A much-needed bill in the Mississippi Legislature could reduce the amount that the state’s defined benefit pension system pays to outside money managers.
A cost of living adjustment should be related to the real world inflation rate. Mississippi PERS’ COLA at 3 percent is not. In 2005, the plan’s COLA payout to retirees was $211 million or about 18.9 percent of total benefits paid out. This year, it grew to almost $700 million, an increase of 7.6 percent from 2018 ($650 million). The COLA payouts are now 25.4 percent of all benefits paid to retirees.
Mississippi is the only state with a supplemental pension fund for its legislators (SLRP), seven states provide no pension benefits for legislators, most notably Alabama and Louisiana. The SLRP chug-a-lugs along with a funding ratio of 84.7%, while PERS and the pension fund for state troopers languish with funding ratios of 62.5% and 67.2% respectively.
A critical question for current and future PERS retirees and the state of Mississippi is this: Can PERS continue to pay its retiree obligations, its generous and growing COLA (13thcheck) and also rebuild its corpus to be there for the current employees who will be retiring in the decades to come?
Like most pension funds, the PERS plan pays a fee to investment managers to help the plan realize maximum earnings potential. Since 2009, PERS has paid more than $647 million in fees to outside money managers. Comparing PERS of Mississippi with three of its neighbors, the amount paid to the plan’s money managers has been on the increase over the decade.
Every two years, the actuaries for Mississippi’s defined benefit pension system release a report that examines the economic and demographic outlooks that underpin the financial planning. The newest one was released last month and the actuaries make some interesting recommendations for the Public Employees’ Retirement System (PERS).