Thursday, January 29, 2009

First I Lost My Life Insurance, Is My Pension Next?

Last October. I received a letter from my life insurance company.

In December, I received another letter from the company. Long story short, I ain't got life insurance no more.

I collect a pension from the Public School Retirement System (PSRS) of Missouri. I am a retired teacher---I taught 6th grade in Nixa, MO and worked for one of Missouri's educational associations. I am a member of the Missouri Retired Teachers Association (MRTA).

This afternoon, I received the following information alert from the MRTA:

A special PSRS/PEERS Board meeting was called for on January 21st in Jefferson City to address and educate education associations on the current financial crisis affecting our retirement system. The meeting was well attended with over a dozen MRTA leaders and members in attendance. President Maggie Elder and I were allowed to sit among the PSRS/PEERS Board members. This was an indication of the seriousness of our financial situation. Below are some of the points brought forward by Executive Director Steve Yoakum, staff, and PSRS/PEERS Board.

1) For the fiscal year July 1, 2007 to June 30, 2008 our system had a NEGATIVE 4.77% return on investments. Our retirement system operates on the assumption of an 8% return on investments every year. For the period of July 1, 2008 to December 31, 2008 the system had a NEGATIVE 20% return on investments. It could be worse by June 30, 2009

2) Our retirement system has lost $9 BILLION in the last year reducing our cash on hand or to be invested from approximately 32 BILLION to approximately $21 BILLION.

3) Our system now has a negative cash flow of about $500 million a year meaning that there is $500 million more going OUT than is coming IN.

4) There are only four ways to fix this crisis. 1 – Increase contribution rates. 2 – Get much better returns on investments. 3 – Reduce retirement benefits. 4 – A combination of the last three.

5) The PSRS staff reported that it would take a contribution rate of 43% starting in 2012 until 2018 to fund the system. Current contribution rate is 26%. It is my opinion that this is very unlikely with school funding so short and teacher salaries ranked at 45th nationally. PSRS employees currently pay the highest contribution rates in the nation.

6) PSRS uses a 5 year smoothing plan to average the ups and downs and also is required by federal law to use a 30 year amortization of benefits. These accounting practices will not alleviate the current funding crisis. To add insult to injury, these accounting practices may be changed where it would be a determent to our system by those who want to privatize Social Security and want to require 401K type of defined contribution retirements. We will need to oppose these accounting proposals with all our might.

7) The PSRS Board and staff had no recommendations at this time and stated that it will be up to the Education Associations and Legislature to address this funding crisis.
It is not just the Police and Firefighters who are in pension trouble.

3 comments:

Lil Jim said...

Maybe a new sales tax is the answer...sorry to hear about that. I think retirement and insurance issues are gonna be the big hangup with our union contract this April.

Horse-farmer said...

If they start messing with the Federal employees retirement fund, Barngoddess and I are in deep horse dung...

dirtsister said...

Is this the fund I read about that Madoff managed? Is there no end in sight?

Today's word verification: pangs