Minnesota Deferred Compensation Plan and Health Care Savings Plan News from MSRS

Minnesota State Retirement System (MSRS) is pleased to announce the selection of Empower Retirement (formerly Great-West Financial) as our new recordkeeper. Effective July 1, 2015, Empower will replace Voya Financial® as the recordkeeper.

MSRS selected Empower, a leader in the financial services industry, as a result of a thorough vendor selection process. Empower is a retirement plan provider to many state, municipal, and county governments.
 

Which MSRS Plans are affected?
The following MSRS-administered plans are affected:

·         Minnesota Deferred Compensation Plan (MNDCP)

·         Health Care Savings Plan (HCSP)

·         Unclassified Retirement Plan

·         Hennepin County 1% Supplemental Retirement Plan

 

What do I need to do?
The transition to Empower will happen automatically and should be relatively transparent to you. However, starting in late June there will be a blackout period during which time you will not be able to make changes to your account. Detailed information about the blackout period will be mailed to you in May.


What’s changing?
The account online website and access will change to improve the user experience. In early July, a new PIN and login instructions will be mailed to you. Otherwise, almost everything else will remain the same: MSRS will continue to administer the plans, answer participant calls, and process transactions.

 

How will MSRS keep me informed during the transition?
Information and updates about the upcoming recordkeeper change will be available on this website and in plan newsletters. In May, you will receive a Transition Guide with more detail about the blackout dates.


What is a recordkeeper?
A recordkeeper provides investment accounting services, access to the account online website that allows you to view your account information and process transactions, and other functions needed to operate a retirement plan.


We are excited about our new relationship with Empower Retirement.

Governor signs 2015 pension bill

Gov. Mark Dayton on May 22 signed the 2015 Omnibus Retirement Bill into law. The bill passed in the state House of Representatives unanimously and in the Senate on a 53-4 vote on May 17 following days of wrangling over state funding for the merger of the Minneapolis Employees Retirement Fund (MERF) into the Public Employees Retirement Association (PERA).

Here are the law’s major provisions:

>·         Interest rate, salary rate, and payroll growth actuarial assumption changes: For PERA, the Minnesota State Retirement System (MSRS), and St. Paul Teachers Retirement Fund Association (SPTRFA), the interest rate actuarial assumption is reduced to 8 percent, along with related reductions in salary and payroll growth assumptions. The Teachers Retirement Association (TRA) assumptions for interest rate, salary and payroll growth remain unchanged.

>·        Post-retirement adjustment financial sustainability trigger: Revises the financial sustainability triggers for post-retirement adjustment mechanisms for MSRS, TRA and SPTRFA. Under current TRA law, the current 2.0 percent COLA would increase to 2.5 percent if TRA’s funded ratio exceeds 90 percent for two years in a row. This 90 percent funded ratio is not expected to be achieved until 2031. Should this higher 2.5 percent COLA be triggered for TRA, the proposal in the omnibus pension bill would require a reversion to a lower 2.0 percent COLA if TRA’s funded ratio dips below 80 percent in one year or 85 percent in two years. (PERA General already has this trigger mechanism.)

>·        Contribution stabilizer: Revises the contribution stabilizer mechanisms for PERA, MSRS, and TRA boards by changing from a mandatory, virtually automatic, rate-setting procedure to an advisory procedure that will grant the boards flexibility to determine the amount of contribution rate increases or decreases required by each fund’s financial condition. 

>·        Changes in refund repayments and leave/prior service credit purchases related to interest assumption changes: For PERA, MSRS, and SPTRFA, the interest rate charged to members who repay refunds, purchase leaves, or purchase prior service credit is lowered to 8 percent for periods beginning after June 30, 2015.  TRA’s interest rates are unchanged.

>·        SPTRFA post-retirement adjustments: changes the fund’s post-retirement adjustment calculation by capping COLAs at 2.5 percent upon reaching 90 percent funding. Current law would allow a potentially higher COLA based on the Consumer Price Index up to 5 percent.

>·        PERA, MSRS and TRA administrative bills and obsolete date revisions: Makes technical, noncontroversial changes and updates.

 

The interest rate assumption generated a fair amount of debate in hearings of the Legislative Commission on Pensions and Retirement (LCPR) earlier this year. TRA Executive Director Laurie Hacking testified that unlike MSRS, TRA has no need for an immediate change in the interest rate assumption to avoid paying a higher retiree COLA. And unlike PERA and MSRS, TRA would experience a significant negative financial impact if the rate were lowered to 8 percent. Lowering the rate would increase TRA’s liabilities by $1 billion and create a contribution deficiency of about 1.9 percent of covered payroll.

Hacking also said that the TRA board of trustees prefers to wait until a legislatively mandated experience study is completed this month. This will permit TRA to quantify the impact of all assumption changes and work with stakeholder groups to develop sustainability measures.

TRA stakeholders showed up in force at LCPR meetings to testify about the investment return assumption and urge the panel to wait for TRA’s experience study and a planned State Board of Investment asset liability study. Among those who testified were members of the Retired Educators Association of Minnesota (REAM), Minneapolis’ Committee of 13, Education Minnesota Retired, the Minnesota School Boards Association (MSBA), Education Minnesota, and the Minnesota Association of School Administrators (MASA).  The American Federation of State, County & Municipal Employees (AFSCME) testified in support of the bill lowering the investment assumption for PERA and MSRS.   

The LCPR often meets during the period when legislature is not in session. Among possible topics for discussion during the interim are the interest rate assumption and the feasibility of switching public employees from the current pension system to a 401(k)-type plan.

Pension bill clears full House, Senate

May 18, 2015 – The 2015 Omnibus Retirement Bill (HF/1508, SF1398) passed in the Minnesota House of Representatives 131-0 and in the Senate 53-4 over the weekend. The bill now goes to Gov. Mark Dayton.

Passage came following a compromise for the funding of the Minneapolis Employees Retirement Fund (MERF) into the Public Employees Retirement Association (PERA). The MERF provision was amended in the House Ways & Means Committee to provide $31 million (employer share) and $6 million (state share) in aid for the 2015 and 2016 calendar years, and $21 million (employer) and $16 million (state) for calendar years 2017-2031.

Here are the major provisions of the bill (for a more detailed description see the LCPR website for a  bill summary):

·        Interest rate, salary rate, and payroll growth actuarial assumption changes: For the Minnesota State Retirement System (MSRS), Public Employees Retirement Association (PERA) and St. Paul Teachers Retirement Fund Association (SPTRFA), the interest rate actuarial assumption is reduced to 8 percent, along with related reductions in salary and payroll growth assumptions. The Teachers Retirement Association (TRA) assumptions for interest rate, salary and payroll growth remain unchanged.

·        Changes in refund repayments and leave/prior service credit purchases related to interest assumption changes: For MSRS, PERA and SPTRFA, the interest rate charged to members who repay refunds, purchase leaves, or purchase prior service credit is lowered to 8 percent for periods beginning after June 30, 2015.  TRA’s interest rates are unchanged.

·         Post-retirement adjustment financial sustainability trigger: Revises the financial sustainability triggers for post-retirement adjustment mechanisms for MSRS, TRA and SPTRFA. Under current TRA and MSRS law, the current 2.0 percent COLA would increase to 2.5 percent if funded ratios exceed 90 percent for two years in a row. For TRA, this 90 percent funded ratio is not expected to be achieved until 2031. Should this higher 2.5 percent COLA be triggered, the proposal in the omnibus pension bill would require a reversion to a lower 2.0 percent COLA if funded ratios dip below 80 percent in one year or 85 percent in two years. (PERA General already has this sustainability trigger mechanism.)

 

·        SPTRFA post-retirement adjustments: changes the fund’s post-retirement adjustment calculation by capping COLAs at 2.5 percent upon reaching 90 percent funding. Current law would allow a potentially higher COLA based on the Consumer Price Index up to 5 percent.

·        Contribution stabilizer: Revises the contribution stabilizer mechanisms for MSRS, PERA and TRA by changing from a mandatory, virtually automatic, rate-setting procedure to an advisory procedure by removing the specific increments of contribution rate increases or decreases required by the stabilizer and by specifying the financial factors each of the governing boards should consider prior to making rate change recommendations. 

·        MSRS, PERA, and TRA administrative bills and obsolete date revisions: Makes technical, noncontroversial changes and updates.

·        Statewide volunteer firefighter retirement plan modifications: Makes a number of changes and clarifications regarding benefits of the statewide volunteer firefighter plans. Also implements recommendations of the Volunteer Firefighter Relief Association Working Group relating to financial statements, allowable expenses, post-retirement adjustments and other provisions.

·        Particular volunteer firefighter relief association changes: Provides certain exceptions and clarifications for the Roseville Volunteer Firefighters’ Relief Association.

·        Small group and individual member retirement changes: Extends MSRS Unclassified coverage to part-time legislative employees. Grandparents into PERA General certain employees of the Minnesota River Area Agency on Aging. Excludes certain current Minneapolis Park and Recreation Board trade personnel from PERA General. Authorizes service credit purchases for certain individuals for pre-1996 Department of Revenue seasonal employment, for unreported St. Paul Public School System employment, and for unreported Nashville Township employment.