The governing board of Mississippi’s defined benefit pension system voted unanimously Tuesday to lower its expected rate of return for the plan’s investments.
The board of trustees for the Public Employees’ Retirement System of Mississippi voted at its monthly meeting to lower the expected rate of return from 7.75 percent to 7.5 percent.
It’s not quite as low as the change recommended by PERS’ actuary, Cavanaugh Macdonald Consulting, which recommended the board lower it to 7 percent in its most recent experience report. The actuary recommended in 2018 that it be lowered to 7.5 percent. The estimated rate of return was last changed by the board in 2015, when it was reduced from 8 percent to the present rate.
The estimated rate of return is important because it used as a planning tool by PERS, which is the retirement fund for most state, county and city employees. Having an unrealistic estimated rate of return can disguise serious underfunding issues with a pension fund.
The funding policy of the board requires a reduction when investment income exceeds certain targets.
Those targets were exceeded in fiscal 2021, which ended on June 30, as the fund earned an astounding 32.71 percent in gross returns for the year. The massive returns will likely help improve the fund’s bottom line.
According to the June 30 investment report, the fund manages more than $35 billion.
PERS executive director Ray Higgins told the board that PERS paid $110 million in investment fees, which was less than the year before when PERS didn’t meet its investment goals. There are 34 managers with 62 portfolios for PERS according to Higgins.
The board also approved the request of Tupelo’s city council for a 1 percent ad hoc cost of living adjustment. Tupelo is one of several Mississippi cities with retirement plans that were managed by PERS officials starting in 1987. All employees hired after July 1 of that year became PERS members.
