Gopher State Workers, Employers Could Face Pension Contribution Hikes

January 19, 2005 ( - New proposals to help deal with Minnesota state pension funds' shortfalls would mandate that about 2,000 cities and counties make higher pension payments to the tune of about $85 million annually in higher payroll costs.

One bill already introduced in the Minnesota state legislature and another expected to be filed soon would also mean that almost 150,000 public workers would have to shell out more in pension contributions, the St. Paul Pioneer Press reported.

“The longer we wait, the more it’s going to cost,” said Mary Most Vanek, executive director of the Public Employees Retirement Association, which manages the pension funds, according to the Pioneer Press. “It’s a case of pay us now or pay us later.” The Public Employees Retirement Fund is about 77% funded.

If state lawmakers approve the measures, city and county government workers would see the pension deduction on their paychecks increase. Public safety workers earning $59,000 per year – the average among the public safety pension fund’s 10,115 active members – would see their take-home salary reduced by about $1,100 per year, or more than $90 per month, Vanek said.

As proposed, officers and firefighters would see the pension deduction increase from 6.2% of pay to 9%. Their employers’ contributions to the pension fund would go up from 9.3% to 13.5%.

Any increases would recommend a dramatic turnaround. During the past 30 years, public safety employees have seen a deduction reduced several times, the most recent cut coming in 1999 – moves that were possible because the Public Employees Police and Fire Fund was overfunded. But poor investment returns for several years, coupled with revised actuarial projections about future demands on the system, eroded the surplus, according to the newspaper.

The paycheck blow would not be as harsh for civilian workers, who would see their pension withholding rise from 5.1% of pay to 6% during a three-year phase-in. Their employers’ contributions to the pension fund would go up from 5.5% to 7% during a five-year phase-in. A clerk making $30,000 per year would see the deduction increase $270 per year, or about $23 per month.

A second bill addressing the police and fire fund will be introduced in the coming weeks, Vanek said. It will not recommend benefit cuts, she said.