State workers face 2 percentage point PERS increase

CARSON CITY - Most of the 100,000 active public employees in Nevada will have to pay 2 percentage points more in retirement premiums starting July 1.

The PERS board, basing its decision on a study by an actuary, voted Wednesday to increase retirement rates to 25.75 percent of each regular employee's wages, with half of that paid by the employee and half by the employer.

For an employee earning $50,000 a year, the increase would be $500 a year, going from the current $5,937 a year to $6,437 a year. Public employees do not pay into Social Security.

PERS Executive Officer Dana Bilyeu said the increase paid by individual school districts, local governments and the state would be "pretty insignificant," reaching a combined $10 million a year.

Some governments and school districts will pay the entire increase, however, because of agreements with employee unions. The state Legislature cannot override Wednesday's action.

The move to raise rates came during a meeting at which PERS members heard their investment fund grew 4.5 percent to $26.9 billion in the July-through-September quarter, but it wasn't enough to cover a drop in contributions .

The PERS fund has a funded ratio of 71.2 percent, up from 70.6 percent. With investment and periodic rate increases, PERS expects to have all of the money it needs to cover benefits costs in 24 years.

Bilyeu said participant rates had to increase because the number of public employees and their salaries have fallen 10 percent since the beginning of the recession, while the number of retirees has increased.

PERS now receives about $170 million a year less in contributions than it did before the recession.

In the past fiscal year, PERS paid out about $100 million more in benefits than it took in through rate contributions.

The declines in program participants and payroll are good reasons why Nevada should not switch to a "defined contribution" system, Bilyeu said. When Alaska switched to such a system, rates paid by school districts for teacher retirements increased from 25 percent to 50 percent in three years, she said.

Under a defined contribution system, similar to a 401K, employees would pay a set amount for their employees' retirement. That amount would not be guaranteed and could be decreased or increased depending on the public employer's financial circumstances.

PERS operates a defined benefits system in which employee retirement benefits are known in advance and rates can be increased to reach the benefit goal.

The agency's actuary, the Segal Co., reported that the retirement pay for PERS employees is $2,603 a month, up from $2,539. But pay for working employees dropped from $48,808 a year in the 2011-12 fiscal year, compared with $49,248 the previous year.

Police and firefighters receive pensions of $4,487 a month, up from $4,347. Their annual pay on average is $72,523 a year, down from $73,895. The PERS board boosted their retirement rate to 40.5 percent, up from 39.75 percent. That means the average firefighter or police officer will pay $14,686 a year in retirement contributions, an increase of $272 from the current $14,414.

As with regular employees, some local governments pay for fire and police department employees' share of retirement costs based on union negotiations.

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