The board that oversees the Mississippi Public Employee Retirement System is pondering whether to increase the amount paid into the pension plan by state agencies, local governments and education entities.
The issue of whether to increase what is known as the employer contribution rate to ensure the long-term financial viability of the public pension plan was discussed recently by the Administrative Committee of the Board of Trustees of PERS, but no action was taken.
But Shelley Powers, a spokesperson for PERS, said the issue “most likely will be revisited” during the Aug. 23-24 meeting or during a special-called July meeting.
The increase in the contribution rate could cost state and local governments an additional ten of millions of dollars annually.
A recent report by the Legislature’s Performance Evaluation and Expenditure Review Committee highlighted the possibility of the employer contribution being increased. The report pointed out that because of multiple factors some warning indicators were “flashing red.”
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%.
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. In total, about 10% of the state’s population is in the system to some extent.
Under the state Constitution, the Legislature cannot block a decision of the Board of Trustees to increase the amount paid by state agencies, local governments and education entities into the pension plan. If the Legislature opted not to provide the extra money to pay for any increase, it would just come out of the amount the Legislature budgeted for the agency, taking money from other programs.
In 2018, the board increased the contributions from employers from 15.75% of payroll for each employee to 17.4%. That small increase cost state and local governments, including education entities, an additional $100 million annually.
Traditionally, the state does not help local governments funds their share of the retirement system.
Funding the increase, minus the local government’s share, cost about $76 million in 2018 — $18.1 million for state agencies, $15.9 million for universities, $37.4 million for kindergarten through 12th grade and $4.9 million for community colleges.
Employees in the system pay 9% of their salary toward their retirement. It was increased from 7.25% 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.