The most important information can be found in the graph and figuress on page 55 of the PDF document below. (You can type "55" in the page number box to go directly to that page.) The graph and figures show the effects on the median funded ratio and median contribution rate of PSPRS based on three different scenarios. The green line and bar represent the effects of the following proposed changes:
- COLA delayed until 7 years after commencement of benefits or age 60.
- Tier 2 members can retire at 25 years of service (no minimum age required).
- Employee Self funded Inflation Protection Program (IPP) provided for all active generations. Members can participate in a Non-contributory, Contributory or Reverse IPP (dependent on the date of hire).
- Pensionable income limited to $180,000 indexed with CPI.
- Eliminate the current excess earnings model for the COLA.
- Reduce employee contribution rate to 7.65% (eliminating the 4% maintenance of effort contribution).
- Create a new account funded by 4.0% employee contributions (plus actual investment income) which would fund an annual COLA payable after 3 full years of contributions.
- A COLA would be paid each year based on funds available.
The graph and figures show that a complete reversal of SB 1609, the red line, would be a disaster for PSPRS. Median contribution rates would continue to increase until 2033, and the median funded ratio would not reach 60% until 2023. We have to remember that these are median rates and ratios and specific rates and ratios for individual employers could be much worse. When we look at the blue and green lines and bars, they are nearly identical. The blue and green bars are of nearly equal height, and the blue and green lines converge to a point where they appear like one line. These lines also maintain a level median contribution rate until 2033. The blue and green bars also maintain higher funding ratios over time and reach 60% funding approximately five years prior to the red bar.
This now brings us to the big question. Why do we need a new set of reforms to PSPRS when the reforms of SB 1609 already appear to be working, and the proposed reforms show no improvement over SB 1609? It goes beyond certain parts of SB 1609 being declared unconstitutional since the SB 1609 reforms could just as easily be proposed as a constitutional amendment as the proposed reforms. We'll go into this further in the next post.
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