What Was The Legislature Thinking?

In one of its first acts of the 2010 Special Session, the Oregon Legislature overrode Governor Kulongoski’s veto of SB 897.    SB 897 provides, in part, that a PERS member can request verification of the data that his or her PERS retirement benefits will be based on,  such as creditable service, account balance and final average salary.  If the PERS member does that, PERS  may not use data that is less than the verified data to compute the member’s  retirement benefit, even if the verified data is mistakenly too high.  The only exceptions to this rule are that the verified data is subject to adjustment for changes that occur after the verification date and the retirement benefit can be based on data that is less than the verified data if the member knew the information was wrong and did not notify PERS within sixty days of receiving it.   

The first exception makes sense as it insures that accurate information is used.  The second exception, while appearing to provide a safeguard against the use of incorrect data, provides no real safeguard at all.  The reason the second exception is meaningless is that the PERS member receiving the verified data has no obligation to review it.    If the data is not reviewed, the PERS member can not know that it is wrong.  As a result, the PERS member has no motivation to review the data and the verification statement becomes a lottery ticket to be opened only at retirement.   

Here is an example of what could happen.  Assume a PERS member with an account balance of $100,000, 31 years of creditable service and a last annual salary of $60,000 requests verification of the retirement data.  If the verification incorrectly shows the member has an account balance of $1,000,000, 310 years of service and a  last annual salary of $600,000, the PERS member’s retirement benefit will be based on the verified data as long as the PERS member does not review the verification statement for at least sixty days after receiving it.  In this case, that would result in a retirement benefit that is ten time higher than the benefit actually earned .  PERS must pay the incorrect benefit and there is no way it can be corrected.   

Senator Ferrioli, a PERS member who voted for the veto override and who stands to gain from the new law, was quoted as saying “It’s time to stop letting bureaucrats dump liability for mistakes onto the backs of the citizens.  If bureaucrats screw up retirees lose.”  That sounds nice but SB 897 does not prevent a retiree from losing.  It only gives the retiree the chance for an unearned windfall.  A retiree loses nothing when he or she receives the retirement benefit that was actually earned.   Now,  if the bureaucrats screw up, the retiree wins big and the the people of Oregon lose.

Representative Nancy Nathanson, also a PERS member who voted to override the veto, said “This bill says that when an agency makes an estimate it ought to get it right”.  While we all want agencies to “get it right”, SB 897 does nothing to help or even encourage an agency do so.  If an agency makes a mistake, the mistake is made by the the agency’s employees.  Those  employees do not pay for the mistake.  It is the citizens of Oregon who pay for the mistake. 

Under SB 897, it makes no difference how the data error occurred.  It could be  accidental or intentional.  It could be made by the PERS employee , it could be made by someone else or it could result from a faulty computer program.  The incorrect data could be provided by a person in the agency or by someone on the outside who has access to the agency’s records.  Someone like a computer hacker.  It makes no any difference how the incorrect data got into the verification statement.  If the incorrect information increases the employee’s PERS benefit, that employee hits the PERS jackpot.

If you do not like SB 897, let your legislators know.

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About Dan Re

I am an attorney who has lived in Bend and practiced law since 1981. In educating myself about the Oregon Public Employees Retirement System (PERS), I was shocked at how the PERS laws were changed by the legislature, once legislators were allowed to join PERS in 1971, 26 years after PERS was first created. Those changes personally benefitted the legislators who made them at the direct financial expense of the people they were elected to represent. That is wrong and I intend to change it. In 2009, I started a non-profit 501(c)(4) corporation, In RE The People, Inc., for the purpose of informing concerned citizens of what happened regarding PERS and other issues of social and civic importance. I then created this blog to further that objective.
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