New hires by state and by local governments would receive less benefits upon retirement under recommendations approved Wednesday by the 10-member board that governs the Mississippi Public Employees Retirement System. Lee County Chancery Clerk Bill Benson, a member of the board, said during the meeting he did not support all aspects of proposed changes in the plan for new hires, but said he would endorse the changes to ensure that current retirees and current public government employees receive the benefits they were promised. The recommendation endorsed by the board on Wednesday would not change any of benefits for current employees and retirees. The new proposal is similar to recommendations the board made last year, but state lawmakers did not adopt. The ultimate decision on whether to create a tier 5 that would entail a different and smaller benefits package for new employees rests with the Legislature. On Wednesday the PERS board simply endorsed creating a tier 5. The hope is that a tier 5 for new employees would address the financial woes many people say exist for PERS, which currently is providing some type of retirement benefits for about 350,000 current public employees and retirees. The recommendation made by the board would not include a guaranteed cost of living adjustment. The current plan includes an annual 3% cost of living increase that many members take at the end of the year as a so-called 13th check. Some PERS Board members said they do not think it is financially viable to continue the current COLA for new employees. “A guaranteed COLA is the big elephant in the room,” Benson told fellow board members Wednesday. “… I will support (a new play for new hires) based on that, we need to sustain what was promised to existing employees.” Benson and others at the meeting said reducing benefits for new hires would help stabilize the system long-term, but noted the system will still need more funding in the meantime. The key elements in the recommendations the board approved Wednesday with one dissenting vote and one not voting is creating a hybrid plan where a portion of the pension benefits for the new hires would be through a guaranteed defined benefit plan while the other portion would be through some type of investment package, such as a 401K, where the benefits would be determined by investment earnings. Under the current plan, all of the benefits are guaranteed each month. Board member Randy McCoy who voted no said he could not support changing the program so that all of the month benefit was not guaranteed. Under an example presented to the board Wednesday, a current employee with 30 years of service earning $60,000 per year at retirement would, based on projections, earn 87% of his or her current work salary upon retirement, including federal Social Security payments. Importantly, those benefits would increase 3% annually based on the guaranteed COLA. By contrast, the same retiree under the PERS board recommendation would receive 84.1% if the earnings from the investment portion of the pension package increased by 7% annually. But there would be no guaranteed COLA, though, a cost of living increase could be awarded each year. Some members conceded that a less attractive pension package could make it difficult to recruit people to work in the public sector where the salaries are often less than those provided in the private sector. Kelly Riley, director of Mississippi Professional Educators, said her group is concerned about the proposal for new hires, “especially its impact on the teacher pipeline and recruitment and retention.” “We believe it will only deepen and exacerbate our state’s teacher shortage,” Riley said. “New teachers under this tier 5 would contribute the same 9% as those in tier 4, but rould receive fewer guaranteed benefits.” The financial issues facing PERS have been an ongoing headache for the Legislature with widespread and long-term ramifications. The system has about 350,000 members including current public employees and former employees and retirees. The system provides pension benefits for most Mississippi public employees on the state and local government levels, including schoolteachers. Members of PERS comprise more than 10% of the state’s population. The system has assets of about $32 billion, but debt of about $25 billion. During the 2024 session, legislation was passed to strip a key power of the PERS’ Board – to set the percentage of the employee paycheck governmental entities contribute to the pension program. To deal with long-term financial issues, the PERS Board had planned a 5% increase over three years to 22.4% that the employers or governmental entities contributed to each paycheck. Governmental entities, particularly local governments and school districts, said to pay for the increase they would be forced to reduce services and lay off employees. While stripping the power from the PERS Board to set the employer contribution rate, the Legislature also enacted a 2.5% increase over five years instead of the 5% increase over three years planned by the PERS Board. In addition, the Legislature provided a one-time infusion of $110 million into the system. The board on Wednesday debated holding off on endorsing the recommendation. “I just got this around 8 last night and I don’t see the rush for us to recommend something,” said board member state Treasurer David McRae. “… I want to get this right. This is going to be a generational change for Mississippi.” Board Chairman George Dales, former longtime state insurance commissioner, said the Legislature “could still do this on their own” without a PERS board recommendation. Others noted a recommendation from the board would be helpful and politically pragmatic for the Legislature. State Sen. Daniel Sparks, R-Belmont, a board member, said that even if the state were to adopt more limited benefits, local governments in the system could still provide more, at their own cost. The post Mississippi PERS Board endorses plan decreasing pension benefits for new hires appeared first on Mississippi Today.