Despite a giant leap investment income and a slightly improved financial position, the report released Tuesday about Mississippi's defined pension system shows several trends that could erode its position even further.
Each year, the Public Employees' Retirement System of Mississippi — which serves most state, county and municipal employees — issues a report on the fund's financial position and the PERS board approved its release at Tuesday's meeting.
First, the good news. PERS went from an anemic return on its investments in 2016 — when it earned only 1.2 percent — to 14.96 percent. The difference between this year's investment income was more than $2.4 billion. The plan expects an annual return on its investments, known also as a discount rate, of 7.75 percent.
As a result, the plan's funding ratio, which is defined as the share of future obligations covered by current assets, increased slightly from 60 percent to 61.5 percent. The amount of unfunded liability also decreased, going from $17.9 billion in 2016 to $16.6 billion.
All isn't well with PERS.
The report points out some trends that could present the pension fund with some financial challenges in the future, especially if another downturn like the 2009 recession occurs.
The number of retirees increased in 2017 to more than 102,000, up 59.9 percent from 2005, when the system supported more than 63,000 retirees. Conversely, the number of contributing employees has decreased to more than 152,000, down nearly 2,000 employees from last year.
The plan's cost of living increase or COLA, which has been the subject of discussion in the run up to this year's legislative session, is also nibbling steadily at the plan's position.
The fund provides a cost of living adjustment (COLA) that amounts to three percent of the annual retirement allowance for each full fiscal year of retirement until the retired member reaches age 60. From that point, the three percent rate is compounded for each fiscal year. Since many retirees and beneficiaries choose to receive it as a lump sump at the end of the year, the benefit is known as the 13th check.
Since 2005, the annual amount PERS pays for the 13th check has increased 185 percent, going from $211 million to this year's $603 million.
The average age of the plan's members is 44.7 and members with at least 15 years of service represent 27 percent of all state and municipal employees in the PERS system.