedious, it will become fairly obvious how this will affect people once the various pieces of the proposal are linked together. Pay particular attention to Sections 25 - 31, and then to Section 20 (h), in that order. Only by reading the document in that way can you see how the remedies described in the later parts of the document come into play in ways unanticipated in the earlier parts. The Salem Statesman Journal has an editorial favorable to this proposal in today's issue (see left "Bill would offer hope, preserve PERS").
On the AEF front, the Board put in motion the final phases of adopting the new AEF's at its special meeting on February 25, 2003. The final rules will be "noticed" early next week. There will be one public hearing (as I recall) and the decision will be finalized at the end of February. I should have a copy of the final AEF tables at the time the formal notice is published. I will try to quickly get the needed modifications into the PERS Calculator posted on this site. It will take some time to program the "lookback", but the issue of the "lookback" may be mooted by Legislative action on HB 2004, which is expected to conclude in the PERS Committee by February 17th. The bill still has a ways to go before final adoption, and the speculation at the Board meeting today is that the Legislature will take a middle ground between the original proposed 1/1/03 implementation date expressed by the Governor and the 1/1/04 implementation with "lookback" approved by the Board. It is widely believed that the Legislative "solution" will be a mid-2003 implementation. If that happens, PERS will process benefit checks by estimating until their Data Processing Center can program the needed changes into their system. As a result, they will probably estimate low and send supplemental checks after all the programming is done (and the court challenges resolved).
One interesting thing happened to me today. For those of you who receive my frequent (daily?) email, you may recall my editorial tirade against the Oregon University System yesterday. I said that I sincerely hoped that OUS wasn't one of the author's/sponsor's of the "employer's proposal" (?HB 2003), for if they were, they would surely reap the disaster they would sow. Quite by surprise, while I was at the PERS Board meeting, a member of the OUS staff coincidently signed in just after me. This is someone I don't know but who acknowledged being a subscriber to my list. I was assured that OUS had no role in the "employer's proposal" and wanted to stress that OUS fully supported the Governor's position. I was heartened to hear that, but will take no comfort in OUS' position unless they take an active role in opposing the bill in its current form. It will only exacerbate recruiting and retention problems within higher education, and will undermine the vital role higher education plays in the state's economic development and recovery. Faculty members from around the state are being recruited by other states offering significantly better salary. Until now, the total compensation package was not hugely better outside than here, but if PERS is eviscerated or emasculated, the last thread holding these outstanding faculty members will be broken. You cannot pay your faculty in the lowest quintile nationally, without something to compensate. PERS was the compensation. Take PERS away and Oregon moves to the bottom of the lowest quintile - a difficult position from which to attract and retain the best and the brightest. Perhaps Oregonians don't care, but those of us who do, feel that this is not the brightest strategy for turning the state around.
Keep the cards, letters, emails, and documents coming. I'm continually astonished by how widely the web site is known and how far the emails are travelling. I've heard from retirees and inactive members in Florida, Arizona, California, New York, Rhode Island, as well as from active members in every burgh and hamlet across the state. I reported that the site was receiving 100 hits per day. Between yesterday and today, the site recorded 500 hits. The word is spreading. Help keep it spreading. The PERS people definitely know of this list; the Legislators definitely know of this list; the Unions know of this list; and nearly every agency in the state has subscribers. More subscribers means more informed members/citizens who can make their opinions known to people in positions of power - the Legislative Leaders of both parties, the Governor, the Unions, and the Employers.
February 10, 2003. Kris Kain, President of the Oregon Education Association, has a guest commentary in today's Oregonian. You can read it at the left by clicking on the link ("PERS isn't the biggest issue"). I also received a copy of one of the employer bills that will be introduced tomorrow at the PERS hearing. I've put a copy here (PERS bill 6-3.pdf) for your reading pleasure. Sections 25 - 31 are required reading for all retirees and those on the cusp of retiring.
February 9, 2003. David Reinhard has an opinion column in today's (Sunday) Oregonian in the Commentary Section. You can read it to the left by clicking on ("Let 6% plan heat up PERS....). Reinhard writes to advocate a solution to the PERS problem being advanced by some public employer groups. The gist of the proposal (which I have not seen in any clear form yet) is that the Legislature would no longer require an employEE contribution to PERS (the 6% that most [ but by no means all ] employERS pay for employEEs ]. EmployEES would then get the 6% as additional salary, additional benefits, or could be put into an as-yet formed defined contribution plan. The bottom line is that the employER cost would decline for most employERS by at least 6% immediately, no employEE contributions would go into PERS anymore, and the Money Match account would grow at a slower rate. Combine this with revised actuarial equivalency factors and the savings appear to be quite large. Mr. Reinhard asserts that this would have relatively little impact on employees nearing retirement (save for the change in AEFs), would affect mid-career employees more significantly, and would affect the last wave of Tier 1 employees (those hired in the mid-1990's) the most. This is all predicated on the assumption that this would diminish the likelihood that "Money Match" would turn out as the "best of three" for younger folks in the PERS system. Like other proposals being advanced by the various public employers, this one is designed to do two things: (a) reduce their costs and (b) reduce the size and growth of employee pensions.
February 7, 2003. The Oregon House approved HB 2005 in a 58 - 1 vote. HB 2005 changes the structure of the PERS Board to 5 members - 3 with business/pension experience and NO PERS connection, 1 representing employers, and 1 representing employees. The bill moves on to the Senate. The Oregonian has a piece on this ("House passes second PERS reform bill") to the left.
February 6, 2003. The Bend Bulletin has a piece on PERS, the Legislature, and the obligations all owe to already retired PERS members. You can read this article (Retired public employees say PERS must keep its promises) by clicking on the link at the left. Another article appears in the SweetHome news ("Local governments consider ....") at the left.
PERS Coalition Attorney Greg Hartman has submitted a letter to the PERS Committee, refuting some of the claims made by Attorney William Gary in his letter to the PERS Committee. This continuing discussion pertains to testimony on HB 2004 - relating to implementing new actuarial equivalency factors. You can read Mr. Hartman's letter (here) and the supporting Lipscomb trial transcript excerpt.
February 5, 2003. With the legislature in session, the news just keeps flowing in on PERS. The PERS Committee held another hearing yesterday on HB 2004 - the bill to require PERS to implement new mortality tables every two years starting on 1/1/04, and to (apparently) retroactively implement them for some retirees planning to retire during 2003. The most recent article on this appears in this morning's Salem Statesman Journal ("PERS Debate sparks rush to retire") linked at the left. Public testimony will continue on HB 2004 tomorrow (2/6/03) and next Tuesday (2/11/03) at 3:00 p.m. in HR E. It is reported that the discussion of HB 2004 could take as long as two more weeks, especially given the retroactivity clause. Both the Legislature and the Governor seem to feel that no matter what is done with mortality tables, the State and PERS will be sued, so the strategy appears to be to make a decision quickly and let the courts resolve the matter finally.
Mr. Jim Voytko gave a Powerpoint presentation on the Mortality Table implementation to the PERS Committee yesterday. You can look at this presentation here (Mortality Table Implementation). For those of you nearing or considering retirement, this might give you a some idea of what timelines might be involved.
Also submitted today is a letter from Attorney William Gary, which disagrees with Attorney Greg Hartman's analysis of the "contractual" element of the mortality table changes. Mr. Gary's letter can be read here in its entirety. (Adobe Acrobat format). It was submitted as part of Mr. Gary's testimony on HB 2004 to the PERS Committee chaired by Representative Tim Knopp.
February 4, 2003. Today's Salem Statesman Journal has a piece on Governor Kulongoski's PERS speech last week. While there have been discussions about what the Governor meant about the implementation date for new mortality tables, the Governor was unambiguous in wanting the date to be 1/1/03. Steve Law writes about this today as it pertains to several thousand retirees who retired on January 1, 2003. You can read this story to the left ("Retirees fuming over PERS plan").
New information has appeared concerning the revised Rule and public commentary on PERS' implementation of the new Actuarial Equivalency Factors (AEFs). This PERS link has the relevant information. Public comment closes on February 17, 2003, and the PERS Board will make its final decision on the rule change to implement the factors at a public telephone conference call on February 25, 2003. There will also be some discussion of the rule change at the PERS Board meeting on February 11, 2003 (8:30 a.m. PERS Headquarters, Tigard).
January 31, 2003. The House Committee on PERS approved an amended version of HB 2005 yesterday and sent it on to the full House. HB 2005 would reduce the PERS Board from 12 members to 5, with only one member from a group with a vested interest in PERS. The bill is endorsed by Governor Kulongoski, and is expected to pass both the House and the Senate relatively easily. There is a short piece in today's Salem Statesman Journal at the left ("Second PERS bill sent to House").
January 30, 2003. Tim Knopp (R, Bend), Chairman of the House Committee on PERS, writes in today's Oregonian his opinion about why PERS needs reforming (see left -"Legislature must achieve PERS reform"). The Oregon House passed the amended HB 2001 yesterday 55-0. It goes to the Senate now. You can read about this in today's Salem Statesman Journal ( left "House passes plan to cap PERS earnings"), or in today's Bend Bulletin ( left "First vote on PERS Reform"). There are several additional articles in today's Oregonian on legal "double dipping" (i.e. drawing PERS benefits while continuing to work for a PERS agency). This issue is really problematic in Washington, where a 2001 law has been exploited to the point where the Legislature is looking to repeal or severely restrict it. The Oregonian articles appear to the left ("Collecting PERS while working", "School workers collect two checks")
January 29, 2003. The House PERS Committee meets tomorrow (1/30/03) at 3:00 p.m. in HR E to take up public testimony on HB 2004, which would mandate that PERS change AEFs regularly (every 2 years) and apply them to any member retiring on or after their effective date. The initial effective date is 1/1/04, but the current wording of the bill in section 4 seems to contain a provision that would allow the Legislature to "slipstream" the newer tables sooner than 1/1/04. I have to confess that the language is quite confusing in this section and so I may be misinterpreting both its meaning and its intent. I'm open to anyone who wishes to clarify. Mark Johnson, the PERS Actuary, distributed an analysis of HB 2004 to the PERS Committee yesterday. You can get a copy by clicking on this link. In addition, Greg Hartman, attorney for the PERS Coalition, emailed a letter to the committee offering his insight. You can read that letter here. You can also read more about Mr. Hartman's testimony at the AFSCME site (click here for AFSCME QuickLinks). The committee will also begin a work session on HB 2005, which would change the composition of the PERS Board from 12 members down to 5. In its current form, HB 2005 would not allow any PERS Board member to have a financial connection to PERS (not a member, not a retiree, not a family member of either, and apparently not an employer). There is active opposition to this particular form of the bill, although both the Governor and the Unions would support the bill if there was some representation by stakeholders.
There are several more PERS-related bills circulating in committee now. The ones of special interest are HB 2328, HB 2375, HB 2421, and SB 258. SB 258 is particularly intriguing if combined with HB 2408. SB 258 offers "inactive" PERS members 150% of their member account to withdraw from the system, while HB 2408 makes all current active members "inactive" as of January 1, 2004. How's that for a quick 25% hit to accrued benefits (50% of employer contribution; 25% of total 'Money Match' benefit)?
January 25, 2003. David Reinhard's latest editorial on PERS appears in today's Oregonian. Not surprisingly, Mr. Reinhard isn't particularly sympathetic to PERS workers near retirement who feel that they've earned every penny of their PERS benefits. You can read this opinion ("We've earned PERS Bonanza, Mister") by clicking on the link at the left.
January 24, 2003. Governor Kulongoski held a news conference yesterday to announce his "ideas" for reforming PERS. I sent out the text of the Governor's press release in an email yesterday. You can read the release in my list archives (see left for link). In the meantime, there is a frenzy of media coverage on PERS in today's Statesman Journal and the Oregonian. There are links to the left to these articles. Governor Kulongoski endorses the 8% cap on regular Tier 1 earnings (HB 2001, passed and sent to the House floor yesterday), reducing the PERS Board from 12 members to 5, but not the specific form of HB 2005, immediate (retroactive to January 1, 2003***) implementation of new actuarial tables, retaining current employees (Tier 1 and 2) accrued benefits, and not touching the benefits of members already retired. He articulated other principles but is open-minded about how they get implemented. His punch line, however, is that "PERS as we know it is done".
PERS has posted an extremely informative and long FAQ on current issues on its website. Everyone should read this. You can find a copy of it here.
*** AFSCME disagrees with this interpretation of the date. Check their website (AFSCME-Alert!) to see how the confusion seems to have come about. [see January 24, 2003 entry].
January 22, 2003. The House Committee on PERS (Chair, Rep. Tim Knopp, R. Bend) has begun its hearings and meetings. There are 13 PERS-related bills that the committee is considering, with several more to come. The complete list of bills can be found on the PERS website. A number of these bills would make substantial changes to PERS. HB 2004 mandates changing actuarial tables every two years, and would compel PERS to implement the most current actuarial tables effective January 1, 2004 without any "lookback". HB 2001 prohibits the PERS Board from paying more than the "assumed interest rate" (currently 8%) to regular Tier 1 accounts. HB 2005, reduces the PERS Board from 12 members to 5, and prevents any of the 5 Board members from having a financial stake in PERS (can't be members, retirees, or beneficiaries). HB 2402 would allow employERS to withdraw from PERS. HB 2404 is discussed below (January 18, 2003). HB 2408 would prohibit active membership in PERS after January 1, 2004 effectively terminating the system for active employees. There is no bill in place yet for a successor system.
January 18, 2003. The PERS Task force recommended repeal of HB 3349, originally passed in the 1995 legislature and modified during the 1997 session. HB 3349 is the bill that provided for a benefit increase to compensate for the decision to begin subjecting PERS benefits to Oregon State Income Tax starting in 1991. (Recall that prior to 1991, PERS benefits were considered to be free from Oregon State Income Tax). To assess the likelihood of a repeal of HB 3349, it is useful (indeed necessary) to look at the tangled and complex legislative and legal history leading up to HB 3349 and subsequently. It is too complicated to summarize, but the Oregon Department of Revenue Summary is relatively brief. After you read through the summary, be prepared for a pop-quiz <g>. Your quiz is: given this history, how exactly could HB 3349 be repealed without starting the entire flood of litigation that led to its initial passage over again? Possible answer: make federal, state, and local pensions not subject to Oregon taxes?
HB 2404, currently being considered by the House Committee on PERS Sustainability (Rep Tim Knopp, Chairman), addresses the repeal of HB 3349. This is a very significant bill that has a number of consequences. The most immediate and obvious consequence of HB 2404 is the loss of the "benefit increment adjustment" (ranging from 1% to 9.9%) for time spent in a PERS-covered position prior to October 1, 1991. The "tradeoff" is that HB 2404 permits PERS and Federal retirees to subtract the fraction of their pension income attributable to service performed prior to 10/1/91; however its effects are anything but equal for all PERS retirees. For those retirees who live in Oregon and draw a PERS pension too small to require paying Oregon State Income Tax now (under the current HB 3349 structure), there would be a significant income hit, without any commensurate benefit. For PERS retirees living in other states, who are not subject to Oregon State Income Tax, this would also represent a significant reduction in pension income. The benefit seems to be limited to those PERS retirees who 1) reside in Oregon and 2) already pay significant Oregon State Income Tax. For these folks, repeal of HB 3349 and substitution of the provisions of HB 2404 offers a quid pro quo. (This doesn't take into account the impact of HB 2404 on Federal taxes). HB 2404 is being pushed by various public employer groups - among them Portland and Multnomah County - who were stuck paying the bill for the HB 3349 adjustment after all the lawsuits were finally settled. HB 3349 is seen as one of the factors driving up employer rates with PERS. Repeal of HB 3349 would shift the burden of paying for this "adjustment" from the employers to the Oregon Treasury; however, because of the different way it "hits" retirees, the loss to the Treasury will be less than the total cost to the employers and it will reduce the employer contribution rate to PERS by a measurable amount.
January 17, 2003. Nothing really new to report. There are several Oregon House bills introduced pertaining to PERS. HB 2001 relates to making the "assumed interest rate" (currently 8%) both a ceiling and a floor on Tier 1 Regular Accounts. There is a Statesman Journal article today ("Coalition Backs limits on PERS") indicating that this bill is supported by 12 unions and the Oregon School Boards Association. This bill isn't much of a surprise since no one really expected PERS to be able to pay more than the "assumed rate" for some time to come. This just makes it clear that they can't do this.
Judge Lipscomb's Final Judgement in the Eugene v PERS case can be read here.
January 16, 2003. Yesterday, Judge Paul Lipscomb entered his order in the Eugene v PERS case. As expected, Judge Lipscomb ordered the PERS Board to immediately implement new actuarial tables and to reconsider the earnings distribution for 1999. He did not define what "immediately implement" meant, nor did he specify how the PERS Board was to redistribute 1999 earnings, or where the funds would come from. He also ordered the Board to refigure employer rates for 1998 and 2000 for the employers who are plaintiffs/petitioners in the case. It is not clear at this point whether the PERS Board or the State of Oregon (co-respondents in the case) will appeal the case; however the PERS Coalition attorney, Greg Hartman, announced that his group would file an appeal. There is a 30-day period during which an appeal can be filed. There are several articles (links to left) about this in today's papers - Salem Statesman Journal ("Judge Orders Money Changes"), Oregonian ("Judge orders changes to PERS"). I haven't seen the order and it isn't obvious to me exactly who's affected by this and what PERS will do to comply with the order. It also isn't clear whether the order will be "stayed" pending an appeal. According to several sources, there is still the possibility of a "settlement" among the parties if it occurs within the appeal filing period. I suspect we'll see an even further acceleration of retirements in the wake of this order. For additional information, you might want to check the websites of OPEU, Oregon Education Association, AFSCME, John Hoag Attorney, and PERS itself.
January 15, 2003. Lot's of action today. Media coverage of PERS is extensive today with big articles in the Oregonian ("PERS Retirements Surge", "Forest Grove Rejects Plan to join PERS"), the Statesman-Journal ("PERS Top Leaders Re-elected", "PERS adopts new mortality tables"), and the OSU Daily Barometer ("Oregon 'the worst mess of all'). Judge Lipscomb holds his second (and possibly) final hearing today to issue his final orders in Eugene v. PERS. In my message to list subscribers yesterday, I reported on a comment made by Bob Muir, Assistant Attorney General for Oregon, during the PERS Board Meeting yesterday. I've since heard that Greg Hartman, attorney for the "PERS Coalition" made a similar comment at a meeting about a week ago. The gist of the comment is that Eugene v PERS is "not a class action suit", and so doesn't apply "across the board" but is limited to the plaintiffs and petitioners. It isn't clear to me now what its wider ramifications are. Rather than reprise the comment here, check the list archives for the summary of yesterday's Board meeting.
January 14, 2003. The PERS Board held its meeting today. I attended the first 3 hours, during which most significant decisions were made. In short, the board delayed finalizing employer rates for 2003, defined "accrued benefits" for the purpose of the "lookback", decided to adopt the 2001 AEF's effective 1/1/04 and will finalize in late February after the full AEF tables are finished by the actuary and there is time for public comment. Fuller detail is available on my list archives - see link at left "List Archives".
January 13, 2003. I've received some information pertinent to the public PERS Board meeting tomorrow that may be of considerable interest to members unable to attend the meeting. All of the documents herein reference Agenda items B4a, B4b, and B4c of the public meeting linked at the left. These pertain to the all-important adoption of the Actuarial Equivalency Factors and are in the form of several word documents and a Powerpoint presentation. You can link to them here. They include Item B4a, Item B4a attachment, B4b document, B4b draft document, B4c document, B4c Draft Rule. Also included is a letter from Mr. Greg Hartman, Attorney for the PERS Coalition, concerning the proposed rule implementing the new AEF's. In the letter (Hartman Letter - Acrobat format), Mr. Hartman addresses some of the legal issues concerning "contracts" and "accrued benefits".
In addition, there is an article on the front page of the New York Times today concerning the underfunding of pensions as a national problem. Of particular interest is the discussion of possible changes to federal pension law. Look to the left for the link "New York Times ...".
Another piece is an electronic editorial by Carl Reynolds "Raining Red Ink", which can be found to the left. Mr. Reynolds offers his perspective on the current PERS funding shortfall in the context of the Legislature's persistent refusal to set aside excess income tax revenues into a "Rainy Day Fund", as former Governor Kitzhaber had repeatedly requested they do.
January 12, 2003. There are click on links at the left for the agenda of the PERS Board Executive (private) session January 13, 2003, and the Board's public session January 14, 2003.
January 10, 2003. Judge Lipscomb held the first of two hearings on the Eugene v PERS case yesterday. He didn't enter his final order to the PERS Board yesterday, instead holding off until Wednesday January 15, 2003. This will give attorneys time to discuss the structure and particulars of the ruling so that when issued, it is in a form ready for appeal. There are lots of media articles on the PERS Taskforce final report. Rather than linking them all here - they all say pretty much the same thing - you'd be better off reading the actual report and drawing your own conclusions. There are articles in today's Oregonian, Salem Statesman-Journal, Eugene Register Guard, and numerous other local papers.
January 9, 2003. Today Judge Paul Lipscomb is supposed to issue his final ruling and order in the Eugene v PERS case. I will send email to the list if I find out what precisely the decision is. David Reinhard of the Oregonian has his op-ed piece on PERS today (see "Korach - PERS Poster Child" to the left). Reinhard attacks PERS but is careful to avoid blaming public employees for the problem. Steve Buckstein has also written another opinion piece, this one for the Hillsboro Argus. It is available at the link ("Steve Buckstein on PERS") to the left. The PERS Taskforce has submitted its final report today. You can read the full 41-page report (in MS Word format or Adobe Acrobat format) by clicking on the one of the two links at the left ("PERS Task Force Final Report").
January 7, 2003. Today's McMinnville News Register has a story on the budgetary impact of PERS increases on the City of McMinnville. Click on the link to the left ("McMinnville's PERS problems").
January 6, 2003. A provocative guest commentary appears in the electronic version of the Oregonian today. It is from a former PERS-covered employee, now working privately while continuing to hold on to his Tier 1 PERS account. You can read it by clicking on the link "Shed no 'Tiers' for me" to the left. Paul Conte's views are probably not shared by many readers of this site, but then most of the newspaper articles aren't advocacy pieces for PERS either. Mr. Conte wrote this editorial while he was an Eugene Water and Electric Board (EWEB) Commissioner (his term ended on 12/31/02, however). The City of Eugene, acting on behalf of EWEB, is one of the lead plaintiffs in Eugene v. PERS (the "Lipscomb" case). (Mr. Conte has responded to an earlier version of this entry in which I questioned his motives for publishing the piece. You can read Mr. Conte's response in its entirety at my list archives (see above for link). A more complete version of Mr. Conte's commentary, co-authored with Terry Smith, appeared in the Eugene Register Guard on December 15 - see left "Conte - Long Version".
January 3, 2003. The Oregonian pretty much rehashes Steve Law's Salem Statesman Journal article from January 2, 2003 in today's paper. You can read it by clicking on the link "PERS 'Double Lump' Sums" at the left. The Oregon Education Association (OEA) has a useful PERS page available here. It seems to be updated frequently and has some valuable counsel regarding both the AEF implementation and the Eugene v. PERS case and the attendant Lipscomb decision.
January 2, 2003. Happy New Year to all. Hopefully 2003 will bring better news and better stock market performance than 2000, 2001 and 2002. The New Year begins with a brand new option for Tier 1 PERS members - the "double lump sum" - which lets retirees take both employEE and employER balances as a "lump sum". Steve Law of the Salem Statesman Journal has an informative piece on this today. Click on the link to the left "PERS Double Lump Sum Cash out" to read this article. Some dates to keep in mind as the new year begins. January 9, 2003 is the date Judge Lipscomb is expected to issue his final order in Eugene v PERS. Ted Kulongoski is inaugurated as Governor of Oregon on January 13, 2003, which is also the same day the 2003 Oregon Legislature convenes. On January 14, 2003, the PERS Board meets in Tigard and will, presumably, make some decision on the actuarial factors.
December 31, 2002. Thankfully 2002 is about to end, not a moment too soon. In the metro edition of the Oregonian today, there is an interesting piece on how an enlightened public employer (Lake Oswego Public Schools) plans to keep one of its valued employees happy. You might find this article interesting reading.
December 30, 2002. Multnomah County has a web page for PERS-related matters. Of interest to all may be County Commission Chair Diane Linn's memo to employees, which is available here. Chair Linn's memo goes out of its way to assure employees that Multnomah County, as a party in the Eugene v PERS decision, does *not* intend to pursue a remedy that requires PERS to retroactively refigure employee earnings for 1999. Whether this is also the position of the other 8 plaintiffs in the case remains cloaked in mystery.
December 27, 2002. Hope you all had happy holidays. Here are a bunch of recent links to articles appearing in the Salem Statesman-Journal concerning PERS. By now, most of this is "old" news, but it is very useful to keep track of what reporters are writing about PERS - Here are several links to recent stories: Chemeketa CC Retirements, Kulongoski's PERS plans, State workers retire in droves, Salem-Keizer school retirements increase, Worker uncertainty following PERS hearings, PERS Negotiations Continue. This last article is interesting in that for the first time, it appears that Judge Lipscomb's patience has worn out. Originally he planned to delay issuing his final ruling and order on the Eugene v PERS case until after the negotiations between the parties wrapped up. Now he's announced that he will issue his final order on January 9, 2003. The PERS coalition attorney, Greg Hartmann, has already announced that he expects to appeal the order.
December 23, 2002. I went to PERS' Headquarters today to file my "Administrative Appeal". I was blown away by the crowd of people. The lobby was literally standing room only and 5 people were working the front reception desk. It looked like Toys 'R Us on the Sunday before Christmas. When they called my number (yes, they were handing out numbers) I asked whether this was normal for the end of a calendar year. "No!" harumphed the harried PERS employee. "This is most definitely abnormal. Friday we took in more than 100 applications and we're looking to exceed that today. It may get worse before the year is over." It looks like the media has whipped up such a frenzy over PERS that many members are bailing out now. I don't envy any of the hard-working folks at PERS. They're already way understaffed, have to work with an antique computer system, and have a difficult enough time handling the normal flow of retirement applications. I can't imagine how they'll be able to process everything in a timely manner under this crushing burden. Those of you retiring should expect that PERS will probably require the maximum 92 days to process applications and get you your first check.
December 20, 2002. I just heard from PERS concerning the question of "administrative" vs "judicial" review of my dispute over the calculation of my final account balance. An "administrative review" appears to be for circumstances where you just plain disagree with PERS' calculations and want the matter investigated further by the Administrator of the Data Quality division. A "judicial review" is exactly what it appears to be. It is a formal legal procedure that involves the court system in the county where you reside (Multnomah in my case). From what I can tell, judicial reviews are for two circumstances: (1) where you still disagree after you've gone through the "administrative" review or (2) if you are challenging a substantive procedural outcome related to your retirement. A "judicial review" definitely trumps any other review. The dicey thing with a "judicial review" is the timetable spelled out in ORS 183.484. According to the statutes, you have only 60 days to file a petition for "writ of judicial review" following a denial of a "Letter of Contest" (there are other circumstances as well, but the 60 days applies nonetheless). So, since my denial letter was dated December 16, 2002, I would have until February 15, 2003 to file for a judicial review. This means that the "administrative review" either has to be finished, or the judicial and administrative reviews have to proceed in parallel. I'm still trying to figure out exactly what paperwork is required and the form in which it needs to be submitted. PERS claims that the paperwork is straightforward; Multnomah County Circuit Court seems to think otherwise. I'm not even certain we're talking about the same thing. In any case, this looks to be a protracted dispute unless it is resolved administratively. I'm proceeding with a request for "administrative review" while I investigate the "judicial review" procedure. I'll keep you posted on my progress.
December 19, 2002. Here is a very interesting Wall Street Journal article on problems with other public employee pension funds - New Jersey's in particular. Oregon's PERS is mentioned briefly as one of the funds whose problems are related to underfunding, not poor portfolio performance. The article also points out that 50% of pension funds of over $10 billion are currently "out of balance".
December 18, 2002. I've just posted a new version of the PERS calculator. The new version does everything the previous version did, but adds one new piece of information and exposes another relevant detail. The PERS actuary released the broad outline of the 2001 Actuarial Equivalency Factors in the report given to the PERS Board on 12/10/02. The AEF's Tabled in this report are only for retirees between 50 and 65 and are only broken down by age (in years) at retirement. The 1978 and 1999 AEF's used in my calculator are taken directly from the full actuarial tables PERS uses to calculate final benefits (these are in years and months attained on the date of retirement). The 2001 Option 1 benefit reported in the new version of the calculator should be regarded as only a very rough approximation, but it will give you some idea of the effect of newer mortality assumptions. The new version also exposes the underlying benefit increment adjustment codified in ORS 238.380. The lump sum balances reported by the calculator *do not* take this into account. If you want a better approximation of the lump sum balance you might receive upon retirement, divide the benefit increment percentage by 100, add it to 1.00 and multiply the sum by the Option 12 (or Option 13) estimated balance. The figure you get will be closer to the actual lump sum you might receive should you elect one of these options at retirement. (To determine whether you have the current version, the opening screen should say 12/20/02 Version).
This afternoon (12/18/02) the mail brought me the first formal response from PERS concerning the "Letter of Contest" I filed last month, challenging the final balance on my account (see below November 18, 2002 for more details). Not surprisingly, the formal analysis shows that PERS calculated my final benefit correctly; however, several issues remain. First, my 2001 Annual Statement is wrong and PERS acknowledges that. The error is not in the actual balance (the BIG number), but in the (lack of) details. The Annual Statement simply leaves out my Variable Balance, burying it in the total, but not listing it separately. The way the statement reads, it appears as if the "one-time transfer" occurred at the end of 2001, as I had requested when I filed the form in late 2001. This was the first "clue" I had that this transaction had been completed. Second, PERS claims that I *should have been* informed that my one-time balance transfer failed the key test in Spring 2002. They never notified me. Finally, on May 23, 2002 PERS prepared my final (and decisive) Benefit Estimate. While I understand that these are just "estimates", the "estimate" perpetuated the same error that was on the 2001 Annual Statement, namely that there was no variable balance. This further supported my belief that the one-time transfer had taken place. Since the impact of this is about a $5200 discrepancy in my employee account - about $100 per month - I'm obviously unwilling to let this go just yet. I am trying to decide which of several courses of action to pursue. One choice involves a "judicial review"; another involves an "administrative review". It isn't clear whether these processes are mutually exclusive or whether one trumps the other. Until I know more, I won't decide which route to take.
December 12, 2002. The House Interim Task Force on PERS Reform met yesterday (12/11/02). I've had some preliminary reports on the discussion but don't have anything concrete to report. Hopefully soon. In the meantime, PERS posted some information on its website yesterday relevant to AEF's, the Lipscomb decision, and related factors. You can get a preview of the generalized 2001 AEF's by going to the PERS website here. Read carefully the Actuarial Equivalency Study (p. 5), which offers a first look at the 2001 AEF's. You will see that the 2001 AEF's are slightly different from the 1999 tables; younger retirees will do even worse under the 2001 tables, while older retirees will fare better (than the 1999, but not the 1978 AEF's). It is worth spending some time with these documents.
December 11, 2002. Articles and information abound right now. Rather than clutter this site with even more links, check the list archives (http://www.lists.pdx.edu/perslist) for recent messages containing links to newspaper articles, summaries of the December 10, 2002 PERS Board meeting, and a later version of the simulation study done by PERS. There are a couple of rather interesting issues floating around in the rumor mill right now. I haven't seen any reference to any of this in any news report. As a result, I'm unwilling to report on the basis of unsubstantiated information (or misinformation) and so will await more evidence before reporting any of this. One thing emerges from the Board Summary, however. The Board's Nominating Committee has recommended that Dawn Morgan and Christine Brown continue as Chairman and Vice-Chairman of the PERS Board for another year despite pressure from the Oregonian and other constituencies for their resignations.
December 5, 2002. Today's Oregonian has a piece on the increase in PERS retirements in 2002 attributable to uncertainty about their or the system's future. You can read this article by going here. I'm unable to attend the December 10, 2002 PERS Board meeting. I'll try to get a summary posted as soon as I get my hands on one.
November 29, 2002. Hope you all had a pleasant Thanksgiving. There will be a brief hiatus for this website and the list while I'm out-of-town until December 5th. While I'm gone, here's something to ponder. The current "Benefits-in-Force" for retired PERS members totals approximately $15.3 billion and represents about 43% of the current PERS liability. I've read reports that somewhere between 25,000 and 35,000 PERS members (active and inactive) have met either age or service requirements to retire tomorrow if they chose. Quite apart from the havoc it would visit on the agencies they work for, and the sheer catastrophe for the PERS processors, what would an abrupt retirement of this many people all at once do to the BIF obligation of PERS? At this point, I don't know the answer to the question - it's been asked - but I could hazard a guess that it is probably more than $5 billion, which would make the BIF more than 50% of the current PERS liability. Would PERS have enough assets to "cash out" the accumulated benefits of all remaining non-retired members while retaining sufficient assets to meet BIF obligations until the last retiree died? I'm hard-pressed to see how a plan like this - the Steve Buckstein/Cascade Policy Institute proposal - would save anyone any money.
In the for what's its worth department, the AP had a wire release on Wednesday that reported only 1 in 6 corporate pension plans was adequately funded right now. The major cause is the poor stock market. The consequence is that 5 of every 6 corporations will have to put more money into the pension funds during 2003 to meet ERISA requirements.
November 27, 2002. I recently emailed both the Executive Director and the Chief Financial Officer of PERS to find out how much of the "unfunded actuarial liability" currently reported can be attributed to the corporate fraud documented for Enron, WorldCom, Global Crossing, Adelphia, and other less spectacular companies. Management of the PERS portfolio rests with the Treasury Department, not PERS, and so I don't have a direct answer to my question yet. However, in searching for an email address for Treasury, I ran across an interesting press release (Oregon Department of Justice Press Release) that addresses this matter with regard to Enron. In short, the loss to PERS alone resulting from the Enron collaspe is claimed to be $81.5 million. Hopefully, it will be possible to establish how much the PERS portfolio has lost from the accounting fraud at WorldCom and the other companies alleged to have committed similar illegal acts. Mr. Voytko has been very forthcoming in his answer to me and in referring my questions to the appropriate people at the Oregon Treasury. Once I've received the pertinent information, I will post both Mr. Voytko's response and the response from Treasury.
November 23, 2002. Steve Buckstein, Cascade Policy Institute, has written a screed against PERS in today's Oregonian. Basically, Buckstein is proposing cashing out all PERS members (presumably active and inactive but not retired, although this isn't specified) and moving them to another less generous plan. You can read this article here. You can also read the full Cascade Policy Institute report on PERS by clicking here (need Adobe Acrobat to read). In addition, you might be interested in the following handout from PERS concerning "immediate implementation" of the Actuarial Equivalency Factors. This document (in MS Word format) is available here. Steve Duin's Sunday (11/24/02) column on PERS is also available here.
November 22, 2002. The Oregonian published a report of an analysis of scenarios after Tier 1 employees die off. It has commonly been expected that the system's problem would be resolved as more and more Tier 1 retirees leave the system and are replaced with Tier 2 employees/retirees. The simulation shows this *not* to be the case even though Tier 2 employees have no guaranteed rate of return. The simulation shows that even without a guarantee, a substantial number of Tier 2 employees will retire under "Money Match" - an unexpected outcome. The Oregonian story can be found at the Oregonian's web site (click here). The actual simulation analysis referred to in the Oregonian article is here.
November 21, 2002. I got my first hint of why there is a discrepancy in my final PERS account balance today. In the current stock market setting, it is nearly impossible to effect the one-time transfer of the "Variable" account into the regular at any time other than retirement. A very careful reading of the "Variable Election" form reveals a "trap" for the unwary. ORS 238.260[14] governs this, and if you try to do this before you retire, PERS goes back and recalculates all your variable contributions as though they had been in the regular. The difference between the regular earnings rate and the variable earnings rate was small in the good years, but substantial in the last few years. As a result, your account balance is likely to have been higher if you had kept your money in the regular from the beginning. If this is the result PERS gets, you fail to meet condition 2 of ORS 238.260[14] and PERS won't transfer the money except when you finally retire. It seems like the design is to prevent you from leaving the variable in a down market following a long spell of high returns. The problem is exacerbated because PERS leaves you completely ignorant of their decision and doesn't really clarify the test when you apply for the transfer. You're left to decode very unclear statute on your own. You only discover that the money WASN'T transferred when you retire, unless you think to ask sooner. My own situation is much more complicated than this, but the dispute will center on the fact that my 2001 Member Account balance statement (the "official" one sent in late April) showed me with a $0 balance in Variable, and my last (and decisive) Benefit Estimate on May 23, 2002 also showed a $0 variable account balance. Both of these led me to conclude that the "one time transfer" had been effected. In the absence of any explicit notification from PERS, how or why would I have known differently in the face of those two documents? I suspect I'll be engaged with PERS over this for some time (on the other hand, maybe they'll just throw in the towel and make it "right").
November 20, 2002. The news just keeps getting cheerier and cheerier on PERS. Today's Oregonian has a front-page headline detailing the latest news on the unfunded actuarial liability (UAL). Read the Oregonian story here. Basically, it reports that Mark Johnson, Milliman Associates actuary retained by PERS, now estimates that by the end of 2002, the UAL will hit $15.7 billion, assuming decent stock market returns in November and December 2002. This will further increase the pressure to craft some significant reforms to the system. Today's Salem Statesman-Journal has a piece on the "secret" task force meeting in Salem to craft a PERS reform package. Find this article here. (Private talks on PERS reform). The Statesman-Journal also had an even more depressing article on the errors in PERS benefit calculations in Monday's (11/18/02) paper. You can read this one here. (PERS calculation errors plague system).
November 19, 2002. Looks like I'm not alone in my problems with PERS. The Oregonian had a story in today's paper about a State Audit of PERS benefits. Apparently about 1 in 7 of the sample the auditor looked at had errors. While the effect of these errors was small in the aggregate, some individual errors were fairly significant. The error I describe below (November 18, 2002) would fall into the "fairly significant" end of the spectrum. You can read the Oregonian article here. Oregonian article on PERS Calculation Errors 11/19/02.
November 18, 2002. My personal saga with PERS. As you know, I got my "Notification of Entitlement" on November 14, 2002. This document usually arrives within a few days (before or after) receiving the first PERS benefit check. Because I am very familiar with the methods used to calculate the benefits, I looked this form over pretty carefully. While all of the calculations were correct, they were based on information I believe to be significantly wrong. All calculations based on the "Money-Match" formulae depend on a very accurate "Member Account Balance". I had calculated my "Member Account Balance" to the penny before I submitted my application for retirement. My situation was actually pretty simple, or so I thought. Because I had planned to retire during 2002, I dutifully applied for my "one-time transfer" of my variable account to my regular account on September 27, 2001. (I have a PERS-stamped copy of this document in my files). This transfer took effect on January 1, 2002. As a result, the balance in my account on 12/31/01 represents an accurate corpus from which all 2002 earnings factors would apply. There was no possibility for my account balance to decline during 2002, regardless of how the stock market performed. So, when I fixed my retirement date, I took the ending balance on 12/31/01 and to it added my employee ("paid for you") contributions for 2002. To that sum I applied the posted regular account earnings factor effective on the date of my retirement (10/1/02). This "earnings factor" is simply the pro-rated fraction of the 8% guaranteed rate. For 10/1/02, the pro-rate is 5.98% (PERS uses some funny rounding, but not enough to make any significant difference). This should be a straightforward calculation that a trained chimpanzee could make. Well, as some of you know, the final account balance that PERS came up with was $5277 lower than the balance I projected. What's worse, I have PERS estimates made in May 2002 that show my projected account balance at retirement to within about $300 of what I calculated it to be and only slightly less than $5000 discrepant with the actual balance they claim I got. If I were to allow this to go unchallenged, this discrepancy would amount to about $10,500 in the "lump sum" corpus used to calculate monthly benefits - a very non-trivial amount - and would result in a monthly discrepancy of about $100 before taxes. Of course, I was at PERS at 8:00 a.m. this morning with a written challenge to the "Notification of Entitlement", which will compel PERS to recheck its figures and puts into motion a process that could go on for the next 8 months. By law, a retiree has 240 days from the date of the first benefit check to challenge PERS benefit calculations. PERS must correct any mistakes and refund any difference - back to the first check - within some reasonable period of time. They must also provide you with an explanation if it disagrees with you. I expect to win this beef because this has all the fingerprints of a data entry error somewhere along the line. I've tried every possible "obvious" permutation to come up with the number PERS reported, but nothing I do comes even close. Typical permutations would have resulted in a number several thousand dollars lower than what they reported, or still more than what they reported. No combination of numbers I have at my disposal results in PERS' estimate. I'll continue to update all as my saga unfolds. In the meantime, recent retirees really do need to check those "Notifications". In all likelihood they're right, but it doesn't hurt to check. If you're beyond 240 days, you're out of luck no matter what you figure out.
November 13, 2002. The PERS Board met on November 12th. Unfortunately, I wasn't able to attend. I had planned on going, but a snafu on the PERS website indicated that the meeting had been cancelled. Fortunately, I have friends and was able to get the meeting notes within hours after the meeting ended. Several noteworthy developments took place. First, the PERS actuary - Mark Johnson - gave his "valuation" report on the PERS system. The bad news is that the unfunded actuarial liability grew from a projected $8 billion to well over $9.5 billion during 2002. The consequence of this is that employer contribution rates are scheduled to rise again on July 1, 2003. Mr. Johnson estimates that the rates could go as high as 16% for some agencies (this does not include the 6% PERS "pickup" negotiated in 1981 in lieu of salary increases). This is far worse than most had feared, and will, almost assuredly, lead to some significant efforts by the next Governor and the Legislature to reduce PERS costs. There are a number of ways this can come about, but none of them will be easy, clean, or pretty.
The Board also appointed a nominating committee consisting of Mark Gardiner and Elizabeth Harchenko who will gather nominations for the next PERS Board Chair and Vice-Chair. Governor Kitzhaber has informed Dawn Morgan, Jeanne Garst, and Christine Brown of his intention to *not* consider them for reappointment to the PERS Board when their terms expire early next year. This effectively eliminates these three from consideration for either Board Chair or Vice Chair (Morgan is currently PERS Board Chair; Brown is PERS Board Vice Chair).
November 3, 2002. I attended the PERS Board Meeting on Hallowe'en. Much of the meaty stuff was discussed in Executive Session; however some interesting tidbits slipped out during the open session. Among them: 1) the PERS Board has asked for an AG opinion on whether they can seek "Independent Counsel". Coming on the heels of an executive session during which the Lipscomb decision (see below) was discussed, one can only infer that the PERS Board and DOJ (Department of Justice) disagree on how to proceed with the Lipscomb decision. It isn't clear to me whether PERS (as a public agency) can secure outside counsel *and* pay for outside counsel using member funds or state revenue. 2) The PERS Board will make NO recommendation for either appealing or not appealing the Lipscomb decision until after Judge Lipscomb enters his final order spelling out exactly what is needed for PERS to comply. Judge Lipscomb's final order isn't expected before the end of 2002. 3) Governor Kitzhaber is trying to bring the parties in the Eugene v PERS decision together to negotiate some sort of "settlement". Since the Governor only has about 3 months left in office, this will be no small accomplishment. Dawn Morgan, Chair of the PERS Board, will represent the Board in these negotiations.
The PERS Board also discussed modifications to the Actuarial Equivalency Factors (AEF). Public hearings are underway to visit the proposed rule change that would implement the 1999 (or later) AEF's for all retirements taking place on or after January 1, 2004. The PERS Board recommended that the new AEF's be implemented with a "lookback" feature that compares a member's benefits as of 12/31/03 (under the "old" tables) with his/her benefits under the later AEF's. Since most of us will live longer than expected under the old AEF's, the benefits post-2003 will be less generous (per month) than under the old system. Given Judge Lipscomb's decision - which instructs the PERS Board to revisit the AEF decision - the PERS Board will be considering an option to implement new AEF's "immediately with no 'lookback'". Since this was not part of the original rulemaking notice, there would have to be a new rulemaking process to consider this formally. According to documents handed out at the meeting, the timeline for "immediate" implementation would be approximately May 1, 2003.
Click here to read the full text of Judge Paul Lipscomb's ruling in Eugene v. PERS