The plan, which must still go to the Legislature next year, would erase the pension fund’s $4.9 billion – and growing – unfunded liability by 2029, according to the retirement association.
Labor union officials said Friday that they will study the plan, but that at first glance it does not appear to unfairly target any one group of employees.
“We knew that they were going to have to hit retirees, current workers and future workers,” said Josh Anderson, political coordinator of the American Federation of State, County and Municipal Employees union in New Mexico. “We understand that they need to spread the pain across the board and not exempt anyone, and this seems to be a pretty fair way of doing that.”
One of the state’s two large public retirement systems, PERA collects contributions and provides benefits for state and municipal workers, law enforcement and legislators, among others. As of earlier this month, the pension fund had 54,214 active members and covered 24,572 retirees.
At its Friday meeting in Alamogordo, the PERA board voted 10-1 to approve the solvency plan recommended this week by agency staff. The lone dissenting vote was that of board member Loretta Naranjo-Lopez of Albuquerque.
The plan calls for the following changes:
⋄ Trimming the annual cost-of-living adjustment increases that retired workers get – in most cases starting two years after retirement – from 3 percent to 2 percent. This would apply to current and future retirees and would take effect in June 2013.
⋄ Future retirees under age 65 would have to wait for seven years after retirement, instead of the current two years, to begin receiving the annual cost-of-living increases. However, workers would be able to earn a bigger pension than is currently allowed by staying on the job longer.
⋄ An increase in the amounts of money that both employees and their government employers, via taxpayer dollars, pay into the retirement fund.
⋄ Reduced benefits, stricter retirement eligibility and other changes that would apply only to future workers and those hired after June 2010. Going forward, this would create a new tier of PERA members.
The plan represents a significant policy shift for PERA, which in recent years has opposed cuts to current workers and retirees.
“We didn’t do the easy thing, but we did the right thing,” PERA Board Chairman Gerald Chavez of Mountainair said in a statement.
Some of the changes, including the benefit cuts, could be fully or partly undone in future years if the pension fund’s fiscal condition improves, PERA Executive Director Wayne Propst said.
However, there is no plan to “sunset” the changes, or make them expire.
“The whole point is to get out of this (solvency crunch) and obtain an adequate funding level as soon as possible,” Propst told the Journal.
Like other pension plans nationwide, PERA has seen its unfunded liability increase in recent years, due largely to investment-driven losses and workers retiring earlier and living longer.
PERA’s unfunded liability more than doubled in a recent two-year span, going from $2.3 billion in mid-2009 to $4.9 billion in mid-2011. The unfunded liability is the difference between future retirement benefits due and assets on hand.
The pension plan’s assets-to-liabilities ratio is about 72 percent. As of March, the fund had about $12.2 billion in invested assets.
A spokesman for Gov. Susana Martinez said Friday that the governor had not reviewed the plan adopted by the PERA board but intends to do so.
If the changes in PERA retirement benefits are approved by the Legislature, Martinez would have to sign off on them for them to become law.
The state’s other large public retirement system, the Educational Retirement Board, is also planning to come up with a new solvency proposal after a proposed fix failed to gain legislative approval during this year’s 30-day session.