Mississippi (PERS) is short 26 billy. Is that bad?
- Thread starter thedoubledeuce
- Start date
It is bad, but the current schedule of contributions is enough to likely to let the state muddle through. Going to suck for taxpayers as they are going to be getting screwed by pers the same time that they are getting screwed by SS and Medicare. Really have just had crazy irresponsible voters for decades, with the boomers being the worst. PERS was nuked in 1999. So right when social security was clearly going to be a problem, and after plenty of warnings of how stupid it would be to increase benefits without increasing funding, our legislature said YOLO, sucks to be a taxpayer, and screwed us.
Let‘s say the state can’t meet its obligations to PERS beneficiaries. What are the legal problems MS would face for forcing a mandatory contribution plan on its workers and then not being good for the money when it comes time to fulfill the contract?
The math doesn't math. My wife is retiring in the next few years from the state. She can take her account present value at retirement or draw half her salary starting on day 1. Her ROI on taking the pension is right at 3 years.
Mississippi politicians nuked Mississippi with PERS because they believed they would get hammered for being responsible. Fordice wasn’t even up for reelection I don’t think and didn’t veto it because he was scared of undoing the little bit of progress republican had made towards getting members elected in the state house and senate.
I am fixing to be 62, and I have been hearing SS was going broke ever since I was in high school. It never happens and the year it's going broke keeps getting put off and after a while it just becomes a political talking point. SS will not go broke. They might have to stop Free Cell phones and other ********. If they would have only done what President Bush wanted to do and put in the stock market it would be worth tens of Trillions.
That’s what I’m saying. What if I’ve worked, oh.. 27 years for the State of MS and it jacked my earnings for 7% of the take only for the scheme to be titsup come payday? Would I have a legal path to recoup my losses and be compensated for potential earnings comparable to had I kept the money and invested it myself?
After all… we’re not talking about an opt-in savings plan here.
I’m no lawyer. But Mississippi has a legal obligation to pay, backed by its full faith & credit. Whether that’s from even more increases in employer & employee contributions or general tax revenues. But we’ll see, or I hope we won’t. At the federal
Level we’re being told they may cut social security benefits by 20% in about 6 years. And i damn sure paid in to that. Again we’ll see. I think a lot of congressmen are going to commit political suicide if they don’t rescue social security. Same with Mississippi lawmakers if they don’t rescue PERS.
100% correct, everyone will get their full SS, there will be no cuts. SS is far too important an economic driver. Most folks don't understand the amount of benefits paid out each month. Just investing a portion in the market, like every other pension plan, would bring in a huge amount of money.
The employee contribution is 9% of salary. The employing agency or political subdivision is required to contribute 18.1%.
That’s bc we have yet to get to a year when the reserve has been predicted to run out. Its pretty much been in the 2030s for a long time.
It’s gone up since I had to deal with it. For years they put all the increases on the employer. And I’ve got bad news. Both of those are going to have to go up. Substantially. They desperately need to cut the benefits going forward (they can’t legally cut what you’ve earned to date). But they don’t have the political will to do that.
There is no precedence for states being insolvent. Political si divisions can de late bankruptcy but states don’t have a bankruptcy section. Just adding one would probably cause some states to go bankrupt because their interest rates on their debts would immediately shoot up once it’s clear bankruptcy is an issue.
The contracts clause in theory prevents them from reneging on debt without some federal legislation allowing bankruptcy. But the contracts clause doesn’t override math.
for a little perspective on the math. Corporate pension plans are required to have a funding ratio of 80%. Mississippi is at 55%.
Same problem they had for decades when they by law were required to fund MAEP but were only able to manage to do it in two election years out of about 25. Nothing.
Because it isn't going broke and hasn't been. There is a shortfall that can be fixed if and whenever they decide to.
Probably not popular, could this be part of the problem. the original PERS plan
https://www.pers.ms.gov/Content/Supplemental/PERS%20Retirement%20Tiers%20Overview.pdf
25 years at any age or age 60 and vested, (4 years to be vested) 25 years for a college graduate had them retiring at 47ish,
https://www.pers.ms.gov/Content/Supplemental/PERS%20Retirement%20Tiers%20Overview.pdf
25 years at any age or age 60 and vested, (4 years to be vested) 25 years for a college graduate had them retiring at 47ish,
The problem with this is that by pretending PERS costs are related to current employees, they are ensuring that more outside contractors are used instead of employees because it's much cheaper. Nothing wrong with that per se and generally is probably a positive, although it opens up different avenues for fraud, but it's going to 17 up their projections.
They need to just take the GASB Statement No. 68 amount and make the relevant government entity chip in an extra amount each year that would amortize that amount over say a 60 year period with a 3% interest to match the statutory COLA. Then governmental entities could just perform work with employees or outside contractors based on what is best, without this artificial wedge created by making up past pension debt.
It's like groundhog day here.
This claim was addressed in a long OT thread last week.
tldr for you- partially privitizing wouldn't have solved things and instead made it worse.
Trying to understand what you are saying here as a non accountant. Are you saying that the state should take the GASB statement no 68 amount for an entity, say a school district, highway dept. etc. and use that projected pension liability to charge that entity, and that entity only, the extra amount each year? Then said entity could see, based on those projections, if it is better to use employees or contractors?
The State will continue to try to fix it by increasing the contribution of the employers (cities, etc.) who can't afford it. As they do this, cities will continue to outsource, and reduce their number of employees. When cities do that, it means less and less people paying into PERS, which means it is less likely to survive.
"Hell hath no fury like a woman scorned" won't hold a candle to state workers that get "scorned" out of their retirement that they were required to pay into for years or decades, me included.................
Those costs ARE related to current employees. And they essentially are amortizing the shortfall over probably much longer than 60 years with the insanely high contribution rates. Problem is, MPERS has historically used unrealistic assumptions in the actuarial valuations which has resulted in the true shortfall being understated and new shortfalls being generated each year as actual experience comes in worse then the assumptions.
In my opinion, the 3% COLA is a killer. The COLA needs to float with documented and measurable inflation.
Correct.
If employers only had to fund the pension benefits their current employees are earning this year, the combined contribution would be about 12% of pay. The extra ~17 percentage points is almost entirely payment on past underfunding.
There is no good reason to collect that catch-up as a percentage of today’s payroll. Doing so ties a historical debt to current headcount.
Example: a county can fill a job for $100,000. With PERS, the all-in cost is about $119,000. Roughly $17,000 of that is the underfunding surcharge. If they hire a contractor instead for $110,000, they look like they “saved” $9,000. They didn’t. The unfunded liability is still there. They just shifted the payment onto remaining employers (and future taxpayers) while spending more in total than the work itself required.
A sane system would assign each employer a share of the existing shortfall based on the underfunding they helped create, then require a fixed payment (or a declining schedule) that does not shrink just because they cut positions or outsource. The current method does the opposite: it rewards shrinking the payroll that the surcharge is levied on. That pushes counties and cities toward contractors even when an employee would be cheaper and more appropriate, and it leaves PERS holding the bag.
It does not take 28% to fund benefits as they are incurred on average.
MPERS has used ridiculous assumed returns in the past. It's still higher than I would use, but it's now basically at the median for public pension funds as far as their assumed return. And with our persistent inflation, it's probably an ok assumed return for the short/medium term. It's not guaranteeing that we are understating our unfunded liability like it did in the past.
That said, while the assumed return is important, it's damn near irrelevant when you completely ignore actuarial calculations for determining the contribution rates. If contributions had been required to have some tie to reality, we probably wouldn't be underfunded, because employers would have had some budgetary pressure preventing them from juicing employees high salary at the end of their career. A 7.25% employee contribution and a 9.75% employer contribution might would have been enough to keep PERS mostly funded for normal career progressions. But it's nowhere near enough when you allow people to serve on part time boards or positions or in the legislature for two decades and then triple their pension or more by taking a higher paying, full time job after accruing two decades of service credit in low paying ones. I think a lot of that has been fixed outside of legislators, but the damage was done. If hiring those employees would have come with the requirement of an almost 6 figure yearly pension contribution to reflect the actual costs, that would have probably ended it for all but the most politically connected hires.
The only thing that would impact federal spending in a meaningful way is some change to SS and Medicare/Medicaid
Social Security + Medicare + Medicaid + Net Interest = approximately 60% of all federal spending, leaving 40% for everything else, including defense, veterans benefits, transportation, education, law enforcement, homeland security, scientific research, foreign aid, and other federal programs. There is no political willpower to make any changes. SS likely won't go broke, but with enough interest rate pressure, our politicians could be forced in to reconsidering benefit structure. Foreign Treasure holdings decline could have a notable impact on interest rates. China isn't exactly "dumping" our Treasury's but they hold about 48% of what they did in 2013. They can't very well just dump it all or it would hurt them as well...
One of the dumbest things to me is that over a certain amount you don't pay any more SS tax each year. What sense does it make that the people most able to pay don't have to? Even if they came up with a graduated % that reduced somewhat it would be helpful. If they scaled benefits accordingly it would still be helpful. It still would not be enough to cover the predicted gap, but it could provide a meaningful portion.
Common sense and sanity are not primary drivers in public sector leadership circles...
It's been a while since I've had to deal with governmental entities (thank God). But for years, Mississippi used the most wildly optimistic assumptions in the country. And that's saying something because everyone was using unrealistically optimistic assumptions. I get your point now that much of the shortfall has accumulated over time and is related to PAST employees (or at least past service time of current employees). And I kind of like your idea of separating bridging the shortfall from paying true current costs for current employees. I've never seen it done that way (bridging the shortfall is just one component of the current rates charged), but maybe it should be separated at least in this case when the shortfall is so catastrophic. One thing they've done is they're cutting benefit accruals drastically for new employees hired. Only 1% per year, when it's been 2-2.5% per year in the past. Without knowing the details of the new hybrid defined contribution plan if I'm told I have to pay 9% into a pension plan that's only going to accrue benefits at 1% per year, I'm taking a hike. I assume most of that 9% goes into the mandatory hybrid defined contribution plan.
Benefit accruals are also capped at that same amount. So under the misguided notion that you get back what you pay in, it seems to make sense. But the tax and the benefits are two separate things. One fix they need to make is remove the cap for the tax, but keep it for the benefits. I have little doubt they will come up with something to prop social security up for the foreseeable future. Old people are a HUGE voting block and they tend to get extremely pissy when you talk about cutting their social security. We may see 300 or so new congressmen in the next election cycle if benefits are actually cut.
That is correct. I can remember Dr. Bullard (MSU Forestry Economics Professor) telling us in the late 90's that SS would run out in it's current form in 2033. I recently read an article to where that estimate was pushed to 2034. That was pretty damn accurate timeline Dr. Bullard gave us. He stressed to us to fund our own 401k's and I am glad I took that advice.
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