An increase in contribution rates likely will be necessary for state and municipal government worker pensions if global financial markets don't rebound in the next 18 months, lawmakers were told Monday.

The finances of New Mexico's pension systems for government workers and educational employees have deteriorated because of significant investment losses in the past six months. Lawmakers are looking for ways to shore up the funds and a program that provides health care to governmental retirees and their dependents.

"This is an enormous problem," Sen. Sue Wilson Beffort, R-Albuquerque, said Monday.

Her comments came as the Senate Finance Committee reviewed the long-term financial stability of the Retiree Health Care Authority, the Educational Retirement Board and the Public Employees Retirement Association.

Employers and employees make contributions into the pension funds as well as the retiree health care program.

Terry Slattery, PERA's executive director, said if there's no turnaround in the financial markets in the next year to 18 months, then contribution increases likely will be needed to bolster the pension fund. However, he said, higher payments by government employers or workers probably wouldn't be necessary until at least the 2012 budget year, which starts in July 2011.

The market value of PERA's fund balances dropped from $12.2 billion in mid-2008 to $8.9 billion at the end of December. ERB's fund went from $8.7 billion to $6.6 billion during the same six-month period.

The Legislature must approve any increase in pension fund contributions. In 2005, the Legislature and Gov. Bill Richardson agreed to improve the actuarial solvency of the educational retirement system by increasing employer and employee contributions.

There are a number of proposals in the Legislature to change the state's retirement plans, including some that would sweeten the pension benefits for certain workers — increasing pension fund liabilities. Other bills would improve the long-term finances of the pension funds by requiring newly hired government or educational employees to work longer before they can retire.

The ERB, for example, is asking the Legislature to approve a longer service requirement for employees of public schools, colleges and universities hired in the future.

Currently, a worker covered by the educational pension plan can retire with full benefits at any age if they have at least 25 years of service experience or they meet the so-called "rule of 75" — their combined service and age at retirement equal or exceed 75.

Under the proposal, an employee could retire at any age without a benefit reduction if they have worked 30 years or if they meet a "rule of 80" — their combined work experience and age equal at least to 80.

Lawmakers were told the Retiree Health Care Authority's financial condition has improved because of money from insurance premium increases imposed recently on retirees. However, the program is projected to be insolvent by 2019.

Wayne Propst, executive director of the authority, said a bill to increase contribution rates by employers and active employees would extend solvency by eight or nine years.

Bill to increase ERB retirement eligibility, HB631; increase retirement eligibility in ERB and PERA plans, HB573; bill to increase contributions to the retiree health care fund, SB366.




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