House leaders quietly let die a bill that would have stripped some of the authority of the board that oversees the Mississippi Public Employees Retirement System.
The bill died Feb. 9, a deadline day, when House Appropriations Chair John Read, R-Gautier, did not call it up for consideration.
The action, or lack of action, came one day after House Speaker Philip Gunn received a letter from PERS Executive Director Ray Higgins saying the retirement system board would likely vote in an upcoming meeting to delay increasing the employer contribution rate.
The board had voted by a 7-3 margin in December 2022 to increase the rate paid by state agencies, school districts and local governments from 17.4% of an employees paycheck to 22.4%.
The board’s December decision had caused consternation with legislators and local governmental entities because of the additional cost of the rate increase.
READ MORE: Lawmakers ponder stripping state retirement system authority after board votes to raise rates
Higgins wrote to Gunn he believed the board in an upcoming meeting would ratify his suggestion to postpone the rate increase from October 2023 to July 2024.
“This change will provide more time for planning while remaining consistent with actuarial recommendations and acting in the best interest of the membership to ensure the plan is properly funded long term,” Higgins wrote to Gunn. “We will also discuss the potential and cost of phasing in the rate increase.”
Higgins recently told members of the Senate Finance Committee the rate increase was needed to ensure the long-term viability of the system. The Public Employees Retirement System currently has more than 300,000 members either working currently or in the past in state or local governments .
Under state law, increasing the rate state and local governments pay into the system is “the only lever” the PERS Board has to address funding shortfalls. The House bill would have given the Legislature the final say on rate increases.
The action of the board to increase the rate by 5% to 22.04% would have cost state and local governmental entities, including school districts and higher education entities, $345 million annually, including $265 million for state agencies and education entities.
In the letter, Higgins said the board also would provide recommendations to the Legislature on how to deal with some of the funding issues, such as changing the benefits for new employees. Higgins had told a Senate committee recently changing the benefits for new employees would help long-term, but would not provide any immediate relief.
The system’s current full-funding ratio is about 61%, meaning it has the assets to pay the benefits of 61% of all the people in the system, ranging from the newest hires to those already retired. Theoretically, it is recommended that retirement systems have a funding ratio of about 80%.
Higgins said the system is stressed by the fact that additional benefits were added for employers in the late 1990s and early 2000s without a method to pay for those benefits.
In addition, the current governmental workforce is shrinking while the number of retirees in the system is growing. Higgins said during the past 10 years the governmental workforce is down by about 10%, while the number of retirees has increased by more than 25%.
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