MPERS’ Board of Trustees Elects to Charge Employers the Full 0.85% "Surcharge" Indefinitely and to Dedicate the Proceeds Solely to Pay COLAs

The MPERS Board of Trustees and the Louisiana Legislature removed the legal barriers for giving cost-of-living adjustments (COLAs) to retirees on June 30, 2022. This was important, because only four COLAs were given in the last 20 years due to these barriers. The board would like to increase the number of COLAs (if possible) and avoid the erratic timing associated with the prior legal barriers.

Now, COLAs have to be paid in advance and not on the employers' "credit card." The board can charge employers up to 0.85% of employee pay to save money for COLAs. In March of 2023, the board resolved to charge the full amount indefinitely and use it only for COLAs.

To grant a COLA, two things are needed:

1. enough money in the funding deposit account (it is empty now); and
2. the approval of the MPERS Board of Trustees.

The board is charging employers an extra 0.425% for FY 23-24 and will charge 0.85% every year after that.

Recently, the board has taken legal action against several municipalities who have been shortchanging (1) their own police officers, (2) their fellow (unlike them, law-abiding) municipalities (through a higher employer contribution rate), and (3) MPERS' retirees (more members in the system equals more money for COLAs). By illegally not enrolling their officers, these municipalities avoid paying the 0.425% / 0.85% surcharge, therefore hurting current and future MPERS retirees. For more background on that project, see MPERS' website.

Similarly, the board also has voted to seek legislation this year to eliminate the ability of certain police officers to "opt-out" of MPERS. Again, this will mean more members, which means a lower-than-otherwise employer contribution rate AND more funds for COLAs. The board also feels it's a matter of common decency, since some employers apparently pressure their officers to opt out of MPERS.

The board has also been working to enroll police department civilian personnel, as required by law. This will also result in more money for COLAs and a lower employer contribution rate. 

MPERS Wins Significant Victory on Behalf of Current and Retired NOPD Officers; Appeal Expected

On December 12, 2023, Judge Johnson signed a judgment declaring that MPERS' interpretation of Ordinance 22493 M.C.S. and La. R.S. 11:2218(J) regarding conversion of terminal leave to retirement service credit is correct.

Although the City has mucked the process up, it should be quite simple. At the time that you retire, you must receive the maximum cash payout for your terminal leave from the City (despite what the City’s forms say, you don’t have a choice regarding the amount to be cashed out or converted to retirement service credit). Per the City’s civil service rules, you’ll get cashed out for all your remaining annual leave but only a portion of your remaining sick leave. The portion of your remaining sick leave that the City can’t legally pay you for will be converted to retirement service credit (up to the amount that would provide you a maximum benefit equal to one hundred percent of your average final compensation). Unfortunately, City officials think they can just write the value of this time off.

The maximum amount of terminal sick leave that will be converted to retirement service credit is 272 days, which converts to 1.1 years of service credit (so, if you want to retire with 30 years of retirement service credit and have plenty of sick leave, you’ll generally be able to retire 1.1 years earlier). The actual amount that will be converted depends on how many sick leave hours you have at retirement. And New Orleans must pay MPERS for the entire cost of the conversion for retirement service credit to be granted.

MPERS expects the City to file a suspensive appeal, which will delay the application of Judge Johnson's judgment. However, MPERS expects to prevail in the long run.

Also, the judgment was a partial summary judgment that did not address the prescriptive period (statute of limitations) issue. If MPERS prevails, the courts will have to decide how far New Orleans must go back to rectify the situation. MPERS believes New Orleans has shortchanged almost every single MPERS retiree who retired on or after January 22, 2007. For more background on this lawsuit and other issues involving New Orleans, see MPERS' website.

MPERS DROP Retirees: Are You Leaving Money on the Table?

MPERS members and retirees currently have approximately $33 million in investments held for them with Empower, our third-party provider. The average individual balance is $96,061. Interestingly, $32.8 million of the $33 million is invested in the default (under state law) stable value fund, rather than the other funds that are offered, which are the Vanguard LifeStrategy Funds. These funds are low-cost fund-of-funds that were specifically selected by MPERS to make it easier for members to manage their DROP funds. Basically, you pick one fund based on your risk tolerance and move all of your money into that one fund. Click here for an explanation of the funds.

To view the actual prospectuses, click on the links below:

Vanguard LifeStrategy Cnsrv Gr Inv

Vanguard LifeStrategy Growth Inv

Vanguard LifeStrategy Income Inv

Vanguard LifeStrategy Moderate Gr Inv

It’s Tax Time — Don’t Forget Your HELPS Deduction for Police Retiree Medical Insurance Payments

If you are an MPERS retiree, please be aware that you may reduce your taxable earnings by up to $3,000 for medical insurance premiums paid during a calendar year. This is allowable under the Healthcare Enhancement for Local Public Safety Retirees Act, or the “HELPS” Retiree Act.

Previously, the premium was required to be deducted from a retiree’s pension check in order to qualify for HELPS credit. That is no longer the case following the adoption of the federal Secure 2.0 retirement law. Any premium paid for health, accident or long-term care insurance qualifies for the credit.

Note that the $3,000 reduction does not appear on the annual 1099-R form that is sent out by MPERS. Retirees must claim the reduction on their individual 1040 tax form on Line 5b or similar adjustment. Instructions on claiming the reduction are included in IRS Publication 575. As this is not a simple matter, it is recommended that retirees consult with their tax preparer to properly claim the reduction. If you are using TurboTax or some other tax preparation software, please contact the software company. Please do not contact MPERS regarding this deduction, as we cannot help you with your tax return. Also, MPERS 1099s will be mailed on or before January 31, 2024. If you don't receive yours, please don't contact the MPERS office until after February 3, 2024.

Note that married couples where both the parties are retired police/fire/EMS may take a reduction in income of up to $6,000.

Election America, Inc. has been engaged to conduct an election for one trustee position to represent Non-chief District III.

The Chairman of the Board of Trustees called for an election with nominations opening April 1, 2024. The Non-chief District III position is for a term beginning July 1, 2024 and ending June 30, 2029. The candidate receiving the most votes for the position will be declared the winner.