PERS went mud-riding in 2025. The retirement system enjoyed a great year in the markets yet failed to make any headway in improving its funding level as it just spun its wheels in the mud.
By all most measures, PERS enjoyed a great year. The PERS portfolio of investments earned a strong rate of return of 11%. Retiree growth crippled PERS in the past as it was common to see the retiree population increase over three thousand every year. However, the population grew by only 1,579 retirees in 2025, giving the retirement system a much-needed breather.
PERS continued to enjoy success in the markets as it achieved an 11% rate of return, virtually identical to its rate of return in 2024.
PERS has managed to beat the assumed rate of return for the last decade:
3-year average: 9.74%
5-year average: 10.67%
10-year average: 8.85%
The assumed rate of return is 7% although PERS lowered it from 7.75% several years ago. Although PERS's rate of return averages topped the assumed rate of return for years, its 26-year average is 7.23%. The success in the markets earned PERS investment income of $3.6 billion.
The reduced retiree growth and investment success would have meant a much improved funding level in years past. Unfortunately, the PERS funding level only increased by 0.8% to 56.7%, a far cry from the 80% required for the system to be considered financially stable.
There are two big reasons why PERS continues to flounder. The deficit between benefits payments and employee contributions grew to a record. $1.4 billion. Read the chart below and weep.
The employee contributions fell as government shrunk across the board in Mississippi. The employee population was 145,042, a decrease of 10% from 161,744 in 2012. As the employee population fell, the retiree population rose by 32,000 new members after 2012. The resulting yield of employees to retirees fell to 1.2 in 2025.
Such growth contributes to another problem: the ever increasing cost of living adjustment. The PERS COLA soared to a record $1 billion in 2025. The chart below spells it out.
What does it all mean? The COLA and deficit combine to create a cost of $2.4 billion, thus eating up two-thirds of investment income. Such is how the funding level barely moves when the PERS portfolio enjoys strong returns:
What does it all mean? It means there is a structural imbalance in PERS as payments often swamp contributions and investment income, thus driving down the funding level.
PERS consultants recommended for several years that PERS lower its assumed rate of return. PERS did so as it lowered the rate of return from 8.00% to 7.55% a few years ago. PERS lowered the rate of return to 7.00% last year. The lowering of the assumed rate of return bumped up the unfunded liabilities.
The unfunded actuarial accrued liabilities rose to a record $26.7 billion in 2025. The UAAL was $12.3 billion in 2011.
JJ reported in 2024:
The change in the assumed rate of return generated some controversy. Some PERS critics argue the assumed rate of return should not change since the PERS portfolio has managed to outperform the assumed rate of return over the last ten years. However, such claims ignore how such returns work as it usually takes the portfolio several years to recover from one year of negative market returns.*
Mississippi also had the highest assumed rate of return at 7.55% among public pensions. The former 8% assumed rate of return is almost unheard of today when it was probably the standard 15 years ago. New York cut its assumed rate of return to 6% and CALPERS is looking at lowering its assumption from 6.8% to 6%. Table of other state assumed rates of return.
What does it all mean? It means PERS can not invest its way out of this mess as Steve Holland and friends said it could over ten year years ago. Even if the assumed rate of return stayed at 7.55%, PERS would have only caught a breather as its structural problems would continue to worsen. The PERS consultant, Cavanaugh McDonald, told the Board several times it could not invest its way out of the current dilemma.
Once upon a time, the PERS Board of Trustees could have tried to shore up the system with employer contribution increases. However, the legislature took that power away from the Board two years ago when the Board approved a 5% increase to 22.4%. The increase would have cost the state $265 million and local governments $75 million. The legislature assumed the power to raise employer contribution rates for itself and replaced with the 5% increase with one of 2.5% but implemented by 1/2% each year from 2024 to 2028.
Shares of employee population
State Agencies: 17% (25,365)
State Universities: 12% (17,499)
Public Schools: 41% (59,643)
Junior Colleges: 4% (5,813)
Counties: 10% (14,925)
Municipalities: 10.5% (15,355)
Other: 4% (6,442)
Total: 145,042 (2012 population: : 161,744) (-10%)
Employer Contribution Rates
2011: 12%
2012: 14.26%
2014: 15.75%
2019: 17.4%
Annual Rate of Return Since 2000 & Averages
2000: 8.4%
2001: -7.1%
2002: -6.6%
2003: 3.5%
2004: 14.6%
2005: 9.8%
2006: 10.7%
2007: 18.9%
2008: -8.2%
2009: -19.4%
2010: 14.1%
2011: 25%
2012: 0.6%
2013: 13.4%
2014: 18.3%
2015: 3.5%
2016: 1.16%
2017: 15%
2018: 9.2%
2019: 6.8%
2020: 3%
2021: 32.7%
2022: -8.6
2023: 7.43%
2024: 10.8%
2025: 11%
3-year average: 9.74%
5-year average: 10.67%
10-year average: 8.85%
26-year average: 7.23%
40 comments:
Will the last one in the room.....
Good analysis. PERS is only but a small surface symptom of the profound financial sickness that we are in at a country level. I would encourage you to zoom out to an even more macro view:
From the 1970s until now, the current system of governing is a runaway train of enormous unfunded liabilities and massive deficit spending.
In a sentence, today there is no monetary symmetry between the government and citizens. There is no trust.
Today, citizens are very disconnected from their government and citizens have no monetary control. Our current dollar is politicized and used for financial control abroad and to steer things against interests of our citizens.
If the money that was issued by the US government was not 100% in government's control (like it is today), imagine going to war. We are going to war? Then we have to ask our citizens to pay their taxes or ask them to buy war bonds. We all have to agree.
Instead today, we just print, print print. Without accountability. And what happens? INFLATION.
It is not just war. It is stimulus during the pandemic. It is X, Y, Z by both sides. It is a money printing party that neither side is going to end soon.
Inflation erodes the value of our dollar. It is impossible to save in dollars because in your lifetime, 50 years, the dollar loses 85% of its purchasing power. So no one can be just a teacher, or a firefighter, or a small business owner--they have to be an investor in the markets to try and keep up. And they have to take more and more risk.
Until the house of cards falls.
Much like the National debt. There will be a time of reckoning. Taxes will go up and benefits will go down. Can only kick the can down the road for so long. We should be acting now, but alas, there aren’t enough competent adults in government.
At least Pelosi and her regime are well invested in the market.
All the Gov has done is kick the can down the road. At what point does the bill come due? I retire in PERS in 23 years, but I don't think the retirement I was promised will even exist at that point.
At some point the PERS board will have to cut benefits to retirees, or change the retirement of those who have not retired yet. Of course they will try not to, even if it is necessary it would be career suicide.
This is why I have plans for retirement that do not include PERS. I would recommend all other PERS employees do the same.
Your post is an excellent analysis....except for one thing: America lost "control" of its money in 1913 with the creation of the Federal Reserve (which is not federal in any way) which represents neither Republicans, Democrats, nor a single American. No one ever wants to ask: Who is the "national debt" actually owed to? A private family banking system.
JFK was murdered on live television because just a few weeks prior, he said he would be doing away with the Federal Reserve, and bringing back sound money to the U.S. Treasury as it was meant to be.
The ignorance on this site is blissful.
And our Mississippi Congressmen and Senators are complicit in the rapidly approaching financial Armageddon every time they vote to bust the budget.
Well, actually they haven't passed a comprehensive
Federal budget since 1996. 30 years. Look it up.
You can't be suggesting anything approximating a haircut @11:07 because doing so is strictly verboten by the myriad of JJ reading PERS retirees who insist something so draconian could never possibly happen to them.
From the graph KF sure looks like that PERS Cola growth rate is accelerating.
Where is Big Haircut dude?
Sad to see so much ignorance displayed re this post.
ASSUMING a lower rate of return, or any rate of return, is irrelevant.
And after taking at the PERS Board's ability to affect either employee or employer contributions, the Legislature refuses, year after year, to do ANYTHING to actually address the problem. Tier 5 won't have any real financial impact for another 30 years or so.
The Legislature has to do one of two things -- change the COLA for *all* retirees, not just future ones, OR dump a huge bucket of money into the system. But they lack the balls to do either.
And people can bitch and complain about "lazy state employees" or whatever, but the reality is that the State of Mississippi (not the PERS plan) has a binding legal agreement to pay benefits to those retirees (but possibly not the COLA). That financial responsibility isn't going away. So until the Legislature finds the intestinal fortitude to deal with it, the PERS UAL is going to continue to count against the state when it comes to our credit rating.
Please be specific....
....about which parts?
Nailed it. Legislature refuses to believe the actuaries and instead does rain dances and consults witch doctors. The one graphic KF posted proves that. Just look at the statutory contribution rate and the actuarily determined contribution rate. Nuff said. If there are haircuts, every legislator who refused to do anything should be indicted for fraud.
Why not cut the number of counties in half? That cuts out a court system, at least one school district, a sheriff’s office, and a courthouse and staff. You don’t have to fire a single deputy or teacher to do it since all you are cutting is admin and officials.
A performance comparison of PERS and SLRP (State Legislators Retirement Program) would be interesting. Maybe there is a good reason, but I've never understood why legislators created a separate plan for themselves rather than participating in PERS. Is there more to it than they just don't want to be in the same leaky boat as the unwashed masses? Guarantee you if they had skin in the PERS game, it would be fixed yesterday. [TBH, it has always annoyed me that SLRP ("slurp") is the sound those hogs make at the public trough. They are laughing at the rest of us.]
Your post is the answer.
Deferred Comp is separate from PERS but still under the same umbrella, right?
PERS offers a deferred comp plan. Counties and Cities can offer it to their employees or offer a competing plan.
Sadly, you are right in your last seven words. Slowly scan each chamber and imagine each seated participant in bib overalls and pig-tails.
SLRP is not a 'separate' retirement plan. The "S" stands for supplemental. All eligible legislators and Light Gubnors, past and present, will draw regular PERS PLUS the Supplemental Legislative Retirement Plan benefits.
I love it when wise men come up with something clever and new.
"Tier 5 won't have any real financial impact for another 30 years or so."
Tier 5 will have a real negative impact effective a month ago. Or do you think inability to recruit and retain is not associated with financial stability?
Are you serious? You make me laugh.
SLRP was created because the legislature really wanted a pay raise but didn’t have the intestinal fortitude to give themselves one.
The plan has exceeded investment returns over time, and all requested contributions have been paid by employees and employers. However, wasn’t it last year that the PERS board and actuaries recommended huge increases in these contributions? It was shot down by the legislature but I personally don’t remember that happening before.
Yes the number of retirees has increased and the number of employees paying in has decreased, but actuaries have all of the numbers to put into their calculations.
Notice that the only “reform” ever mentioned by the retiree community is to pump in more money.
Retirement systems in municipalities are not held at same standard as corporate pensions. Governments have a tendency to offer retirement packages that they cannot fund. This will be just like healthcare. One day u have to face reality. When retirees become too heavy (too many retirees and more generous benefits) and the working population cannot support them that is when catastrophe happens. U can kick the can down the road but one day the engine doesn’t work like u wanted and there will be pain to suffer. We have a perfect example in Jackson: water system. If u don’t understand how it works and u keep promising what u can’t deliver, u cannot earn, borrow or tax the contributors enough to fix the system. Benefits eventually have to be cut and there will be one generation that takes the biggest hit. That my friend is as real as gravity.
"Notice that the only “reform” ever mentioned by the retiree community is to pump in more money."
Well...that's a better recommendation than simply closing the briefcase and adjourning for the session.
Retirees will go along with a pay cut when the legislature enacts one for themselves.
If the teachers get a $2k raise this year, who is funding the $350 employer contribution on that? Interesting teaches are all levels make up almost 60 percent of the covered employees. Most teachers start right out of college, at about 23 years old.
IMO, people are being allowed to retire too early with full lifetime benefits that I don't think is accurately fed into the benefit computation. Retiring at 48 with full pension benefits for life means the average person lives to 73, that's 25 years of benefits plus a compounding COLA that has to be funded.
There's also the effect of replacing employees with contract workers so neither the agencies nor the personnel pay into PERS leading to shrinking contributions. Any defined benefit plan that is funded at less than 80% (?) is dependent on future contributions from future employees and employers to fund the current and future crops of retirees, including defined benefit plans like PERS and SSA.
With so many state related employees howling about being underpaid, PERS retirement is a huge benefit that is not considered in their argument. In light of that, it makes sense to switch to a 401k style defined contribution plan so the state is not paying future PERS benefits on top of increasing pay rates.
The COLA doesn’t start until the retiree turns 60. So if you retire at 48 the COLA doesn’t start compounding then. I don’t know a state employee that can retire at 48 on a retirement benefit that is half of your paycheck. Who can do that without having to get another job is what most people do. What is bullshit is these Commissioners that are appointed by the governor that are six year terms quit after four and then they get a pension for life after only being in PERS for four years . And a COLA!
The ONLY thing the legislature did for PERS in 2026 is return to digging the hole deeper. i.e. return of the High 4 manipulation
If you make it to 48, odds are that you will make it much longer than 73
@1:19 PM, you’re correct but for any assumptions that the number of administrators would be reduced. Every one of them will claim that they’re all essential, that while the number of counties is down, the workload remains the same. What then? Get some elected politicians to make the staffing cuts? Yeah, right, that’ll happen.
Who cares we are all gonna die anyway!
"bust a deal, face the wheel"
Explain how there is manipulation of high 4? So you are saying employees manipulate their salaries? There’s another state employee myth!
Thanks for the clarification, 5:06. Can you describe the supplements they receive that regular PERS participants do not?
Not a myth....it applies to the "connected" who can maneuver through who they know to get the plum, high salaried positions those last four years....it's actually why this whole mess exists in the first place because it's been going on for 15 years, and that's when the problems began.
Post a Comment