COMMITTEE ON LEGISLATIVE RESEARCH
OVERSIGHT DIVISION
FISCAL NOTE
L.R. No.:1346H.01I Bill No.:HB 329 Subject:Retirement - Schools; Retirement Systems and Benefits - General; Education,
Elementary and Secondary; Employees - Employers; Teachers
Type:Original Date:February 26, 2025Bill Summary:This proposal modifies the total cost of living adjustments for members of
the Public School Retirement System and the Public Education Employee
Retirement System.
FISCAL SUMMARY
ESTIMATED NET EFFECT ON GENERAL REVENUE FUNDFUND AFFECTEDFY 2026FY 2027FY 2028Total Estimated Net
Effect on General
Revenue $0$0$0
ESTIMATED NET EFFECT ON OTHER STATE FUNDSFUND AFFECTEDFY 2026FY 2027FY 2028Total Estimated Net
Effect on Other State
Funds $0$0$0
Numbers within parentheses: () indicate costs or losses. L.R. No. 1346H.01I
Bill No. HB 329
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ESTIMATED NET EFFECT ON FEDERAL FUNDSFUND AFFECTEDFY 2026FY 2027FY 2028Total Estimated Net
Effect on All Federal
Funds $0$0$0
ESTIMATED NET EFFECT ON FULL TIME EQUIVALENT (FTE)FUND AFFECTEDFY 2026FY 2027FY 2028Total Estimated Net
Effect on FTE 000
☐ Estimated Net Effect (expenditures or reduced revenues) expected to exceed $250,000 in any
of the three fiscal years after implementation of the act or at full implementation of the act.
☐ Estimated Net Effect (savings or increased revenues) expected to exceed $250,000 in any of
the three fiscal years after implementation of the act or at full implementation of the act.
ESTIMATED NET EFFECT ON LOCAL FUNDSFUND AFFECTEDFY 2026FY 2027FY 2028Local Government(Unknown)(Unknown)(Unknown) L.R. No. 1346H.01I
Bill No. HB 329
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FISCAL ANALYSIS
ASSUMPTION
Officials from the Joint Committee on Public Employee Retirement (JCPER) state the bill
has no direct fiscal impact to the JCPER.
The JCPER’s review of this proposal indicates that its provisions may constitute a “substantial
proposed change” in future plan benefits as defined in section 105.660(10). It is impossible to
accurately determine the fiscal impact of this legislation without an actuarial cost statement
prepared in accordance with section 105.665. Pursuant to section 105.670, an actuarial cost
statement must be filed with the Chief Clerk of the House of Representatives, the Secretary of
the Senate, and the Joint Committee on Public Employee Retirement as public information for at
least five legislative days prior to final passage.
Officials from the Public Schools and Education Employee Retirement Systems
(PSRS/PEERS) state this bill, as currently drafted, would amend RSMo Section 169.070 and
Section 169.670 to allow the current 80% lifetime limitation on total cost-of-living increases
granted to a retired member or beneficiary (the "COLA cap") to increase over time. Beginning
December 31, 2025, and at each December 31 thereafter, an increase to the COLA cap of 1%
shall be approved by the Board of Trustees if the System's investments earn 2% or greater
returns in excess of the investment return rate adopted by the Board of Trustees in the
immediately prior fiscal year (ending June 30 of such year). The annual increase to the COLA
cap shall not exceed 1% per year, and the COLA cap shall not increase to more than 100%.
The Public School Retirement System of Missouri (PSRS) and the Public Education Employee
Retirement System of Missouri (PEERS) have an actuary firm, PwC US (PwC), that prepares
actuarial cost statements on any proposed legislation as well as the annual actuarial valuation
reports for the Systems. This legislation was submitted to them and the actuarial cost statements
discuss in detail the estimated impact to the Systems. As currently proposed, the COLA cap
increase is estimated to have a significant fiscal impact to both PSRS and PEERS and is further
discussed in the following analysis.
Analysis of impact on PSRS and PEERS
To estimate the fiscal impact of HB 329 PwC assumed the current 80% COLA cap would
increase prospectively by 1% (to 81%, then 82%, and so on) each year the System's investment
return on a market value basis exceeded the expected rate of return on assets assumption by 2%
or more. As of June 30, 2024, the expected rate of return on assets assumption used in the annual
actuarial valuation of the System is 7.3%, so PwC assumed that any time the return on the
market value of assets is 9.3% or more, the COLA cap would increase by 1% until the cap
reaches 100%.
Based on an analysis provided by the Systems' investment advisor, the asset return on the market
value of assets is expected to exceed the assumed return by 2% or more 40% of the time, or two L.R. No. 1346H.01I
Bill No. HB 329
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out of every five years. Therefore, PwC assumed that in two years, the 80% COLA cap would
increase to 81%, and then three years after that, the 81% COLA cap would increase to 82%, and
so on until the COLA cap reached 100%.
The estimated fiscal impact analysis for PSRS and PEERS was illustrated by PwC using various
alternative scenarios and comparing to the Baseline scenario. The Baseline scenario is defined as
the June 2024 valuation results, which utilize the most recent member data and includes current
plan provisions. PwC’s estimates do not include any additional administrative costs that may be
incurred by the System to implement this change.
For PSRS, the estimated fiscal impact to the Actuarial Accrued Liability (“AAL”) ranges from
$95.9 million based on the Systems current inflation and COLA assumptions (Scenario A) to
$2.5 billion if higher inflation is a sustained economic trend resulting in changes to the
Systems’ inflation and COLA assumptions (Scenario B). For PEERS the estimated fiscal
impact to the AAL ranges from $2.2 million to $292.6 million under the same Scenarios.
Additional scenarios were provided within the actuarial cost statements with varying ranges of
estimated impact to the AAL for both PSRS and PEERS.
Scenario A illustrates the estimated fiscal impact of HB 329, as currently drafted, compared to
the Baseline scenario. Scenario B is the same as Scenario A, but the long-term COLA
assumption for the Systems was increased by 50 basis points from 1.35% to 1.85% beginning
January 1, 2026, and each January 1 thereafter. This scenario is provided to illustrate the
sensitivity of the liabilities to the COLA assumption. The COLA assumption is directly
correlated to the Systems inflation assumption. To the extent the Federal Reserve is unsuccessful
in reducing current inflation to the 2.00% long-term inflation target, the Systems inflation and
COLA assumptions could be impacted in the future.
Based on the information provided by PSRS and PEERS, Oversight notes the following:
PSRS Actuarially Determined
Contribution (ADC) Rate
Baseline (Current Provisions) 27.98%Scenario A28.11%Scenario B31.65%PEERS Actuarially Determined
Contribution (ADC) Rate
Baseline (Current Provisions) 13.22%Scenario A13.23%Scenario B14.33%
Oversight assumes these provisions will increase employer contribution rates for school districts
and community colleges beginning in FY 2026. L.R. No. 1346H.01I
Bill No. HB 329
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FISCAL IMPACT – State GovernmentFY 2026
(10 Mo.)
FY 2027FY 2028$0$0$0FISCAL IMPACT – Local GovernmentFY 2026
(10 Mo.)
FY 2027FY 2028LOCAL POLITICAL
SUBDIVISIONS
Costs – School Districts - increase in
employer contributions(Unknown)(Unknown)(Unknown)
Costs – Community Colleges - increase
in employer contributions(Unknown)(Unknown)(Unknown)
ESTIMATED NET EFFECT ON
LOCAL POLITICAL
SUBDIVISIONS(Unknown)(Unknown)(Unknown)
FISCAL IMPACT – Small Business
No direct fiscal impact to small businesses would be expected as a result of this proposal.
FISCAL DESCRIPTION
Currently, retired members of the Public School Retirement System ("PSRS") and the Public
Education Employee Retirement System ("PEERS") may receive yearly cost of living
adjustments on monthly retirement allowances, but the total of the cost of living adjustments
must not exceed 80% of a member's original monthly retirement allowance.
Under the provisions of this bill, the 80% limitation will be subject to annual increases approved
by the Board of Trustees beginning December 31, 2025, and every December 31st thereafter,
except the increases to the limitation must not exceed 1% per year. Additionally, if the
investments of the system earn 2% or greater returns than the investment return rate adopted by
the Board, the limitation on the total cost of living adjustments must be increased by 1%.
However, the cost of living adjustments must not exceed 100% of a member's original monthly
retirement allowance.
This legislation is not federally mandated, would not duplicate any other program and would not
require additional capital improvements or rental space. L.R. No. 1346H.01I
Bill No. HB 329
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SOURCES OF INFORMATION
Joint Committee on Public Employee Retirement
Public Schools and Education Employee Retirement Systems
Julie MorffJessica HarrisDirectorAssistant DirectorFebruary 26, 2025February 26, 2025