Vol 4, Issue 5
SEIU Local 503, OPEU members are active in the fight for a secure retirement for every worker. Since the PERS (Public Employee Retirement System) legislative "reforms" of 2003 were implemented, members have taken up the fight in court to defend the pension rights of active and retired workers. Sometimes the wheels of justice turn slowly. Sometimes a fair outcome may take years of court filings, hearings and appeals. While the courts deliberate, members know how important it is to stand strong together and support every worker's right to due process.
In this issue of President Joe's Journal, active members challenge the Governor-appointed PERS Board to live up to its obligations and protect the rights of PERS plan participants, not take them away. Retiree members look forward to a final decision in two court cases to stop the PERS Board from collecting so-called "overpayments." Finally, our PERS Coalition attorney has some advice for those who opted for a "lump sum" option and are now faced with massive collection invoices.
In this issue: White v. Public Employees Retirement Board . Arken and Robinson Cases Still Pending. PERS Lump-Sum Retirees
White v. Public Employees Retirement Board
The White case challenges the settlement agreement between the PERS Board and employers that ended the City of Eugene (a.k.a. Lipscomb) case. As Tier 1 PERS members recall, that settlement did nothing to protect the rights of PERS plan members. Instead, the PERS Board decided to give in to every demand made by the employers. The result was a re-allocation of earnings credited to member account balances in 1999, a reduction in retirement benefits for tens of thousands of retirees and a reduction of future retirement benefits for every active Tier 1 PERS member.
SEIU Local 503, OPEU and our coalition partners have a very clear argument in White. As trustees, the Governor-appointed members of the PERS Board have a fiduciary obligation. The PERS Board has one primary duty and that is to protect the interests of PERS members. PERS members relied upon the PERS Board to protect those interests and by entering into a one-sided settlement with employers, the PERS Board failed in its fiduciary responsibility.
PERS Coalition Attorney Greg Hartman reports that trial for the White case has been set for August 4 through August 6, 2008 in Multnomah County Circuit Court before Judge Kantor.
It doesn't matter whether you are a Tier 1 or Tier 2, PERS or OPSRP, active worker or retiree, a deal is a deal. SEIU Local 503, OPEU members stand together with our PERS Coalition partners to make sure that promised pension benefits are protected.
Arken and Robinson Cases Still Pending
Arken and Robinson cases are both specific to retired PERS members. In Arken, members challenge the PERS Board's current attempts to collect back-payments from individual "window" retirees resulting from the re-allocation of 1999 earnings. In Robinson, retired members challenge the PERS collection efforts using an alternative legal argument.
The term "window retiree" includes every PERS member who retired between April 1, 2000 and March 31, 2004. Those members retired with a good faith expectation that PERS would honor the commitments made to them at the time they left public service. Instead, the PERS Board interpreted one sentence in a court decision to allow them to collect "over-payments" from window retirees. This decision resulted from retirement system changes which were not in effect until long after the window retirees had left the system.
Last June, Judge Kantor issued an initial opinion in favor of retirees in both Arken and Robinson but some issues were not fully resolved. Our PERS Coalition attorneys believe Judge Kantor ruled clearly and unequivocally that it was not appropriate for the PERS board to make collections from retirees and ordered that they cease and that the monies that were improperly collected be returned to the retirees. However, all affected retirees still await a final decision.
In a recent email to attorney Greg Hartman, Judge Kantor again apologized for his delay in making a final determination in Arken and Robinson. In the meantime, every day the decision is delayed causes additional hardship for retirees living on fixed incomes.
While these two cases only involve current retirees, the outcome is important to everyone in the long run. Think about it. If your promised pension benefits can be changed AFTER the date you retire, then no pension plan is worth the paper it's written on. That's why the Arken and Robinson cases matter to every member.
PERS Lump-Sum Retirees
Thousands of PERS-covered members opted to retire from active service with a lump sum distribution of retirement benefits. These retirees made a good faith decision to avoid any future complications that might arise from retirement system changes, lawsuits or PERS Board "settlements" with third parties. They thought they could retire with the account balance they had earned, as calculated by the PERS Board. Unfortunately, like other retirees, these members have been receiving collection invoices since last spring demanding recovery of "overpayments."
While SEIU Local 503, OPEU and our coalition partners have filed lawsuits to obtain relief, affected members should consult with their own individual attorney for advice regarding collection invoices. However, there are some general observations and options for lump sum retirees that PERS Coalition attorney Greg Hartman has recommended:
1) Retirees can pay the invoice. Some of the amounts are relatively small and some members may be in a position to pay the invoices without undue financial strain. If a member pays the invoice and it later turns out that PERS was in error in sending the invoices then they will get their money back and PERS Coalition attorneys will attempt to make certain that they are paid interest for the time PERS has their money.
2) The notice itself indicates that members have the right to appeal this determination and may do so within 60 days. Individuals who feel that this invoice is improper, unfair or who generally want to communicate how they feel about this process can certainly pursue an administrative appeal on their own. They can also wait to file their appeal until a time fairly close to the 60-day deadline. If nothing else this will allow the litigation process to proceed for some additional time and perhaps reach some resolution, at least at the trial court level.
3) PERS is exploring the possibility of permitting a tax-free rollover back into PERS to satisfy this liability. Presumably many of the people who took these lump sum distributions rolled them over into another tax-free vehicle, such as an IRA. If PERS retirees withdraw funds from IRA's to make this payment to PERS then they may owe taxes on the IRA withdrawal. Attorney Greg Harman urges members not to do that at this point because it's not at all clear that it will be possible to recover those taxes even if the pending litigation in these cases succeeds. In almost every instance members will be better off to take advantage of this rollover opportunity than to have the tax burden placed on any withdrawal from tax-deferred accounts. Last year, the Oregon Legislature passed a law to permit the tax free rollover and PERS has asked for a private letter ruling from the IRS about the rollover process. Tax-free rollover provisions are still a work in progress and may be resolved before the underlying lawsuits are resolved.
4) The member can do nothing. Hartman says that this may be a tempting option for at least some PERS retirees, particularly those who feel that this entire process is inconsistent with their rights. Though he says this option may be tempting, he suggests that it is not generally appropriate. It is reasonable to assume that PERS will at some point take additional collection efforts and if they do so, they are likely to ask for additional costs incurred in that collection effort. Ignoring the invoice could simply make things more difficult for any affected member.
There are undoubtedly individuals who will not be able to make this payment because at this point they don’t have the funds available, whether in tax-deferred accounts or not. Even if that is the case, Hartman doesn’t think ignoring the billing notice is a very wise course of action. He says those retirees would be better off to communicate with PERS that they are without funds to make this payment, even if they wanted to.
Members who chose lump sum settlements of PERS accounts were hit especially hard by PERS Board decisions. Receiving a billing notice for $30,000 or $40,000 several years after deciding to take a lump sum option would be a shock to anyone—particularly retirees who had made that decision years before any discussions about account "re-calculation."
All members are understandably outraged by the treatment of former co-workers who made a good faith, irrevocable decision to retire based upon promises made to them by the PERS Board. It has been a long legal battle, but members know that an injustice to one is an injustice to all!