Lawmakers looking to change state retirement system in 2024. Here are the options and why

When Toby Barker, mayor of Hattiesburg and president of the Mississippi Municipal League, came to Jackson Wednesday with a group of mayors, he wanted to voice his hope to work with the Legislature on the state’s retirement system.

That work, he hopes, will save public employers, such as cities, counties and state agencies from future contribution increases into the Public Employment Retirement System of Mississippi, which currently sit at a 17.4% match of employee’s yearly salaries, while worker’s themselves pitch in 9%.

“The PERS Executive Director Ray Higgins said the employer contribution will likely go up to 27%,” Barker said. “For us, that'd be three million new dollars from where we are right now that we have to come up with every year to pay for existing employees. Other towns that maybe don't have the same sales tax growth that we have, that would be a disastrous prospect.”

Fortunately for Barker, while no bills have been submitted for review, legislators in the House and Senate are planning to bring retirement reforms to the floor this year to address a growing number of retirees and a shortage of public sector employees to help fund PERS, several lawmakers told the Clarion Ledger.

What are the issues?

Higgins told the Clarion Ledger one of the largest issues facing the retirement program is $25 billion the agency holds in liabilities, which is a total of money owed, and a declining number of public employees entering and staying in the system.

As of 2023, 146,664 active members are paying into the system, a 10% fall from 2014 when it sat at 162,044. Also the program has 96,139 inactive members, which are people who will receive benefits upon retirement, but are no longer contributing into the system. Currently 118,301 retirees receive an average of approximately $26,000 per retiree, per year.

“The last 25 years have seen additional benefits enhancements placed into law without additional funding at the time, the active member-to-retiree ratio decline, retirees living longer, several economic downturns, including the Great Recession in 2008 and a more conservative approach to public pensions in general,” Higgins said. “There has been a decline in the number of active members contributing to PERS and this does typically have a negative effect on the financial condition."

PERS is currently funded through employee and employer contributions as well as money invested by PERS into several domestic and foreign markets in real estate and private infrastructure, among others.

Higgins said the PERS Board of Trustees passed a 5% employer contribution increase over the next three years, to assist paying down PERS overall liabilities, as well as help alleviate the member-to-retiree fall. The contribution rate for employers will go from 17.4% to 22.4% by 2027, and the first increase will happen July 1, rising to 19.4%.

Billy Knight, mayor of Moss Point, and Barker both said if those increases happen beginning July 1 this year, it could have serious impacts on their city’s ability to hire new employees and maintain other jobs for their cities. Barker said that trend could lower PERS participation even further.

“We are going to have to make decisions about whether or not to hire new people that we really need to hire or are we going to have to lay off some key positions and undercut public services,” Barker said. “We just can’t afford (that increase) on our budget.”

What do legislators plan to do?

Republican Lt. Gov. Delbert Hosemann and Republican Sen. Walter Michel, who represents Madison and Hinds counties, both said PERS should stop future increases in employer contribution.

According to a PERS report given to Lawmakers in 2023, the agency proposed a 10% increase from 17.4%, as well as adding a new tier of its retirement plan, which would give members new options for contribution amounts, and no guarantee of cost-of-living adjustments, among other things.

“That plan will absolutely ensure the catastrophic failure of PERS,” Hosemann said. “Every city and county will go to leasing employees, which means that nobody will be contributing, which means it's absolutely going to fail.“

Michel said the state could possibly pass a bill to either add more retirement plan options to public employees to work in tandem with PERS.

“It's very common in the private sector for employers to match a portion of the money the employee puts aside,” Michel said. “That 9% that they're giving right now could go into a retirement fund, and the state could match that 9% with funds.”

Rep. Kabir Karriem and Jeramey Anderson, Democrats representing Lowndes and Jackson counties respectively, said they are willing to find solutions beyond raising contributions for public employers, but they will need to see what bills make it to the floor before making decisions on the issue.

Sen. David Blount, a Democrat representing Hinds County, said active members would not be effected by any changes in law, but the Legislature could look at changing benefits and contributions for future hires.

“It's absolutely essential that we protect the long-term sustainability of PERS, and that means that all the employers in the system such as the state, counties, cities and school districts all have to meet their financial obligations,” Blount said. "Every single retiree today (will receive benefits). It’s what future hires may expect and what their employer is obligated to pay when that person is hired that is open for discussion.”

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

This article originally appeared on Mississippi Clarion Ledger: MS lawmakers could change state retirement plan, PERS