2018 Sustainability Bill Passes Out of Pension Commission

The Legislative Commission on Pensions and Retirement (LCPR) on Tues., March 13, passed the 2018 omnibus pension bill. The next stop for the bill is the Senate State Government Finance Committee, which will hear it on Thurs., March 15, at 1 p.m. in Room 1200 of the Minnesota Senate Building.
The bill includes sustainability measures for all four public pension systems: the Teachers Retirement Association (TRA), the Public Employees Retirement Association (PERA), the Minnesota State Retirement System (MSRS), and the St. Paul Teachers Retirement Fund Association (SPTRFA).
Details on the bill, currently moving as SF 2620 (Senate version)/ HF 3353 (House version), may be viewed on the State Legislature website.
Minnesota Management and Budget Commissioner Myron Frans told commission members that Gov. Mark Dayton endorses the pension bill in its current form and will include the funds in his supplemental budget. Frans said the bill is a “very important sustainability package” that has been several years in the making and includes measures to improve the financial health of the pension funds and the state.
The bill reduces liabilities by about $3.4 million immediately, lowers the rate of return on investments to a “reasonable” 7.5 percent, puts the plans on the path to full funding, provides funding to schools to offset increased pension contributions, ensures that unfunded liabilities won’t weigh down bond ratings, and safeguards the retirement security of public employees for the future, Frans said.

KEY TRA PENSION BILL PROVISIONS
* COLA: 1.0% for 5 years (2019-2023), then increase by 0.1% per year in each of next five years (2024-2028) to 1.5%
* COLA delay to age 66  (effective 7/1/2024) (exempt: Rule of 90, disability, survivors, age 62/30 years)
* Early retirement: Increase penalties, 5-year phase-in (fiscal years 2020-2024), age 62/30 years exempt
* Employee contribution increase: +0.25% beginning in FY2024 (7.5% to 7.75%)
* Employer contribution increases: +1.25% phased in over 6 years, FY19-24 (7.5% to 8.75%)

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Commission hears public comment on pension bill

The Legislative Commission on Pensions and Retirement (LCPR) on Tues., March 6, reviewed miscellaneous pension-related bills and again took up the 2018 Omnibus Retirement Bill. Numerous stakeholders spoke during the public testimony portion of the meeting.
Teachers Retirement Association (TRA) retirees from the group Retired Educators of Minnesota (REAM) said that REAM supports the pension bill as long as funding of the employer contribution portion is approved. REAM’s Lonnie Duberstein said that he is grateful for his defined-benefit pension and wants the same benefit to be preserved for the next generation of teachers.
Education Minnesota’s Rodney Rowe spoke to the recruitment and retention value of the TRA pension and said that his union supports the bill. Joan Beaver of REAM and Education Minnesota Retired and Louise Sundin of the Minneapolis Committee of 13 also spoke in support of the bill.
Representatives of school boards and administrators showed up in force to support the bill provided state pension adjustment aid is included. Scott Croonquist of the Association of Metropolitan School Districts thanked the commission for working out the pension adjustment formula, noting that because schools do not have general levy authority, such an aid provision is needed to offset increases in the TRA employer contribution.
Grace Keliher of the Minnesota School Boards Association, Valerie Dosland of the Minnesota Association of School Administrators, Fred Nolan of the Minnesota Rural Education Association, and Joel Albright of Schools for Equity in Education also testified in favor of the pension bill.
Public safety and firefighter representatives testified that a strong pension system is needed to recruit and retain police officers. Joe Dellwo of the Minnesota State Patrol Trooper’s Association noted that state troopers don’t get Social Security and said that the bill represents shared sacrifice by all parties.
Members of the Minnesota State Retirement System (MSRS) representing the state Pollution Control Agency and the University of Minnesota agreed that a healthy pension system helps attract and retain skilled public workers at a time when “brain drain” and succession planning are major concerns.
Public Employees Retirement Association (PERA) members from AFSCME testified that the 1 percent COLA outlined in the bill is hard to swallow, but the union supports the bill. It was noted that many PERA retirees have no Social Security coverage and are therefore deeply dependent on their state pensions.
Also on Tuesday, the commission reviewed separate bills dealing with state aid eligibility reporting for the Clearbrook Fire Department Relief Association, TRA coverage election authority for a Minnesota State employee, coverage for PERA part-time paramedics and emergency medical technicians employed by Hennepin Healthcare System, and clarifying PERA DC distributions for those still employed.
The pension commission intends to pass the bill at its next meeting, March 13 at 5:30 p.m. in Room 1200, Senate Office Building.

Courtesy TRA Communications

Cof13
 Committee of 13
Communications Extra:

It is important to let your Representative and Senator know how important the passage of the LCPR Pension Omnibus Bill is – to you and to all Minnesotan.
The Pension Bill has numbers in both houses:  SF 2620 and HF 3053.  Chair Rosen is working to get universal support in the Senate and Rep. O’Driscol, Vice Chair, is working to get support in the House. Governor Mark Dayton has agreed to put funding for pensions into his Supplemental Budget.

Listen, Talk, Vote

It is an election year for Minnesota. Much is at stake.
Midterm elections don’t usually draw much voter turnout. When the state economy seems to be doing well, voters may think that not voting returns the status quo. These conditions favor the opposition, whose turnouts produce stunning defeats and are followed by dramatic reversals.
Minnesota stands out as a great place to live, for now. The governor’s efforts to hold off the forces of capital side pressure have preserved many gains for Minnesotans. That could come undone in November. There is a fragile and unreliable balance in power.
If the effects of an international trade war sharply depress the equity markets and the economy, pensions and other retirement savings could be similarly depressed and under renewed threat from the investment industry. Losses in farm exports could put further demands on our state’s resources. Meanwhile, prices for consumer goods as well as medical costs and inflation could rise. Social Security and Medicare are already under threat from blossoming Federal debt and the prevailing “everyone for her/himself” attitude in Washington.
We can anticipate debates around gun sentiment and actual education needs upping that piece of the next budget, while the 2017 budget standoff gets revisited attention. The #MeToo movement will rightly demand some actions. Meanwhile, other gender rights agendas lie right beneath the surface. And there will be water quality problems and climate change effects that are unpredictable but seemingly inevitable. Actions taken will have long-lasting outcomes.
Voting in November could not be any more important. Your everyday lives are far more impacted by state controlled factors than any other. Every candidate must be asked about all of the above points, and their answers must be clear and their positions firm. That’s how you must decide your votes.
If you’ve read this far, you were already committed to voting. Now commit to getting family and friends to do likewise. Find out where candidates are on the issues and get yourself and others to the polls in November. Every day you should think about what’s important in your life that the State of Minnesota affects in some way. Listen to what others are saying about these things and talk with them about why you feel as you do. Then every day, tell someone to vote in November.

Reps from Pew Charitable Trusts, South Dakota pension system speak at LCPR

The Legislative Commission on Pensions and Retirement on Mon., Feb. 19, heard testimony on a state public pension stress-testing analysis from researchers at the Pew Charitable Trusts. Also testifying was the executive director of the South Dakota Retirement System, a “hybrid defined benefit plan.”

The Pew research is part of its Public Sector Retirement Systems Project, which began in 2007 and has received funding from the anti-pension Laura and John Arnold Foundation. The research includes 50-state trends on public pensions and retiree benefits related to funding, investments, governance, and employee preferences.

In their discussion, presenters Susan Banta and Tim Dawson said that pension systems are “as exposed to the impact of an economic downturn as ever, based on measures of fiscal health and investment risk.” They added that pension fiscal health varies across states and cities. There is a $1.1 trillion pension funding gap in the nation, according to 2015 data collected from annual reports in all 50 states, Pew reports.

The stress testing referenced by Pew is an analysis in which adverse economic scenarios and market volatility are simulated to assess fiscal health. Stress testing also assesses the impact of lower investment returns or an economic recession on pension costs and liabilities. Pew touts its stress testing as a tool to aid administrators and policymakers to plan for the next market downturn. Banta and Dawson presented stress-tested projections for several states on metrics such as assets and contributions, and said that nine states presently require stress testing.

Robert Wylie, executive director of the South Dakota Retirement System, testified regarding recent plan changes at SDRS – notably legislation in 2017 tying the retiree cost-of-living adjustment to the Consumer Price Index inflation measure. The SDRS COLA equals the CPI-W with a minimum of .5 percent and a maximum of 3.5 percent that may be restricted based on actuarial projections for keeping the plan fully funded. 

All three speakers emphasized that each state is unique and there is no one-size-fits-all approach to pension reform.

Also on Monday, the LCPR approved a motion to change all economic assumptions (except the investment rate of return) for the Public Employees Retirement Association (PERA), Minnesota State Retirement System (MSRS), and Teachers Retirement Association (TRA).

LCPR chair Sen. Julie Rosen laid out a timeline for upcoming meetings:

  • Feb. 27: Pension bill to be released.

  • March 6: Consider changes to the bill.

  • March 13: LCPR to vote on pension bill.

  • March 20: LCPR hearing on Secure Choice.

Courtesy of Minnesota TRA

    State workforce, national pension trends discussed at LCPR

    The Legislative Commission on Pensions and Retirement (LCPR) on Tuesday heard a presentation on national public pension trends from Alex Brown, research manager at the National Association of State Retirement Administrators (NASRA), and testimony from State Demographer Susan Brower on trends and forecasts for public employment in Minnesota.

    Brown called attention to differences between Minnesota and other areas of the United States in pension policy and spending. He noted that the employer-employee contribution rate in Minnesota is more evenly split than in other states (most often the employer contribution rate is higher than the employee’s share).

    He said that nationally in fiscal year 2015, about 4.6 percent of state and local government spending went to pensions. In Minnesota, only about 2.3 percent of state and local government spending went to pensions. In addition, the normal retirement age in Minnesota, age 66, is higher than the national median of age 63. Minnesota public workers also fund a higher percentage of their benefits than the national median. Brown mentioned some of the reforms in the U.S. in recent years, including lowering benefits, raising contributions, conversion to hybrid plans, and the transfer of risk from employer to employee.

    Brower presented data on Minnesota’s aging population, the resulting projected workforce changes, and the impact of growing diversity on the state labor force. The transition to an older Minnesota has begun, and the aging of the population will change demand for public services – especially health and human services and K-12 education, she said. As baby boomers continue to transition to retirement, labor force growth is projected to slow over the next decade, transforming the state workforce in the process.

    Brower said that the state government workforce is heavily weighted toward older workers, which shows how defined-benefit pension plans do appear to help attract and retain workers. In Minnesota, trend lines show that workers tend to stay employed in state government for a long time.

    Both presenters’ slides are available on the LCPR website: https://www.commissions.leg.state.mn.us/lcpr/meetings/agendas/2018/020618_agenda.htm.

    Courtesy of TRA Communications

    2018 DFL Precinct Caucus Resolutions

    The Committee of 13 and the Retired Teachers Council 59 encourage retirees to take the following resolutions to the precinct caucuses and move to them for approval. If passed, these resolutions will then help shape the platforms of Minnesota’s political parties and be a guide for legislative candidates running for office and serving in the MN Legislature.

    Ready to introduce a resolution at your DFL precinct caucus?

    First, download this page so that you can open Web pages and can still copy the resolutions from those below. You can download it as any sort of file, but keep it open and handy.

    Next download the DFL precinct caucus resolution form here:

    https://www.dfl.org/wp-content/uploads/2013/05/Resolution-Form.pdf

    Your resolution will need to be on this form in order to be considered at the caucus.

    Once it’s downloaded, open it and keep both the text of this page and the Resolution Form open on your desktop or tablet. You will need to work between them.

    Fill in the Resolution Form and print it out. Just copy and paste the language of one of the resolutions listed those below. Then save the form with its own file name for your record–and just in case. Then you can erase the resolution section of the open Resolution Form and reuse it by copying and pasting the next resolution in. You may also need to change the category. Just remember to save the changed form under a new file name.

    Don’t forget to take your resolutions with you to your caucus on Tuesday, February 6th at 7:00. Look here to be sure you know the location of your caucus location: http://caucusfinder.sos.state.mn.us/

    Exercise your democratic rights. Attend your caucus, become a convention delegate, and vote.

    ———————————————————————

    Secure Retirement resolutions

    I move that the party support a strong, secure retirement system for our public educators and support the goal of maintaining a defined-benefit pension plan for current and future generations.

     

    I move the party support providing an investment of state funding to ensure continued financial stability of the major public pension funds.

     

    Early childhood Education resolution

    I move the party support funding to offer universal, school-based pre-kindergarten taught by licensed professionals, to all Minnesota 4-year-olds.

     

    Higher Education resolution

    I move the party support state and federal financial aid grants, loans and tax credits to make public higher education affordable and accessible for every Minnesota resident.

    Commission explores public pension privatization

    An organization that spends millions of dollars on a state-by-state effort to privatize public pensions is now playing a significant role in pension discussions at the Minnesota state capitol.

    The Legislative Commission on Pensions and Retirement (LCPR) heard testimony on Wednesday from a University of Minnesota research fellow whose pension policy research is funded in part by the anti-pension Laura and John Arnold Foundation. Also testifying was the executive director of the Oklahoma Public Employees Retirement System, whose state’s transition away from pensions to a private, defined-contribution system was partly due to a push from the Arnold Foundation.  

    The Feb. 19 LCPR meeting is set to include testimony from a representative of the Pew Charitable Trust. Pew has received $9.7 million from the Arnold Foundation to support its Public Sector Retirement Systems project (http://www.pewtrusts.org/en/projects/public-sector-retirement-systems), according to Governing magazine (http://www.governing.com/topics/mgmt/gov-john-arnold-pensions.html).

    The Arnold Foundation has directed nearly $28 million to fund pension policy research nationwide and millions more in personal donations from the Arnolds to support political candidates and ballot initiatives aiming to switch public workers to 401(k)-style plans, according to Governing magazine.

    Kurt Winkelmann, a former managing director at Goldman Sachs, is leading the inter-disciplinary research project on pension policy design at the University of Minnesota’s Heller-Hurwicz Economics Institute. Winkelmann told the LCPR that his project’s goal is to “provide a solid research foundation for choices” in retirement plan design and take advantage of cutting-edge tools for developing pension policy.

    The dual policy goals, he said, are secure retirement income for employees and reducing volatility in taxpayer expense. Referring to a few 2017 news articles debating the nature and extent of Minnesota’s public pension challenges, Winkelmann compared the state’s pension policy to the Bill Murray movie, “Groundhog Day.” An article appears about funding issues, op-ed rebuttals ensue, new funds are allocated at legislature, and the cycle repeats, he said.

    Using Arnold Foundation funding, the project will include academic conferences with experts and researchers, quarterly policy briefs (four of which have been published at https://cla.umn.edu/heller-hurwicz/pensions-initiative), three policy forums that will be open to the public, and two workshops to “help policymakers with pension policy,” Winkelmann said.

    Sen. Sandy Pappas, D-St. Paul, asked Winkelmann whether he has ever studied Minnesota pensions before, or if this is a new endeavor. She asked whether he intends to familiarize himself with the history and reform record of Minnesota’s pensions. Winkelmann affirmed that you can’t talk about changes unless you spend some time studying how you got from Point A to Point B.

    Winkelmann touched on the privatization of public pensions in Pennsylvania and Rhode Island, but was unable to answer in-depth questions about those states. He also mentioned the success of pension systems in the Netherlands and Australia and the transparency of those plans. 

    Sen. Warren Limmer, R-Maple Grove, asked whether Winkelmann believes Minnesota lawmakers are doing something that’s not transparent, noting that reporting requirements for actuarial valuations for pension plans are set in statute. Winkelmann responded by touting a market-based rate (around 4 percent). Pension systems use an assumed rate of return on investment that’s higher than the market rate because long-term average investment return performance is typically higher than 4 percent.

    Testifying via Skype was Joseph Fox, executive director of the Oklahoma Public Employees Retirement System, which closed its defined-benefit plan to new state employees hired on or after Nov. 1, 2015. From 2010 to 2015, legislators studied pension reform and ultimately made changes to raise the retirement age and eliminate retiree cost-of-living adjustments, among other things. OPERS has not paid a COLA since 2008.

    Today, state employees have a mandatory contribution rate of 4.5 percent but may opt to contribute more. The employer contribution for all new state employees is 16.5 percent of payroll. Of this total, only 6 percent to 7 percent goes to the employee retirement account. The remainder (9.5 percent to 10.5 percent) goes into the closed legacy fund.

    Rep. Tony Albright, R-Prior Lake, asked how fees are reported to participants in the defined-contribution plan, who choose from a menu of investment options through Vanguard. Fox said the fee structure is transparent; participants can access fee disclosure in all records and by viewing their individual accounts. Fox said the system’s board was very concerned about fees.

    Pappas said that the 2011 DB/DC study commissioned by the LCPR and conducted by the three Minnesota statewide retirement systems should be reviewed for new commission members who might be unaware of the estimated cost of transitioning public employees from the defined-benefit plan to private savings plans. (That cost, in 2011 dollars, was estimated at $3 billion.)

    Pappas asked Fox whether Oklahoma has done a cost-benefit analysis of the switch to private retirement plans and if the change was worth it. Fox said the state has not conducted a cost-benefit analysis. The driving force behind the move, he said, was the “changing face of public pensions in the country.” “Reform has been in the air for a decade now,” Fox said.

    Sen. John Jasinski, R-Faribault, asked whether the change has affected the ability of Oklahoma’s public sector to attract employees. Fox said his state has been under a hiring freeze, but admitted that new employees are unhappy about the mandatory defined-contribution plan once they become aware of the differences between the benefits of a DB plan versus a DC plan.

    The LCPR next meets on Feb. 6, when it will hear from the National Association of State Retirement Administrators (NASRA), the head of the South Dakota Retirement System, and the Minnesota state demographer. On Feb. 19, a representative of the PEW Charitable Trust will address the panel.

    Courtesy of TRA Communications