In an attempt to sure up the public pension system in Mississippi the trustees for the Public Employees’ Retirement System pension board have voted to increase contribution levels for employers, including state agencies, public schools, public universities, community colleges, cities, counties and some other entities. The annual contribution rates will escalate from 15.75% to 17.4% – ouch! Employee contributions remain at 9% of pay.

The system currently has only 61% of the assets needed to meet future benefit payments, and of course, that is using a 7.75% discount rate for their liabilities, which was recently reduced from 8%.  The shortfall in assets accumulated versus promises made is roughly $17 billion using the inflated discount rate. A true mark-to-market evaluation would reveal a much more severe level of underfunding.

According to the System’s actuaries, the fund will be 100% funded in 2047, but that is assuming that future contributions are made and the ROA achieved. A further analysis indicates that a 7.25% return for that period would result in the system only having 69% of the needed assets to meet future liabilities. By keeping the ROA assumption inflated the System is consistently under contributing to the plan.

Lastly, outgoing Executive Director Pat Robertson is quoted as saying “Even though we are projected to have a good growth of 9 percent this year, there is going to be pressure to reduce the assumed rate of return.”  Given the flat performance in the markets so far this year, the 9% expectation (guess) is looking a little shakey.