The bill includes proposals to cut benefit increases for retirees and raise contribution percentages for current workers. According to Minnesota’s Finance & Commerce business publication, under the terms proposed in the omnibus bill, the 2.5% annual increases in retired teacher benefits would be suspended in 2011 and 2012, then the benefits increases would be fixed at 2% a year until the Teachers Retirement Association (TRA) is 90% funded.
The bill does not propose contribution increases for the Minnesota State Retirement System (MSRS), but includes proposed contribution increases for the Public Employees Retirement Association (PERA) and a reduction in annual retiree benefit increases for both systems.
An amendment that would place employees hired after July 1 in defined contribution plans, to which employees and the state would contribute, was proposed, but sources from the TRA say the amendment was defeated.
According to the news report, the TRA is in the worst financial shape of the three major statewide pension plans, at 59% funded. The latest actuarial figures project that the TRA will go broke in 2032 even if the fund garners an 8.5% annual rate of return. MSRS is 65.6% funded, and PERA is 53% funded, according to actuarial valuations as of July 2009.
The measure is now being considered by the State House.