According to preliminary data, the state's defined benefit pension system had its second-best year in investment income, a boost that will greatly help the flailing fund's bottom line.
The Public Employees’ Retirement System of Mississippi is reporting a rate of return of 30 percent on its investments, the second most since the fund began investing in the stock market in 1981 and the best since it recorded a 25.4 percent return in 2011.
The PERS Board of Trustees held a meeting Tuesday to discuss several issues with the fund, including reforms that could ensure that the gains aren't merely a blip on the plan's finances.
The plan expects an annual rate of return of 7.5 percent on its investments in U.S. and international stock markets.
PERS' governing board will make the data official at its governing board's meeting on August 24 and could reduce the anticipated rate of return on the investments as per the plan's funding policy due to the massive investment windfall. The reduction in the anticipated rate of return would be 7 percent, a figure supported by the plan's actuary, Cavanaugh Macdonald Consulting.
PERS executive directory Ray Higgins is also proposing, subject to board approval, several initiatives that could shore up the plan's finances and ensure it will meet its fully-funded goal by 2047.
One of those initiatives is to increase the plan's employer (taxpayer) contribution, which is now at 17.4 percent to 19.6 percent. It would mark the sixth time in the last decade that the employer rate has been increased.
Another is to change the plan's cost of living adjustment or COLA. These changes could include freezing the rate of COLA for a few years, a reduction in the rate from 3 percent to 2.5 percent and possibly changing it from a compounding COLA to one with a simple 3 percent increase once the retiree reaches age 60.
Higgins is also proposing changes for new hires that could help the plan's bottom line. Under one of these proposals, new hires would receive ad hoc COLAs once they reach age 60 with the approval of the board that would be paid monthly rather than in a year-end lump sump, now known as the 13th check. Their COLA would also be tied to the federal Consumer Price Index.
The board of trustees have the ability approve an increase the employer contribution, but the Legislature must appropriate the funds. An employer rate increase will also hit city and county governments as well. The last rate increase in 2018 (from 15.75 percent to the present rate) cost the state an additional $73 million annually and local governments $25 million.
An earlier report by the plan's actuary recommended that the expected rate of return on investments be decreased since it expects lower rates of return in the future from the market.
The actuary also recommended in the same report that the payroll growth assumption used by PERS officials should be reduced from 3 percent to 2.65 percent.
Only lawmakers have the power to authorize changes to the contribution rate for employees, which has remained at 9 percent since the last increase was passed into law by then-Gov. Haley Barbour.
In 1985 and 2005, there was only one increase in the employer (taxpayer) contribution that increased the rate from 8.75 percent to 9.75 percent.