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.