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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...

Saturday, June 14, 2014

Whose ox is going to get gored: PSPRS reform efforts that everyone needs to see

It is a lot to read, but this is of interest to everyone that has a stake in PSPRS because it will determine your future cost of living alllowances (COLA), if your retired, or your future paychecks, if you are still working.  The PSPRS Special Board of Trustees Meeting from June 5, 2014 has several actuarial studies that show the impact of various changes to the COLA formulation that could occur, but more interesting is the proposal put forth by the Professional Fire Fighters of Arizona (PFFA).

Starting on page 31 of the PDF documents is a Powerpoint presentation produced by PFFA entitled, "Fixing the PSPRS Pension Fund."  My preliminary reading of this document makes me, particularly as a current employee with quite a few years until I retire, very uneasy about what is about to be proposed and possibly sent to Arizona's voters for approval.  If I was a retiree, I would also be very concerned.  This looks like a proposal that will benefit those closest to retirement at the expense of those with many more years to work. This Arizona Republic from June 5, 2014 article, Arizona pension board seeks special session, shows that the PSPRS has not endorsed the PFFA plan but does want the Arizona legislature to begin considering some kind of changes.

This document is too large to cover in one post, and parts of it, particularly the actuarial studies, will need a much closer analysis.  However, I am interested in any comments, especially from active or retired law enforcement personnel about how they feel, so please comment if you have anything to add.  The Scribd document follows.

Thursday, June 12, 2014

How to stop the PSPRS pension monster from eating your paycheck: this is a good first step

It appears that the practice of using sick and vacation leave sellback to spike pensions has been all but ended.  These two stories from Phoenix and Tucson, Phoenix ends pension spiking for police officers, firefighters by Dustin Gardiner and Judge won't force city to resume sick-time selling policy by Darren DaRonco, from the Arizona Republic and the Arizona Daily Star, respectively, show that the governments of the state's two largest cities and the Goldwater Institute are on the same page: you can not legally count sick or vacation leave as pensionable compensation.

It remains to be seen how the courts will rule.  However, the judge in Tucson ruled against the police union who wanted a delay in implementing the city's new policy until the actual court hearing, and the Goldwater Institute is considering dropping its lawsuit in Phoenix.  The amount of money that can be saved by employers is just too great for them not to do everything they can to eliminate sick and vacation from pensionable income, especially when it is clearly illegal.  This makes it seem like this issue is now settled, except for the issue of employee and employer contributions on past sick leave sellback, which I previously addressed here.

The Arizona Republic article says that eliminating sick and vacation leave sellback from pensionable income will save Phoenix taxpayers "an estimated $233 million over next 25 years, according to a city report," and $2.3 million in the next fiscal year alone.  Those opposing this change in Phoenix (and, of course, considering a lawsuit) can only point to how some employees have saved their sick and vacation leave for years to enhance their retirement.  This is another iteration of the "broken promise" defense.  However, the outrage over the elimination of sick and vacation leave from pensionable income is lost on me.

We are now in a situation where the pension tail is wagging the compensation dog.  Even if we care not a whit about taxpayers or the funding of other city services, we have to recognize that pension costs are now driving down the available money that can be paid to current public safety employees.  Remember, we now have a pension that has two tiers of employees based on when they were hired, although I might substitute the term "caste" for "tier" when we consider the difference in how each group is treated.  These Tier Two employees, hired after 2011, are required to pay more, work longer, and have lost many other pension benefits, including enhanced refunds and the DROP.

Keeping sick and vacation leave pensionable benefits only one group of workers: those close to retiring or entering the DROP; yet it increases costs to everyone else since it negatively affects PSPRS' financial condition.  These costs will continue long after the beneficiaries retire and will affect the income of those still working for years to come.  These costs may be visible, through the increased pension contributions already in place, or invisible, through pay raises never implemented in the future, but either way they are going to drop the career earnings of those still working.  A policy that beggars junior workers still left behind after those more senior retire is hardly worth fighting to keep.  Shouldn't we care more about the pay of everyone than the retirement income of a few?

Wednesday, June 11, 2014

Better late than never: PSPRS pays retroactive COLA's

For those of you who haven't had a chance to visit the PSPRS website, here is the latest on the permanent benefit increases (aka COLA's) that retirees are due in the aftermath of the Fields case:
In compliance with the Supreme Court decision regarding post benefit increase (PBI) payments, the Public Safety Personnel Retirement System is issuing a retroactive post benefit increase payment for its eligible members (those members who retired effectively on or before July 1, 2011). Please read the following notice for details regarding this payment.
Retroactive PBI payments:
  • Notifications of the retroactive post benefit increase (PBI) payment were sent on Tuesday, June 10, 2014 via U.S Mail and e-mail. Your notification contains the exact dollar amount you will receive for the retroactive post benefit increase.
  • Eligible members will receive their retroactive PBI payment in the same manner they receive their monthly pension payment.
  • Checks will be mailed on Tuesday, June 10, 2014. Please allow 5-10 business days for U.S. Mail delivery.
  • Direct deposit payments are being sent Tuesday, June 10 and Wednesday, June 11, 2014.
  • Retroactive PBI payment information will also be available in the Members Only site (click here). Check your Member Account Record under the section "PBI History."
Public Safety Retroactive PBI payments (per member)
July 2012 $6.07 per member ($159.13 total per member)
July 2013 $121.19 total per member
CORP Retroactive PBI payments (per member)
July 2011 0.57% additional paid
July 2012 1.95% additional paid
July 2013 0.55% additional paid
EORP Retroactive PBI payments (per member)
July 2011 1.53% additional paid
July 2012 4.00% additional paid
July 2013 4.00% additional paid
July 2014 PBI payments:
  • In July 2014, the PBI will return and be awarded as usual.
  • The July 2014 PBI payment will be included in the regular pension payment on July 31, 2014.
  • The amount of the July 2014 PBI payment is currently being figured by the PSPRS actuaries. This information is expected to be available at the end of June 2014.
Requesting Changes:
  • Member information changes (for mailing address, email address, etc.) are not accepted over the phone; they must be submitted in writing.
  • Retirees can submit change of address, telephone number, direct deposit information, and tax withholding elections through the Members Only site (click here and go to "Personal Data Changes")
  • All other changes must be requested by completing the applicable form and submitting it to the PSPRS Administrative Office. Click here for a list of forms available for download to request changes to your account.
For the most up-to-date information, please check this area of the PSPRS website, or listen to the PSPRS voicemail greeting (602-255-5575), as it is frequently updated with time sensitive notices.
This is general information, and retired individuals should check their mailboxes or bank accounts to see what they will be paid.  The amount will depend on when one retired. There is a lot going on behind the scenes with potentially big changes proposed before the next general election.  I should have more posts about COLA's soon as a clearer picture emerges about what exactly will be on the ballot.  I usually end these posts with the request to "Stay tuned," but the next five months are a time when everyone really should take that to heart.  We may wake up the morning after November 4, 2014 with permanent, unchallengable modifications to PSPRS.  So, once again, STAY TUNED.