We want our members to be informed about what’s going on with retirement and PSRS, just in case you have heard something or been asked to sign a petition. One thing: the sky isn’t falling.
What is happening in the short term is that the PSRS Board amended its Funding Policy regarding the cost of living allowance (COLA) increases. PSRS has the discretion and responsibility under current statute to adjust the COLA when circumstances require. Under the newly amended policy, retirees will not get a COLA increase if the consumer price index is less than 2 percent.
The PSRS Trustees are faced with difficult decisions to ensure that your retirement system remains strong for the long-term. Most of us wouldn’t want the pressure and responsibility to make decisions affecting tens of thousands of active and retired members of PSRS. MSTA trusts the Board to make these tough calls and supports their recent decision. Improved life expectancies and lower than expected investment returns are affecting all retirement plans, and PSRS is no exception. It is noteworthy that the Trustees’ decision was unanimous. All of the trustees, including active and retired members of the system, supported this change. In an effort to help lower the liabilities of the retirement system, they made this change. It helps the long-term health of the retirement system. That is the fiduciary responsibility each board member, regardless of what constituency they represent, took on when they agreed to serve on this Board.
Is this change permanent?
No, the PSRS Board of Trustees retains the authority under statute to amend the policy in the future. For example, if investment returns are higher than expected because of an improved economic environment, the Trustees could restore the COLA increase when the CPI is under 2 percent.
What if the CPI is more than 2 percent?
The annual COLA increase will be 2 percent if actual inflation is 2 percent or greater. And, if inflation is greater than 5 percent, a 5 percent COLA would be granted.
What does this change mean to me? If you were a retired member before this change, when the CPI was 0 to 2 percent, you would have received a COLA of 2 percent. With this change, when the CPI is 0 to 2 percent, you will receive a COLA of 0 percent.
Why is this change good?
It supports the long-term health of the retirement system, which in turn protects retirees and active educators.
What was the catalyst for the policy change?
Simply put, it is the fact that people are living longer and future investment returns (in part due to low-interest rates) are projected to be lower than historical returns. PSRS is not alone in having to address these trends. All other retirement plans are faced with the same challenges. Fortunately, PSRS is being proactive in responding to these trends.
Why am I being asked to sign a petition?
Last week MRTA issued a “Call to Action” for their members to write to the governor and in addition, started a petition to replace Wayne Wheeler, who was appointed as a PSRS retiree to serve on the PSRS Board of Trustees (who is a member of both PSRS and MRTA). MRTA says Wheeler, a retired educator, is not representing the education retiree.
What impact will this petition have?
The petition has no legal basis or authority. It doesn’t force the governor to remove Mr. Wheeler, it is just a request. Indeed, at this point in the governor’s term it is highly unlikely he would take any action. And even if the governor chose to respond to the petition, the Senate is unlikely to pick it up when it returns for the veto session in September.
What can RMSTA members do?
Plenty. While the MRTA petition will have little to no impact, we ask you to join with other RMSTA members to:
- Be informed – RMSTA will continue to send communications to keep you updated and aware of changes that may affect you both in your retirement system and as a life-long educator. Visit the PSRS website to get the rest of the story here.
- Be involved – Plan to attend MSTA and exclusive RMSTA events. Your involvement makes MSTA a stronger organization. We will only ask you to call or write your elected officials when your action is truly needed.
- Get ready to grow your local RMSTA community – In the coming months we will begin to create opportunities for RMSTA members to get together and talk about issues that are important and relevant to them. Look for more information in upcoming emails and communications.
What if I don’t sign the petition?
Because the petition has no legal basis or authority, ignoring the petition will have no impact at all.
Why is this a big deal?
Understanding your retirement system is vital. We believe that it’s important for you to have accurate and relevant information. There will be issues that call for your attention in the future and MSTA will ensure that you hear from us with a timely, and accurate message. If you would like more information you can read PSRS’s statement here. If you have further questions or concerns, please contact MSTA’s Governmental Relations Department at 800-392-0532.