LEGISLATIVE REPORT: FIXING SENATE BILL 501

This past week I have received several calls from teachers and retired teachers regarding Senate Bill 501. I felt that devoting this week's article to bring you up-to-date on the status of Senate Bill 501 would be important.

I serve on the Retirement Committee and where we have been busy this past week going through actuaries of the Public Retirement System to determine what caused the $1.1 billion discrepancy in the report.

I would like to commend the PSRS Board and their Executive Director Joel Walters for being very forthright and open about the problem and his willingness to discuss all options to salvage Senate Bill 501.

The original proposed legislation (Senate Bill 501) contains a variety of significant retirement benefit increases for the Missouri teachers participating in the system.

Earlier work by the actuarial consultant had indicated that the entire package of increases could be financially supported. The bill ran into trouble last week when an audit ordered by the PSRS Board discovered that the actuary, The Segal Co., had left out a group of teachers from its studies.

After adding back in those teachers who are eligible to retire with 30 years in PSRS before the age of 55, actuaries said the bill would require an additional $1.1 billion.

The PSRS Board of Trustees was concerned about the accuracy of the Segal Company's initial valuation of the retirement system.

Last October, the board asked Segal to explain why its results differed from earlier valuations conducted by the former actuary.

The board still wasn't satisfied and in January, before the legislative session began, it ordered a full audit.

Initial audit results, delivered to the board on March 18, showed that the Segal Co., had failed to recognize the actuarial liability for teachers who retired before the age of 55 with 30 years in the system.

We are now making several changes in Senate Bill 501 to try to preserve the key elements of the bill: a 2.5 multiplying factor; a two-year extension of 25-and-out; an 8.7 percent increase for current retirees. In addition, the studies included a 25-and-out graduated factor.

Some of the items dropped from the bill was the expensive portions of the original bill changing the cost-of-living adjustment from the third January after retirement instead of the fourth, survivor benefits and raising the COLA cap from 75 percent to 80 percent.

Second, changes in the actuarial assumptions brought the system more in line with assumptions made by other retirement systems around the nation, going from a 4.5 percent annual COLA to 3.5 percent and assuming an annual salary growth rate of 5 percent instead of the currently assumed 5.5 percent. The assumptions are within the mainstream of what other systems are doing.

The PSRS Board unanimously endorsed the new assumptions, which they say now make the bill affordable, also testifying for the substitute bill were Retired Teachers' Association; Missouri Council of School Administrators; Missouri State Teachers' Association; Missouri National Education Association; and Missouri School Board Association.

To answer the often asked question, "is there still time in this legislative session to pass the Substitute Senate Bill 501?" The answer is yes, "if we can keep other amendments off and if the legislators are comfortable with the new numbers."

The Public School Retirement System of Missouri is created by state law to provide retirement benefits for the teachers in Missouri public schools except for those teachers in the cities of St. Louis and Kansas City. The level of benefits provided is established in state law and the operation of the system is in the hands of a seven-member board of trustees.

David Schwab is a state representative for the 157th district.