Board members for the retirement system that covers more than 96,000 educators and retirees voted 4-3 to endorse the plan, which calls for current employees to funnel more of their paychecks into their retirement funds.
The plan endorsed Wednesday calls for retirement contributions by employees making $40,000 annually to increase, for example, from $3,760 a year to $4,280 a year, according to ERB staff.
It would also impose a new minimum retirement age of 55 and defer the start date of certain retirement benefits, but those changes would apply only to future workers.
And it calls for the taxpayer-funded contributions to be increased by 3 percent, which would equal the amount approved by the Legislature in 2005 but not yet fully funded.
“I think this is a good start,” said state Treasurer James Lewis, one of the four board members who supported the plan during the meeting Wednesday at Santa Ana. “We have to do something, and I think our fiduciary responsibility is to do what’s good for the fund.”
Earlier this year, an ERB solvency proposal that would have trimmed the annual cost-of-living adjustments that retirees receive and enacted other changes stalled in the Legislature after being opposed by some unions.
Backers of the current plan say they have learned from that experience. About 15 labor unions and retiree groups met several times this summer and helped craft the solvency proposal endorsed Wednesday.
“We believe it’s a plan that works and would get us to where we need to be in terms of solvency,” said Sharon Morgan, president of the National Education Association in New Mexico.
However, board member Brad Day, who was appointed to the ERB by Republican Gov. Susana Martinez, suggested the plan was drafted largely without board input and said it would be unfair to future teachers.
Public Education Deputy Secretary Paul Aguilar, who like Day voted against endorsing the plan, suggested future investment earnings likely won’t be high enough for the plan to achieve its target of making the fund 95 percent solvent by 2043.
“This proposal doesn’t work,” Aguilar said.
The Educational Retirement Board, one of two public retirement systems in New Mexico, has an unfunded liability of $5.9 billion, the difference between the benefits due to be paid out and the assets on hand, according to its most recent assessment. The pension fund had a balance of about $9.5 billion in assets as of July.
The ERB also has a funded ratio of just 63 percent, meaning it has 63 cents in invested assets for every $1 in retirement benefits it owes to its members.
Its fiscal condition has worsened in recent years due to a combination of factors, including market-driven investment losses and the Legislature’s decision to delay an approved increase in taxpayer-funded contributions to the fund.
Some states have taken drastic action to address pension solvency issues. In Rhode Island, lawmakers slashed retirement benefits for workers, including teachers, by eliminating the annual cost-of-living increases until the pension system’s funding status improves.
In New Mexico, pension solvency is expected to be a high-profile issue during the 60-day legislative session that begins in January. In addition to the ERB, the state’s other retirement system, the Public Employees Retirement Association, has also endorsed a proposed solvency fix.
The meeting Wednesday at the Prairie Star restaurant came during a two-day ERB retreat at Santa Ana Pueblo.
— This article appeared on page A1 of the Albuquerque Journal