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Was it constitutional for Proposition 124 to replace PSPRS' permanent benefit increases with a capped 2% COLA?

In this blog I and multiple commenters have broached the subject of the suspect constitutionality of PSPRS' replacement of the old perma...

Friday, September 22, 2017

The end is near! Final interest rates have been decided in Parker v. PSPRS

The end is nigh for Parker v. PSPRS.  Here is the latest minute entry in the case from September 20, 2017 says:
The plaintiffs in the Hall case have decided not to appeal the trial court’s ruling regarding prejudgment interest.  Phoenix Law Enforcement Association (PLEA) has also decided to abide by the same prejudgment interest rate.  PSPRS has already paid members for the permanent benefit increases (PBI), except to the few members who are deceased.  PSPRS is also working with each employer to return the excess contributions to their employees.  There are many employers, each with its own issues.  The parties will be discussing whether the issuance of a declaratory judgment will be sufficient to resolve the case.
IT IS ORDERED setting a Telephonic Status Conference regarding case status on January 22, 2018 at 9:00 a.m. (time allotted: 15 minutes) in this Division . . .
PLEA had asked the judge in this case to consider an interest rate separate from what was awarded in Hall, but it appears that this was not going to happen and they have dropped this request.  PLEA may have also been hoping that the plaintiffs in Hall were going to challenge the rate in their case and piggy-backed onto that challenge, but that did not come to pass.  So it looks like litigation over SB 1609 is finally over for PSPRS members.

The final interest rates set in Hall were 4.25% pre-judgment and 5.25% post-judgment.  You can read more about in this notice dated July 18, 2017 on PSPRS' website.  Pre-judgment interest will come from employers, just like the excess contributions refunds did, and they will again be allowed to credit the interest payments against their current employer contributions.  Post-judgment interest will have to come from employers' own funds.

The final rates set in Hall were from a court decision dated June 8, 2017.  The cutoff date that separated the pre- and post-judgment periods was June 28, 2017.  It appears that there are still some legal procedures that need to be completed for a formal judgment to be lodged in Parker, but it appears that this should go through unchallenged.  If the same timeframe is followed as it was in Hall, we should see a cutoff date in Parker  of somewhere around October 10, 2017.  The post-judgment period does not go all the way back to the Supreme Court decision.  While I cannot say for certain, I would assume that all excess contribution refunds have been completed by employers, which means the only possible post-judgment interest payment that could accrue would be on any delayed pre-judgment interest payments.  I do not see any reason why employers would delay these interest payments if they can just credit them against their current contributions.

As we have discussed in the past, 4.25% is low and does not represent what PSPRS actually earned on members' money they never should have possessed in the first place.  The Supreme Court decision in Hall came down just after the 2016 election, and we know how much the markets have gone up since then.  In the end, the Duke brothers carry on in spirit within the ranks of PSPRS management and Board of Trustees.  If you want to see some speculation of what the interest payment might be, this post may interest you.

10 comments:

  1. Under Parker I received approximately a .07 percent PBI in June 2017 after 4 years. Seriously is that it or am I not understanding something.

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  2. I am not sure of the exact date you retired, but from what you write, it seems like you would have only been eligible for the retroactive $65.20 PBI from FY 2014 that would have been paid starting in FY 2015. That was the year the PBI fund was depleted. PSPRS did not have investment earnings in excess of 9% in FY 2015 or 2016, so no more funds transferred into the fund used to pay PBI's. The FY that just ended did surpass 9%, but Proposition 124 passed last year completely eliminated the PBI. The next benefit increase you might see would be some time next FY (after 7/1/2018), which would be the lower of 2% or the local inflation rate.

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  3. Thanks for the information. This clarifies

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  4. So in your opinion when would they issue the pre and post interest payments ?

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    Replies
    1. This will depend on when each individual employer decides to pay their affected members. The court is giving a 1/22/18 date as a follow court date, so I would assume the court is expecting the payouts to be done by then. My completely speculative guess would be late October at the earliest.

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  5. Is there any estimate on what the prejudgment interest may be based on the average return?

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    Replies
    1. The prejudgment will be the prime rate + 1% and looks to be the same as in the Hall case, 4.25%. PSPRS' returns will not factor in the what rate is chosen.

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  6. Any word on payout of interest it's been quiet....

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  7. Replies
    1. No. I have been checking the court website for new information, and nothing new has been posted. I thought it would have been settled by now since there was only one party, who has now given up, in opposition to the rates that were set in the Hall case. I understand delay from PSPRS' end, as they are inept and don't care about members, but I am not sure why the court has not issued a final judgment on rates. I will keep checking.

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