9/19/2013: Christian Gaston has an excellent piece in the Oregonian
on the deal and the politics. As usual Marc Feldesman has some biting commentary on his PERSINFO
blog. I suggest reading all of both pieces, because the consequences for your lifetime income stream are likely to be significant. You might want to put that goat bonus into stocks. Uncle Bernie, you got any tips for us?
9/20/2013: Uncle Bernie’s very helpful digest, from the comments:
From the news articles, it appears that they dropped the attack on PERS “inactives” i.e. ORP faculty. The plan was to reduce the annuity rate on their pensions to 4% or less, which would have reduced their pensions by 30 – 37% or so. The plan is so manifestly illegal, especially as regards ORP faculty, that they apparently decided to drop it and avoid a big lawsuit.
Anyhow, if they had gone through with that plan, ORP and other inactives would probably have taken the “double lump sum” option, removing their money from PERS altogether, so it’s not clear the state would save any money. Uncle Bernie knows of ORP people who are planning to do the lump sum anyway.
Everyone should be somewhat more motivated to do that than before, because the current proposal in Salem has rather sharp cuts in the COLA adjustments to PERS. They are 2% annually, and will be reduced quite significantly, especially for those with a relatively large pension, I believe it is $60K, above which the COLA will nearly disappear; below that, the COLA is reduced to 1.25%.
I have no opinion about whether this will be deemed legal or not by the Oregon supreme court. There is is reason to think from the Strunk opinion of about 10 years back that it won’t, but the statute is written so vaguely that it’s really hard to predict what the court will do.
The COLA caps will apply to past and future retirees alike, by my understanding, so no need as far as I can tell to consider acting precipitously i.e. retire right away. (There is a drop in the annuity rate from 8.0% to 7.75% that is going into effect in a few months, that might be reason to get your retirement papers in if you’re planning to retire soon, since it will affect the size of your pension, as well as the return on your PERS account.)
Bottom line: PERS under attack, Uncle Bernie happier than ever to have gone ORP in 1996. Leaning toward taking lump sum out of my prior PERS account when retirement comes, be done with the state of Oregon, the people out to get public employee members for their pensions, the whole public pension mess. Unclear whether the PERS cuts will stand up in court, but want to be done with Oregon regardless.
It’s all pretty sad, because Oregon has been one of the best states in keeping its public pension plan funded, it’s now ~ 90% fully funded and increasing steadily with the stock market surge that has been going on after the 2008 financial crisis. By comparisons, most states are far less securely funded, if you are in a public pension plan.
The reason for all the trouble with PERS in Oregon is that the state stubbornly follows actuarial “rules” on the unfunded liability, i.e. ignores that the financial markets are solving the problem, and therefore keeps jacking up employer rates until the public understandably won’t stand for it anymore.
With good luck, the PERS cuts will be stopped by the court, the PERS trust fund will be fully funded in a couple of years, and the attacks on PERS will abate.
By the way, none of this really affects much whether the pension benefits at UO are substantially better than at other public universities. Unless you work for one of the few states (like Washington, which is 100% funded) in which the public pension plan is more securely funded than in Oregon, you are better off here.
The public employee unions have not done a good job, to put it mildly, in representing any of this to the public, in my opinion.