Fewer active workers are supporting a growing number of retirees receiving pension benefits from the Mississippi Public Employees’ Retirement System, a report by a legislative oversight agency concluded.
The study by the Mississippi Legislative Performance Evaluation and Expenditure Committee pointed out that between 2010 and 2020 the ratio of active employees to retired employees decreased about 33%, from 2.02 active to 1 retiree, to 1.35 to 1.
“As a result of the decrease, the payroll of fewer active members must fund future pension obligations, a factor made more important because contributions from active members and their employers comprise approximately 46% of PERS revenues” as of 2020, the report pointed out.
It could be argued that state budget cuts made in recent years by the Legislature resulting in a reduction in the government work force have made it more difficult to ensure PERS’ financial viability.
The reduction in the employee to retiree ratio and other factors will at least lead to the PERS governing board considering increasing the employer contribution (paid by state, education entities and local governments) to the retirement plan, according to the report by the legislative committee. The increase in the employer contribution, costing government more money, could be considered as early as the June 23 meeting of the PERS Board.
The legislative PEER committee does an annual report on PERS, which has been in the spotlight for more than a decade as the governing board for the retirement system has strived to put in place policies to ensure its long-term financial viability. Most state, city and county employees and public educators are in the system that currently has about 325,000 members, including current employees, retirees and others who used to work in the public sector but no longer do.
The report said that because of some warning indicators “flashing red” the governing board might have to consider raising the employer contribution to the public retirement system in the coming year.
The system had a full-funding ratio of 58.8% last June down from 61.3% the previous June. That means that it has almost 59% percent of the assets needed to pay the benefits of all the people in the system, ranging from the newest hires to those already retired. Theoretically it is recommended that a system has a funding ratio of about 80%.
The system has struggled to increase its funding rate, the PEER report said because of:
- The decline in public sector workers
- A growing number of retirees
- Slow wage growth for public employees
- Benefits that were added by the Legislature in the early 2000s
- Investments not meeting returns in some years
Officials had said earlier they believe steps taken in recent years will over time help boost the funding ratio.
In 2018, the board took the step of increasing the contributions from employers, such as state agencies and local governments, from 15.75 percent of payroll for each employee to 17.4%. That small increase cost state and local governments, including education entities, an additional $100 million annually.
Employees in the system pay 9 percent of their salary toward their retirement. It was increased from 7.25 percent in the late 2000s. The average yearly benefit from the plan is about $24,400.
In June 2020, according to PERS’ actuary, the plan’s funding ratio was projected to be at 67.6% by 2047 compared to a projection of 83.2% by 2047 made the previous year.
The decline in the funding ratio was attributable to multiple factors, including “less than expected revenue gains.”
The system has total assets of $28.2 billion.