PERS issued an annual report stating Jackson's municipal retirement system is less than 50% funded. The unfunded liability is $63.5 million dollars. The unfunded liability increased $2.3 million from the 2012 report and $3.5 million since 2011. The retirement account covers police and firefighters hired by the city prior to April 1, 1976. The funding level is currently 48.8%.
Retirement systems for policeman and firemen were managed by municipalities for decades. Enrollment in these retirement accounts ended in the late 1970's as new employees were enrolled in PERS. The municipalities were given the option of converting these accounts to the PERS system in the 1980s but nearly 20 chose not to do so. The municipalities, not PERS, are responsible for funding these accounts although they are managed by PERS. 2011 post, 2012 post The payments will decrease each year as enrollment was closed and beneficiaries die. The chart on page 58 in the report posted below provides a graph showing the plan will "wind down" in 2030's until it reaches zero.
|Click on chart to expand|
The report states there is only one current city employee enrolled in the system and 640 beneficiaries- 439 retired employees and 191 surviving family members. 10 are on disability. The annual benefit to a retiree is $22,328 and $14,662 to a survivor. The total payment in fiscal year 2011 to beneficiaries was $12,910,994. The average age is 72 years old. A member is paid 50% of his average compensation and an additional 1.7% of average compensation for each year of service over twenty years (the maximum level is 66%.). There are 14 fewer beneficiaries than last year but the liability still increased.
The total liability for Jackson is $124,017,685 but the plan has $60,511,241 in assets. The plan assumes a rate of return of 8.0%. The system is earned the same rate of return as PERS: 0.6% in 2012. The plan was funded on September 30, 2012 at a level of 48.8%.
Jackson faced a similar problem in the mid 1990s. Jackson's plan was below a funding level of 50% from 1991 (38%) to 1996 (46%). The unfunded actuarial liability was $73,861,000 in 1996 and after reaching $80,568,000 in 1994. Jackson issued $50 million in retirement bonds (actually $49.8 million) that were paid off in 2009. The interest cost was $23 million of the bonds. The average interest rate paid on the bonds was 6.3% (not a weighted average) and the average annual principal payment was $4.1 million. The proceeds gained from the sale of the bonds paid the unfunded liability down to $15.8 million in 1997 and improved the funding level to 88%. The plan had a surplus of $6.2 million in 2002 and was funded at 104%. Unfortunately, the funding level has declined since 2004:
Jackson dedicates 5.00 mills (slightly over $1 million per mill) to funding the plan. The funds generated by the property taxes were used to retire the bonds. Thus Jackson only contributed $280,482, 7.9% of the PERS-required contribution of $3,563,516. However, Jackson paid more than the required amount in 2010: $5,735,113 while PERS required $5,005,779 - a payment of 114%. Jackson is scheduled to end contributions in 2020 as it projects the system to be fully funded as it winds down to zero beneficiaries.