Report shows Mississippi Legislature retirement reforms this year aren’t effective. See why

Lawmakers, PERS director agree they must work together in the future

State lawmakers will need to readdress concerns about the Public Employment Retirement System of Mississippi in 2025 if it is to remain viable long term, according to a July study.

Legislative actions in the 2024 Session to reduce public employer contribution rate hikes and increase state funding are not enough to address billions in unfunded future benefits to retirees, according to a report released by the Legislature’s third-party watchdog group, the Performance Evaluation and Expenditure Review Committee.

Projections show the state’s retirement plan being less than 50% fully funded by 2047 and having $25 billion in liabilities. According to several municipal leaders who spoke to the Clarion Ledger earlier this year, the legislative move from lawmakers in the past session should save public employers from cutting positions and raising taxes to keep and hire more public employees.

“Change in approach for increasing the employer contribution rate, in addition to the one-time funds transfer, reduces the plan’s projected future funded ratio from 65.5% to 49.9%,” the report reads. “…The PERS plan is currently expected to be at a lower-funded level in the future than it currently is today.”

PERS Executive Director Ray Higgins told the Clarion Ledger he wasn’t surprised by the report’s findings.

“The PEER analysis seems to be an accurate report and generally reconciles with our information,” Higgins said. “Also, the legislative action from last session appears to be a short-term solution.”

While the report does not list out any specific recommendations for lawmakers this coming year, it says continued work will be necessary to fix the retirement system that has 118,000 retirees receiving benefits and 147,000 active members paying into the system.

In 2023, the PERS governing board, made up of mostly elected members, as advised by financial actuaries who watch over the state’s retirement plan, passed a rate increase on public employers, such as cities, counties and school districts from 17.40% to 19.90% that was to take effect July 1. The rate would have continued to increase to 22.4% by 2027.

In the 2024 Session, the Legislature passed two bills. Senate 3231, prohibits the PERS Board’s plan to gradually increase the employer contribution rate and replaces it with a plan to increase to 19.90% over the next five years in 0.5% annual increases. SB 3231 also takes the board’s only regulatory power to increase rates and puts it in the hands of the Legislature.

SB 2468 enacts a one-time transfer of $110 million of capital expense funds into the PERS trust.

More on PERS bill MS Legislature passes bill restricting state retirement board’s authority

Lt. Gov. Delbert Hosemann’s Deputy Chief of Staff Leah Rupp Smith told the Clarion Ledger efforts Hosemann helped push forward that resulted in those bills’ passage led to a potentially more stable retirement system.

“To avoid this calamity while developing a future solution, the Legislature adopted a less-aggressive employer increase,” Smith wrote via email. “We are now informed the plan has a projected future funding ratio of 65.5% as of 2047, as compared to 48.6% projected one year ago.”

Republican House Speaker Jason White’s Communications Director Taylor Spillman did not reply to several emails requesting White’s comments on the report.

What are the big problems?

Higgins previously said the ratio of retirees to active members has seen a reverse trend since 2013, when there were 93,000 retirees and 162,000 active members. This increases the unfunded liability of the system as fewer people take jobs in government, reducing active members and more people retire, increasing the funding obligation of PERS.

The other issue lies with projections for the retirement plan’s future if state lawmakers decide not to take action in the years to come.

“While the ($110 million) funding for the first year is comparable, each year in the future could potentially see a greater deviation in expected employer contribution revenues for the PERS plan,” the report reads. “This deviation does not immediately constitute a problem for the PERS plan; however, careful evaluation of the plan’s future liabilities and funding needs will be necessary to ensure the sustainability of the PERS plan.”

Are there any solutions?

Higgins and Smith both said future work on PERS is still a top priority.

Higgins specifically mentioned a new retirement benefits package that could be offered to new public sector employees, which the PERS board has called tier 5.

“The Board has previously recommended a tier 5 for new employees to help better sustain PERS in the future and is currently considering what may be included or resubmitted in next year’s legislative package,” Higgins said.

Read about new Medicaid program Mississippi Medicaid prenatal care access program still awaiting federal approval. Why?

Earlier this year, Hosemann told the Clarion Ledger he wanted to see evidence that a new tier of benefits could help maintain the retirement system long term. Smith did not confirm whether Hosemann’s office is currently studying that idea in the legislative off season, but she did say the Legislature is looking at several ideas.

“The Legislature is exploring any option for a more viable plan,” Smith said. “The Lt. Governor continues to be committed to fulfilling current employee and retiree benefits, including the cost-of-living adjustment for these individuals.”

Grant McLaughlin covers state government for the Clarion Ledger. He can be reached at gmclaughlin@gannett.com or 972-571-2335.