PSRS/PEERS Board of Trustees Adopts Funding Stabilization Policy
Posted August 29, 2011
The Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS) Board of Trustees has been working diligently to stabilize contribution rates for members and employers, while continuing to maintain the financial health of the Systems. At the August 29, 2011, PSRS/PEERS Board of Trustees’ meeting, a new Funding Stabilization Policy was adopted and the impact on the funding of the Systems as a result of the policy is very positive.
“The clear consensus among the education community was that members and school districts needed some relief from rising contributions rates,” said Steve Yoakum, PSRS/PEERS Executive Director. “The PSRS/PEERS Board and staff, as well as the various educational associations, have been very committed to exploring all options available in order to achieve the goals set forth and all parties believe the new Funding Stabilization Policy achieves those goals.”
The Funding Stabilization Policy will have a significant impact on the funding status of the Systems. It relies on a shared commitment by both active and retired PSRS/PEERS members and allows the Systems to continue to provide retirement security to current and future educators and education employees.
The Policy provides the following:
- Stabilizes contribution rates for members and employers at or near the current 2011-2012 school year rates;
- Maintains the current benefit structure for retirees, active members and new hires;
- Provides an annual 2% cost-of-living adjustment (COLA) to retirees when inflation is between 0% and 5%;
- Improves the pre-funded ratio of the Systems to over 80%, which is considered to be a healthy financial status by the pension industry as a whole; and
- Utilizes a 30-year amortization period with the goal of paying off the unfunded actuarial accrued liability (UAAL) and becoming 100% pre-funded within that time period.
The stabilization of the funding of PSRS/PEERS is possible due to three components – strong investment returns over the last two fiscal years, updated actuarial assumptions as the result of the recent Five-Year Experience Study and the Funding Stabilization Policy adopted at the August PSRS/PEERS Board meeting regarding stable COLAs for retirees.
- Investment Returns: The Systems achieved investment returns significantly above the 8% actuarial assumed rate of return in fiscal years 2010 and 2011 with returns of 13.0% and 21.7% respectively.
- Actuarial Experience Study: The actuary recommended several changes utilizing updated assumptions regarding such things as mortality, payroll growth, individual salary growth and inflation.
- Funding Stabilization Policy: The Policy maintains contribution rates at or near current levels and provides an annual 2% COLA for current and future retired members.
“We are very encouraged by the actuarial projections regarding the Funding Stabilization Policy,” stated Yoakum. “After extensive research and discussion, we have a policy that stabilizes contribution rates while maintaining the same level of benefits for our current and future active and retired members. It must be acknowledged, however, that there are three important components of the Funding Stabilization Policy. Those components are continued investment returns at the 8% assumed rate, consistent member and employer contributions at or near current rates, and the annual 2% COLA for current and future retirees.”
As is the case with all public defined benefit plans, the overall financial stability of the Systems is dependent on both consistent investment returns and on the accuracy of actuarial projections. Any positive or negative change in either area will affect the overall financial status of the Systems. The PSRS/PEERS Board and staff will remain diligent in their ongoing evaluations of the Systems through annual actuarial valuations, actuarial experience studies and asset-liability studies.
PSRS/PEERS proudly partners with Missouri’s public school districts and our members to provide retirement security to over 220,000 active and retired public education employees and their families. The Systems strive to apply leadership, innovation and outstanding customer service in order to continue to deliver sound retirement benefits to current and future generations of Missouri’s teachers and school employees.