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PERSI announces higher rates

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. PERSI’s 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 PERSI’s primary goals, explains retirement board chairman Jody B. Olson, is to maintain stable contribution rates at levels required to fund benefits.

“When PERSI’s 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 nation’s 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, PERSI’s 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 increases.

“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.”

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