Just one of the myriad of devils in the details where PERS is concerned. Actually there be devils throughout.

PERS is probably the premier object lesson in why one should NEVER blindly trust governments to have anything like fiduciary responsibility to taxpayers.

Some old information here. The PERS system has been fixed so that the number of retirees receiving a high percentage of their final salaries as benefits is dropping quickly. In a few years we'll be back to a benefit of only 50% or so of final salary.

The 8% earnings rate applies to the final balance because there aren't any more contributions being made to the Tier 1 and 2 accounts. At all. New contributions are going to the new 401k-style individual accounts. So if I have $10,000 in my Tier 1 account on 12/31/05, that's the same amount I'll have a year later just before the earnings are credited.

Rather than take offense at about half of what is said, let me offer the comment to the PERS recipient about WHY PERS computes interest that way. Unfortunately, there are two related factors involved. The first has to do when employers bother to actually contribute money on behalf of the employees. The proposal to credit on the average daily balance would work if employers put money in on a regular and predictible basis. Because PERS' computer system is so completely antiquated (they're still running software written in 1986 using EasyTrieve. This software is poorly documented and EasyTrieve itself is, to the best of my knowledge, no longer licensed to new users), that there is no significant interface between public employers' payroll systems and PERS' system. So, even if employers were to contribute in a timely way, PERS is unable to credit these accounts in a timely way. Worse still, some employers contribute money quarterly, some weekly, some monthly regardless of how the employees are paid. Consequently, how would you compute an average daily balance for an employee who was entitled to monthly credits, who doesn't see them appear in his/her account for several months after the work is completed. It's not fair to the person who's done the work to be deprived of the benefit simply because the employer doesn't contribute on a predictible basis that bears any resemblance to the pay cycle. All of these problems relate to the second reason why PERS only credits once a year. PERS computer system is only now starting to be upgraded, despite year after year of requests from PERS' own IT people and from the Executive Director of PERS. Jim Voytko, former Executive Director of PERS from 2000 until late 2003 actually resigned from PERS over the Legislature and eBoard's repeated denials of PERS' requests for more IT support and upgraded hardware and software to process complex payments.

It is reasonable for people to grouse about the fact that PERS credits interest once per year on the ending account balance rather than as the money comes in. But this has nothing to do with members or retirees and has everything to do with a state that has been pennywise and pound foolish in helpful create a culture within PERS that can implement these kinds of cost -savings.

Finally, let me repeat for the record that the benefits PERS recipients receive is in exchange for work performed under contract (not necessarily actual union contracts), for which the employers received full value at the time the work was performed. I take no responsibility for my own benefits. I worked hard for them and am receiving, for now anyway, exactly what I was promised - no more nor any less. I didn't have any input into the type of retirement system I had nor did I have any input in any of the features of the system. The system is the product of years of legislative tinkering and a group of public employers who wanted to avoid paying competitive salaries in exchange for the deferred benefit of the retirement system we had.

What part of promise is hard to understand? I don't have problems with people criticizing the system for its many inefficiencies, but I do have problems with people expecting PERS members and retirees to cover shortfalls that they neither created nor had in input in maintaining. I suggest you read the lengthy history of PERS, which is available in a number of locations. I think you'd be hard-pressed to feel obliged to take this out on PERS members and retirees. We took the system we were given, not necessarily the one we wanted or would have designed ourselves.

And Jack, as a tax lawyer teaching at a well-known and respected law school, you should know better than I about the IRS regulations covering pensions and "accrued benefits".

Jack - before you smear all public employees realize that it was public employers (primarily cities and counties) that pushed for a lot of these reforms. Remember the City of Eugene case? That case was pushed by public employees who were essentially asking the courts to reduce their pensions. Why? Because it was the right thing to do. I know a lot of these people personally and they want to fix the system.

We ended up with a totally screwy system for a lot of reasons. But remember that there are a lot of public employees that share the same concerns about PERS as taxpayers because it affects their ability to do their jobs.

One more comment. Regarding 53 year olds who retire. The ONLY group of people who can retire before age 55 are police and fire (NOT Portland Police and Fire) members who can retire as early as age 50 because of the job hazards. NO ONE ELSE can retire before age 55 *except* if they have more than 30 years of service. Even if they do, the IRS imposes some special requirements on how they receive their benefits. The normal retirement age is 58 for Tier 1, 60 for Tier 2, and 65 for new hires since 8/29/03. Tier 1 members represent a declining percentage of the total membership of PERS (currently about 50% are Tier 1). Tier 2 will start to decline in a few years, but it has only been in existence since January 1996 and ended on 8/28/03. Within a few years as more and more Tier 1's retire, the system will become dominated by Tier 3 members who have NONE of the benefits afforded to Tier 1 or Tier 2 members.

The problem is self-limiting and the reforms of 2003 and the subsequent litigation and settlement agreement has accelerated both the pace of retirements and the rate at which benefits are declining. Watch these same numbers in about 3 years. Benefits are dropping like rocks from an airplane.

There's another [and obvious] reason why there so many 53-year-olds are retiring: That's pretty much exactly 30 years after the start of many teachers' careers, begun when they were freshly minted teachers out of college. Thirty years is a solid career, and PERS, like many pension systems, promises a full retirement to public servants who so serve and fulfill their end of the bargain [25 years for firefighters and police]. This "trend" isn't new.

Brian writes:

"That case was pushed by public employees who were essentially asking the courts to reduce their pensions. "

I think you may be reaching a bit here. While it is true that public employers are also public employees, it was the employers who were pushing for the reforms. To say that "public employees" were pushing for the reforms is somewhat disengenuous. The public employers were at least half-responsible for the mess in the first place. They kept asking to defer full cost of the system by agitating the PERS Board to come up with all sorts of clever accounting tricks like "smoothing". Eventually, between the market forces, the various avoidance techniques whose bill finally came due, and the Legislature's moronic solution to the "income tax" cases from 1988 (federal) and 1991 (state) which dumped the burden on the employers rather than the Department of Revenue, the problem became acute and called for solutions. Interestingly enough, if the employers and PERS hadn't both tried to play both sides of the street from the middle, some of these problems could have been solved years earlier. The actuarial table matter didn't require legislation or a court case. The unions proposed a perfectly sensible solution in 2000, but neither the legislature nor PERS were interested in this solution. They stubbornly held out until the situation got so bad that something had to be done.

Just once I'd like to see the employers accept some responsibility for creating this debacle. They didn't blink an eyelash forcing public employees to accept the PERS-pickup (the 6% that employers generally pay on behalf of employees) instead of a salary increase. The employers saved a boatload of money on that deal, but long after the employees accepted that in good faith, the employers wanted out of the deal they shoved down our throats. It didn't take a genius to figure out that the employers would eventually have to come up with the money they were "contributing" on our behalf. They tried as long as they could to avoid paying it and are still trying to avoid paying it.

The story just isn't as simple as Brian would like us to believe. The public employee as altruist story is just too precious for words.

Thirty years is a solid career

Really? In the private sector, retirement age is 62, 65 or 67. If you get out of college when you're, say, 22, that's 40, 43 or 45 years.

Jack Bog wrote:

"Really? In the private sector, retirement age is 62, 65 or 67. If you get out of college when you're, say, 22, that's 40, 43 or 45 years."

True, but it is pretty much the case that most people don't work for the same employer for 30 years. So anyone who works for the same employer for 30 years is entitled to retire. Most of us "retire" but continue to work in our fields of training, just not necessarily for our former employers, and most definitely not full-time. Besides, if you'd worked in the public sector for 30 years and had to put up with the sh*t many people dish out undeservedly to hard-working people, you'd need to retire. (I know, I know. There are plenty of counter-examples to this. I encounter them myself often enough. But a few counter-examples/bad-apples don't disprove the general rule that *most* are regular people trying to do the best job they can, often with antiquated tools).

Sorry but I just disagree with you here. I think anyone who works for ANY employer for 30 years deserves both a medal and the right to retire.