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PERS stress tests show large downside risk; trustees vote to ask governor to include funding language in special session call
Summary
Actuarial stress tests presented to the Public Employees Retirement System of Mississippi showed how adverse market years could sharply lower the plan’s funded ratio and balloon its unfunded liability, prompting trustees to ask the governor to allow legislative consideration of additional funding during any special session.
CABMAC and PERS staff presented stress-test projections at the April 1 meeting that illustrated the system’s sensitivity to near-term investment returns and the limited short-term benefit from market rebounds.
The actuarial presentation used the 2024 valuation as the baseline and showed that, under the board’s 7% long-term assumed return, the system’s funded ratio was projected to be about 53.7% in 2047 and the unfunded accrued liability could grow from roughly $26 billion to about $36 billion by 2047 and toward $38 billion by 2054 given current statutory contribution phases. CABMAC showed several down-side scenarios: a 3% return in the current fiscal year, 0% or negative returns, and a -19% shock. Under several adverse paths the funded ratio declined substantially through the projection window; a very severe sequence could lead to near exhaustion of the fund during the projection period.
Ed and CABMAC emphasized that a single poor year cannot be offset by an equally good following year because valuations assume multi-year growth and the base for future liabilities shifts after losses. The actuaries noted the recently enacted Tier 5 law and other legislative changes were not yet reflected in the interim stress tests; they said a full set of projections that incorporate Tier 5 would be presented in June.
After the stress-testing presentation Dr. Randy McCoy moved that the board request the governor include language in any special-session call allowing the legislature to consider additional funding for PERS; Mr. Benson seconded. Trustees debated precise wording and agreed to keep the request focused on permitting legislative consideration of “additional funding” rather than prescribing a funding source. The board then directed the executive director to draft and submit a letter to the governor, under the chair and vice-chair’s oversight, by close of business Friday. The motion passed by voice vote.
Trustees and legislative members on the call said pension reform (Tier 5 and ORP changes) will help long term but will not negate the near-term need for an infusion or a structured funding stream. Several trustees asked staff to prepare numbers showing the effect of various funding amounts and time horizons for use in legislative discussions.
