November 16, 2011 Meeting of PERS Study Commission
· The Management Subcommittee presented four recommendations, the first of which recommended that the Legislature consider revising the composition of the PERS Board of Trustees to represent taxpayers. The full Commission asked that this recommendation be worked on some more and brought back for further consideration at its meeting this morning, as the Commission does not want to give any indication that the current Board of Trustees has been ineffective. The remaining three recommendations addressed funding for the State Auditor to review PERS’ risk and performance at least every four years, PERS’ implementation of a comprehensive risk management system, and support for the PERS Board of Trustees’ decision that PERS not design a plan of health insurance.
· The Investment & Finance Subcommittee recommended that PERS reconsider lowering its investment return assumption (currently 8%) as recommended by PERS’ actuaries, that PERS review its investment policy more regularly, and that ongoing study be given to the benefits of a hybrid retirement plan to determine if Mississippi employees would benefit from more options.
· The Legal Subcommittee did not make any recommendations to the full Commission, but provided information regarding changes that the subcommittee thought the law would allow for. The subcommittee acknowledged changes could be made for new hires most easily and that employees have a contractual right to what they have already earned, but that some changes could be made prospectively (i.e., for the future), including, but not limited to, removing disability coverage for non-disabled members, applying a retirement age for future accruals, eliminating “stacking” of salaries by employees, and changing the calculation of the COLA (i.e., possibly tie it to the Consumer Price Index (CPI) rather than current 3% compound basis).
· The consultant from the firm of Gabriel, Roeder, Smith and Company (GRS) then briefed the Study Commission on the firm’s review of the PERS plan and policies. I had to leave during this presentation, so I cannot speak to that discussion.
October 31, 2011 Meeting of PERS Study Commission
· Chairman George Schloegel began the meeting by discussing that the state has to keep a $1 promise with only $0.64 revenue, so sustainability has to be considered. He was referring to PERS having approximately 64% of the funds needed to pay its liabilities over 30 years. Senator Hob Bryan (a non-voting legislative member of the Commission) pointed out that this $0.64 would be the case if the system shut down that day and had to pay its obligations, rather than operating over time.
· Rep. George Flaggs of Vicksburg met with the Commission and expressed his concern that the Commission had not been able to meet with the Joint Legislative Budget Committee. He also stated that the Commission should not recommend: 1) privatization or changes to the current Defined Benefit plan, 2) abolishing or changing the current composition of the PERS Board, or 3) reducing or eliminating the COLA
· Rebecca Staples, a member of the Governor’s staff, briefed commission members on the Supplemental Legislative Retirement Plan (SLRP). In discussions later in the meeting, Commission members considered whether or not to study the SLRP. Chairman Schloegel asked members to consider this for more discussion at the Commission’s next meeting.
· Most of the meeting was comprised of the actuarial consultants from the firm of Gabriel, Roeder, Smith and Company (GRS) running different scenarios to show how adjustments to expectations or other factors (assets, payroll, financing and membership) would impact the PERS system.
· PERS Chairman Bill Benson, a member of the Study Commission, repeatedly reminded Commission members that the PERS Board can only make recommendations, and that the Legislature authorizes changes
· The Study Commission had a brief discussion regarding the outcomes of its work, given that it can only make recommendations, with the decision as to any action regarding its recommendations left up to the PERS Board and the Legislature
· Chairman Schloegel wrapped up the meeting by saying that if anything, maybe the state can learn from its mistakes of the past (i.e., increasing benefits in 1999 without increasing contribution rates) and move forward to a new system. He suggested the PERS Board might want to consider a split system with some degree of a 401(k)-style component for the future, saying 2 parachutes are better than 1.
· The Commission set a tentative date of Thursday, November 10 for its next meeting.
Click here to read the Clarion Ledger report of the October 31, 2011, meeting of the PERS Study Commission.