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PERS retirements up statewide


Cornelius, Forest Grove numbers stable after board changes rules

by: NEWS-TIMES PHOTO: CHASE ALLGOOD - Science teacher Paul Burnett plans to retire this month from Neil Armstrong Middle School. Hes one of 15 Forest Grove School District employees who opted for retirement this month in the wake of changes to the compensation formula for Oregon Public Employees Retirement System workers.A flurry of teachers and other Oregon public employees are retiring this year, by far the largest retirement bulge since before the Great Recession.

Statewide, more than 9,500 people have filed to start receiving Oregon Public Employees Retirement System pensions — 44 percent more than last year. A large share of them filed to retire on Dec. 1 to avoid taking a modest hit to their PERS pensions.

But Cornelius City Manager Rob Drake said last week that flurry hasn’t extended to his western Washington County community.

“We have not had people rushing out the door to gain their PERS retirements,” said Drake. “We are fortunate to have such long-term employees.

“No one has left in the last two years for PERS and [we don’t] recall anyone in the last five years leaving to beat a PERS deadline.”

Meanwhile, in the Forest Grove School District, Chief of Staff Connie Potter said 15 administrators, teachers and other employees launched their retirements during the 2012-2013 school year, possibly after hearing their PERS pensions will be trimmed roughly 2 percent if they wait to retire until Jan. 1 or later.

Those numbers are down from two years ago, she said.

This year, she said, “we’ve only had three staff members submit resignation letters at this point, although I’m sure there will be others before the end of the school year.”

One of those getting out now is Paul Burnett, a science teacher at Neil Armstrong Middle School. Now 58, Burnett has been teaching in Forest Grove for three decades. He said that besides the fact he’s eager to retire and “pursue new interests,” other potential major changes to PERS had him anxious.

“I don’t want to go through another nail-biting year worrying about what the government is going to do next to my retirement,” said Burnett, who added his pension “has been whittled down considerably over the years.”

City of Forest Grove employees do not participate in PERS.

Metro, the Portland-based regional government, saw 24 people retire in 2013, the largest number in more than a decade, says Mary Rowe, human resources director.

One of them is Bill Doran, a park ranger at Oxbow Regional Park who retired last week. Doran, 62, had planned on retiring at year’s end, after 36 years on the job. By retiring a month early, he figures he avoided a 2.3 percent hit to his pension.

“When I heard that was a possibility, I left,” Doran says. “It was kind of a no-brainer.”

Boomers anxious

Fully one-third of all PERS-covered public employees are now eligible to retire, says David Crosley, PERS spokesman. Many of them get more anxious whenever there’s talk in the air of PERS reforms, he says, as there was throughout this year’s regular legislative session and the fall special session. PERS retirements often jump in years when there’s legislative sessions, Crosley says.

But the much-publicized PERS reductions made by the Legislature this year — cuts to future cost-of-living adjustments and elimination of a tax break for out-of-state retirees — only affected people when they are retired, Crosley notes.

Public employees still on the job won’t face those cuts until they retire, and there’s nothing they can do to avoid them, he says, unless the courts overturn the PERS reforms.

But there were two changes made by the PERS board this year that will reduce pensions for those who retire starting Jan. 1.

What the PERS board did

The PERS board reduced the 8 percent “assumed earnings rate” to 7.75 percent, and it updated actuarial tables to adjust for changing life expectancies and related factors.

The pension system has long operated with an assumption that its investments will earn more than 8 percent a year, enough to cover PERS administrative costs and boost workers’ regular retirement accounts by 8 percent a year. That’s often dubbed the “8 percent guarantee,” because PERS recipients could count on their regular accounts growing 8 percent a year while they work. And, if they retire under the Money Match program, the pension system calculates their pensions on the assumption their funds will continue to earn 8 percent a year.

Investment professionals now expect the market won’t earn as much in coming decades as in the past, so the PERS board dropped its assumed earnings rate to 7.75 percent. As a result, when workers retire under Money Match, their pensions will be “annuitized” — essentially converted to a monthly payment for life — based on the assumption their accounts won’t earn quite as much in future years.

The changes in actuarial tables also reduced pensions somewhat, and the combination caused many public employees to hit the exit doors rather than see their pensions fall.

But when the PERS actuary calculated the impact of the two changes made by the board, they turned out to be relatively small. And, it’s important to note, the reductions only affect those people in Tier 1, who joined PERS before 1995, and who retire under the Money Match calculation. Those who joined the system after 1996, or who retire under the formula — a fixed percentage of their final average salary for each year they work — won’t see any reductions from the two changes made by the PERS board.

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 prevent a 1.9 percent reduction in their pension. A 65-year-old in the same boat would avert a 2.3 percent reduction.

But that same employee could make up much or all of those losses by working several months longer, according to the actuary.

Pent-up desire to retire

Experts say people decide to retire based on multiple factors, including their job satisfaction, family situations, health care, children in college, and outside investments.

Many people delayed retiring when the Great Recession pillaged their home values and other investments. That pent-up demand may partly explain this year’s surge in retirements, because many peoples’ home values have recovered, and the stock market has hit record highs. That gives people more confidence about retiring, or the necessary earnings if they or their spouse plan to supplement their PERS with IRAs or 401(k)s.

The early retirement incentives provide up to five years of health insurance and 50 percent of the cost of a spouse’s insurance, Foster says. That enables people to retire before they reach Medicare eligibility at age 65, without having to shell out $700 to $1,000 a month for health insurance.