Taxpayers will soon spend more to shore up the finances of the Judges Retirement Fund after lawmakers approved a proposal Monday to increase contribution rates.
Members of the Idaho House Commerce and Human Resources Committee approved the plan to increase taxpayers’ share of pension contributions from 55.28 percent of judges’ annual salary to 62.53 percent per year.
Under the plan, judges will have to pay more, too. Public Employee Retirement System Of Idaho will request judicial contributions to increase from 10.23 percent to 11.57 percent.
PERSI Executive Director Don Drum told committee members that the judicial pension system needs a cash infusion to stay within the bounds of the law.
Idaho law mandates that the state take action if the pension account boasts too large of a gap between its assets and liabilities. Had legislators rejected PERSI’s plan, the state would have been in violation of state code.
In raw numbers, the judges’ pension fund finds itself about $20 million short of the cash it needs to achieve legally defined fully-funded status. That’s up from a $13.6 million gap in 2013.
An audit released in October 2016 revealed the fund was 75.3 percent funded, below the 80 percent threshold some regard as the low bar for a healthy pension fund. The American Academy of Actuaries disputes the 80 percent figure, though, and says no single figure at a singular point in time can accurately describe a pension fund’s health.
“All plans should have the objective of accumulating assets equal to 100% of a relevant pension obligation, unless reasons for a different target have been clearly identified and the consequences of that target are well understood,” the 17,000-member group wrote in a 2012 policy memo.
Though PERSI wants full funding for the judicial pension account, it’s trending in the wrong direction. The account was 82.99 percent funded in 2013, and 81.28 percent funded last year.
The judicial pension plan has been criticized in the past as too generous. A judge earning more than $100,000 a year could take home more than $70,000 annually in retirement payments after meeting certain on-the-job longevity requirements.
Rep. Phylis King, D-Boise, defended the generous benefits as a recruitment and retention tool, and a nod to the state’s inability to match private sector compensation for attorneys.
Rep. Steven Harris, R-Meridian, expressed his distaste for Idaho’s whole pension system, which provides taxpayer-backed payments to retirees, regardless of market outcomes.
“This does point out the inherent problem with the defined-benefit program,” Harris told the panel. “If the market doesn’t perform as needed, the [contribution percentage] number will go to any level it has to.”
PERSI projects its investments will return 7 percent each year, but it has failed to meet that target for three years running. Through this fiscal year, which ends June 30, PERSI’s investments have returned just more than 5 percent.
Harris, plus freshman Rep. Dorothy Moon, R-Stanley, voted against PERSI's plan to increase taxpayers’ share of judicial pension contributions.