Ten years ago, Mississippi PERS had enough money to cover 88 percent of its long-term responsibilities, Barbour said. Now, it has enough money to cover 62.5 percent, and money managers would like to see system have at least 80 percent, he said.

Barbour, who leaves office Jan. 10, said many states are shoring up the finances of their public employees' pension plans, and Mississippi needs to do it, too.

"Who deserves this the most?" Barbour said Wednesday. "The taxpayers deserve it. But the employees and the retirees deserve it the most, because they're the people who are basing their future assumptions that this money is going to be there at a time when the system is going in the wrong direction."

The possibility of change worries some state workers and retirees.

"When your financial future is possibly in jeopardy, you are concerned," said Brenda Donnell, who retired in 1996 after 30 years of teaching reading to elementary and middle school students in Jackson.

Donnell was among about two dozen government retirees who packed a room at the Sillers state office building, where Barbour and the commission chairman, Gulfport Mayor George Schloegel, announced the recommendations.

Under the current structure, all of PERS is a defined benefit plan, with managers making investments for all participants and retirees receiving a guaranteed payout based on how many years they work and how much they earn on the job.

If a defined contribution plan is added for new employees, the workers would either manage part of their own investments for retirement or hire someone to manage the investments for them.

The cost-of-living adjustment is typically referred to as a "13th check" because many retirees take it as a lump payment at the end of each calendar year. However, they have the option to receive the COLA each month. Barbour said the actual cost of living has increased by less than 3 percent for each of the past few years, so PERS beneficiaries were overpaid during that time. He said a three-year halt to the COLA payments to current retirees would save the system money.

The study group proposes that for upcoming retirees, the COLA be withheld for the first three years after they leave government service.

The group makes several other recommendations, including requiring PERS to set lower assumptions for the annual earnings rate on its own investments and diversifying the PERS board to add members who don't have a financial interest in the system.

During public hearings this fall, public employees expressed concern about the possibility of reduced benefits for their retirement. Many said a reduction would make it difficult for them to retire comfortably. Union leaders said many public employees already work for lower wages than private-sector workers, and a defined-benefits retirement package is incentive for many to stick with government work.

The study group met during the legislative election season, and the uproar over possible changes in benefits prompted Democratic and Republican candidates to pledge to protect the system, including preserving the 13th check, if possible.

Mississippi PERS manages pension funds for 80,000 state and local government retirees and 167,000 active employees. The members include teachers, firefighters, state hospital workers, prison guards and other nonfederal government workers. State troopers have a separate fund, while legislators have a supplemental fund on top of the regular plan.

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