The Legislative Commission on Pensions and Retirement (LCPR) met Tuesday night to hear a staff presentation regarding possible benefit cut options in addition to the benefit reductions already proposed by the retirement systems.
Commission chair Julie Rosen, R-Vernon Center, explained that the hearing would be a listening session and encouraged LCPR members to ask questions. Rosen explained that LCPR would begin to build the pension bill at upcoming March meetings. The next LCPR meeting is scheduled for Tues., March 7, at 5:30 p.m.
LCPR staff, Susan Lenczewski and Rachel Barth, reviewed the proposals made by MSRS, TRA and SPTRFA and described the financial status of the plans. Staff explained that Rosen and Rep. Tim O’Driscoll, R-Sartell, had asked them to develop benefit cut options in addition to those proposed by the plans.
LCPR staff had originally developed a list of approximately 30 benefit cut options, but O’Driscoll and Rosen had narrowed down the list to about 14, which they described as being in a “research and report” mode. The benefit cut options that were described by staff included:
- Lowering the retiree cost-of-living adjustment to 1 percent permanently.
- Increasing early retirement penalties for members who retire before the normal retirement age of 66.
- Increasing the normal retirement age from 66 to 67.
- Increasing the minimum early retirement age from 55 to 57 or 62.
- Lowering TRA’s current benefit formula multiplier from 1.9 percent to 1.7 percent for each year of service.
- Delaying payment of the first full COLA until a retiree reaches the current normal retirement age of 66.
- Eliminating or reducing the benefit increase (augmentation) mechanism now available for members who terminate public service and elect to leave their contributions with the pension system and delay receiving a benefit.
Commission members asked several questions about changing demographics and growing number of retirees relative to active members. There were also several questions about the complex mechanics of the augmentation or deferral mechanism. Some commission members asked for more explanation about how early retirement penalties work. There were also questions regarding how retiree health care costs are accounted for in the CPI and whether COLAs had been frozen in prior years.
Regarding the proposal to lower TRA’s benefit formula multiplier, some commission members recalled that TRA employee contributions were increased in 2006 to pay for this formula improvement. Some LCPR members expressed a desire for more consistency among the provisions of the statewide plans. Concerns were also expressed about the need to avoid reducing benefits for members close to retirement so that benefit promises are kept. The importance of pensions in the recruitment and retention of public employees was also mentioned.
Some commission members cited their concern that the systems were asking for $400 million in financial assistance “in perpetuity.”
Courtesy of Minn TRA Communications