PERS costs, tied for highest nationwide, ignite member complaints
Update: The July 1, 2019 rate hike will increase Nevada PERS costs to 29.25 percent of pay — leaving members paying the highest rates in the nation.
Ever wonder which state’s government workers pay America’s highest public pension costs?
Nevada, says a research and advocacy group for the U.S. public pension industry.
According to a just-released report from the National Association of State Retirement Administrators (NASRA), Nevada PERS members — at 14 percent of pay — are in a virtual tie with Ohio and Missouri teachers for the highest employee contribution rate of any public pension plan nationwide.
That finding significantly contradicts claims made by PERS officials last year in a board discussion of rank-and-file complaints about rising rates.
PERS investment advisor Ken Lambert suggested that members had no reason to complain, stating that, “our contribution rates are approximately 4 percent below the average rate in the country. So you could walk in and say ‘well you guys are mad at 28? The average rate is 33, so let’s just go to 33.”
The NASRA report, however, shows something quite different.
PERS members were clearly complaining about their half of the total 28 percent rate which, contrary to Lambert’s implication, is amongst the highest nationwide.
In fact, according to NASRA, PERS members pay 75 percent more than the national median.
The chart below shows the median employer and employee contribution rate for pension plans whose members, like those in PERS, do not participate in Social Security:
Median contribution rate for U.S. public pension plans
Even the national median combined employee and employer contribution rate — 23.7 percent — is much lower than the 33 percent rate Lambert cited. While NASRA’s data are medians and Lambert cited an average, little substantive difference is likely to exist between the two values. In addition, the median — which is the rate used by the middle plan, with half of plans using a lower rate and half using a higher one — is a more appropriate metric to use.
The chart also reveals how the past funding failures of public pension plans nationwide are being foisted onto the current generation. While this added cost is typically paid by government employers and taxpayers, Nevada state law mandates that all costs be split 50-50 between employee and employer — although evidence suggests law enforcement is not being held to that rule.
Consequently, Nevada public school employees have become uniquely aware of the growing costs needed to bail out PERS. Those costs — discussed in more detail here and here — effectively function as a tax for which these employees receive no additional benefit.
Sending 14 percent of each paycheck to PERS seems as if it would entitle members to ask questions and, most importantly, receive accurate answers to those questions.
Yet, far too often the Retirement Board and its investment advisor appear to be more concerned with muting their members, and pushing politically favorable narratives, rather than honestly addressing their concerns.
Going forward, PERS board members should endeavor to provide members with the substantive answers and thoughtful analysis that they deserve, regardless of what that means for political optics.
Update 2: The July 1, 2021 rate hike will increase Nevada PERS costs to 29.75 percent of pay for all members other than police and fire officers, for whom the contribution rate will rise to 44 percent of pay. The nearly 15 percent that all teachers and other non-safety public employees will have to pay is the highest rate nationwide. For Nevada public employees hired after 2015, this national-high rate entitles them to a benefit that is dramatically lower than what their veteran colleagues will receive.