Gov. Lujan Grisham signs retirement security measure into law
Senate Bill 72 provides an immediate $55 million cash infusion for the Public Employee Retirement Association to begin reducing its $6.6 billion unfunded liability. It also requires increased contributions from current employees and employers, and it changes, over time, the COLAs retirees receive.
“By paying out more than it was taking in, PERA was on a path to eventual bankruptcy. Now we’ve reversed course, and I’m confident New Mexico can keep its promises to current and future retirees,” Gov. Lujan Grisham said. “These changes will protect what is one of the best pension plans in the country and an essential tool in recruiting and retaining our excellent state workforce. Legislators from both parties recognized the dire need for this reform, and I thank them for their leadership.”
The bipartisan bill, sponsored by Sen. George Muñoz and Rep. Phelps Anderson, was supported by the New Mexico Municipal League, New Mexico Counties, AFSCME Council 18; Communication Workers of America; New Mexico Professional Firefighters Association; Fraternal Order of Police; National Association of Police Officers; the Albuquerque Fire Department Retirees’ Association and the Albuquerque Police Officers Association.
“The solutions in this bill will go far to get our retirement system back on track while protecting our most vulnerable retirees from any hardship,” Sen. Muñoz said. “It’s never easy making changes. A downturn is inevitable and we’ve taken the right steps to guard against it. We’re watching after everyone’s future and safeguarding the state’s bond rating.”
“The path to PERA solvency would never have been accomplished without this bipartisan effort,” said Rep. Anderson. “The governor led the way and I’m grateful for her leadership. This is important for our retirees and for our state’s bond rating.”
The new law will:
- Ensure a 2.5 percent cost-of-living adjustment, an increase from 2 percent, for retirees over the age of 75 as of July 1, 2020, roughly a third of the state’s public retirees and exempt other vulnerable groups of retirees – disability retirees and retirees with pensions lower than $25,000 after 25 years of service – from the changes;
- Continue the current 2 percent cost-of-living adjustment for other retirees for three years but make it non-compounding; after that, compounding COLAs would resume based on a new “profit-share” model aligned with investment performance and the funded ratio. Retirees would be assured of COLAs between .5 and 3 percent;
- Restore the two-year wait period upon retirement to qualify for cost-of-living adjustments;
- Incrementally increase contributions in a model that shares the burden across active workers and public employers;
- Delay contribution increases for municipal and county workers for two fiscal years;
- Provide for incremental decreases in employer and employee contributions as the plan comes closer to being fully funded;
- Allow retirees who return to work – for example as substitute teachers, bus drivers, school nurses and school resources officers – to receive a COLA.
The governor also signed Senate Bill 111, which will provide an incentive for public service retirees to return to work for Educational Retirement Board employers.
“SB 111 will allow substitute teachers, bus drivers, secretaries, professors and school resource officers to return to work in our schools without paying non-refundable contributions into the ERB,” said Sen. Mimi Stewart. “These retirees, who help our school’s function with little pay, are a very important part of our schools. I’m grateful to the governor for recognizing the need to fix this.”