squid jigging ground

The Squid Jigging Ground

I attended part of today's PERS Board meeting. (I confess that it was

getting so tedious and boring that I left after about 105 minutes when

it was apparent that there was still one long and boring report to

go). There weren't too many surprises to report. Paul Cleary handed

out a new document called "PERS by the numbers", which was intended to

pull together all the disparate statistics PERS has given out over the

years. It is a really useful document that PERS intends to post on its

web site after the State finishes its maintenance early next week.

Many of the facts will surprise people and will, hopefully, disabuse

some of the system critics of ideas they have that retirees are

getting fat and rich. The statistics simply don't bear that conclusion

out. (I have asked for my own electronic copy, but haven't received

one yet).

It is clear that the Strunk/Eugene implementation project will take a

long time. The first order of business is to get 2004 Member

Statements completed for still-active and inactive members. That will

involve recrediting for 1999, adjusting 2003 and then crediting 2004.

The goal is to have those statements out by the end of January 2006.

To follow will be the 2005 member annual statements at close to the

usual time in 2006 (mid May). The retiree piece is expected to consume

the lion's share of time and resources. While the short-term deadline

is April 1, 2006, it is obvious from comments and observations that

this is expected to be a multi-YEAR project (it might have been Paul

Cleary who remarked, somewhat off-the-cuff, that it would probably be

2008 before they'd be able to 'close the books' on the Strunk/Eugene

implementation). One new fact emerged today. In terms of the actuarial

reduction method, Craig Stroud confirmed that if the member took an

option that involved joint survivorship (2, 2A, 3, 3A), the actuarial

reduction *would* be based on joint life expectancies IF both parties

were still alive. Otherwise, the reduction would be based on single

life expectancy of the surviving recipient. The planning group and the

Board are still open to alternative payment options and heard again

today from someone advocating that PERS agree to an installment plan

that allowed the member to repay the exact amount owed in something

other than a lump sum. The Board was receptive to the idea, but there

was no committment made to implementing such a method. The

Strunk/Eugene implementation plan is still short on many details and

it is expected that it will continue to evolve for 3 more months (and

3 more meetings) before a final plan emerges.

There was a lengthy and tedious discussion over the 2004 crediting

order, which has never been finalized. PERS Staff asked for finality

today so that the Strunk/Eugene implementation could proceed. As I was

leaving, virtually everything about 2004 had been settled except for

the matter of whether or not to fund the Capital Preservation Reserve

(henceforth CPR). The Board struggled with the concept of taking money

from Tier 2 members to put into the CPR. Staff had recommended that

the CPR be funded at 0% for 2004; the Board wanted something more than

0% and something less than 7.5%. The discussion centered on 0.75%, but

the real debate was whether Tier 2 members should have their earnings

diverted to the CPR when there was no clear plan to repay Tier 2

members in down markets. Greg Hartman argued against putting money in

the CPR, PERS Staff discouraged putting 2004 money into the CPR, Tom

Grimsley wanted 0% to go into the CPR, while other Board members

wanted something more than 0% to go in. Since this discussion seemed

to be going nowhere quickly, I decided to leave. The main message is

that Tier 2 members have been losing earnings to the CPR since 2003,

even though they're supposed to "earn what they earn". That's another

discussion for another time.

One other final note. Marsha Chapman, one of the two local Mercer

actuaries assigned to PERS, has already resigned to "pursue other

opportunities".