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Retiree group tells Legislature: Change PERS and you will pay an electoral price

BALLOT BOX: The Mississippi Retired Public Employees' Association says the ballot box is the best place to deal with legislators who "aren't supporters of PERS." Photo illustration by Steve Wilson

The Mississippi Retired Public Employees' Association says that it won't accept any changes to the state's defined benefit pension system with the 2019 statewide elections less than year away.

In her letter to members in the newsletter, MRPEA president Ann Thames said, "Remember, the voting booth is the most effective way to deal with those who are not supporters of PERS."

The MRPEA's fall newsletter tells its members if a legislator is considering any modification to the Public Employees' Retirement System of Mississippi, they should consider casting their vote differently. That includes changes to the cost of living adjustment, which is one of the many factors eating PERS' fiscal lunch.

The organization says it will begin surveying candidates on where they stand on changing PERS and reveal those results on its Facebook page.

The Legislature will have to increase its employer contributions to PERS by $75 million this year after the PERS board voted this summer to increase the employer contribution rate from 15.75 to 17.4 percent. This number, using 2017 figures, could be as much as $87 million annually for state employees and $25 million for local governments.

The 2018 comprehensive annual financial report on the pension system will likely be released after the PERS board meets on December 18.

PERS is in better shape financially, but demographics (fewer workers supporting a greater amount of retirees) and the COLA are presenting substantial headwinds to the bottom line.

The pension fund went from an anemic return on its investments in 2016 — when it earned only 1.2 percent — to 14.96 percent. The difference between 2017'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.

UPWARD: Unfunded liabilities thankfully dropped slightly in 2017 for PERS. Photo illustration by Steve Wilson

The amount of unfunded liability also decreased, going from $17.9 billion in 2016 to $16.6 billion.

The biggest problem for the plan is demographics, as fewer workers are having to support an ever-larger pool of beneficiaries.

The number of PERS 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.

DEMOGRAPHICS: The number of PERS retirees supported by each active PERS member continues to grow. Photo illustration by Steve Wilson

Things are likely to get even worse in coming years — no matter what the gains the plan makes with its investments — as a tsunami of retirements is in the offing. 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.

On top of more retirees, PERS provides a cost of living adjustment that has become more expensive every year. PERS provides the 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.

UPWARD: COLA payments for PERS since 2005. Photo illustration by Steve Wilson

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 2011 commission on PERS reform called by then-Gov. Haley Barbour recommended that the PERS COLA be frozen for three years.

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