Below is an opinion column by Sam Taylor:
Sam Taylor writes that it is time for the trustees to roll up their sleeves and get to work making the difficult decisions necessary to ensure PERS’s solvency.
With $25 billion in unfunded liabilities, the state’s Public Employees Retirement System (PERS) is on an unsustainable path. As a result, the PERS board of directors regularly and unilaterally increases contributions to prop up the system. These contributions come from two sources: employees pay 9%, and their employers contribute a whopping 17.4%.
Starting July 1, the PERS trustees planned to increase the employer contribution by another 5%, gradually over three years until it reached an incredible 22.4%. A 5% increase on top of 17.4% means a total increase in the employer contribution of 28.7%. To be clear, the “employers” paying this contribution are the state’s taxpayers, most of whom neither participate in nor are direct beneficiaries of PERS. They fund these contributions through taxes in one form or another.
This latest measure was the last straw, as evidenced by the numerous mayors who publicly opposed the proposed employer raise and stated the obvious – that they would have to raise taxes, lay off workers, or both to cover their increased costs. Their opposition led the legislature to take action to reduce the raise and change the process to require future raise proposals to be recommended by two independent actuaries and approved by the legislature.
Not surprisingly, this led to a decidedly negative response from the PERS Board of Trustees, which issued a call to PERS participants and beneficiaries, encouraging them to contact their state legislatures and voice their opposition to the bill.
PERS trustees are required, as fiduciaries, to act in the best interests of the plan, its participants and beneficiaries. By periodically increasing contribution rates, they are acting in accordance with their fiduciary mandate. However, most, if not all, PERS trustees are participants or beneficiaries of PERS, which is a clear conflict of interest. Even the state legislators who may now have final decision-making power over future increases are participants of PERS. It is possible that anyone who can directly influence PERS funding is or will be a beneficiary of that system. If someone can influence an outcome that benefits them personally, it is a conflict of interest. Does someone acting as an independent trustee represent the best interests of the state’s taxpayers, who bear the lion’s share of PERS funding?
Compare PERS to the private sector. According to the U.S. Bureau of Labor Statistics, in 2020, 67% of private sector workers had access to some type of employer-sponsored retirement plan, and the average company contribution was 3.5%. That means a third of companies offer their employees no path to a more secure retirement plan at all, and among those that do, the employer contribution rate is one-fifth of the current PERS employer contribution rate of 17.4%.
Because companies must attract and retain qualified employees while also generating profits to remain solvent, business owners must constantly weigh the pros and cons of employee benefit packages. Most cannot contribute at the level of the PERS system and expect to make a profit. The PERS system does not have this limitation, so the simple solution to underfunding is to keep raising contribution rates. Constantly asking PERS participants to shell out a larger portion of their salaries or, more commonly, forcing the state’s citizens to pay more taxes to avoid real reform is not the solution. As the old saying goes, “If it were easy, anyone could do it!”
Mississippians receive invaluable benefits from their public employees – teachers, health care workers, police officers, firefighters and others. PERS is an important program that must be maintained for the thousands of dedicated employees and their families who depend on it for a dignified retirement. In addition, it is a valuable recruiting tool to encourage people to pursue careers in the public sector. Unfortunately, the current structure is broken and needs to be systematically changed rather than continually asking PERS participants and taxpayers to pay more.
It’s time for the trustees to roll up their sleeves and get to work making the difficult decisions necessary to ensure PERS remains solvent and provides equity for all Mississippians. With more oversight from the state legislature, that could happen now.
Sam Taylor
Sam Taylor is CEO of Wealthview Capital, LLC and an accredited investment fiduciary.
— Article courtesy of Sam Taylor, for the Magnolia Tribune —
