Missouri's retirement systems for public educators on solid footing says director

Tuesday, October 6, 2015

Nevada Daily Mail

The Public School and Education Employee Retirement Systems of Missouri is doing what it needs to do, said Steve Yoakum, executive director of PSRS/PEERS.

Yoakum told those attending the Vernon County Retired Teachers meeting Sept. 25, at the Bowman Building in Nevada that the system was meeting its stated goals:

* To help school districts attract and retain the best and brightest educators and employees for Missouri's school children.

* To manage the systems in a prudent and cost-efficient manner.

* To provide retirement security to Missouri's educators and education employees after a full career of service.

The current retirement system for Missouri's public educators was put in place in 1946. Today, there are 256,000 active and inactive members, Yoakum noted. Some 82,000 of those receive a monthly benefit.

Approximately 90 percent of the recipients live in Missouri. Of the total benefit payments of $2.4 billion, $2.2 billion of that was distributed among Missouri's counties in fiscal year 2014.

"That's a huge financial impact to the state. We sent $6.6 million to Vernon County."

Yoakum said despite this success story and that financial impact, he finds a lot of confusion and misunderstanding.

"I talk to a lot of civic clubs and non-educators and they want to know why does this exist."

He said he answers by pointing to the goals he outlined, especially focusing on the quality of educators and employees tasked with educating the state's school children.

"There's really no other purpose. And we've done pretty well with each of our goals. The system is well run and cost efficient.

"We are 85 to 90 percent prefunded and that's an extremely healthy position."

According to a PSRS/PEERS brochure, 63 cents of every dollar in the trust fund comes from investment earnings, with 19 cents coming from members and 18 cents from employers.

"Trust funds are not part of or assigned to any department of state government," it noted. "The systems do not receive state money."

"There's been a lot of negative press about pension plans but we've strived to make sure we're well funded and well administered," Yoakum said. "We are one of the success stories.

"There are problems out there, but not with our plan. You don't have to go very far to see the ones in trouble," he said, pointing out nearby Illinois and Kansas.

"We've never missed a payment," he said of the Missouri system. "And we're doing what we're supposed to do.

"But that's no guarantee of staying around. There is a concerted attack on public education and retirement. It's typically the same people who push for vouchers and private schools.

"There are those who don't believe in pension plans and those who believe it should be on the individual to plan for retirement. Then are those who insist that a defined contribution plan should be the rule," he said.

"The reality is, as the Baby Boomer Generation retires, 80 percent of them are not prepared for retirement.

"There is a big difference in our defined benefit pension plan and in the defined contribution plan that is in place in the private sector.

"With a defined contribution plan, you can take your money out and take it with you at any time," which appears appealing.

Yet the result ends up being less money for the individual.

"We know that this is usually around $5,000. Studies show that this money is then spent and not saved.

"The defined benefit plan is hugely important to you and the school district.

They invested in you and this rewards you and the district for you gaining additional experience and teaching additional years.

"Teachers' entry age into education is usually in the mid 20s, with the key period in the profession being to stay five years. The first five years is the critical time.

If teachers do that, they tend to stay a career.

"School districts invest in their teachers knowing that they want to get their best 30 years."

There are two major threats to the state's PSRS/PEERS, he said.

"The first one is economics. What happens in places like Europe and Asia can impact us. When the Euro declines, it has an effect on us."

That's because the Missouri PSRS/PEERS of some $38 billion is the 44th largest defined benefit pension plan in the U.S. and the 110th largest investor in the world, he noted.

"The last two years we've been a net seller of stocks and we still have a surplus.

Over 30 years, our system has performed very well. The 30-year annualized return is 9.9 percent.

"With interest rates essentially zero in the U.S., we've had a good investment return history.

"The second threat is politics and that's a philosophical one. It's a huge challenge.

"It's hard to get elected officials to think beyond their terms.

"The state Legislature and the governor control the plan."

Yoakum said PSRS/PEERS doesn't advocate on behalf of members regarding benefits. That is the role of the Missouri Retired Teacher Association, the Superintendents Association and other professional education groups.

"We don't do that."

Responding to a question from the audience, Yoakum noted that those who take part in the PSRS aren't eligible for Social Security, although those in PEERS are.

"Six percent nationally of employees don't participate in Social Security. That's primarily teachers and law enforcement members.

"Social Security was initially set up to exclude teachers. Then in the 1940s and '50s, teachers were given the opportunity take part. In 1950, Missouri teachers voted not to get into Social Security. And that was a wise vote."

Citing a personal example, he noted that with Social Security, the real benefit was about a third of what is estimated.

"Social Security is not a pension plan. It's a social insurance plan. It pays based on need and is skewed to lower compensated employees.

"Social Security is in deep trouble. They (lawmakers) can't keep doing what they're doing with that system.

"The money comes in and the money gets spent. It went cash flow negative in 2010.

"With PSRS, we take your investments and earn more, and it stays in the trust fund until it's needed. Our kids are better served by teachers not being in Social Security."

Answering another question about when to take retirement and when to fill out the necessary paperwork, he said, "I encourage you talk to our counselors (at PSRS/PEERS). They are very good at what they do."

Walt Cochran with the Vernon County Retired Teachers, who is a member of the MRTA, wrapped up the meeting by encouraging everyone in attendance to join the association.

"The MRTA advocates on your behalf," he said, listing several lawmakers and pieces of legislation that he said were "not friendly to public education.

"The battles are always going to be there. We need to be ever vigilant and watchful of our retirement system. We are so thankful for Steve Yoakum and his staff's work."

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