At long last PERS reform is upon us. But will it work?

 

When the House abruptly jumped on the chance to pass the Senate’s typo-ridden income tax cut bill, it incidentally adopted the Senate’s PERS reform package which was included. House leadership was not in favor of the Senate position but could not alter the bill and still take advantage of the typos.

 

Thus, beginning March 1, 2026, new government hires will be placed in a new PERS tier that provides substantially reduced benefits. Key changes include:

 

1) Calculating benefits based on the top eight consecutive years of pay instead of the high four not-necessarily-consecutive years;

 

2) Accruing 1% of that average pay for each year of creditable service rather than 2% for the first 30 years and then 2.5% thereafter;

 

3) No guaranteed 3% COLA, however employing agencies may provide COLAs from time to time;

 

4) Increasing ages required to receive full accrued retirement benefits, from age 60 to age 65 and from any age with 30 years of service to age 62 with 30 years or any age with 35 years of service;

 

5) Losing the partial lump sum distribution option but instead all will receive a defined contribution plan similar to a private 401k (along with the reduced guaranteed retirement payments);

 

6) No option for separated participants who get rehired or re-elected to get back into the old system;

 

7) Of the 9% of salary each employee pays toward retirement, 5% will go into the defined contribution plan and 4% into the defined benefit plan rather than all 9% going toward the defined benefit plan;

 

8) Legislators elected after March 1, 2026, will not be eligible to participate in the Supplemental Legislative Retirement Plan.

 

Will these changes save PERS? They will reduce future costs, but …

 

“PERS remains very much at risk in the face of a volatile and unpredictable future,” according to the Pension Integrity Project at the Reason Foundation, which provided technical assistance for the new plan. “The main culprit threatening the state’s pension funding will continue to be its rigid contribution policy with rates set in statute rather than adjusting each year to achieve a payoff goal.”

 

PERS and its actuaries say the employer contribution rate should be 25.9%. The legislature is escalating the employer rate but stops at 19.9% in 2028. Neither is adequate says the Reason Foundation.

 

Bottom line: PERS’ $26.5 billion in unfunded pension liabilities must still be funded. The reform does nothing to address that yet that is what drove the need for reform.

 

 

Crawford is the author of “A Republican’s Lament: Mississippi Needs Good Government Conservatives.”