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Public workers make a break for exit door


PERS changes spur some employees to get out while getting is good

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.

Janice Avidan, a fourth-grade teacher at Buckman Elementary School, is one of 99 Portland Public Schools teachers who officially retired Dec. 1.

“I’m just ready; I felt it in my bones,” said Avidan, who turns 60 in January and has taught 29 years.

Avidan had planned to formally retire at the end of the school year in June but moved her date up when she found out that her PERS pension will be trimmed roughly 2 percent if she retires Jan. 1 or later.

Including nonteachers, 149 Portland Public Schools employees officially retired last week, according to data supplied by district spokeswoman Christine Miles. That’s more than the entire number who retired all last school year, or the five prior school years.

Avidan, like many others, will continue teaching until the end of the school year, because retirees are allowed to work half-year or half-time while drawing PERS checks.

Portland Public Schools teachers have more at stake than other public employees right now because the school district also is seeking, via collective bargaining, to eliminate early retirement incentives at the end of the school year. That’s what prompted Avidan’s initial decision to retire.

But the Portland school district is not the only local government agency seeing a surge in retirees.

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

One of them is Bill Doran, a park ranger at Oxbow Regional Park who retired several weeks ago. 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 said. “It was kind of a no-brainer.”

The city of Lake Oswego has apparently escaped the retirement trend. City Manager Scott Lazenby said he hasn’t noticed an uptick in retirement parties, although officials are looking ahead to the expected bump in retirements from baby boomers. Megan Phelan, the city’s human resources director, confirmed that data doesn’t indicate any increase in Lake Oswego’s employees retiring over the past year.

At Lake Oswego School District in 2011-2012, there were 19 retirements, and in 2012-13, there were 18 retirements. This fiscal year, 2013-14, there were two retirements in July, one in August, one in October, two in November and three in December.

“Generally, we have not noticed any unusual activity in regard to retirements so far this year,” said Mary Kaer, the school district’s human resources director.

Boomers anxious

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

But the much-publicized PERS cutbacks made by the Legislature this year — reducing cost-of-living adjustments and ending a tax subsidy for out-of-state retirees — only affect people once they are retired, Crosley noted.

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 said, 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.

Board actions

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 operates with an assumption that its investments will earn enough to boost workers’ regular retirement accounts by 8 percent each year. Tier 1 public employees, who joined PERS before 1995, are guaranteed their regular accounts will grow 8 percent annually, no matter how PERS investments fare. If those employees retire under the Money Match program, PERS calculates their pensions on the assumption their funds will continue to earn 8 percent each year.

But professionals now project that investments won’t earn as much in coming decades, and so the PERS board dropped its assumed earnings rate to 7.75 percent. As a result, when Tier 1 workers retire under the Money Match program, their pensions will be “annuitized” — converted to a monthly payment for life — assuming their accounts will earn slightly less 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 board decisions, it turned out to be relatively small. And, it’s important to note, the reductions only affect Tier 1 members retiring under the Money Match calculation. Those who joined the system since 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 board changes.

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 avert a 1.9 percent reduction in their pension that takes effect starting with 2014 retirees. A 65-year-old in the same boat would avert a 2.3 percent reduction.

But those employees could make up much or all of those losses merely by working several months longer.

Pent-up desire to retire

People decide to retire based on multiple factors, including job satisfaction, family situations, health care, children in college and other financial considerations.

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 hit record highs. That gives people more confidence about retiring, or the necessary earnings if they or their spouses plan to supplement PERS pensions with retirement accounts such as IRAs or 401(k)s.

Portland teachers face a more complex decision now.

“In the case of Portland, it’s a perfect storm of events,” said Ed Foster, a Lake Oswego financial planner who works closely with the Portland Association of Teachers, advising teachers about retirement.

The early retirement incentives provide up to five years of health insurance and 50 percent of the cost of a spouse’s insurance, Foster said. That enables people to retire before they reach Medicare eligibility at age 65 without having to shell out $600 to $1,200 a month for health insurance. Portland Public Schools also provides $425 monthly stipends for up to five years, or until age 62, when workers are eligible for early Social Security benefits.

Foster, who says he’s been “twice as busy” as ever this year counseling Portland teachers, has advised them not to retire because of the PERS cuts, because they could counter those by working several more months. But the potential loss of early retirement benefits is a much-bigger deal, he noted.

The maximum early retirement benefit is worth up to about $79,500 over five years, said Michelle Ridell, the school district’s assistant chief human resources officer.

Mary Morris, an award-winning teacher at Da Vinci Arts Middle School in Portland, is one of many Baby Boomers facing a dilemma.

She turns 55 in February and hoped to continue teaching until age 58, when she’ll have earned a $2,400 monthly PERS pension. But if the district ends the early retirement incentives in June and she subsequently retires before turning 65, health insurance would cost a huge chunk of her pension. As a result, Morris is thinking about retiring before the school year is out, to retain her right to five years’ worth of health insurance benefits and the monthly stipend.

“I feel like if I don’t take this now, I’ll never be able to afford to retire,” Morris said.

— Kara Hansen and Jillian Daley contributed to this story.