Mississippi’s Public Employee Retirement System, known as PERS, has a cash flow problem. Recently, sate lawmakers and the board elected to oversee the retirement system aren’t seeing eye-to-eye on how to fix it.Established in 1952, the benefit plan uses a formula based on a member’s average age and years of service to determine how much a retiree gets each month at the end of their career. The members include doctors, firefighters and county clerks, among others. The PERS Board includes the state treasurer and nine trustees elected by members of the system.After all these decades, the pool of funds is now worth nearly $30 billion, with 361,000 members, 118,000 of which are retirees. Right now, those members are concerned because PERS needs more money. “But in order to take care of the cash flow to pay future benefits and bring us to that 80% level of funding, it requires more money than what we’re generating,” said Bill Benson, PERS Board chairman.The 80% Benson mentioned is the goal they want to reach to keep the system fully funded for the next 70 years. Right now, the system has enough funds to pay 60% of the total funds owed to every member of the system if it needed to be paid out today. But that’s now how PERS works, so the retirement system isn’t in any immediate danger. Benson said the problem everyone is trying to solve is maybe 30 years down the line. The funded ratio needs to be 80% to be considered in the green. The current 60% is red status.At the current rate, PERS is paying out more money than what’s coming in. Right now, employers contribute 17% of employee salaries into PERS, while workers contribute 9% of their earnings. The majority of the funds’ earnings come from investing a portion of the money.So, why is PERS heading in the wrong direction? According to a recent valuation report, in the last fiscal year, PERS paid out $3.3 billion, while employers and employees contributed nearly $1.9 billion. Taking the advice of actuaries, the board’s recommendation is to increase the employer contribution by 5% over the next three years, starting with 2% this summer. But that money ultimately will come from taxpayers.“It is the only lever that the board has if the state wants to step in and take some of that impact away. The ability is there, but we don’t have it,” Benson said.“That’s a serious subject for a lot of people,” said Byram Mayor Richard White.For the city of Byram, that first 2% increase could cost the city roughly $92,000 a year without any bumps in salary. But the mayor said they have to give their law enforcement officers raises in the near future to keep up with other cities, which is adding to the financial demand.“It caught me off guard, just to be honest with you,” White said. “We’re just flowing with it until we see what’s going to happen, but right now, everything is happening so fast, we’re not sure.” For the city of Brandon, Mayor Butch Lee said it’s the cost of doing business. He looks at the increase as a way to sell potential employees on the jobs.“I tend to look at this as a recruitment tool, so it’s a way to attract people,” Lee said. “There’s not many people out there that will put 20% back into your retirement account for you when you get ready to retire at some point in time.”A retirement plan can be life-changing, especially for career paths that may not be as lucrative. State employees and employers can see the problem in front of them, but the reason it’s happening might surprise you.“You’ve got more people pulling out of the system than you’ve got putting into the system,” Lee said.The trend over the past 10 years, according to the PERS valuation reports, is the number of public employees paying into the fund dropped by roughly 16,000, while the number of retirees has jumped by 22,000. There are many factors, but Benson said state government has trimmed its workforce over the years and cities have started to privatize departments, such as public works, and hospitals are even outsourcing departments, like collections.These are just a few examples of a much bigger issue in Mississippi’s workforce. But the bottom line is PERS needs to increase its cash flow.“With the decrease in employees, with the decrease of money coming in, we aren’t in a situation of imminent danger,” Benson said. “There’s plenty of money to pay benefits. We aren’t in a situation where PERS is going under. There’s money to pay people.”But some state lawmakers have signaled the board’s plan isn’t the right one. The PERS board members said the only option is an employer rate increase or cash from the state legislature.“This is not just something we can overlook and move on. We need to be looking together to get to one common goal and get a solution to it,” Benson said.There are several bills in the state legislature that could freeze the potential employer rate increase. If state lawmakers don’t pass a bill, the rate increase begins this summer for employers.
Mississippi’s Public Employee Retirement System, known as PERS, has a cash flow problem. Recently, sate lawmakers and the board elected to oversee the retirement system aren’t seeing eye-to-eye on how to fix it.
Established in 1952, the benefit plan uses a formula based on a member’s average age and years of service to determine how much a retiree gets each month at the end of their career. The members include doctors, firefighters and county clerks, among others. The PERS Board includes the state treasurer and nine trustees elected by members of the system.
After all these decades, the pool of funds is now worth nearly $30 billion, with 361,000 members, 118,000 of which are retirees. Right now, those members are concerned because PERS needs more money.
“But in order to take care of the cash flow to pay future benefits and bring us to that 80% level of funding, it requires more money than what we’re generating,” said Bill Benson, PERS Board chairman.
The 80% Benson mentioned is the goal they want to reach to keep the system fully funded for the next 70 years. Right now, the system has enough funds to pay 60% of the total funds owed to every member of the system if it needed to be paid out today. But that’s now how PERS works, so the retirement system isn’t in any immediate danger. Benson said the problem everyone is trying to solve is maybe 30 years down the line.
The funded ratio needs to be 80% to be considered in the green. The current 60% is red status.
At the current rate, PERS is paying out more money than what’s coming in. Right now, employers contribute 17% of employee salaries into PERS, while workers contribute 9% of their earnings. The majority of the funds’ earnings come from investing a portion of the money.
So, why is PERS heading in the wrong direction? According to a recent valuation report, in the last fiscal year, PERS paid out $3.3 billion, while employers and employees contributed nearly $1.9 billion. Taking the advice of actuaries, the board’s recommendation is to increase the employer contribution by 5% over the next three years, starting with 2% this summer.
But that money ultimately will come from taxpayers.
“It is the only lever that the board has if the state wants to step in and take some of that impact away. The ability is there, but we don’t have it,” Benson said.
“That’s a serious subject for a lot of people,” said Byram Mayor Richard White.
For the city of Byram, that first 2% increase could cost the city roughly $92,000 a year without any bumps in salary. But the mayor said they have to give their law enforcement officers raises in the near future to keep up with other cities, which is adding to the financial demand.
“It caught me off guard, just to be honest with you,” White said. “We’re just flowing with it until we see what’s going to happen, but right now, everything is happening so fast, we’re not sure.”
For the city of Brandon, Mayor Butch Lee said it’s the cost of doing business. He looks at the increase as a way to sell potential employees on the jobs.
“I tend to look at this as a recruitment tool, so it’s a way to attract people,” Lee said. “There’s not many people out there that will put 20% back into your retirement account for you when you get ready to retire at some point in time.”
A retirement plan can be life-changing, especially for career paths that may not be as lucrative. State employees and employers can see the problem in front of them, but the reason it’s happening might surprise you.
“You’ve got more people pulling out of the system than you’ve got putting into the system,” Lee said.
The trend over the past 10 years, according to the PERS valuation reports, is the number of public employees paying into the fund dropped by roughly 16,000, while the number of retirees has jumped by 22,000. There are many factors, but Benson said state government has trimmed its workforce over the years and cities have started to privatize departments, such as public works, and hospitals are even outsourcing departments, like collections.
These are just a few examples of a much bigger issue in Mississippi’s workforce. But the bottom line is PERS needs to increase its cash flow.
“With the decrease in employees, with the decrease of money coming in, we aren’t in a situation of imminent danger,” Benson said. “There’s plenty of money to pay benefits. We aren’t in a situation where PERS is going under. There’s money to pay people.”
But some state lawmakers have signaled the board’s plan isn’t the right one. The PERS board members said the only option is an employer rate increase or cash from the state legislature.
“This is not just something we can overlook and move on. We need to be looking together to get to one common goal and get a solution to it,” Benson said.
There are several bills in the state legislature that could freeze the potential employer rate increase. If state lawmakers don’t pass a bill, the rate increase begins this summer for employers.
