PERS recommendations would likely raise districts’ rates

The Public Employees Retirement System’s actuary is recommending changes that could push up school districts’ rates.

The PERS Board will meet Friday to look at changes the 2019 Legislature made and to consider the assumed rate of return on its investments. Milliman's recommendations were released Monday.

Milliman recommends that the board not raise the assumed rate from the current 7.2% and that it consider decreasing the rate to 7.1% or 7%. Decreasing the rate would increase PERS’ unfunded actuarial liability, resulting in a system-wide 2021-23 uncollared rate increase of 0.7% to 1.3%.

The assumed rate is a prediction of how much the PERS Fund will earn on average. PERS Fund returns pay for about three-quarters of PERS’ obligations. When profits exceed the assumed rate, public employers have to chip in less, and when profits fall short of the assumed rate, public employers have to put in more.

A lower assumed rate forces the payroll rate to be set so that public employers make up more of the obligation. The board lowered the rate in 2017.

In light of the stock market’s recent climb, the PERS Board has faced some pressure to raise the assumed rate, which would lower public employers’ payroll rates. If the fund doesn’t meet the higher assumed rate, though, the PERS debt gets bigger and public employers could end up owing even more in the long run, according to Piper Jaffray & Co. Managing Director Carol Samuels.

Milliman is also recommending updating demographic assumptions, which would increase the systemwide uncollared rate by 0.3%. PERS has “collars” that keep the rate from rising too steeply, so the uncollared rate often goes up more than the actual rate increase for employers.

PERS will release its advisory employer-specific contribution rates for 2021-23 in December. The actual rates will be released in fall 2020. 

- Jake Arnold, OSBA
jarnold@osba.org