Altering retirement ages of Mississippi’s public workers and temporally freezing retiree cost of living raises are not the only likely flashpoints ahead in this year’s Legislature.
Look for equal volatility over proposals for an increased private-sector presence on the board of trustees of the Mississippi Public Employees Retirement System and increased oversight of the trust fund’s daily operation.
A report presented earlier this month by a study commission appointed by Gov. Haley Barbour suggests options such as changing the makeup of the 10-member Mississippi Public Employees Retirement System‘s governing board or setting up a separate commission to assume authority over plan design, inputs, and assumptions used by the plan actuary
The departing-governor gave the panel a main charge of closing what he says is a $12 billion gap between the trust fund‘s assets and its liabilities. But he also asked for a close look at the trust board and whether an injection of private-sector influence could help in its decision making.
He likewise asked the study commission to explore opportunities for regular audits and performance reviews of the $20 billion fund.
The 10-member PERS board includes the state treasurer, a gubernatorial appointee who is a member of PERS, two retirees, two state employees and one representative each of public schools and community colleges, IHL, counties and municipalities. With the exception of the state treasurer and the gubernatorial appointee, members are elected to staggered six-year terms.
The current board has not won over many hearts in the governor’s office with its adherence to a February 2010 opinion from Attorney General Jim Hood that any increase in employee contributions to the plan must be offset by increased benefits. At Barbour’s urging, the Legislature for 2011 increased the employee share to 9 percent from a nearly two-decade old rate of 7.25 percent.
Meanwhile, the PERS board has raised the employer contribution rate to what will amount to total increases of 46.2 percent over the last eight years once the taxpayer share rises to 14.6 percent in July 2012.
The PERS study commission was near unanimous in endorsement of an overhaul of the way the trust board is constituted. Bill Benson, a study commission member and chair of the board the commission wants to change, cast the only dissenting vote.
“In my opinion there is nothing in the report” that justifies altering the board’s makeup, said Benson, a former administrator for Monroe County and current chancery clerk for Lee County. He serves as a state worker representative on the PERS trust.
The board as constituted “is the proper makeup of the board,“ he said, because the makeup “reflects the composition of the trust fund,“ he said.
That, Benson said, is “as it should be.”
The study commission’s report cited Benson’s opposition, and emphasized that he noted for the record that as a member of the PERS board he was not “a representative of the taxpayers,” but was a “trustee representing the beneficiaries.”
Faith in change
Anna Hurt, executive director of the 450-member Mississippi Association of School Administrators in Clinton, said her membership is concerned about having a dwindling say on the board. But that’s just one of several worrisome proposals from the study commission, she said, citing fears that some longtime promises may not be kept and that attracting strong educators to Mississippi could become yet more difficult.
However, legislators may be less than eager to take tinker too much with a retirement plan whose membership includes some 80,000 retirees and about 246,000 public service workers, Hurt said. “Many of us have faith that when it hits the floor it won’t be quite as bad as the committee as recommended.”
Center for Public Policy chief Forest Thigpen also hopes the plan is changed by the time it arrives on the floors of the House and Senate. However, the changes he and his Jackson-based think tank want are opposite those desired by Hurt.
Like Hurt, Thigpen is unhappy with the study panel’s report, but for entirely different reasons.
Barbour’s study commission only “kicked the can farther down the road,“ Thigpen said.
The center wanted a straight forward shift to a 401 (K) style “defined contribution” plan from the current “defined benefits” pension plan. The study panel suggested a defined contribution plan be added as an option but not mandated.
“We would have preferred they moved more toward a defined contribution plan more quickly than the study committee recommended,” Thigpen said, and added he thinks the recommendations failed to include “making the structural changes that are going to be necessary.”
Thigpen is heartened by the proposals for changing the board but wants an even split in membership between participants in the PERS plan and citizens with no stake in the plan, preferably professionals in financial investment.
CHANGING THE BOARD
Here are options presented to Mississippi legislators by the Public Employees Retirement System study commission for altering the makeup of the PERS board of trustees:
>> Option 1: Add additional independent members to the PERS board with senior investment or financial management experience or extensive, senior-level private sector management experience and no direct or indirect interests in the plan.
>> Option 2: Revise the positions on the trust board currently held by the state treasurer and appointed by the governor by requiring the governor and treasurer to appoint independent members with senior investment or financial management experience or extensive, senior-level private sector management experience and no direct or indirect interests in the plan. If this option is selected it should be coupled with a recommendation for an annual review of the PERS plan by the state auditor.
>> Option 3: Form a six-member commission with the governor, lieutenant governor, and/or speaker of the House appointing three members, each with senior investment or financial management experience or extensive, senior-level private sector management experience and no direct or indirect interests in the plan. The PERS Board would select three of its members to serve on the commission. This commission would assume authority over plan design, inputs, and assumptions used by the plan actuary. Plan operations and implementation along with other ministerial functions would remain under the PERS board.
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