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Mississippi municipal pension funds that predate PERS improve their position in 2021

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Retirees in Jackson’s municipal retirement plan have reason to rejoice after the plan enjoyed a strong financial year, thanks to a banner year with the plan’s investments.

PERS, along with the other funds it manages (the Municipal Retirement Systems, the Mississippi Highway Safety Patrol Retirement System and the Supplemental Retirement Plan) earned 32.2 percent on its investments in real estate, U.S. and global stock markets for $39.5 million. That’s a massive improvement over last year when the MRS’ investments earned a five-year low of nearly $4.2 million.

PERS expects an annual rate of return of 7.55 percent on its investments, which was lowered from 7.75 percent this year by the plan’s board of trustees.

According to the plan’s comprehensive annual financial report, that windfall has helped reduce the unfunded liability for the MRS from $145.7 million in 2020 to $134.1 million in 2021. An unexpected increase in the mortality rates of beneficiaries also contributed, as the total number of beneficiaries in the MRS decreased from 1,585 to 1,510 (a decrease of 4.7 percent). Since 2012, the number of beneficiaries in the plan has decreased 23.6 percent from 1,978 in 2012.

There were 109 beneficiaries removed from the rolls in 2021, up from 83 in 2020 and 97 in 2019.

As a result, the MRS plan’s average funding ratio — defined as the share of future obligations covered by current assets — increased from 49.1 percent to 51.1 percent. The city of Jackson plan funding ratio is 52.98 percent. While unfunded liabilities don’t come due at once, the funding ratio is an excellent metric to assess a plan’s fiscal health.

Since 2012, the MRS’ average funding ratio has increased by 17.2 percent, improving from 43.6 percent that year. 

The Jackson Fire and Police Fund is the largest (33.1 percent of all retirees) participant in the MRS, which is managed by PERS and predates the state’s defined benefit pension fund. Jackson has 500 retirees in its retirement, with the other participating plans — Biloxi, Clarksdale, Clinton, Columbus, Greenville, Greenwood, Gulfport, Hattiesburg, Laurel, McComb, Meridian, Natchez, Pascagoula, Tupelo, Vicksburg and Yazoo City — having a total of 1,010 retirees.

Another bit of good news for the city of Jackson is that the city will have to pay less for its contribution to the plan. The plans are funded with millage assessments ($10 in tax on every $1,000 in assessed value for property) on the participating cities. PERS’ actuaries, Cavanaugh Macdonald Consulting, estimates that Jackson will be able to transition to a pay as you go model to cover benefits for its retirees by 2040.

Cavanaugh Macdonald estimates that the city’s millage rate contribution will dip from 3.79 in fiscal 2022 to 2.65 in fiscal 2023, which begins on July 1. According to the actuaries, the millage rate increased this year for 11 municipalities and decreased for six.

Millage rates are based on assessed values and can change when property values increase or decrease. Jackson’s assessed values have increased from $1.197 billion in 2016 to $1.251 billion in 2020, an increase of 4.5 percent.

The amount of money that the city of Jackson must contribute to PERS for the MRS has decreased 15.1 percent since 2012, going from $6.12 million that year to nearly $5.2 million in 2021.

The actuaries estimate that Jackson’s plan will have its benefit payments decrease from $10.7 million in 2021 to $5.254 million by 2035 and its contribution will decrease to $3.317 million by 2040.

Jackson also represents the largest chunk of the unfunded liability ($42.1 million), followed by Hattiesburg ($13.2 million), Biloxi ($12.29 million), Gulfport ($9.5 million), Vicksburg ($8.6 million) and Tupelo ($7.9 million).

Hattiesburg’s part of the MRS is 60.15 percent fully funded (135 beneficiaries) and its millage contribution will drop to 2.03 in 2023, while it will transition to a pay as you go model for contributions by 2049. 

McComb (42.6 percent fully funded) will reach the pay as you go milestone in 2041 and its millage rate requirement will drop from 1.9 to 1.05 in fiscal 2023 with only 17 beneficiaries on the rolls. 

Greenwood (48 beneficiaries and 44.29 percent fully funded) will be able to switch to pay as you go in 2038 and its millage contribution will drop from 3.28 to 2.62 in fiscal 2023. 

Yazoo City was the only city that will need to increase its millage rate for its employer contributions, from 2.93 to 3.43. The city’s plan covers only 10 beneficiaries and is only 10 percent fully funded.

On July 1, 1987, the 19 municipal plans transitioned to administration by PERS and were closed to new members, with employees hired after that year enrolled in PERS. The plans are now retired only, with the final two contributing employees having retired in 2020.