State employees who participate in the Public Employee Retirement
System of Idaho (PERSI) will contribute slightly more to the
account beginning July 1. The rate for general member employees
will increase by .37 percent, or from 5.86 percent of their
gross salary to 6.23 percent.
Although the PERSI fund remains very healthy and continues
to grow, it still is slightly short of being fully funded.
During the rapid economic growth of the late 1990s, the fund
grew to 116 percent of full funding which allowed administrators
to initiate a gain sharing plan for employees, retirees and
members. PERSIs Unfunded Actuarial Liability (UAL
resources needed to meet retirement commitments) now is 83.5
percent of the total required (as of June 30, 2003).
To meet those obligations and to conform to Idaho law, the
PERSI retirement board voted to increase employee contributions
in 2002. But to ease the impact on members and employers,
the board delayed the increase for two years and chose to
phase the increase in over three years, beginning July 2004.
One of PERSIs primary goals, explains retirement board
chairman Jody B. Olson , is to maintain stable contribution
rates at levels required to fund benefits.
When PERSIs funding was at an all-time high a
few years ago, your retirement board decided to share
the wealth with you by reducing contribution rates and
granting $155 million to members, retirees and employers as
gain sharing, Olson explains.
Now that our funding status is lower, we hope that
you understand the need to raise rates at this time. We realize
that employees have ever greater health care and insurance
costs and raises have been low or nonexistent for many. To
ease the impact of our rate increase on members and employers,
we delayed the increase for two years and phased it in over
three years. When fully phased in by 2006, rates will be back
to 1997 levels.
The nations economy is emerging from one of the longest
and worst bear markets in history (2000-2003),
and investment markets appear to be rebounding.
PERSI reported assets of $7.519 billion at the end of 2003
and calendar-year returns of 25.5 percent (its best-ever calendar
year return), and returns of 18.7 percent through February
of this year.
This is definitely good news, but even with such recent
performance, PERSIs funding is still lagging due to
the previous several years
Because of this, we must
go ahead with the first of the scheduled contribution rate
Should future fiscal year investment returns be significantly
better than assumed, it may be possible to decrease or defer
the rate increases. Conversely, if future returns do not meet
assumptions, rates may have to be increased further.