Board to discuss letter to educators’ retirement system

Board agreed to draft letter at annual retreat in August

By MIKE ANTHONY

Mehlville Board of Education members were scheduled this week to review a draft of a letter to the state’s education employee pension agency outlining their support for continued reforms to cap the amount of money school districts and employees contribute to the retirement system.

The school board was set to meet at 7 p.m. Wednesday, Oct. 12, in the Administration Building, 3120 Lemay Ferry Road — after the Call went to press.

During their annual retreat in mid-August, board members agreed to write the letter to the Public School and Education Employee Retirement Systems after discussing a plan that had been endorsed by the Missouri School Boards’ Association.

That plan, a funding stabilization policy, was approved Aug. 29 by the Board of Trustees of the Public School and Education Employee Retirement Systems.

The policy establishes an across-the-board 2-percent annual cost-of-living adjustment to retirees regardless of the inflation rate unless the inflation rate exceeded 5 percent, in which case the adjustment would be 5 percent as required by law.

The plan freezes the amount employees contribute from their salary to the retirement system at the current rate of 14.5 percent for PSRS members — certified teachers — and 6.86 percent for PEERS members — non-certified employees. School districts match those contributions.

PSRS/PEERS contribution rates for 2010-2011 were 14 percent and 6.4 percent, respectively. The current ceiling is 15 percent unless increased by the state Legislature.

The plan maintains the current benefit structure for retirees, active PSRS/PEERS members and new hires.

Over time, PSRS/PEERS officials believe the plan could significantly improve the funded status of the retirement system.

As of June 30, 2010, PSRS could fund 77.7 percent of its liabilities and PEERS could fund 79.1 percent. PSRS had roughly $8.3 billion in unfunded liabilities at the time.

The draft of the Mehlville Board of Education’s letter states that the board “would like to commend the Board of Trustees of the Missouri Public School Retirement System for approving a plan to cap contributions to the PSRS at 14.5 percent of pay for employees with a 14.5-percent matching requirement for school districts.

“We believe this is a strong first step in stabilizing a retirement system that has previously required school districts to increase contributions, placing a strain on our al-ready-underfunded operating budgets,” the draft letter states. “The mandated contribution rate for 2011-2012 has resulted in more than $7 million designated toward the PSRS in our district’s current operating budget, with an equal amount being contributed directly by more than 700 certified employees. As you can see, our school district has a substantial stake in the PSRS and we appreciate your efforts to reform the system to limit future increases.”

Mehlville’s draft letter also notes that the adopted funding stabilization policy, combined with the 2-percent annual cost-of-living adjustment for current retirees, “may result in continued underfunding of the system. With our public school teachers contributing 14.5 percent of their pay into the fund, we believe it is necessary to look at additional system reforms in order to ensure that teachers will receive their future retirement benefits.

“Therefore, we encourage the Board of Trustees to continue investigating strategies to protect and grow the current assets without placing additional burdens on the school district budgets. We appreciate the work you have completed to date and believe the new policy, passed on Aug. 29, 2011, is a solid start,” the draft letter concludes.

During the board’s annual retreat, Chief Financial Officer Noel Knobloch contended it’s unlikely the contribution rate could remain unchanged and the system remain solvent.

He noted that the PSRS rate has been projected to climb as high as 19 percent.