MoDOT & Patrol Employees’ Retirement System
Here we are again with another year having flown by, and I can share more good news regarding MPERS’ financial condition. For those of us that have been around a while, there is one word that describes where things stand today. Unimaginable! Funding levels that were once considered near impossible have been realized thanks to aggressive policy and patience. It is so good to put a plan in place, then stick it out to see it work. That is where we are today. The plan is working but there is still work to do. Let me explain.
MPERS’ funded status made another leap forward this year, rising from 75.7% to 81.7%.
That number, 81.7%, represents the ratio of assets available to cover earned benefits, and it’s never been higher. We can and should celebrate this progress; however, we are not finished yet. Our ultimate goal is to be fully funded, and we are well on our way to achieving it.
I am confident in this progress because the MPERS Board of Trustees continues to support the aggressive funding policies that began turning things around almost 20 years ago. They have also supported an asset allocation strategy that has resulted in investment performance ranking near the top of other public pension systems across the country. It has been both exciting and rewarding to see these improvements firsthand.
As a result of this funding improvement, employer contribution rates are decreasing. This, too, is a welcome result of the funding policies governing the plan. Many of you noticed this decrease on your check stub last year and you will see it again this year. The reduction to the employer contribution rate is normalizing to a level that is sustainable and legitimate for the cost of the plan. There is no reason to fret as the larger than normal employer contribution rates we have been accustomed to seeing are not necessary for a plan that is well funded. Again, great progress has been made on the MPERS funding journey, but it is not complete just yet.
Let’s briefly highlight the employer contribution rate. First, here is the current employer contribution rates for both non-uniformed and uniformed employee groups. You see these rates consist of two basic components, the normal cost and the unfunded liability.
Normal Cost is the amount needed to fund the benefits earned by employees in the current year. It is essentially the cost of keeping the plan on track for future obligations.
Unfunded Liability, also called the catch-up payment, is the shortfall between the plan’s current assets and the total amount needed to pay all earned benefits. It represents past funding gaps that must be made up over time.
The recently approved rates that will go into effect next July dropped again relative to these current rates. As the funding shortfalls of the past are covered, the overall rates will drop. Again, this is welcome news for all.
Before I close, I want to mention that all Vital Sign results for the last fiscal year were green. If you are unfamiliar with Vital Signs, be on the lookout later this month for an update where you can see the annual Vital Sign results for MPERS. These key metrics paint a visual snapshot of system performance across key indicators.
That concludes this year’s update. Thank you for taking a few minutes to learn more about your retirement system. It is a pleasure to serve those who keep us safe.
Sincerely,
Scott Simon
Executive Director, MPERS