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The trustees for state government's second-largest retirement system voted Wednesday to consider several options for proposed legislation, ranging from increasing how much new members and non-vested members contribute to the system, to changing the annual cost-of-living increase granted on retirement benefits.

The legislation proposals will be considered during the trustees' Jan. 8 meeting. Any legislation recommended by the Arkansas Public Employees Retirement System's trustees would be for lawmakers to consider during the 92nd General Assembly's regular session starting Jan. 14.

The Public Employees Retirement System is valued at roughly $8.5 billion after the recent volatility in the stock market, system Executive Director Gail Stone said. The value of the system's investments increased by $248 million to $9.1 billion in the first quarter that ended Sept. 30 to secure an investment return of 3.45 percent that ranked among the top 16 percent of the nation's public pension systems, according to the system's Chicago-based investment consultant Callan Associates.

The system included 46,207 working members with an average annual salary of $37,302 and 37,398 retired members with annual retirement benefits of $575.1 million (or an average of about $15,377 a year) as of June 30 of this year, according to a report presented by system actuary Gabriel, Roeder, Smith & Co. of Southfield, Mich.

State and local governments paid $275.7 million into the system, while system members paid $63.2 million in fiscal 2018, which ended June 30, Gabriel reported. State and local governments pay the equivalent of 15.32 percent of their employees' pay into the system. The trustees decided in August to keep that for the next two fiscal years, starting July 1, 2019. Most of the system's working members pay 5 percent of their pay into the system.

The system has $2.27 billion in unfunded liabilities to pay off over a projected 26-year period as of June 30, Gabriel said. Unfunded liabilities are the amount by which the system's liabilities exceed the value of their assets. Actuaries often compare a projected pay-off period to a mortgage on a house.

Trustee Gary Carnahan of Hot Springs said he wants to focus on reducing the retirement system's unfunded liabilities rather than reducing the rate charged to state and local governments.

Trustee Larry Walther said changing the annual 3 percent cost-of-living adjustment on retirement benefits could put "a dent" in unfunded liabilities and help the state's bond rating.

But board Chairman David Morris said changing that cost-of-living adjustment for system members "would be a firestorm" politically.

The options that the trustees voted Wednesday to consider at their Jan. 8 meeting include changing the annual 3 percent cost-of-living adjustment for retirement benefits to:

• The lesser of 3 percent or the consumer price index for all members.

• 2 percent of the consumer price index for all members.

• The lesser of 2 percent or the consumer price index for new members.

• The lesser of 3 percent or the consumer price index for working, retired and non-vested members.

The board also will consider these other options:

• Requiring new members and non-vested members to contribute 6 percent of their salary to the system, up from the current 5 percent.

• Cutting the multiplier for calculating retirement benefits from 2 percent to 1.8 percent for new and non-vested members.

• Basing the final average compensation for computing retirement benefits on the highest 60 months of compensation, up from the current highest 36 months of compensation, for new and non-vested members.

• Reducing the interest credited on members' contributions to the system from 4 percent to 2 percent for all members.

In other business, Morris said he's submitted his resignation to Gov. Asa Hutchinson from the board because he represents city employees on the board and he is retiring as mayor of Searcy as of Dec. 31. The trustees elected trustee Candace Franks, who is the state bank commissioner, as their chairman, effective Jan. 1.

Metro on 12/06/2018

Print Headline: Retirement trustees plan look at legislative pitches

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