The governing board of Mississippi's defined benefit pension system voted unanimously at their scheduled meeting Tuesday to not ask lawmakers to increase the employer (taxpayer) contribution.
The Public Employees’ Retirement System of Mississippi — which is the retirement fund for most state, city and county employees — will keep the employer contribution at 17.4 percent rather than increasing it to 19.6 percent as recommended by the plan's actuaries Cavanaugh Macdonald. If the increase would've been approved, it would've marked the sixth time in the last decade that the employer rate has been increased.
The last rate increase went into effect in fiscal 2020 from a rate of 15.75 percent.
The board's Administrative Committee recommended keeping the contribution rate the same at its Monday meeting. The board's vote would've been the first step toward a rate increase, as lawmakers would have to agree to the proposal. In addition to the state, cities and counties would've also had to increase the amount they contribute to PERS for their employees.
Only the Legislature can 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.
One factor for PERS not requiring another employer contribution increase is the massive windfall of investment returns in fiscal year 2021, which ended on June 30. The plan earned an astounding 32.71 percent in gross returns according to its latest investment report.
The PERS Board of Trustees also unanimously approved the actuarial demographic assumptions that deal with mortality, withdrawals, disability and salaries and the economic assumptions that show a lower rate of return on PERS investments. These are the forecasts used by PERS actuaries to run financial models decades into the future.
PERS has been investing in the stock markets since August 1980, which promised larger returns than the treasury bonds that represented most pension fund investments up to that point.
The board will decide in October whether to reduce its expected rate of return. The plan's funding policy requires a reduction in the anticipated rate of return when returns exceed a certain level. The proposed reduction in the anticipated rate of return would be from 7.75 percent to 7.5 percent, a figure supported by the plan's actuary.
The actuaries have suggested to lower the rate even further, to 7 percent, as they forecast lower rates of return from the U.S. and international stock markets over the next few years.
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, a move approved by the board Tuesday.