The House Government Operations committee on Monday approved a limited sustainability measure for Teachers Retirement Association (TRA) and the Minnesota State Retirement System (MSRS). The measure:
· Reduces the retiree COLA for MSRS Plans (other than State Patrol and Judges) and TRA for one year only, effective Jan. 1, 2017, to 1.75 percent for MSRS and 1 percent for TRA. The COLA then reverts to 2 percent.
· Removes the COLA trigger for MSRS-General, MSRS-Correctional, TRA, and St. Paul Teachers Retirement Fund Association (SPTRFA) so there will be no automatic increase in the COLA for each of these plans if specific funding thresholds are reached; and
· Provides for an increase in the employer contribution of 0.5 percent of salary, for both the basic and coordinated plans of St. Paul Teachers Retirement Fund Association, effective July 1, 2018 (funded by the St. Paul School District).
The limited measure passed on Monday will not close the $1.5 billion funding gap created by increased member longevity and other findings of recent pension system experience studies. For example, reducing the TRA retiree COLA alone addresses only about 4 percent of the funding gap; a gap of over $1.4 billion would remain.
The pension systems have been seeking a more comprehensive solution that reflects a more balanced approach – or shared sacrifice – among retirees, active employees, and employers.
Rep. Tim O’Driscoll, R-Sartell, who chairs the Legislative Commission on Pensions and Retirement (LCPR), said that much more needs to be done to stabilize the plans and that the COLA measure is only a start. O’Driscoll acknowledged that there is much “heartburn” over the partial solution, but said there is no funding forthcoming and that this action is one step in the right direction.
Rep. Mike Nelson, D-Brooklyn Park, said he was disappointed that not more is being done this year to support the pension funds, especially in a surplus year, and expressed support for pursuing a more complete solution next year. He said the state must meet its obligation to Minnesota’s public workforce to ensure that the plans are sustainable and that legislative solutions are fair and balanced.
Nelson and Rep. Joe Mullery, D-Minneapolis, said they were concerned that the burden falls to one group (retirees), and Mullery noted that there have been instances in the past where funding for pensions was allocated in non-budget or even-numbered years.
Courtesy of TRA Communications