PERS board reviews alternative Tier 5 DB plan with 1% guaranteed COLA as legislature debates hybrid

At a special-called meeting of the Public Employees Retirement System of Mississippi, board members reviewed an alternate "tier 5" defined-benefit (DB) proposal that would guarantee a 1% cost-of-living adjustment (COLA) for new hires and, in staff projections, produces funding metrics comparable to a hybrid plan the board previously discussed.

The presentation and follow-up questions centered on how the pure DB alternative compares to that hybrid model on three metrics the board emphasized: projected funded ratio, the funded-ratio trajectory in 2054, and short- and long-term cash flow. Actuary Ed Coble told the board that “those numbers have not changed,” confirming the figures in the slide deck and spreadsheets had been run through the actuarial model and accurately represent the consultants’ projections.

Why it matters: the board has been asked by legislators to provide framework and numbers lawmakers can use. Board members and legislative liaisons said the legislature remains free to choose an approach, and some urged that giving lawmakers a second methodology could be useful while others cautioned that presenting two competing frameworks could divide the legislature and risk inaction.

The technical contrast: staff and the actuary explained that a DB plan with a fixed 1% COLA shifts more long-term risk to plan sponsors (employers and the retirement system) because the COLA is statutory and guaranteed; by contrast the hybrid plan creates different risk profiles with some risks borne by participants. As the actuary summarized, the 1% option is “a fixed 1%” COLA in the model; that guarantee improves projected funded ratios in some scenarios but increases the system’s exposure to adverse experience.

Board debate and motion: a board member moved to endorse a Tier 5 DB model that meets the qualifiers the board previously approved; the motion was seconded and drew extended discussion. Supporters argued the alternate DB model meets the board’s funding qualifiers and would provide legislators another workable option. Opponents said releasing a second framework now could confuse or divide lawmakers at a critical point in the session. The transcript records the motion, the second and substantial discussion; a clear roll-call result for that endorsement is not recorded in the meeting transcript provided.

What comes next: members of the board and legislative liaisons agreed the actuary’s numbers should be used by lawmakers and staff will continue to provide technical information as the legislature considers the bills. Board members also stressed that inclusion or exclusion of items such as sick and military leave can materially affect hybrid-model numbers.

The board did not adopt detailed implementation directives at the meeting; instead, the director and staff were asked to continue working with legislators and the board on timing and administrative implementation if a new tier is enacted.