A room full of PERA members pack into Monday’s meeting in Santa Fe. Courtesy photo

By Carol A. Clark

People jammed into the Public Employees Retirement Association (PERA) meeting in Santa Fe Monday with many more turned away for lack of space.

The agenda item that drew the massive crowd is proposed cuts and changes to the retirement plan affecting thousands of employees across the state and hundreds in Los Alamos.

PERA’s assets declined by a staggering $6 billion during the global financial market downturn of 2008-09.

Although PERA’s assets have increased since the downturn – a $5 billion pension liability remains, according to PERA’s board.

Paying off the pension liability cannot be made up by stock market returns, or by increasing employee and, or employer contributions.

The board explained that significant changes to the benefit structures of not only new hires but across all membership groups are necessary.

Without these changes, the board says the actuaries estimate that in 2041, the market value of fund assets would be about $30 billion, while the benefits owed would be about $56 billion – leaving $26 billion in benefits without the funding to pay them.

PERA board members discuss proposed changes. Courtesy photo

To become fully funded by 2041, the PERA Board is proposing changes that will affect active employees, new employees, retirees, beneficiaries and employers.

Rep. Jim Hall, R-Los Alamos, Sandoval and Santa Fe counties, weighed in on the issue Thursday.

“PERA was funded at 70.5 percent as of June 30, 2011, with an unfunded actuarial accrued liability of $4.9 billion. This has to be addressed, and the sooner we do it the less painful it will be,” Hall said. “There are only three sources of potential funding – current retirees, those still working in the system, and the taxpayer (through public employers.) I would carefully examine any proposed legislation for fairness and financial sustainability of the program. I do have a bias to try to protect retirees with the least financial resources.”

In the interest of full disclosure, Hall added that he collects a small pension from PERA.

“The 2012 legislative session adjourned with overwhelming support of PERA’s House Joint Memorial 19, co-sponsored by Rep. Jim Trujillo and Sen. Carlos Cisneros,” Sen. Richard C. Martinez said. “HJM 19 calls for PERA to make recommendations by October 2012 for an all-encompassing and actuarially sound plan to address its unfunded liability for the 2013 legislative session.”

Martinez explained that PERA board member Loretta Naranjo-Lopez has reported that Cavanaugh MacDonald Consulting LLC was hired to perform an Open Group Study of the issue.

There have been nine changes in the PERA COLA since the 1965 state statute, and it is currently at 3 percent, Martinez said, adding that New Mexico, Arkansas and Mississippi are the only state public pension funds that continue to provide retirees with an annual 3 percent compounding COLA in the face of significant funding losses for most retirement funds.

“Every other state public pension plan pays lesser COLA benefits. Often other states tie the COLA calculation to how well the plan is funded or the Consumer Price Index,” Martinez said. “Several states have suspended paying COLAs altogether until the pension plan reaches 100 percent funding. I would encourage the board to provide several scenarios that provide the basis for a possible solution, i.e., set retirement benefits based on the average of an employee’s seven highest years of salary rather than the current average of the three highest years, etc.”

Martinez also said that he would urge the board to recommend further consideration only to those scenarios which result in at least 100 percent funded ratio at year 2041 without additional contributions.

The longer changes to the PERA retirement plans are delayed, the more drastic the changes will need to be in the future, he said.

“This is a very complex issue that will impact many households and I will want to be assured that all the options have been explored, so we can vote on a piece of legislation that preserves the benefits for the many retirees who depend on it,” Martinez said.

A long line of PERA members wait to attend Monday’s meeting in Santa Fe, many were turned away because the room was full. Courtesy photo

The plan the PERA board is currently proposing affects three groups of members differently.

Active retirees as of July 1, 2013:

• The Cost of Living (COLA) rider is reduced from 3 percent to 2 percent annually.

Active employees hired before July 1, 2010:

• The pension factor would be reduced by .5 percent for any time worked after July 1, 2013. Previous years remain at the already earned percent rate.
• Hazardous duty employees, such as firefighters and police officers may still retire at 20 years of service but at a reduced percentage, or would be allowed to work the difference to achieve 70 percent.
• The maximum pension factor would be raised from 80 percent to 90 percent. At 3 percent a year, it would take slightly more than three years to increase from 70 percent to 80 percent and another three years to increase retirement from 80 percent to 90 percent.
• A contribution increase of 2 percent is proposed. It’s unclear whether the employer or employee would pay that increase.
• COLA is reduced from 3 percent to 2 percent in retirement.

All employees hired after July 1, 2010:

• The pension factor is reduced by .5 percent.
• No 20 or 25 year retirement plans.
• New retirements based on age and service.
• General members have to meet 85; hazardous duty employees have to meet 75. (A 21-year-old hazardous duty employee would have to work 27 years before his age and years of service equals 75) at 3 percent per year he/she could retire with 81 percent.
• Non-hazardous duty employees hired at 21 years of age under the proposed plan, must work 32 years to qualify for retirement and would receive 80 percent, at a pension factor of 2.5 percent.
• Retirement pay would be based on the employee’s highest paid five years of service rather than the current highest three years of service.
• Vesting would take eight or 10 years instead of the current five year requirement.
• COLA is reduced from 3 to 2 percent.

Los Alamos County Regular and Limited Term Employee Benefits:

Medical Insurance:

HMO or POS (Point of Service) – LAC offers medical insurance coverage through Blue Cross/Blue Shield of New Mexico (BC/BS) to regular employees. For medical, dental, vision, basic life and dependent life insurance, LAC currently contributes 80 percent of premiums for full-time employees, 60 percent for three-quarter- time employees, and 40 percent for half- time employees. Employees contribute the remaining 20 percent, 40 percent or 60 percent, respectively.

Retirement Benefits:

• Public Employees Retirement Association (PERA)
  LAC currently contributes 9.15 percent for County employees, 16.65 percent for detention officers, 18.50 percent for police employees and 21.25 percent for fire employees. County employees contribute 13.15 percent, detention officers contribute 16.65 percent, police employees contribute 16.3 percent and fire employees contribute 16.2 percent. Employees are vested after five years of service and can retire at any age with 25 years (20 years for police and fire) of service.
• Los Alamos County Pension Plan (LAC)
  In lieu of Social Security, this plan is available to regular LAC employees only. This is a supplemental pension plan with contributions from the employee and LAC. LAC contributes 9 percent and the employee contributes 1 percent. Employees are automatically vested in 4 percent of LAC contribution. Vesting for the remaining 5 percent is currently based on years of service with LAC as follows:
• 3 years – 20 percent
• 4 years – 40 percent
• 5 years – 60 percent
• 6 years – 80 percent
• 7 years – 100 percent 
• Retiree Health Care Plan (RHCP)
  This benefit entitles the employee to continue insurance benefits after he/she retires through the New Mexico Retiree Health Care Authority (NMRHCA). LAC contributes 1.3 percent and the employee contributes .65 percent. Once the employee retires, NMRHCA currently subsidizes the retiree’s premium based on the retiree’s years of service with a participating employer. Contribution amounts are set by the Retiree Health Care Act.

The proposed changes will be voted on by the PERA board then taken to the 2013 legislative session in January.

If approved, these changes would take effect July 1, 2013.