Mississippi — Local leaders across Mississippi are urging the Legislature to set aside $100 million in annual funding for Mississippi’s Public Employment Retirement System during an upcoming special session.
At the same time, local leaders and several economists appear to disagree on whether a recently passed hybrid retirement plan for future government employees will affect their ability to recruit new workers while also benefiting future retirees.
Currently, PERS members who sign up for the system through February 2026 contribute a 9% match of their pay to PERS for 30 years, which can then be withdrawn as a guaranteed benefit. Retirees also receive a yearly cost of living adjustment payment, known as a COLA or 13th check.
To compare, the new benefits that go into effect in March 2026 will have the same 9% employee contribution rate, but 5% will go into a private 401(a) account, where retirees can invest and grow their money over time.
Employees under the new system, known as Tier 5, will be required to work for at least 35 years, with no COLA offered.
Both House and Senate leadership stated this past session that they wanted to address the $26.5 billion in unfunded liabilities that are currently plaguing the state retirement system, prompting the PERS board in 2023 and the Legislature in 2024 to raise PERS contribution rates for public employers.
Last year, local leaders strongly opposed the rate increase, claiming that it would prevent them from making future hires due to increased costs. As a compromise, the Legislature approved a rate increase that will raise employer contributions by 0.5% per year for four years.
This year, the House proposed putting $100 million into PERS to help reduce the system’s unfunded liabilities. The Senate proposed Tier 5 as a means for the state to provide more affordable retirement benefits.
Hosemann argued that the new benefits would eventually help to pay down the $26.5 billion debt while also providing flexibility to public employees.
In the end, new retirement benefits were approved as part of an income tax elimination bill signed by Gov. Tate Reeves in March. New annual funding did not occur.
Lawmakers discussing PERS funding as part of budget talks?
Hosemann stated that the Senate is now negotiating with the House to include that funding in an upcoming special session, which was called early due to lawmakers’ failure to pass a budget.
“In addition to previous years’ cash infusion and increased contribution rates to the Public Employees’ Retirement System, the Senate and I are committed to finding a recurring revenue stream for PERS,” Hosemann told the crowd.
Before the regular session ended, House Speaker Jason White, R-West, stated that the House was still committed to finding an annual revenue source for PERS while attempting to coax Senate leadership into last-minute budget negotiations.
Mayors, local leaders pushing for PERS funding
Several mayors who spoke with the Clarion Ledger said that, while not a major obstacle, the new benefits package may discourage people from wanting to work in government.
At the same time, they want the Legislature to create new recurring funds for PERS in the hopes of avoiding future employer rate increases.
“While retirement benefits are important, they are not always top of mind for today’s workforce,” Greenville Mayor Errick Simmons stated. “The Legislature should not have (the PERS funding responsibility) trickling down to local cities, towns and villages and taxpayers.”
West Point Mayor Rod Bobo and Gluckstadt Mayor Walter Morrison both stated that the increased cost of funding PERS has placed an unsustainable burden on local public employers, and that more money at the state level is required.
“I think it’s absolutely going to impact our city’s ability to recruit,” Morrison informed the crowd. “This has been like hocus pocus math if they think that (PERS) is going to continue to be sustainable … something needs to be done to shore up PERS because PERS financing in the way in which it’s funded now is just not sustainable.”
PERS Director Ray Higgins has expressed this sentiment several times, stating that the system requires both new benefits and new annual funding to remain stable.
Shari Veazy, Executive Director of the Mississippi Municipal League, stated that her organization would likely support a measure to increase PERS funding if it avoided a rate increase for public employers.
“We feel like down the road, there’s going to have to be a revenue stream or some additional funds put toward PERS, or else they will have to come back to the employers and do another employer contribution increase,” she told me.
Experts weigh in on PERS funding, benefit reforms
According to Robert Clark, an economist at North Carolina State University, transitioning to a more hybrid system is not a novel idea. As of this year, approximately 18 states had transitioned from full state-backed benefits to hybrid retirement systems or full defined contribution plans like 401(k).
The main reason for this is the rising cost of maintaining pension funds, as well as the desire to maintain current retiree benefits while reducing the state’s financial burden.
Clark stated that in some states, such as Alaska and Utah, the transition to a hybrid model resulted in higher turnover rates in the public sector.
Toren Ballard, a public-school teacher advocate and researcher, believes the most important question is whether public employers will be able to retain employees over the course of their careers. According to him, the new system will provide fewer incentives for public employees, particularly teachers, to stay.
“There’s not really an incentive under the Teir 5 structure for somebody to stick around for a given period of time,” says Ballard. “I can tell you that teachers self-reported employment patterns suggest that the defined benefit pension (the current retirement benefits offered) is an incentive for teachers to spend a career in the classroom.”
Policy analysts at the Reason Foundation praised the new benefits to help stabilize PERS in their March analysis of the Legislature’s 2025 reforms, but also stated that lawmakers must now consider putting more money into the system.
