Senate passes tier 5 pension reform bill with new retirement provisions

The Mississippi Public Employees Retirement System (PERS) is moving forward with significant changes to its retirement plan, particularly with the introduction of Tier 5 provisions. During a recent meeting on February 26, 2025, key updates were discussed that will impact future employees hired from March 2026 onward.

One of the most notable changes is the introduction of a military credit provision and a new 35-year retirement option. Employees who work for 35 years will now be eligible for unreduced retirement benefits, a shift from the previous requirements of 65 years of age with 8 years of service or 62 years of age with 30 years of service.

The Tier 5 plan will feature a hybrid model combining defined benefit (DB) and defined contribution (DC) components. The DB portion will offer a 1% multiplier, which is approximately half of the current pension structure. However, this new plan will not guarantee cost-of-living adjustments (COLA) for the DB portion, nor will it include options for refunding or buying back service credits for unused leave. Employees will contribute 9% of their salary, with 4% allocated to the DB portion and 5% to the DC component.

Additionally, the legislation aims to establish a 401(a) profit-sharing type vehicle, allowing employees to manage their investments through a selection of funds, including a target date fund. This initiative is designed to empower employees to take control of their retirement savings while adhering to IRS requirements.

The board is tasked with creating rules and regulations to administer this new program, ensuring that the transition to Tier 5 is smooth and beneficial for future employees. As discussions continue, stakeholders are encouraged to engage with the board for further clarification and input on these significant changes to the retirement system.