Chapters

00:00 Introduction to PERS Changes

01:08 Overview of PERS Tier 5 Structure

03:46 Impact on Existing Members and Retirees

05:06 Summary and Future Directions

Transcript

Hi everyone, I'm Ryan Earley, host of the PERS Pro YouTube channel. PERS is undergoing its most significant change in over a decade with the creation of new Tier 5. This new tier for future employees, combined with recent discussions on COLA for existing members, has created a lot of questions. Today, we are breaking down everything you need to know whether you are a new hire, a long-time public servant, or a soon-to-be retiree. We'll cover the big COLA changes for Tier 5 and the recent PERS recommendations affecting the COLA payments for existing tiers 1-4. Let's get started.

Before we dive in, make sure you hit that subscribe button down below so you don't miss any of our future videos. Our goal with this channel is to provide you with short, easy to understand, financial education videos that are relevant to PERS members like you.

Disclaimer. This video is for educational and informational purposes only. Neither the host nor this YouTube channel are officially affiliated with, endorsed by, or sponsored by the Public Employees Retirement System of Mississippi. Always consult a qualified professional for personal advice specific to your situation.

Let's start with the new structure for future public servants, PERS Tier 5. This new tier was created by House Bill 1 during the 2025 legislative session and will go into effect on March 1st, 2026 for all new PERS hires. For these new members in Tier 5, there is no guaranteed cost of living adjustment in the new language in Mississippi Code of 1972, Section 2511.112 as approved by the Governor. The language reads, a member who became a member of the system on or after March 1st, 2026 is not entitled to the additional annual benefit under this section legislature may provide an additional benefit for a specific year.

Unlike tiers 1 through 4, which receive an automatic 3% COLA, Tier 5 retirees will not have that automatic protection against inflation. Future COLAs for Tier 5 are now considered a permissive benefit. While the legislature may provide an additional benefit for a year, the amount and conditions are undefined.

The PERS Board and Legislature have a lot of time to develop future legislation around the COLA calculation since Tier 5 requires 8 years to be fested and at least age 62 or 35 years of service to draw benefits. However, we can still look at prior PERS recommendations to get a feel for the discussions that may happen again in the near future.

Here were the proposed changes that PERS sent to the legislature all the way back from 2024. As you can see, when it comes to COLA for future retirees in Tier 5, there is a possibility that the COLA will be tied to the Consumer Price Index, or CPI, but capped at 3% and only paid if funding is available. What I haven't seen anywhere is whether the COLA would be computed based on simple or compounding interest under this scenario.

Now for future PERS Tier 5 retirees, this change to COLA places a much greater emphasis on the new defined contribution portion of the plan to make up for the lack of inflation protection from the defined benefit portion of the plan. And as our previous videos have shown, annual COLA payments can become as large as, or even larger than, the base retirement benefit itself.

Now, let's turn our attention to the good news for existing members and retirees in tiers 1 through 4. Your retirement benefits, including your COLA, are unchanged with House Bill 1 from the 2025 legislative session. You will still receive the guaranteed 3% annual COLA after you meet the eligibility requirements we covered in video number three. However, there has been discussion and language presented that would affect how future Tier 1 through 4 retirees might receive their COLA benefit upon retirement.

Here were the PERS proposed changes sent to the legislature all the way back from 2024. As you can see, was proposed as a possibility that future tier 1 through 4 retirees would have the COLA default change from lump sum to monthly payments. However, the future retiree would still be able to opt for the lump sum COLA option if they chose. It's important to note this proposed change would not have been a change in the COLA amount. And again, to emphasize, this was just a proposal from the past, which doesn't necessarily mean we will see it become state law in the future.

So to summarize today's video, Tier 5 new hires effective March 1st, 2026 have no guaranteed COLA. Tier 1 through 4 retirees retain their guaranteed 3% COLA.

This wraps up our COLA series of videos. Our next series will dive deep into actual school employees' salary data from across the state and present hypothetical PERS retirement benefits you can expect for various roles. Make sure you subscribe so you don't miss those future videos. If you found this video helpful, can thank me by liking the video and sharing it with other PERS members. If you have a follow-up question about COLA, PERS, or anything else related to personal finance that impacts PERS members, please visit our website at perspro.ms and submit your question for a future episode. Thank you for your valuable public service to the state of Mississippi. We'll see you next time.