Financial Health of Plan

Posted on

Recently we’ve heard from members in the field who’ve expressed concern about the financial health of MOSERS. Hearing of the System’s 84% funded status has raised questions among some members who then wonder if this will impact the state’s contribution rate for FY2012. Some are even hearing rumors that the contribution rate would be 20% next year, and the difference (between the FY2011 rate of 13.81% and 20%) would be paid by the employee.
First, and most importantly to you, no employee contributions are being considered for present employees. We are definitely on an economic roller coaster ride, but our returns are exceeding expectations so far this year. The state’s contribution rate, which was certified by the MOSERS board for FY 2011 to be 13.81% of payroll, fully recognized our funding ratio of 84% (which is viewed by the industry as a healthy position). We have no idea what would have prompted someone to suggest that the rate is going to 20%.
These and other rumors may have stemmed from press reports on the recent Pew report. That report, unfortunately, had a misleading title, and the data they used included the Public School Retirement System’s (PSRS’) liabilities in their calculation. There are still a few PSRS members who are state employees and because of that the preparers of the Pew report included PSRS’ total liabilities in their report on the state of Missouri. That’s not just misleading – it’s simply wrong. You can read MOSERS’ response to the Pew report
here.
Also, the state cannot require contributions from any employees without a change in the law. SB 714 (which is now also attached to HB 2357) has a provision which would require a 4% of pay contribution rate for new employees only, who are hired for the first time on or after January 1, 2011. While the University of Missouri recently established a contribution rate for current employees, their plan specifically allows the Board of Curators to make those types of changes without a law change. Our statutes do not.
The fact that the funded status is not higher than it is currently can reasonably be attributed, in part, to significant benefit increases that have been enacted over the years. Benefit changes enacted in the 1990s that resulted in material increases in unfunded liabilities are described below.
Benefit Changes Since 1992


  • 8/28/94 - Permanent Rule of 80 adopted (It had previously been put in place for a one
    year window period commencing 8/28/92)
  • 1/1/95 - Benefit multiplier increased from 1.5% to 1.6% (applied to active and retired
    members)
  • 8/28/97 - COLA made permanent for life rather than temporary period (applied to active and retired members)
  • 8/28/97 - “Free 50” survivor benefit enacted (applied to active and retired members)
  • 7/1/2000 - Year 2000 Plan became effective but this was cost neutral. (However, the
    other changes identified here resulted in significant additional liabilities and related
    contribution rate increases.)
Print Friendly and PDF