Featured Post

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...

Wednesday, May 31, 2017

The lastest on refunds of excess contributions in the Hall v. EORP and Parker v. PSPRS cases

In case you have not seen this, PSPRS posted this to their website today:

Board of Trustees takes action on Hall-Parker payments
PSPRS to pay PBIs and provide refund amounts
The PSPRS Board of Trustees today voted to recommend that employers begin refunding employee contributions related to the Hall and Parker lawsuits. The decision impacts certain active and retired members of EORP and PSPRS, but does not settle what interest will be owed to members of either plan.

Per federal regulations, the refunds cannot be paid back by PSPRS to members, but instead must be done by the employers. However, PSPRS will allow for employer contribution credits in the amount to be paid back to help employers who need to use that method to free up funds. PSPRS will soon provide employers with the names of impacted employees and retirees, as well as itemized lists of contribution amounts owed to each individual. When determined, pre-judgment interest will be allowed in the employer contribution credits, but post-judgment interest will not.

In the interim until individual contribution amounts are provided, the PSPRS Board of Trustees also strongly recommended that employers work closely with their Local Boards to decide on the method and manner of repayment that is in the best interest of the employees and employers.

Additionally, all contributions being returned are considered wages and must be taxed as such. However, the forthcoming interest payments are not considered wages and do not need to be taxed by the employer, provided the employer receives a Form W-9 for each affected employee. Therefore, it is strongly recommended that employees be given the opportunity to adjust their tax withholdings and deferred compensation arrangements.

Furthermore, the Board directed staff to pay out the retroactive permanent benefit increases for those PSPRS, CORP and EORP retirees entitled to increased benefits before the end of June. Again, these retroactive increases will not include any interest at this time.

PSPRS will continue to provide pertinent updates to members, employers and local boards. Interest rates to be applied to Hall-Parker lawsuit contribution refunds and retroactive permanent benefit increase may or may not be settled through a June 6 Maricopa County Superior Court hearing.
Please see the following document for the in-depth report provided to the PSPRS Board of Trustees on this issue.
There is a 22-page report linked to this message, so there will be more to talk about this after we all have a chance to take a closer look at it.  My immediate takeaway is that this is a recommendation to employers and, based on the steps PSPRS is encouraging employers to take during this process, there still seems to be a lot more work to do before money can even begin to start coming back to effected PSPRS members.  While the PSPRS Board of Trustees crows that they are taking "action on Hall-Parker payments," this seems like another case of PSPRS blindsiding employers and local employee representatives with a sudden decision that leaves them scrambling to get this completed.


  1. I doubt that any of the agencies affected will have a million dollars or more just sitting around at their disposal. Especially in the case of state employees at the mercy of ADOA. IF a city or county agency has the money somewhere they need to get approval by their respective governing board to let the money go out and forfeit any interest they may had coming from the money. I wonder how long it takes to recoup a million dollars in "credit".....

    1. I think you're mistaken about the credit. Agencies most likely pay over $1000 per employee into PSPRS each pay period. For an agency of 500 that's at least a half million dollars each pay period. Additionally page 3 of their attached document says, "it is recommended that an employer take no longer than the number of pay periods it takes to utilize their contribution credits..." So if this agency has to pay it's employees back 3 million, it should take no longer than 6 pay periods that it takes the credit to do so.

    2. Additionally, it looks like the longer an agency waits to refund the excess contributions, the more post judgment interest they would be on the hook for.

    3. Somewhat confusing document. Being a retiree since no longer on the payroll the employer I would hope would return the funds in a one time payment. Of course the question would be when?

  2. So it will be up to the employers to return the excess, rather than PSPRS. And with, as I understand it, no "post-judgment" interest, there is no incentive for them to pay it off quickly. While the employer can just stop withholding current employees' contributions and claim "credit" from also paying the employee share, what about those already retired? And what about the employers (like my former one) that are in such financial disrepair that they can't pay their current bills, much less what they have to return to employees and retirees? They can drag their feet for months or even years, or pay it out at $10 bucks a month, since there's nothing to tell them when or how they have to pay it, nor any accruing interest to incentivize them to pay it off quickly. I see many more lawsuits just to get back (our own money) what the courts have said we entitled to.

    1. Your assumption about post judgement is incorrect. On page 2 of the document they sent out it says, "Additionally, I have
      been advised there will be pre- and post-judgment interest being awarded, possibly at different rates." The document also says, "I do not recommend that post-judgment interest be included in the credits so as to entice the employers to return the excess contributions as quickly as possible." So, PSPRS just won't be allowing agencies to use the credit for post tax interest.

  3. Let's not let laws get in the way of bashing psprs. Under federal tax law psprs CAN NOT just pay the money back to the employers or the members. That would be the easiest way but under federal law they can't do it. So it has to be left in the hands of the employers and hopefully the local boards who legally run each employers pension system will get the money back to the members as soon as possible.

    If you listen closely the motion EXCLUDED post judgement interest to be in the credits from psprs to the employers. The reason for this is to create an incentive for the employers to get the money back asap as the employers will he on the hook for the post judgement interest. So the longer they drag their feet the more it will cost.

  4. Hi does anyone know when, psprs will inform employers of refund amounts?

  5. Was today oral arguments? Anyone know outcome?

  6. Did anything come out of 06/06/17 Maricopa Court hearing?

  7. I can't seem to get a direct answer on this. Why is our overpayment being considered "wages"? Since we contributed this pretax in the last 6 years why aren't we allowed to roll the refund into our 457 account and avoid the tax hit?

    1. Whether or not one's refund can be moved directly into a 457 account will likely be determined at the employer level. I see know reason why you should not be able to do this, and this is my personal preference for my refund. Wages are wages and it should not matter that they are being paid in a lump sum. However, I do not know what the IRS regulations are regarding this. I would think that if it is allowed by the IRS, whoever is managing your 457 contract would be working overtime to get this option available to members who were interested in it.


Relevant comments are welcome, but please adhere to the following rules:

1. No profanity or vulgarity.
2. No spam or advertising.
3. No copyrighted material may be posted unless you are the copyright owner.
4. Stay on topic.
5. Disagreement is fine, but please avoid ad hominem attacks.

Comments reflect the views of the authors alone, and do not reflect the opinion of this website.