(The Center Square) — Mississippi’s defined benefit pension system had a better financial year in 2023 after losing money on its investments last year, but obligations such as the plan’s so-called “13th check” continue to weigh it down.
The Public Employees’ Retirement System of Mississippi — which serves most state and local government employees in the Magnolia State — had its combined net position increase by $836.1 million or 2.7%, according to its annual comprehensive annual financial report released on Tuesday.
This year, the plan has earned a return of 7.76% after returns were in the red to the tune of 8.54% last year. This came after PERS’ investments earned a near-record 32.71% in fiscal 2021.
PERS has an unfunded liability of $25.2 billion, which is up more than $5 billion compared to last year.
But, the plan’s funding ratio continues to show issues that the 10-member PERS board is trying to rectify by increasing the employer (taxpayer) contribution from 17.4% to 22.4% of payroll will be phased in over three years. It’ll need to be approved by the Legislature in the session that starts in January.
The funding ratio has declined in the last 20 years, going from 79% to 55.7% this past fiscal year. The funding ratio was 59.9% last year.
The funding ratio is defined as the share of future obligations covered by current assets and is a solid measure for determining the fiscal health of a pension fund.
For the first time in more than 20 years, the number of retirees and beneficiaries actually shrank by 0.88%, going from 116,921 to 115,890 this year. The number of contributing employees also increased after years of decline, growing slightly by 0.63% to 145,985 compared to 145,068 in 2022.
The plan’s cost of living increase, known as the “13th check” since most retirees choose to receive it as an end-of-the-year lump sum, continues to be a financial sea anchor. PERS provides a cost of living adjustment that amounts to 3% of the annual retirement allowance for each full fiscal year of retirement until the retired member reaches age 60, regardless of the nation’s inflation rate. After that, the 3% rate is compounded for each fiscal year. Payments for the plan’s COLA added up to nearly $1 billion at $901 million in 2023, an increase of 6% after payments totaled more than $849.8 million. Compared to 2005, when COLA payments added up to $211 million, this year’s COLA payments are up 326%.
