MOSERS Board Approves New State Budget Contribution Percentages

Actuaries debunk treasurer’s “crisis” warning.

Following criticism from Republican Treasurer Eric Schmitt, the Missouri State Employees Retirement System’s (MOSERS) board approved asking lawmakers for a 20.21 percent-of-payroll contribution in the state budget for 2018-19.

Of the 11 board members present, only one voted “no” on the decision.

The money is the state government’s “employer contribution” to the MOSERS board, which covers most past and present state government employees. The exact dollar amount will be decided during the budget-writing process.

Missouri’s current contribution in the 2017-18 budget is 19.45%, with more than $393.3 million for all funds—including $234.5 million in state revenue funds were listed in the budget bills. The total contribution, however, is a small chunk of the state budget.

The new contribution rate for the 2018-19 state budget was suggested by the Cavanaugh MacDonald actuarial firm, which began running the MOSERS account in May.

The vote comes just a day after Schmitt warned lawmakers of a state pension crisis, which he reiterated at Thursday’s meeting, referencing MOSERS missing earnings assumptions in “16 of the past 17 years.” To address the issue, he suggested MOSERS lower expectations for earnings as well as lower its investment fees.

However, Joseph A. Nichols and Patrice A. Beckham—consulting actuaries from Cavanaugh MacDonaldinformed the MOSERS board things were not as bad as Schmitt claimed, citing reductions to the system’s estimated income from investments.

“A lot of changes have been made that are pushing us in [the] right direction,” Nichols said at the meeting, according to the Jefferson City News Tribune. “We talk about a crisis—[but] it’s not.”

Beckham, who is also a principal at the firm, noted that the board had previously lowered its rate from 8.5% to 7.5%. By 2020, the board will reduce the expectation to 7.05%.

Nichols also addressed Schmitt’s “16 of the past 17” statements, telling the board that MOSERS had not missed earning assumptions in the last 30 years—with the last 15 featuring “two of the biggest (economic) corrections we’ve had.”

Schmitt’s Wednesday concerns revolved around MOSERS using an outdated mortality table for decisionmaking. While she admitted MOSERS had previously used the Guaranteed Annuity Mortality Table from 1971, Beckham also noted that MOSERS currently uses a mortality table that was adopted in the 2016 evaluation. Beckham also said that the Society of Actuaries doesn’t create mortality tables on a regular basis.

In the coming months, MOSERS’s CIO Seth Kelly plans to hold workshops with board members to discuss changes to the current investment decisions.

“The purpose of yesterday’s board meeting was to certify the employer contribution rate for the fiscal year beginning July 1, 2018 [FY19],” a MOSERS spokeswoman told CIO. “There was discussion on investment fees, but no formal action was taken. The essence of the fee discussion was that MOSERS is committed to lowering the fund’s fee level in the future.”

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