Duck Coach Aliotti to get Frohnmayeresque PERS payout

4/18/2014: Ted Sickinger has the story in the Oregonian:

Aliotti is 59 years old. If he lives another 26.5 years, as PERS’ actuarial tables predict, the state pension system will pay him about $6.6 million in retirement, plus cost of living increases.

Where will that $6.6M come from? As Sickinger explained in his earlier story below, these payouts are so high because UO pulled a scam with how it treated the Nike money that is part of the coach’s compensation. So UO and OUS didn’t pay enough into PERS for to cover these payouts, and now the rest of the money will have to come by diverting payments from current UO/OUS employees.

And then the university will claim that, when they count the cost of faculty benefits, faculty are overpaid. Got it?

4/10/2012: Bellotti, Frohnmayer top PERS payouts

It took a long legal struggle, but the Oregonian has been getting data on PERS payouts from the state, bit by bit. The Ted Sickinger story on how Mike Bellotti managed to pull off his $500K pension scam is pretty amazing. It will cost taxpayers $5 million.

And here’s a bit on how Bellotti took UO for another $2.3 million, plus this. He tried to get $7 million. And now the curious/jealous/outraged/smug can now check up on their friends and colleagues retirement benefits on the Oregonian website:


Good PERS returns to reduce faculty subsidy for Bellotti’s pension?

Good news on PERS. High investment earnings and Kitzhaber’s cuts mean that it’s now 87% funded. I think that’s the best of any state pension fund. Ted Sickinger has the report, here.

But let’s face it, no one reads this blog for the good news. And the bad news is that UO is still on the hook for the unfunded pension liability of people like former football coach Mike Bellotti. Sickinger’s investigative piece on how UO’s decision to funnel Bellotti’s Nike money through UO boosted the pension for him and his wife former wife wife to ~$500K a year, and how we have to pay for it, is here.

The other good news? If you are pre-1995 Tier 1 faculty and opted into the ORP plan in 1996, (typically TIAA-CREF) UO’s contribution rate to your account is determined in part by the need to pay PERS the unfunded liability for the payouts to Bellotti and his ilk. The more Bellotti gets, the more UO has to pay PERS, and the more they have to pay into your retirement account. And if you are not Tier 1, or stayed in PERS, you don’t need to worry much about further cuts.

The bad? The S&P 500 was up 30% last year, so Treasurer Ted Wheeler 16% PERS earnings are not very impressive, even after a healthy risk adjustment. He would have done much better for the State by simply buying the basket, and furloughing his expensive stock-pickers. Also bad: If you went into the ORP, it’s now even more likely you could have done better staying in PERS. Even if you didn’t get a sweetheart deal from former UO General Counsel Melinda Grier, like Bellotti’s:

The ugly? UO’s PERS costs are set for the next 2 years, and VPFA Jamie Moffitt will likely use the fact that UO still has to pay for Bellotti in the next round of union negotiations – which will start in December – to argue that faculty are overpaid and that UO can’t afford more merit and equity money, just as she did last time. The probability that these rates will soon fall has increased, but I’m guessing if the union presses that point, Moffitt will choke and leave the room, just as she did last time.

UO promotes Don Pellum to defense coach

Update: No word on pay and perqs or Aliotti’s buy out deal, if any. Aliotti was getting $420K, see below.

“The well is dry” for external equity raises for faculty, but it’s flowing freely over at Rob Mullen’s football operations offices, thanks in no part to the millions in subsidies he gets from the academic budget. There will be a report from the Senate ad hoc committee on ending athletic department subsidies at the meeting Wednesday (Full dislosure: I’m the chair). A vote is currently scheduled for the Feb 12 meeting, unless the ad hoc committee can work out a compromise with President Gottfredson before then. Things don’t look particularly optimistic at the moment. VP for Budgeting Brad Shelton refused to let me attend the Senate Budget Committee meeting on the athletic budget on Dec 11, a week after President Gottfredson gave his support for the ad hoc committee.

12/28/2013: UO starts national affirmative-action compliant search – for football job: While the UO business school dean Kees De Kluyver just appointed the chronically underperforming Jim Bean as associate dean without any sort of search, Duck AD Rob Mullens has considerably higher standards, and is conducting a national affirmative-action compliant and transparent search for Nick Aliotti’s replacement as defensive co-ordinator. Job ad here. The top internal candidate, assistant football coach Don Pellum, currently makes $300K:

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12/27/2013: Nike payments to inflate Aliotti’s PERS pension too?

UO helped Mike Bellotti exploit a PERS loophole to collect retirement income on payments from Nike, even though no (or vastly inadequate) PERS contributions had been taken out. He’s now getting more than $500K a year, and the unfunded liability for PERS is about $5M. Payments from regular OUS employees, and Kitzhaber’s cuts to their benefits, pay for this. It looks like Aliotti is also PERS Tier 1, and will be eligible for the same sort of pork. Ted Sickinger’s amazing 2011 Oregonian expose on the Bellotti scam is here. Aliotti’s retirement announcement is on, here. UO is paying Alliotti $420K a year, I believe that includes his Nike supplement:

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Early PERS retirees avoided 2% hit to pensions

That’s the take from OPB reporter Steve Law, in the RG:

For those affected, it’s roughly a 2 percent hit. The PERS actuary calculated that a typical 55-year-old retiring Dec. 1 on Money Match would avert a 1.9 percent reduction in his or her pension that takes effect starting with 2014 retirees. A 65-year-old in the same boat would avert a 2.3 percent reduction. But those employees could make up much or all of those losses merely by working several months longer.

The legislature had considered, but did not implement, changes that could have let to huge hits for “in-active” members such as the faculty who switched from PERS to the ORP in 1996. That uncertainly led to a least a few early UO retirements. These much smaller cuts are due to small changes in the death-tables and a cut in the assumed earnings rate for annuities.

Sickinger on PERS COLA cuts

10/8/2013: Ted Sickinger is an investigative reporter for the Oregonian. His piece on Mike Bellotti’s PERS scam was a classic.

At retirement, Bellotti’s post divorce account balance was only $300,000. The university made its own contributions over the 21 years he was employed. But combined, they won’t come close to covering the $5 million benefit reserve that PERS established to cover his payments.

Carefully documented with public records, obtained only after a long and expensive public records battle which led to the publishing of all Oregon PERS payments online:

He’s just published an excellent piece on the politics and finances behind Kitzhaber’s deal to cut the PERS COLA, and the chances the unions will be able to get it declared illegal:

… Then there’s the legal question. 

Senate Bill 861 establishes a fixed annual adjustment starting in 2014 of 1.25 percent on PERS benefit amounts up to $60,000, and 0.15 percent on benefits above that amount. That would supercede the tiered COLA limits that were passed last spring. And it would replace the adjustment in place since 1973, which was based on the cost of living index for the Portland metropolitan area and limited to 2 percent per year — applied to all benefits. …

Worth reading it all. 

Kitzhaber’s "Grande Compromesso"

10/4/2013: I confess I’m not following this or the government shutdown as much as I should. I’m in Italy for a few more days – a country with a relatively stable and responsible political system.

But now it’s over, Christian Gaston has the wrap up in the Oregonian:

“What is the message that this Legislature is sending when we cut my taxes 20 percent?,” asked Rep. Brent Barton, D-Oregon City, a lawyer in private practice. “We cut taxes on thousands of lawyers, doctors, lobbyists, accountants on the same day that we cut benefits for retirees? What message does that send?” 

Rep. Jules Bailey, D-Portland, likened the tax cuts to the Business Energy Tax Credit. The cost of that program grew so quickly that it became a political embarrassment and the Legislature has worked to rein it in.

So, the biggest beneficiaries will be people like noted tobacco company lawyers Sharon Rudnick and Dave Frohnmayer? Kitzhaber got advice on the legality of the cuts from Bill Gary at HLGR. So maybe he’ll now make the DOJ hire HLGR, who lost Strunk, to try to defend this? Frohnmayer’s PERS COLA will take a big hit if it sticks in court, so he’ll have to balance that against his usual $550 an hour motivation. Keep an eye on the persinfo blog for commentary and analysis.

Kitz to gut PERS, get tax increases?

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. The healthy stock market has allowed people to be confident enough to look into things like this ig trading review and invest in stocks and shares. The more people invest into the economy like this, the longer the surge will continue. By comparison, most states are far less securely funded, if you are in a public pension plan. This dichotomy is why many have been looking to bolster their savings with help from Stash reviews and other ways to enter the stock markets.

Furthermore, the best stock investors are the ones that take every piece of advice and opportunity that they can to ensure that they are making the best trades and investments, from learning how to buy monero to ensuring that their portfolios are diverse enough to survive near any contingency. There are many steps that can be taken to ensure this security. This includes things like using a CFP, which is a Certified Financial Planner, to help with investments that can be done by using platforms like and completing a Test to get the most advantages from the stock market.

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.

Unions file lawsuit against PERS cuts

7/20/2013: Brent Hunsberger writes an excellent personal finance column for the Oregonian. His take on the impact of the SB 822 PERS COLA cuts is here.

7/3/2013: That was quick. From the law offices of BENNETT HARTMAN MORRIS & KAPLAN, full pdf here.

For someone retiring with a $60K per year starting PERS annuity, the COLA cut in SB 822 would reduce the annuity 20 years out from $87.4K to $77.5K, and cost a total of $84K over 20 years.

For someone like Dave Frohnmayer, with a current annual annuity of $257,373, the cuts will reduce the annuity 20 years out from $375K to $284K, and cost a total of $837K over 20 years.

Replace “cost” with “save” if you are looking at this from the state’s point of view, and note that these costs or savings are not discounted back to present values.

7/3/2013: Latest update from Mr. Fearless:

It just may die there. If these bills fail, there will be no cut to inactive benefits, no additional cuts to the retiree COLA, no phase out of senior medical deduction, and a host of other noxious tax increases.

Democracy is messy. I personally know 5 UO faculty who retired early, losing substantial amounts of income, causing a moderate amount of disruption to teaching, and a lot of lost sleep and administrative time, because of fear the legislature would do something arbitrary and capricious to cut PERS ORP inactives with no warning. Sounds like we’ll go through it all again next session. From Harry Esteve in the Oregonian:

It’s the last-ditch effort to raise more money for education and other state programs in exchange for deeper cuts into the Public Employees Retirement System. The Senate gavels in at 10:30, and the agenda includes House Bill 2456, which raises about $200 million in corporate, income and cigarette taxes, and Senate Bill 857, which puts further limits on cost of living increases for government retirees.

6/28/2013: From Hannah Hoffman in the SJ. Sounds like people who switched to ORP may be OK so long as they still work for the state:

The amendments discussed Thursday also included one further reduction to the Money Match program, beyond the COLA reductions. It would change the annuity rate on Money Match accounts for “inactive” retirees, or people who have left public service for more than three years and not re-entered. The current rate is 8 percent, and that would get cut to 4 percent.

6/27/2013: Read it all, from Mr. Fearless at, regarding SB 857. Details here.

If you aren’t eligible to retire either due to age or service or both) you are screwed (unless the court overturns these changes before you retire) as your money match benefit will see a 37% or more reduction. The PERS Board is considering changes to the assumed rate, which will affect Tier 1 earnings guarantee on August 1, 2013 and thereafter. Since the time is not adequate for the bill to be completely processed by close of business tomorrow, anyone who is inactive and who is already eligible to retire is taking a huge risk if tomorrow passes and a retirement application for July 1 isn’t already in PERS’hands. … 

Lest you think this bill isn’t going to survive the end of session games, think again very carefully. The bill has the support of the Governor, Senate R and D members, OSBA. OBA. 

6/27/2013: Update from Hannah Hoffman of the SJ:

It’s rising from the grave today as the Senate Committee on Revenue and Finance takes up two placeholder bills introduced last week. One provides space for legislation further cutting the cost of the Public Employees Retirement System and the other would allow for the tax deal. 

The committee meets at 2 p.m. in Hearing Room A.

6/27/2013: is a great source for PERS news. While anything could happen, Mr. Fearless thinks that the inactives are safe for now, and that if the legislature does do anything more this session they will cut the COLA for everyone (even more than the SB 822 cuts) and appoint a committee to try craft legislation that might stand up in court to decouple the annuity payout rate from the assumed earnings rate. This would mean large cost savings for employers, and large reductions in the monthly annuity for new retirees. That would take legislative action, presumably next session.

In addition, the PERS board is meeting in July and will presumably reduce the 8% rate to 7.5% or so, and update the death tables to reflect current longer life expectancies. These changes can be done administratively and will supposedly start phasing in starting in December. Word from people who know is that Tier one PERS (inactive or not) would have to work an additional 6 months or so to make up the difference, so people on the verge of retiring might consider speeding it up.

On the other hand, another factor to consider is that the TRP plan has become significantly less attractive. Under the TRP you get a 6% pay raise when you sign up, and then must give up your tenure within three years, then UO must hire your for 3 years 1/2 time or the equivalent, spread out over more years. But as of a few years ago UO stopped making retirement plan contributions after you have given up your tenure and started working part time. For Tier One people this is effectively a 20.5% pay cut, and that’s pre-tax money.

From a strictly financial standpoint it therefore may well make sense for potential retirees to keep working full time rather than plan on part-time work under the TRP. On the other hand you have to sign up for the TRP to get the 6% raise. At the margin I think this will mean more faculty will delay going on the TRP, which is quite cheap for UO, and so UO may have to sweeten the TRP deal in order to encourage higher paid full profs to retire. Of course that possibility gives yet another reason to delay taking the TRP.

PERS follies get recursive

6/12/2013: From Hannah Hoffmann in the SJ:

Public sector retirements this year are up 54 percent over last year, according to statistics kept by the Public Employees Retirement System. Workers say the proposed cuts in the legislature are driving their early exits. 

PERS spokesman David Crosley said 2,305 public sector employees retired last year between January and June. This year, 3,539 people have retired between January and June.

Fortunately Salem has announced they will not raise the cost of dulling the pain.

6/8/2013: From Harry Esteve and Christian Gaston in the Oregonian:

Revenue: Lawmakers would approve $275 million in additional spending by reducing medical care tax breaks given to the elderly; increasing cigarette or beer taxes; lowering personal income tax deductions; and raising corporate tax rates.

PERS: In addition to the $460 million savings approved last month in Senate Bill 822, the state would save $440 million by further reducing cost-of-living increases for retirees and by changing the payout formula for workers who are no longer in the PERS system.

6/4/2013: Panic update:

Kitzhaber holds more secret meetings with legislators.

Persinfo blog advises those who can, to consider retiring by 7/1/2013, to avoid getting hit by death table revisions.

Rumor is that at least 3 B-school profs and several other quant types retired Friday 6/1/2013.

Read the thoroughly frightening Friday post from the PERSINFO blog:

The Oregon Republicans in the Legislature used a lazy Thursday afternoon, very late in the month of May to announce their newest “compromise” proposal on PERS Reform.  I’m not going to bore you with too many details; you can read the proposal for yourself here .  What’s notable about the proposal is that it contains every element of the former SB 754, with just a few of them scaled back in their extent.  From here on out, I will refer to the new proposal as “SB 754 sorta lite”.  The hands behind this bill are principally the Oregon School Boards Association (OSBA) and its umbrella group “Fix PERS Now” (see yesterday’s post).
The bill is audacious in its scope, revisiting the retiree COLA even more punitively than before, it goes after inactives by proposing a cut to the Money Match annuity rate from the current 8% to 4% (the PERS Board will take up the assumed rate at today’s Board meeting and will undoubtedly cut it to 7.5% in July, to be effective for all retirements after December 1, 2013), “fixes” the Judges pension (how isn’t clear), ends pension spiking without completely eliminating sick leave (I guess you can have 40 hours) and vacation time, it redirects 1% of the IAP to the PERS fund your own retirement, offers flexibility to employers to renegotiate the 6% pickup, removes Legislators and other statewide elected officials from PERS, and creatively goes after OPSRP members (Tier 3) by reducing the accrual rates by 25 basis points going forward.  It also raises the retirement age for OPSRP by 2 years.

5/31/2013: They’ve put 22% of their our portfolio into private equity. Earnings?

  • PERS private equity picks: 5.59% annual over past 5 years. 
  • PERS stock picks: 2.52% over 5 years. 
  • The Russell 3000 benchmark?: 5.63% over 5 years. 

The comparison is even worse if you look at last year, disastrous if you look at this year so far. So why are they paying big salaries to state employees to schmooze with the private equity salesman and pick stocks? They had a few lucky years way back, and now they think they are Warren Buffett. Nope, just buy the benchmark basket. More PERS info here.

What about Jamie Moffitt’s claims that UO couldn’t give raises because of the scary upcoming PERS cost increases? P64 of the pdf here:
Costs this biennium will increase by only 0.7% of salary, not 5.1%. So, she can now boost the UO raise proposal from 10% to 14.5%!

Republicans make their PERS move. Kitzhaber … ?

Plan C: Retire today. You have to drive to Salem and submit the paperwork at PERS by COB today. Rumor is that it will be a madhouse, get there early. Then submit your TRP plan retroactively like UO let Frohnmayer do (surely Doug Blandy will do the same for the rest of us, though he won’t answer my email about it) and get another part-time job to supplement your PERS.

Retirement forms etc. are here.

5/31/2013: Hannah Hoffman reports the Republican plan includes a cut in the annuity rate from 8% to 4%:

Their plan also calls for employee contributions to be redirected from their individual accounts into the main PERS fund; for Money Match accounts to be annuitized at 4 percent, rather than the current 8 percent; and to prohibit employees from using unused vacation time or more than 40 hours of unused sick leave in calculating their final salary.
Kotek and House Majority Leader Val Hoyle, D-Eugene, have been clear in the past that none of these ideas resonate well within their party.

That did not seem to deter Republicans. Ferrioli said they were searching for the “sweet spot” on PERS reform and weren’t in any rush to do it by the end of June, the tentative date for ending the current session.

“Getting it done on time is not nearly as important as getting it right,” he said.

So, perhaps there will be a window to retire early and get the 8%, if this does go through? What a mess.

5/30/2013: Christian Gaston and Esteve have more details here. This new story seems to suggest the inactives would indeed get screwed.

5/30/2013: Harry Esteve reports in the Oregonian: Is it just me or does he seem a bit skeptical?

Republicans legislative leaders unveiled their version of public pension reform Thursday, a plan that relies heavily on ideas that Democrats already have rejected as unconstitutional, unfair to retirees or politically infeasible. …

The bulk of the savings in the Republican plan would come from nearly doubling the cuts in cost-of-living increases for PERS retirees.

Under a plan that passed with all Democratic votes, retirees who get more than $20,000 annually in PERS benefits would face smaller caps on yearly increases. The current cap of 2 percent stair-steps down at higher benefit levels. In all, the plan shaves $460 million from the cost of PERS over the next two years.

The Republican plan calls for steeper cuts, with stiffer limits after the first $20,000 in annual benefits. It would add another $447 million in savings to the Democratic plan.

Other elements of the Republican proposal include reducing benefits for PERS members who no longer work in public jobs, reducing the employer contribution to PERS accounts and ending the practice of counting unused sick leave and vacation time toward retirement benefits.

I think this means the inactive definition wouldn’t apply to current faculty? And the last doesn’t matter to the MM folks. But an end of the 2% COLA for amounts over $20K would seriously cut benefits. Assume you retire at 65 with $60K PERS. Currently you’d get $87.4K at age 85. Under this plan you’d get $69.1K – very unlikely to keep you even with inflation, not that I’m a macroeconomist.

5/29/2013: State offers SEIU swap of 6% retirement pickup for 6% raise. I don’t get the point of this. Anyone?

And my post below is a little too paranoid – this is nothing new, just a centralization of existing special plans to work around IRS limits on the amount of income these highly paid employees can shelter under regular retirement plans. See below for OUS Counsel Ryan Hagemann’s prompt response.

5/28/2013: Meanwhile, deep inside the bunker, OUS plans a figures out how to maintain their special supplemental retirement scheme for presidents and coaches after an OUS break-up:

and spends taxpayer’s money on an administrator to run it for them:

OUS Chair Matt Donegan will be at Matt court for President Gottfredson’s Investiture. If anyone goes, give him a shout-out about this.

And maybe Chancellor Melody Rose knows what’s up:

From: UO Matters
Subject: retirement plan for coaches and presidents, public records requestDate: May 28, 2013 8:46:27 PM PDT
To: “”
Cc: Ryan Hagemann , Charles Triplett , Diane Saunders

Dear Chancellor Rose:
I saw in the announcement of the 3/15 meeting for the Board Committee on Governance & Policy that there was to be discussion of a special retirement plan for university presidents and coaches: and that OUS was hiring an administrator for this.

I’d appreciate it if you could ask your public records officer, Chuck Triplett, to send along any public records describing this plan or proposed plan.

I ask for a fee-waiver, on the basis of public interest in retirement plans, which is currently quite high given the various proposals to cut PERS for state employees.

From OUS Counsel Ryan Hagemann:

The reference to retirement plans in the March 15, 2013 Governance & Policy Committee docket was not a proposal to create a new retirement plan. The plans listed are existing plans of the Oregon University System. The materials were included as part of a discussion of services that might be shared if one or more of the OUS institutions achieves an institution board. Because retirement plans-now administered across the system-are complex and touch on the lives of employees, the Committee thought it a reasonable place to start in approaching the principles and substantial work that would be necessary to conceive of shared services. I have included the links to the materials that were used for this discussion on shared services and retirement plans.

5/28/2013: Peter Keyes (Architecture) sends his analysis of the possible PERS changes:

How a long-term, full-time faculty member in the OUS system could get hammered by changes aimed at “inactive” PERS members.

Background: The Optional Retirement Plan (ORP)

In the early 1990s, the State of Oregon instituted the Optional Retirement Plan (ORP) for faculty
and some administrative employees of the OSSHE (now OUS) Oregon University System. This
was a defined-contribution plan, in contrast to the defined-benefit feature of PERS. This has a
good feature for the employees, who would have a portable retirement plan which could follow
them to another state if they changed jobs (which often happens with young academics). It also
had benefits for the State, as it would greatly reduce the amount of money the State of Oregon
would contribute to these employees’ pensions in the long run. The ORP can be seen as the
first of the actions that the State subsequently took to reduce its PERS liabilities.
Tier 1 PERS employees had to make an irrevocable decision to enter the ORP program by
September 27, 1996. If they did, henceforth the State would place an amount into the
employee’s ORP account that was equivalent to the amount the employer would have continued
to contribute to PERS if the employee had remained. (This amount comprises both the
employer’s contribution, and the State’s “pick-up” of the employee’s 6% contribution.)
If employees were vested in PERS, they had the option of transferring the balance of their
PERS Employee Accounts into their ORP accounts (in which case they would “…forfeit the
existing balance in my Oregon PERS Employer Account and I forfeit all rights to future Oregon
PERS benefits..”), or leaving that balance in their now “inactive” PERS account, and be eligible
for future PERS benefits. Any amount left in PERS would continue to receive the return on
investment, either in the variable account, or the fixed return of 8%.
Some employees kept their PERS accounts, conservatively hedging their retirement bets by
having both a defined-benefit (PERS), and a defined-contribution plan (ORP). The terms of the
“inactive” PERS deal were clear – if one was in the 8% fixed account, one’s balance at
retirement could be calculated in advance, as could the Money Match and Full Formula benefit
calculations. This was the benefit – calculated according to the rules set up by the State – that
many of us have counted on in all our long-range financial planning over the past 16 years.
The proposal: eliminating the Money Match Option for “inactive” PERS accounts
If the legislature goes forward with the proposal to eliminate the Money Match Option for
“inactive” PERS accounts, ORP members will have to use the Full Formula Option, which will
base their PERS benefit solely upon their highest salary and years of service before they
entered the ORP. The Full Formula Option was intended to be used by active employees,
based upon their salary at retirement, not what their salary happened to be 16 to 30 years
before their retirement. The Money Match Option allows one’s Employee Account to
compound until retirement, then uses the same annuity formula for that balance as is used by all
other PERS members.
What are the costs and benefits of the ORP?
How much money does the State save by having these employees who opted into the ORP,
and how much do these members stand to lose? Let’s look at two employees whose cases
define the range of current employees in the ORP:
  • A faculty member who began employment in 1978, switched to the ORP in 1996, and plans to retire in 2013. This faculty member essentially has the first half of her pension in PERS, and the second half in the ORP.
  • A faculty member who started work in 1990, switched to the ORP in 1996, and plans to retire in 2025. He had passed the years of service for vesting in PERS, but had a relatively small PERS balance in 1996.

Each of these employees has already saved the state a lot of money by opting into the ORP. If
we assume a 20-year life expectancy after retirement, how much does the State save on
pension costs for each of these employees, under the current rules, which maintain the Money
Match option?
Current ORP condition compared to base-case PERS
So the decision of faculty members to go into the ORP turns out to have been very good for the
State of Oregon, while it turns out to have been not so good for the employees, who can expect
a retirement income that will be between 10% and 24% less than if they had stayed in PERS.
(Note that this is not just the decline in PERS income, but in total income, including from ORP.)

Costs and benefits of eliminating the Money Match for “inactive” PERS accounts
However, now the State is thinking of changing the deal the faculty signed on to, eliminating the
Money Match option for “inactive” employees. How much money will the State save by doing
this? And how badly will this hurt current employees in the ORP? The numbers are rather
The only possible conclusion is that the elimination of the Money Match Option for OUS
employees who opted into the ORP and so became “inactive” PERS members will result in a
retirement income that is 33% to 55% less than they were planning on (and had been
promised), and 49% to 60% less than if they had stayed in PERS. This is for people who
stayed at their university as full-time employees, for 35-year careers.
Immediate Effects on the University

Many ORP members nearing retirement in the next few years are considering retiring
immediately, as the deadline for putting in retirement papers is June 1. If the elimination of the
Money Match is not publicly taken off the table quickly, we may see a large exodus of key
faculty members this week, as they will not want to risk up to 55% of their retirement income.
Peter Keyes

May 26, 2013

To find your current PERS balance and calculate possible annuity payouts use the official PERS calculator:

Hannah Hoffman delivers more potentially bad news about PERS, and every other state pension plan.

5/27/2013: Saul Hubbard on PERS politics in the RG:

Roller-coaster nego­tiations over how and how deeply the state Legislature should alter the Public Employee Retirement System this year have taken another twist.

Oregon Democrats have declared themselves open to one final avenue of PERS reform, if the minority Republicans agree to provide the needed votes for $200 million in tax increases, probably aimed at high-income individuals and big businesses.

The Democrats’ new PERS proposal, first presented by Democratic Gov. John Kitz­haber, would eliminate, or greatly reduce, the “money match” retirement formula for “inactive” PERS members – most often former state employees who haven’t yet retired, meaning their PERS pension accounts are still open.

Good article, seems like anything could happen. Harry Esteve has more in the Oregonian.

5/27/2013: TRP not such a good idea?

I’ve suggested that faculty with who switched from PERS to ORP in 1996 might want to consider retiring and going on the TRP before the legislature acts, to try and lock in their annuity at the current 8% rate. I just learned of one disadvantage of the TRP, from Ernie Pressman:

The ORP Plan document is clear that no contributions can be made to the ORP after faculty finish the tenured full time part of the program (up to 3 years). You can take a distribution from the ORP after the 3 years are up, but no further contributions until after the 5 year/3000 hour time is over. Same is true of PERS. Once an employee begins to take a PERS benefit no more contributions are made.

Currently for Tier 1 facult UO pays about 22% of your salary, pre-tax, into the ORP. But that stops when you got on TRP. This reduces your effective pay while on TRP by 18%. Additionally, once you start taking the PERS benefits (typically when you start the TRP although I think that’s flexible) the total money match amount is locked in, so you lose what is (currently) an effective 16% rate of return on that, and in addition your annuity is reduced because you started taking it at a younger age.

Maybe I’m missing something, but the TRP is starting to look like a pretty lousy deal. Including retirement contributions, the payoff from putting in another 1.5 years at full time and then retiring is 22% higher than the payoff from working 3 years at 0.5 FTE under the TRP, without the contributions. But of course you do get a 6% raise when you commit to retire within 3 years. So if you know you are going to retire within 3 years you should sign the TRP papers now. In a pinch you could always get in another 1.5 FTE after that. (One person told me that UO used to make contributions for TRP people but stopped a few years ago.)

The TRP agreement is here. I couldn’t find anything about how it affects your UO health insurance – you get it for the quarters you are teaching? If you do 0.5 FTE TRP in a year do you get health benefits for the whole year?

If you have a lot of pre 1996 years it still might might sense to try and jump the gun on the legislature. But for others it might be worth sticking it out, collect the UO contributions, and hope that the annuity rate cut is not all the way to 4% and that the courts will rule the cuts are illegal.

5/26/2013: Ted Sickinger reports on the PERS machinations in the Oregonian.

DOJ doesn’t want to defend cuts just to inactives in court – easier if the cut is to everyone. Kitzhaber’s plan to cutting the assumed rate from 8% to 4% is back on the table. This means everyone close to retirement that has any PERS stake, active or inactive, should be thinking about retiring immediately, before the bill gets through. July 7 is the last day of the session.

5/26/2013: Questions to VPAA Doug Blandy on retroactive TRP and sabbatical repayments:

From: Bill Harbaugh
Subject: retirement rulesDate: May 26, 2013 9:00:34 AM PDT
To: Douglas Blandy
Cc: Ernie Pressman , Russ Tomlin

Hi Doug –

I assume you’ve been following the possibilities of substantial PERS changes that might result in large reductions in retirement income for many UO faculty. From what I’ve been reading it seems possible that the legislature might implement change very quickly, and that it might therefore be very advantageous for a fair number of faculty to go on the TRP immediately, before they are in place.

The attached TRP contract for former President Frohnmayer shows that your predecessor Russ Tomlin allowed Frohnmayer to enroll in the TRP program retroactively. I am wondering if UO has done this in other instances, if UO will extend that same courtesy to other faculty if this legislation advances, and what the rules for such retroactive enrollments are.

I hope you can provide a quick explanation for the faculty, given the speed of events and the potentially large amounts of money that are involved.

Bill Harbaugh


From: Bill Harbaugh
Subject: year of return after sabbatical?
Date: May 26, 2013 11:02:53 AM PDT
To: Douglas Blandy
Cc: Ernie Pressman , Russ Tomlin , Gary BLACKMER

Hi Doug – A second retirement question:

UO has traditionally told faculty that they must return for a full year at full-time after a sabbatical, or pay back their sabbatical salary. Secretary of State auditor Gary Blackmer has said that, actually, the relevant OAR (OAR 580-021-0220) just requires faculty to return for a year, and is silent on that year being full-time or part-time.

Your predecessor Russ Tomlin has said that UO interpretation of the rule has sometimes not been enforced, and that some faculty have been allowed to use one quarter of part-time TRP time to count towards the year of return requirement.

My question is this: Will UO allow a faculty member to use a full year of TRP work, even if only at 1/3 time, to complete the year of return sabbatical requirement, as the OAR rule allows?

Given the news from Salem on PERS cuts, this issue may be crucial for at least a few UO faculty, and I would appreciate a speedy reply. There is more info at

Bill Harbaugh

5/25/2013: Frohnmayer retirement loopholes may help some ORP victims by allowing retroactive 600 hour retirement contracts and part-time work to satisfy post-sabbatical employment rule.

Also see the latest PERSinfo blog post, here, and Hannah Hoffman’s blog at the Salem-Journal, here.

Disclaimer: This is not financial advice, but it is something to think about very seriously.

If Kitzhaber’s plan to eliminate the money match for inactive PERS members gets through the legislature, many UO faculty who switched into the ORP (TIAA-Cref, Valix, Fidelity etc) in 1996 may find themselves facing cuts in retirement income of as much as 50%. The PERS spokesperson has said that these people will likely be considered inactive, and therefore lose a huge chunk of PERS income, at least given the most recent language he’s seen.

One way out would be to immediately retire under current rules, and go on the 600 hour program. This allows you to work between 1/3 and 1/2 time for up to 5 years after retirement. (So, for example, 5 years at 1/3 time, or 3 years at 1/2 time). This will be particularly attractive because the PERS hit increases the earlier you started at UO before 1996. Faculty close to retirement face the largest potential losses.

It’s quite possible the bill could take effect in a very short period of time, giving people only a week or so to get this done. If you are anywhere close to retirement you might want to talk with your dean and prepare the 600 hours paperwork, which takes quite a while. You don’t have to sign it yet. As explained below, VPAA Russ Tomlin let Frohnmayer sign his retroactively, but that doesn’t mean you’ll be allowed to!

Another issue is that OUS rules and UO sabbatical contracts require you to repay your sabbatical earnings unless you work at UO for a year afterward. The VPAA has traditionally told faculty that returning on the 600 hours program does not count, you have to work full-time as a regular employee. So if you took some sabbatical time this year – even just one quarter – you could be in a serious bind: take the PERS hit, or repay $60K or so to UO.

Fortunately, Dave Frohnmayer may have found a loophole that could work for others as well. His retirement contract did not include the clause about repayment of sabbatical money. He took the sabbatical his last year of regular employment, then retired and went on 600 hours. Back in 2011 I asked the state Audits Division to look into this and see if he should have to repay UO.

Their report noted that his contract should indeed have included this clause, but that he didn’t have to repay anything because he had returned to UO for a full year of work afterwards. My take on their interpretation of the rules was that the VPAA had been misinterpreting them. One full year of post-retirement employment under the 600 hours program, even though it’s not full time, satisfies the post-sabbatical requirement.

So, if you do decide to prepare for the potential loss of a major part of your PERS benefits by preparing to retire immediately, ask your dean and VPAA Doug Blandy if UO will also apply this interpretation to you, and count a year of 600 hours employment as satisfying the post-sabbatical employment requirement.

Here is the mail from the auditor:

From: “Sandra K HILTON”
Subject: Audit Manager ContactDate: December 1, 2010 1:27:22 PM PST
** Confidential **
Dear Mr. Harbaugh,
I wanted to let you know that I am the audit manager at the Oregon Audits Division that is your contact person for the concerns surrounding former President Frohnmayer’s contracts. If you have any additional documentation, you can forward it to me. Also, I would appreciate it if you could direct me to the appropriate OAR or OUS Policy that requires sabbatical salary to be returned if the academic staff member does not return to regular full time employment. I reviewed OAR 580-021-0220 which requires the staff member to return to the institution for a period of at least one year, but I do not see anything that specifies service must be full time. Thank you.
Sandra Hilton, CPA
Audit Manager
Oregon Audits Division
(503) 986-6359

VPAA Russ Tomlin’s earlier email on this:

From: Russ Tomlin <>
Date: August 16, 2010 10:10:51 AM PDT
To: Bill Harbaugh <>
Subject: Re: Public Records Request – Current Frohnmayer Employment
Just back from vacation this morning.
Prior practice on sabbatical has permitted faculty to count one term
(or semester) of TRP service toward the required one-year continued
service after sabbatical. I have approved this for a couple of cases on
my watch, following prior institutional practice.

In addition, VPAA Russ Tomlin allowed Frohnmayer to sign his 600 hours contract retroactively. I can imagine that this courtesy, while it sounds a little dicey legally, could be extremely important if the Kitzhaber legislation does go forward:

The full set of Frohnmayer contracts and the auditors report are here.

5/23/2013: Kitz plan gets more support. Hannah Hoffman reports. No updates on whether or not this would affect the many current UO employees who shifted from PERS to ORP in 1996.

5/20/2013: Panic update: Hannah Hoffman reports that negotiations are on again. One mathy prof reports that this would cut his retirement income by 40%.

5/16/2013: Hannah Hoffman has the news that Kitz has bailed on this plan. The Republicans aren’t willing to raise taxes on the richest 2% in exchange. And state tax revenues are up. And the stock market is up so much that PERS is back to looking fairly robust. Many people are wanting to buy shares while the economy is in a good place which is driving the economy up even more. So PERS looks safe for this session at least.

5/15/2013: Too early to panic, but many UO faculty switched from PERS Tier 1 to ORP in 1996 when it was introduced. Their PERS balances have accumulated since then, and when they retire they typically use the money match formula, which doubles the balance, which they then take as an annuity. This is presumably how people like Dave Frohnmayer get $257K a year in PERS, even though his salary when he left the plan was only $121K. Obviously the deal for most faculty is considerably smaller, but still potentially $50-60K a year. The reports on Kitzhaber’s new plan say it would prevent people who have left PERS from getting the money match. Instead they’d have to use a considerably less generous plan, based on their last years of earnings while in the plan – i.e. 1996. No inflation adjustment! Would this also apply to UO faculty who switched out but still work for the state? Not yet clear. Also not clear if this will get through the legislature – the Democrats and unions are opposed, but it may be the price of income tax increases for the top 2%.

OK, start panicking. In response to a Q from UO M, former UO student journalist Hannah Hoffman, now at the Salem Journal and the reporter of the best piece on this so far, offers her interpretation:

… “inactive” is anyone no longer in the PERS system. That would include anyone who left it for another retirement plan. If the employer isn’t making contributions to PERS for them, and they aren’t contributing to PERS, they won’t count. It’s all preliminary, and there may be exceptions, but it looks like it would apply to these faculty.

Or maybe not quite yet: Ernie Pressman from HR, one the many excellent UO administrators who keep this place working, and are not afraid to answer questions, reports that he is on it:

I am acutely aware of this situation and am working with OUS on the definition of “inactive” and how that applies to ORP participants.

Or maybe panic right now: response to a query from Hannah Hoffman, from PERS spokesperson:

From: David CROSLEY <<>>Date: May 16, 2013, 9:34:13 AM PDT
To: “Hoffman, Hannah”Subject: Re: Question about inactive members

Hi Hannah:
If a non-vested Tier One or Tier Two member elects the OUS Optional Retirement Plan (ORP), the member’s account is transferred to the ORP and membership in PERS is terminated.

Vested Tier One or Tier Two members who elect the ORP may leave their PERS accounts intact or transfer their accounts to the ORP. Those who leave their accounts with PERS become inactive PERS members. To the extent any legislation affects inactive members, they would be affected as would any other inactive member, with the hedge that the actual impact cannot be determined until the actual text of a bill is reviewed. Vested members who transfer their accounts to the ORP terminate PERS membership.

Best regards,
David Crosley

There’s more in the persinfo blog here, under “Train Robbery”.

Frohnmayer & Bellotti hold retirement workshop for UO faculty

5/27/2013: Potential changes in PERS make this workshop a must for all UO faculty. Friday at 8PM, in the Lariviere smoking lounge at the UO Faculty Club.

Club Steward Russ Tomlin has agree to relax the usual men only smoking lounge rule, so that UO’s lady faculty can benefit from a special talk by the former (and current) Mrs. Colleen Bellotti, explaining how a quickie divorce and remarriage can add $50K to your PERS take.

The workshop will conclude with a video address from Governor Kitzhaber, explaining how much he will cut your pension in order to pay for the benefits the people who retired before you are pocketing.

Open letter on ORP inequities from Bownik in Math

4/8/2013: Update: Marcin asked me to move this to the top of the blog, in case people had additional comments.

3/22/2013: Dear Union Bargaining Team,

I would like to raise your attention to enormous inequity in ORP retirement contribution rates between two different tiers of university faculty. I think this should be a subject of bargaining negotiations, e.g., a part of the union salary package. There has been a UO senate resolution last fall, see:
These rates can be found see page 8 in Decision Making Guide available at OUS website:
In short, the inequity between tier 1/2 (all those hired before 2003) and tier 3 members (hired in 2003 until now) is ENORMOUS and it will be even BIGGER starting in July 2013.
Currently (until June) Tier 1/2 members are getting 16.14% employer contribution, whereas Tier 3 members get 6.21%. In July, Tier 1/2 will be getting 20.90%, whereas we tier 3 will experience a minimal gain to 6.42%. That is, Tier 1/2 will be getting 14.48% more of their TOTAL salary toward retirement than Tier 3. Fortunately for Tier 3 members the university pays 6% employee contribution for all tiers. However, “the 2013-2015 Employee Contribution rate is subject to legislative, executive, management or collective bargaining action”. So we cannot be sure of that.
I think this is shockingly unfair and something has to be done about it. Note that 14% difference in total compensation package (salary+benefits) is much more than the salary raises we can dream of in the next few years.
Do you think anything can be done to reduce this enormous inequity?
Best regards,
Marcin Bownik (Math)

PERS reform dissected

Fun graphic from Mark Friesen in the Oregonian – mouseover the dots and see the retiree’s name, final salary, and retirement benefits (you gotta follow the link here, below is just a screenshot).

The accompanying article by Ted Sickinger makes a lot of interesting points about how haphazard current payouts are under the money match formula, and analyzes the reform proposals. I won’t try to summarize, except to say that Frohnmayer got bumped from #5 to #6 by an oncologist – even after his $5K COLA. Read it all here.

Updated with politics: Moffitt’s PERS arithmetic problem

3/28/2013 update: SB 822, the Democratic response to the PERS cut proposals from Kitzhaber and the Republicans, has passed out of committee on a 3-2 vote. It is the weakest of the 3 proposals, and, according to the fiscal analysis, even it is enough to completely offset the “30% increase” in PERS costs that Jamie Moffitt has been scaring the faculty union with:

Composite employer contribution rates for state agencies are slated to increase from 15.57% for the  current biennium to 19.84% for the 2013-15 biennium. This measure, coupled with the action of the  PERS Board, would reduce the composite rate to 15.47%, or by 4.37% [Sic. They mean 4.37 percentage points.] Local government, the Oregon University System, and other PERS entities should see similar reductions in employer contribution rates.

That’s a 0.6% *decrease* in PERS costs. Presumably the other bills would significantly cut UO’s costs. It will be interesting to see Moffitt’s new math.

There’s now some log-rolling going on with the Republicans, on cuts to the amount of federal deductions allowable on Oregon income taxes. Follow the Statesman Journal’s Hannah Hoffman’s tweets for more.

3/22/2013: It looks to me like UO’s retirement costs are set to increase by 10%, or about 0.6% of UO’s total budget, not by the 30% for PERS that Moffitt claimed. And even that increase may well not happen.

At union bargaining session XI UO’s VPFA Jamie Moffitt said she’d been told to budget for a 30% increase in PERS costs, and that this limited UO’s ability to make raises. 30% sure sounds scary.

Here are the numbers, taken from the OUS guide here, and including FICA.

Currently (until June):
29.65% for Tier 1/2 members: 16.14% employer contribution + 6% pickup + 7.51% FICA
19.72% for Tier 3 members: 6.21% + 6% pickup + 7.51% FICA

In July:
34.41% for Tier 1/2 members: 20.90% employer contribution + 6% pickup + 7.51% FICA
19.93% for Tier 3 members: 6.42% + 6% pickup + 7.51% FICA

Tier 1/2 means hired before 2003. Pay in the bargaining unit is roughly split 50/50 between Tier 1/2 and 3. So variable benefits costs currently are about

0.5*29.65+0.5*19.72 = 24.7%

Not the 35% number Moffitt claims. They are scheduled to increase to 

0.5*34.41+0.5*19.93 = 27.2%

or by 2.5 percentage points or 10%, not the 30% Moffitt claims. (Excluding FICA would change the 10% increase to 15%. There are also some smaller costs for unemployment insurance and worker’s comp, maybe 1%, I’m ignoring them unless someone shows me where to find them.)
Extrapolating to UO’s ~$200 million payroll, these PERS increases will cost UO in total about $5 million, or about 0.6% of UO’s total ~$800 million budget. Not so scary. About half of that 0.6% is for bargaining unit members. And it’s ignoring the fact that the IRS now prohibits UO from paying PERS or ORP for the part of salaries over $205K to $255K (depends on plan. Too bad that law wasn’t in place for Bellotti and Frohnmayer). This binds for Gottfredson, Bean, Espy, the Moffitts, and many (most?) coaches and assistant coaches, and drives the cost increase down a bit more.

But is even this 0.6% cost increase going to happen? Not if Kitzhaber and the Legislature have their way. Still, couldn’t their PERS reforms fail in the courts, so UO might have to pay more later? HLGR attorney Bill Gary recently did a legal analysis of this, and he thinks the COLA cuts are legal. And Gary charges $500 an hour, not Rudnick’s pitiful $400.

So I’m going to go with the really, really expensive lawyer, and conclude that this is all a red herring. Nice try though, Jamie.

Why I love Oregon

From the Oregonian, 3/26/2013: “I’m not going to add any fuel to their fire,” she said. “My comments are not printable.”

In other news, the Democrats have released their PERS reform plan:

— Retirees would receive the current 2 percent increase on the first $20,000 of retirement income. The COLA would decrease to 1.5 percent on income between $20,001 and $40,000, 1 percent on income from $40,001 to $60,000, and 0.25 percent on income above $60,000. That saves $400 million. 

— The PERS board would be asked to set aside $350 million in employer increases that were supposed to be paid into the retirement system over the 2013-15 biennium. Devlin and Buckley said that would give the state time to recover some of the money lost to the stock market dive of 2008.

Looks like Gottfredson can give the faculty merit raises *and* keep Kilkenny’s baseball program. Or dump baseball and get the faculty up to our comparators.