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.

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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

    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

    Pension commission OKs its staff bill on party line vote

    MAY 10 – The Legislative Commission on Pensions and Retirement approved the omnibus pension bill this morning on a party line vote of 8-4. Members voting against the bill were Sen. Sandy Pappas (D-St. Paul), Sen. Dan Schoen (D-St. Paul Park), Rep. Paul Thissen (D-Minneapolis) and Rep. Mary Murphy (D-Hermantown).

    The bill begins moving through other House and Senate committees starting today.

    Before tboxhe bill passed, Pappas said she was disappointed there was not agreement in LCPR but indicated there is still potential to reach agreement on a bill that the governor would sign if everyone remains flexible. Pappas said most of the disagreements pertain to the TRA provisions and she is hopeful that with a few adjustments an agreement could be reached. Sen. Julie Rosen, (R-Vernon Center; LCPR chair), indicated she was willing to continue to work on the bill with the governor and feels that the commission has a good foundational bill.

    Before considering a series of amendments to the bill, Thissen asked about funding to offset pension costs for state agencies and school districts. Rosen stated that as the bill moves through other committees, funding can be added, including a possible increase in the school aid formula for schools. Rosen said she and Rep. Tim O’Driscoll (R-Sartell) expected to meet with the governor on Monday regarding pensions but the meeting was cancelled.

    Pappas said she has concerns about elimination of augmentation and the COLA delay, which she believes will create a rush to retire and have the unintended consequence of exacerbating the teacher shortage. She also advocated for more of a phase-in for lowering the investment assumption to 7.5 percent for TRA. Pappas criticized the 1 percent COLA proposal and the proposed increase in employee contributions, saying these measures are “too much” and do not achieve shared sacrifice.

    With regard to a provision that would delay receipt of a retiree’s first COLA until the retiree reaches normal retirement age (66 for most TRA members), Pappas successfully offered an amendment to delay implementation from 2018 to 2023 for all the pension systems. She explained that members near retirement need time to accommodate the change. Rosen said she supported the amendment and it passed.

    An amendment to replace the TRA provisions in the bill with proposals supported by the TRA Board of Trustees and stakeholders was offered by Pappas with support from Thissen, but the amendment failed on a party-line vote. Thissen noted that the commission usually proceeds with major pension changes only when the pension system boards and stakeholders are in agreement.

    Thissen offered an amendment to remove PERA provisions from the bill since all who testified on these measures indicated opposition, including the PERA board, employees and retirees. This amendment failed on a voice vote.

    Courtesy TRA Communications and Committee of Thirteen

    April18th LCPR meeting

    The Legislative Commission on Pensions and Retirement (LCPR) met on Tuesday, and Minnesota Management and Budget (MMB) Commissioner Myron Frans testified regarding Gov. Mark Dayton’s recommendations (SF2233/HF2486). These recommendations contain measures endorsed by a Blue Ribbon Panel convened at the governor’s request earlier this year and included in the governor’s biennial budget.

    For TRA, the bill calls for a 1 percent retiree cost-of-living adjustment for five years and 1.5 percent thereafter, as well as a 2 percent increase in employer contribution rates.  For MSRS, the bill calls for a reduction in the COLA from 2 percent to 1.5 percent.

    Frans said bipartisan support is needed for pension reform. He was questioned about why the employer contribution rate increase for Teachers Retirement Association (TRA) was only funded for two years, and why St. Paul Teachers Retirement Fund Association (SPTRFA) does not receive its requested $5 million direct appropriation in the bill. Frans said MMB believes it cannot commit to these dollar amounts beyond two years.

    Sen. Dave Senjem asked about how much the bill is going to cost and what funding ratio trajectory is projected for each of the funds over the next 30 years. With regard to the investment return assumption, Rep. Tim O’Driscoll said that it’s difficult for the State Board of Investment to target one rate for TRA and a different rate for the other systems. TRA has proposed moving to 8 percent while a data-driven study is conducted on best practices for setting the investment assumption. Frans and the blue-ribbon panel recommended 7.5 percent for all systems immediately (July 1, 2017).

    Sen. Julie Rosen, commission chair, asked LCPR members whether it would be helpful to get actuarial costing on the governor’s proposal. Members agreed to proceed with a cost study. Separately, Deloitte actuary Michael DeLeon testified on actuarial studies on the retirement systems’ reported actuarial liabilities. Deloitte has only minor recommendations for the system actuaries for the fiscal year 2017 valuation work.

    The Pension Commission is expected to meet again next Tuesday, April 25th but no agenda has been set for that meeting

    Courtesy of Minnesota TRA Communications

    Pension commission hears public testimony on TRA, St. Paul Teachers funding proposals

    Teachers Retirement Association stakeholders testified Tues., Feb. 14, at the Legislative Commission on Pensions and Retirement (LCPR) regarding TRA’s board-approved 2017 financial proposal.

    Eighth grade social studies teacher John Bartholow, who teaches at St. Michael-Albertville School East, said that he would question whether to remain in the profession if drastic changes are made to the TRA pension. He cited a Towers Watson study that found that young workers consider a defined-benefit pension an important factor in accepting a job and staying on the job. Teacher effectiveness improves with experience, Bartholow said, and the teacher shortage will worsen if pension benefits are cut.

    LeMoyne Corgard of Anoka-Hennepin Education Minnesota said that the TRA pension is a staple of the teaching profession and that active teachers have contributed a substantial portion of their income to their pension. The TRA proposal is balanced and will help sustain the system, Corgard said.

    Isle Public Schools social studies teacher Jennifer Ernest spoke about her experience as a young archaeologist who decided to work in a small community school teaching K-12 history, science and social studies. Despite the relatively low pay for teachers, she said she hopes to retire with a sound pension someday. She added that it’s difficult for small school districts with limited resources to absorb contribution increases without state aid.

    Rodney Rowe of Education Minnesota testified that half of teachers leave the profession in the first five years, so good benefits are important. EdMN supports TRA proposal because it is balanced, he said.

    Lonnie Duberstein, president of the Retired Educators Association of Minnesota, said he can’t ask his retiree members to support a permanent 1 percent COLA and pointed out that the proposed employer contribution increase would still leave Minnesota well below the national average. Duberstein testified about his decisions as a young teacher to remain in the profession despite higher-paying job opportunities.

    Representing active and retired Minneapolis teachers, Louise Sundin of the Committee of 13 also testified in support of the delicate balance of the TRA legislative package. Sundin pointed out that 75 percent of active teachers in Minnesota are women, and a high percentage of those are single and heads of households. “Without our public pensions we will become your wards,” Sundin said, noting that the average TRA pension check is a modest $1,800 per month. Research shows that women are 80 percent more likely to become impoverished, she said.

    Sundin said that active teachers took a four-year cut as part of the last pension bill because their contributions rose 2 percent. Starting salaries in the mid-$40,000 range make it hard to recruit young talent, especially with heavy burden of student debt, she said. Sundin asked LCPR to keep the normal retirement age at 66, saying that she has a friend who teaches kindergarten and “can’t get up from those little chairs.”

    Joan Beaver, board member of Education Minnesota Retired, said that EdMN Retired supports TRA’s proposal and stressed that pensions provide an important economic boost to Minnesota communities. She said that two-thirds of retirees have borne benefit cuts and that benefits are not keeping pace with inflation. TRA’s proposed lower COLA translates into a reduction of about $573 a month, she said. Even so, retirees are willing to share in the sacrifice for the good of the fund, Beaver said.

    REAM vice president Paul Ehrhard similarly testified that pensions are a key element in teacher recruitment/retention and that he can’t support a COLA that’s at “1 percent for infinity.”

    Representatives of school districts and school boards also testified. Gary Amoroso, executive director of the Minnesota Association of School Administrators, said his group supports TRA’s proposal and added that the TRA board engaged employer groups in the deliberation process. He stressed that state funding to offset increased employer costs is important, especially because previous TRA contribution increases were absorbed by school districts. Amoroso pointed out that the governor’s pension proposal only funds the contribution increases for two years and additional funding will be needed in the third and fourth years.

    Scott Croonquist, executive director of the Association of Metropolitan School Districts, said that his group worked with TRA and supports the state aid mechanism in the TRA bill. Croonquist explained that the school aid pension adjustment mechanism is efficient and equitable because it will reimburse districts for their actual increased costs.

    Grace Keliher of the Minnesota School Boards Association backed up the testimony of Amoroso and Croonquist and credited Gov. Mark Dayton for recognizing the need to help school districts cover the increased pension costs. Keliher said she supports including a mechanism in TRA’s bill that covers the entire 2 percent employer increase.

    Earlier in the evening, the LCPR heard testimony regarding the St. Paul Teachers Retirement Fund Association (SPTRFA) legislative proposal. Mike McCollor, vice president of the SPTRFA Board of Trustees, Mary Gilbert Dougherty of St. Paul Schools, and Brian Rice of the St. Paul Teachers Pension Political Action Committee testified in support of the St. Paul funding bill. Rice stated that it is wise and prudent to lower the investment return assumption to 7.5 percent based on action taken by other states, and that this will keep the system’s financing solid for the long term.

    The pension commission approved non-controversial changes to pension system actuarial assumptions – some of which were requested last year. The 2016 administrative bill (SF545/HF565) will be the vehicle for other pension funding reform measures that may be approved by the commission later in the session, LCPR chair Julie Rosen said.

    In closing, Rosen said that the process of evaluating the systems’ proposals is only beginning and that while it’s important for LCPR to hear concerns, stakeholders shouldn’t assume that the commission has a course of action already in mind.

    Courtesy of Minnesota TRA Communications

    Senate passes pension bill

    The Senate version of the 2016 Omnibus Pension Bill (SF 588) on Thursday passed out of the chamber on a vote of 61-1. Sen. Eric Pratt voted no.

    Senate bill author and pension commission vice chair Sen. Sandy Pappas, D-St. Paul, introduced the bill by saying that the state’s pension plans recently conducted studies and found that public employees are living longer, which means that retirees will be collecting pension checks for a longer period of time as well. Pappas said it is a normal part of pension oversight to have to come in and adjust items such as employer and employee contribution rates and retiree cost-of-living adjustments.

    Pappas said that the Teachers Retirement Association and the St. Paul Teachers Retirement Fund Association (SPTRFA) brought sustainability plans to the Legislative Commission on Pensions and Retirement (LCPR) that were expensive because they required more from school districts and state agencies. As it became clear that money would not be available, Pappas said, the current bill was scaled back and has no dollars attached to it.

    Under the current bill, St. Paul Teachers will increase contributions by 0.5 percent of salary beginning in 2018. A mechanism that would trigger higher COLAs for all public pension fund participants is being eliminated “so nothing is on automatic pilot,” Pappas said. TRA’s amortization period will be extended to June 2046. To avoid statutory COLA increases on Jan. 1, 2017, the current bill calls for the COLA for MSRS members to drop to 1.75 percent for one year, and TRA members’ COLA drops to 1 percent for one year.

    These measures save the plans some money now, but the goal is to return next year to discuss further adjustments. “The governor believes this [a comprehensive sustainability package] needs to happen, if not this year then next year,” Pappas said, adding that the stopgap measure provides time to consider what kind of adjustments in school aid and agency budgets will be required to offset increased employer contributions.

    Pappas summarized the technical administrative provisions in the bill, which includes lowering the investment return assumption for TRA to 8 percent. The Public Employees Retirement Association and MSRS lowered their investment assumptions last year. Another provision of the bill allows public plans to accept gifts or bequests. Pappas said the bill moving to the House on Friday is the same as hers.

    Sen. Pratt, R-Prior Lake, asked Pappas about the origins of the 8 percent investment assumption. Pappas said that the pension funds, their actuaries and boards – as well as the pension commission – consults with the State Board of Investment. Minnesota’s investments have done very well, are well managed, and are designed with a long-term strategy in mind. Pappas said the pension commission felt that lowering the rate was a good cautionary move, though lowering that rate does have the effect of making the funds look like they’re not as well funded.

    Pratt said that the assumption is still too high, and that even investment guru Warren Buffett says that over the long term, the market assumption for returns shouldn’t exceed 7 percent. Pratt added that while there have been good years where the return is 15 percent or more, those gains were wiped out during economic downturns. The state should be looking at fairly conservative investments, he said, noting that the prime rate is only 3.25 percent and that no depository is paying more than 1 percent on deposits.

    “These plans aren’t sustainable under their current assumptions, and this is one of those assumptions that are still too high,” Pratt said. He added that he is glad the retiree COLA is being dropped to 1 percent for TRA.

    Pappas said that with the Consumer Price Index, a measure of inflation, under 2 percent, LCPR members have been torn about cost-of-living increases for retirees. “In our pension principles, we really believe we need to retain the buying power of the retirees’ paycheck in order to not have it erode” but we realize that the COLA is expensive, she said. She invited Pratt to bring his expertise to the pension commission, and encouraged him to consult with SBI Executive Director Mansco Perry about the investment return issue.

    Sen. Mary Kiffmeyer, R-Big Lake, said that large retiree COLAs during boom times in the stock market and the economy “robbed the core” of the pension funds of money that needed to be retained for a rainy day and that legislature was complicit in those decisions. She said there should be a standard that all retirees can count on so that one group of retirees does not get a severe reduction in their COLAs while previous retirees almost double their pensions in a few years. Kiffmeyer said that investment return assumptions have been too high, but the costs to the plans of lowering it shouldn’t be “put on the backs of retirees.” 

    Sen. Terri Bonoff, D-Minnetonka, also expressed concern about the 8 percent investment return assumption and said she shares Kiffmeyer’s concerns about keeping promises to retirees. Bonoff said she has been approached by constituents who are investment advisers and they also are concerned that the pensions are underfunded. She asked Pappas for her view about the long-term viability of the state’s pensions.

    Pappas said that SBI’s Perry has been quoted as saying that 8 percent is “not unreasonable.” Because of the amount of money the state invests ($65 billion in pension fund assets) and the clout that comes with it, Minnesota is able to get a good rate of return. She added that MSRS is over 85 percent funded, TRA is about 75 percent funded, and St. Paul Teachers is about 74 percent funded. Pappas added that if lawmakers are concerned about the state’s bond rating, additional parts of the original sustainability package can still be acted upon this weekend.

    Sen. Dave Thompson, R-Lakeville said that the pension systems are unmanageable and that Pratt is correct that it’s dangerous to assume an 8 percent rate of return. “If you drop the rate, projections look bad,” he said. “And not only do we have economic insecurity, now we’ve got an aging population that’s going to put stress on the system.”

    Thompson said the legislature should discontinue the defined-benefit program and go to a defined contribution plan such as the 401(k)-type plans found in the private sector. The people who run these pension plans and the investment portfolio do an extremely good job and in good faith, he said, but “the system is just unworkable.”

    Pappas responded to Bonoff’s comments by saying that in Minnesota, the percentage of state and local spending on pensions is much less than the national average (about 2 percent in Minnesota vs. 4 percent nationally). Pappas also pointed out to Thompson that transitioning from a defined-benefit pension to a defined-contribution model would cost billions of dollars because benefits would have to continue to be paid out even though the plans lose new contribution revenue.

    Sen. Julie Rosen, R-Vernon Center, said the pension commission is nonpartisan and that members take their duties very seriously. Rosen said the current pension bill is a very good compromise made necessary  after the commission “received a sucker punch” in the form of hard-to-stomach mortality studies. “When you do reform in pensions it’s very slow, like trying to turn the Titanic – and you have to do it deliberately and with seriousness and make sure those funds stay viable.” She urged her colleagues to vote for the bill because it’s the right thing to do.

    courtesy TRA Communications