top of page

State's PERS investments struggle to meet benchmark return rate


UPWARD: The cost of living allowance given to Mississippi PERS retirees has increased annually at least since 2010. Graph by Steve Wilson

Investments for Mississippi’s defined benefit pension system, the Public Employees' Retirement System of Mississippi, earned less than benchmark returns in fiscal 2017's final quarter, according to a report released by PERS.

The fund’s investments had a 3.56 percent rate of return, 4.19 percent below the benchmark rate of return of 7.75 percent.

PERS reduced its benchmark rate of return to 7.75 percent from 8 percent in 2015.

Last year, the rate of return on PERS investments was only 1.15 percent.

ROLLERCOASTER: Mississippi retirees' have endured an investment rate of return rollercoaster since 2005. Graph by Steve Wilson

PERS has been in serious financial trouble for the last decade thanks to an ever-growing number of beneficiaries. Fewer state, city and county workers means fewer people are paying into the system than drawing money out.

A recent AP story spotlighted an audit report by GRS Retirement Consulting on PERS that calls into question the long-term stability of the fund. PERS officials have said their calculations, which use a base inflation rate of 3 percent annually and 4.75 percent return on its investments for a total return of 7.75 percent, indicate that the fund will be 80 percent fully funded by 2042.

GRS said the inflation assumption is too high and should reduce that planning figure to one ranging from 2 percent to 2.5 percent.

PERS says the plan will be up to 80 percent fully funded by 2042, the figure typically cited by administrators for a healthy plan. But according to the American Academy of Actuaries, the 80 percent funding ratio benchmark is a “mythic standard” and the financial health of any pension fund should be judged by factors other than just the funding ratio, such as the ratio of pension obligations to revenues, financial health of the plan sponsor, contribution policy and investment strategy.

The number of retirees receiving benefits has grown 40.6 percent since 2007, with 3,145 new retirees leaving the government workforce in fiscal 2016. The number of employees who contribute to the plan also fell from more than 157,000 in fiscal 2015 to about 154,000 in fiscal 2016.

The 3 percent annual cost of living adjustment — which is paid out to most retirees in the form of a “13th check” in December — is getting bigger every year. In 2010, the fund paid more than $330 million to retirees. By 2016, that figure has increased to more than $559 million, an increase of 69 percent in only six years.

bottom of page