Public retirement program rate hike could cost Idaho governments $24 million if implemented
In coming months, members of the oversight board for the Public Employee Retirement System of Idaho (PERSI) are likely to make a decision that could force the state and local governments to shell out as much as $24 million more annually for pension plans.
Trustees will decide if PERSI can delay an increase in the contribution rate public employers – the state, school districts, fire departments, and many others – pay toward the retirement accounts of their employees.
In December of 2009, the PERSI board approveda move to phase-in an overall increase of 5.8 percent in the contribution rate through a three-year period to build the health of the fund, but then decided a year later to delay the initial increase originally set for July 1, 2011. At that time, it was estimated by the Division of Financial Management that move saved the state as much as $15 million.
One component of the decision to delay the initial rate hike may have been a letter trustees received from Gov. Butch Otter, House Speaker Lawerence Denney, R-Midvale, and Senate Pro Tem Bob Geddes, R-Soda Springs, asking that the panel delay the rate hike. Otter said trustees could maintain the health of the fund while freeing up the $15 million for use in other programs.
It appears PERSI board members won’t face the same pressure this year. Otter’s spokesman, Jon Hanian, told IdahoReporter.com Friday the governor hasn’t spoken with legislative leaders about the PERSI decision and that it’s likely no letter will be sent this year.
The retirement fund income is considerably healthier since the initial decision was made in 2009 to hike rates, though a funding gap still remains. On March 6, 2009, the fund was at a historic low point, worth about $7.6 billion As of Sept. 13, the fund is valued at $11.154 billion, down from April 29’s high mark of $12.2 billion.
Perow says the retirement program was 89.3 percent funded as of June 30, 2011.
That $24 million figure, according to PERSI communication director Patrice Perow, is how much the rate hike would cost governments across the Gem State if implemented. Of that figure, Perow says the state would bear $6.7 million, schools would pay $10.3 million, and other governments would fund about $7.6 million. Perow notes the $24 million figure is an estimate and may change as more data becomes available.
As it stands, employers pay 10.39 percent of each employee’s salary into PERSI each year. Employees pay 6.23 percent of their own salary into the system.
If the hike is enacted on July 1, 2012, it will raise the total contribution from employers to about 11.44 percent of an employee’s salary rate. Contributing employees of PERSI will see a half a percent increase in their contribution rates, meaning they will put in an additional $13 per check toward their retirement accounts.
Perow says if the decision is made, it will come after the fund’s annual report is released in October. Trustees must take action if they want to delay the rate hike. If the five-member panel simply ignores the decision, the increase will be implemented on July 1, 2012.
The retirement program has more than 68,000 contributing members and about 33,000 retired enrollees. The fund takes in about $39 million in contributions from enrollees on a monthly basis and pays out about $46 million in benefits, with the difference being paid by investment returns.