State employees facing layoffs might retire, hurt PERS assets

CARSON CITY -- Massive layoffs of state employees could induce many long-term workers to retire and potentially hurt the assets of the Public Employees Retirement System, its top official said Friday.

"There might be a lot of retirements," if the state lays off thousands of employees, PERS executive officer Dana Bilyeu said. "I don't know yet what will happen. It is an open question."

She said state government has an older work force, and some might retire early to ensure they have an adequate source of income.

Gov. Jim Gibbons plans to call the Legislature into a special session to deal with sagging tax revenues. Employee representatives have said laying off workers, cutting pay and reducing or eliminating some programs are his most likely options.

PERS has $22 billion invested to pay for retirement for its 40,000 retirees and 104,000 active members, which include local government employees, teachers and state government employees.

The money now covers 72.5 percent of what PERS estimates will be needed to pay their retirement costs, down from a peak of 83.4 percent.

Under a long-term plan which has 26 years remaining, the retirement rate paid by government and employees, now 21 percent of their gross wages in most cases, can be increased periodically until 100 percent of the long-term liabilities are met.

Bilyeu said increased retirements would have more of an effect on PERS' assets than laid-off workers withdrawing their share of what they have contributed to the agency for retirement.

That is because more than 80 percent of public employees in Nevada participate in what is called "employer-pay" retirement. Instead of paying half the costs of their retirement like private employees do with Social Security, employer-pay workers contribute nothing directly to PERS and cannot withdraw funds if they are laid off.

Employer-pay employees have agreed in advance to have their gross pay reduced by the amount that they otherwise would have paid to PERS.

The state or local government pays that money into the retirement system.

But public employees under the "employee-pay" system can request a return of what they paid for retirement if they are laid off. Those employees directly pay their half of retirement costs to PERS.

Bilyeu figures most of them would decide against withdrawing this money since those with more than five years of service are vested and ultimately will receive retirement benefits when they reach retirement age.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.