Friday, September 21, 2012

PERS looking at raising Employer contribution rates

Collection of all posts on PERS

PERS Executive Director Pat Robertson told the Joint Legislative Budget Committee Tuesday the PERS Board of Directors will recommend raising the employer contribution rate to 15.75%. for the retirement system.

She said the board was reaching a consensus of adopting an employer contribution rate of 15.75% to yield a funding ration in excess of 80% in thirty years (9:00). Representative Flaggs asked her how much money the additional employer contribution would require. She said it is estimated it will require an additional $44 million from the general fund (15:30). The current employer contribution is 14.26% (See p.30 of document posted below). She said creating a long-term rate of 15.75% was more stable than increase the rate to over 16 or 17 percent and then lowering the contribution rate as the funding level stabilized.

Ms. Robertson said there will be an increase to the employer contribution to PERS. She said there were 900 employers contributing to PERS. They included "mainly public schools." 40% of active members of PERS are public school employees while 30% of the employers are state agencies and 28% are municipalities. She said the average payment is over $19,000 per year.

Ms. Robertson said PERS' funding level of "62% was not ideal" but that PERS "is financially stable." She said "changes have been made to ensure the sustainability of the plan" such as eligibility, contributions, and other measures. She repeatedly said the legislature increased benefits in 1999 without putting a funding mechanism in place to pay for the increase. She said the increase was made retroactive and "cost 10% of payroll." She said "those benefits were not paid for and its catching up with us now." She said only the legislature can change benefits.

Ms. Robertson said PERS earned a rate of return of only .6% last year. PERS earned 25% and 14% the two prior years. There were no Democrats jumping up and down bragging about the rate of return as Steve Holland did last year. The ten year rate of return is 5.4%. Speaker Pro-Tem Greg Snowden asked if the 8% assumed rate of return was a reasonable estimate. Ms. Robertson said the board is examining the assumption and determining whether it should be changed. She said a report will be made to the board by a auditing firm in February.

Representative Flaggs asked Ms. Robertson if the board would change the COLA adjustment known as the 13th check. Ms. Robertson said only the legislature could change the COLA as its considered to be a benefit.

Ms. Robertson distributed a booklet containing facts about PERS. Here are some of the highlights from the booklet:

161,895 active members
86,821 retirees and beneficiaries
40% of active members are public school employees
30% of employers are state agencies. 28% are municipalities.
Actuarial funding level is 62%
Asset allocation: 65% stocks, 25% bonds, 7% real estate,
Revenue sources: 51% investment earnings, 29% employer contributions, 20% employee contributions
Benefits paid for FY 2012: $1.86 billion
Investment income: $60 million
Net assets: $19.8 billion
Rate of return for FY 2012: .6%
10 year average: 5.4% rate of return
30 year rate of return: 9.6%
Assumed rate of return: 8%

Not one time was SLRP mentioned.


Anonymous said...

She's right that the PERS Board can't roll back the COLA. The COLA is in statute, the PERS Board can only amend their own regulations.

The Legislature needs to accept responsibility for the mess they created in the 1990's. They are complaining about costs that THEY CREATED.

Anonymous said...

With lower sales tax returns and this projected increase, many cities and towns are not able to give their employes raises this year.

Yet another unfunded mandate.

Anonymous said...

Just do your average rate of return at 3% and leave it at that. What the problem is thay projected a rosey return on investment. Better realize that the taxpayer is paying for the increased employer contribution in one form or eanother. Same problem with the IMPACT school program.

Shadowfax said...

This has nothing to do with giving municipal employees a raise or with the hollow assertion that the taxpayer is being screwed. Some of you obviously watch too much news out of Chicago.

Anonymous said...

Didn't Pat tell the PERS study commission they would need to go as high as this.

Anonymous said...

I'm hoping that's a typo in the headline. Employee is what it should say.

My 401k doesn't even match 100 % in a union job. They get great benefits already. Taxpayers should match employee contributions at most.

Shadowfax said...

Some 401k programs have zero match. Especially when the employer is struggling to simply stay afloat. What is your basis for saying (anon 9:35) "Taxpayers should match employee contributions". The PERS program is basically a pension with a defined benefit. Don't employers typically fund the entire pension program? I don't suggest by any means that employees should not contribute; but, I don't see the reasoning behind your suggestion that the employer's contribution should not exceed that of the employee. As the good Captain often points out, I'm no PERS expert.

You also say "They get great benefits already." I'm not sure what 'benefits' they get other than the retirement check when they retire and while employed they probably get eight or so holidays and the ability to purchase insurance.

Anonymous said...

My understanding is PERS gets a horrible return on its investments, even in a bad economy. Here is the PERS Board (below at link), which according to its website, is responsible for investing all assets. Notice how many financial investment professionals are on the board (ZERO), yet all kinds of county and state government workers/officials are on it making financial investment decisions.

Anonymous said...

If Hays pulls this one off, we all will be impressed

Shadowfax said...

8:00; The law stipulates the makeup of the Board. A certain number must represent employees and certain numbers must represent other factions. I'll leave it to someone else to break it down for you. Suffice it to say, however, nobody simply decides to stack the board with dunces for your entertainment.

Anonymous said...

1:02, Hays? What's that mean?

Anonymous said...

Shadow, you don't need someone to break it down for me. I'm not challenging what the law stipulates re the make-up of the board. If the law stipulates the make-up, however, we need to change that law. I am saying the board is not up-to-par with what an investment board needs for investment decisions. Look at the bios. If you think they are adequate for the task at hand, well...

Yet again. They don't do well in bad times. They don't do well in good times. There is a problem.

Shadowfax said...

8:22; if you are suggesting that employees should not be represented on the board that determines their retirement benefits your head is more hollow than first glance would suggest.

Anonymous said...

Shadow, stop putting words in people's mouths.

A Chancery Clerk is on there. I'll just pick that person for fun. You want him/her running your retirement account? Want to sign that person up to run your kids account? How about the others to run your retirement?

I didn't think so. You pretentious ass.

Kingfish said...

Didn't approve your last comment Shadow. Was fine until the last sentence.

Keep in mind Hob Bryan said these were just assumptions, they should be ignored, and we shouldn't look at PERS for another 5 years and I have him on video saying it.

Shadowfax said...

10:55; If I'm a pretentious ass (where's the moderator?) for pointing out your fallacy, so be it. Certain positions are reserved for those who represent and work in the public sector. The intent is that they represent those similarly employed. They run for office and win or lose. It was never intended that the board consist of accountants, actuaries and pencil pushers. The board HIRES those types. Please educate yourself.

Anonymous said...

I think you are missing my point. The overseers (board members), if you will, aren't well versed enough to know the ins and outs of the bill of goods being sold to them by the persons the board "HIRES" (to put in in all caps as you did). I certainly wouldn't know those ins and outs.

I'm not saying you shouldn't have representation on the board from the persons who are affected by these decisions. I am saying it is shortsighted to not have anyone on the board with real financial investment experience. Yet again, I raise the point: PERS does poorly in bad years, and does poorly in good years. Something is amiss.

Anonymous said...

There is a state agency in place well versed in securities and securities law, and is our state securities regulators. However, that agency is not allowed jurisdiction over any other state agency.

Let our own regulators get involved, the ones who know the investment professionals, the firms, the law, the products, etc., etc., and you would see changes. At a minimum, that agency under Delbert should have a representative at all times.

Shadowfax said...

If I'm not mistaken the State Treasurer is automatically a member of the PERS board as are several other high officials. Are they also dunces simply sitting around the table waiting to be made fools of by actuaries?

The state agency referred to by 4:20 doesn't need to have 'jurisdiction' in order to collaborate and provide advice. Maybe Kingfish will roll out the requirements for Board setup or Kangaroo can provide an archival link.

Anonymous said...

"Are they also dunces simply sitting around the table waiting to be made fools of by actuaries?"

Well, that's what Jackson is like - is the whole state as dumb?

Anonymous said...

Dumb question here. Can the PERS Board raise the employee contribution rate or does the legislature have to do it?

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