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May 10, 2012
Gov. Dayton signs 2012 Omnibus Pension Bill
Gov. Mark Dayton has signed a 2012 pension bill that reflects bipartisan compromise on a number that is of great significance to public pension systems.
The law lowers the pension systems’ investment return assumption from 8.5 percent to 8 percent for five years, allowing for study during the five-year “select” period to determine a long-term rate and whether a return to 8.5 percent is advisable. The three statewide retirement systems – TRA, PERA and MSRS – supported the bill.
The investment assumption rate is important to public pension plans because lowering the rate decreases funded ratios and increases liabilities and projected benefit costs. Some state lawmakers wanted to lower the rate permanently to 8 percent or lower.
Sometimes called the “discount rate,” the number reflects the assumed rate of return on investment of pension fund assets managed by the Minnesota State Board of Investment (SBI). The assumption rate is also used to discount future pension fund liabilities. Some states have recently lowered their assumptions.
Although SBI has regularly bested 8.5 percent – logging 23.3 percent for fiscal year 2011, 15.2 percent for 2010 and 10.1 percent annually since 1980 – recent market volatility has raised concerns about the future outlook and whether 8.5 percent is too optimistic.
“Members, this change is supported by all the major funds and we ask you for your support,” said Rep. Morrie Lanning, R-Moorhead, addressing the Minnesota House of Representatives before it approved the bill 104-24.
Lanning said that the Legislative Commission on Pensions and Retirement (LCPR), which he chairs, debated whether to move public employees to a 401(k)-type retirement plan or a hybrid – a combination traditional defined-benefit pension and a 401(k) – but determined that such a plan was not ready to be rolled out.
Lanning spoke favorably about past pension sustainability efforts, including the 2010 law. He mentioned the $6 billion reduction in unfunded pension liabilities resulting from the 2010 law, but said that unfunded liabilities are still too high. Minnesota is one of 41 states that pursued reforms in the past two years, and while Minnesota is in better financial shape than many, Lanning said more reform is needed.
The pension bill was carried by Sen. Julie Rosen, R-Fairmont, in the Senate, where it passed with a bipartisan vote of 45-18 in April.
The law has several provisions that affect TRA. The law will:
§ Extend the statewide systems’ actuarial experience study periods by two years (from four years to six) so that experience studies are completed in time for a re-evaluation of the investment rate before the end of the five-year select period.
§ Require the state’s finance agency to collect and post extensive Minnesota public pension data on its website in each odd-numbered year.
§ Correct TRA’s post-retirement annual increase process for prorating a benefit recipient’s first increase to conform to 2010 law.
§ Make appropriate revisions in the maximum limits affecting benefits, compensation and contributions, based on recommendations from the systems’ IRS compliance consultant.
May 4, 2012....House approves 2012
omnibus pension bill with strong bipartisan vote of 104-24
After an hour-long debate, the Minnesota House on
Thursday evening approved the 2012 Omnibus Pension Bill on a 104 to 24 vote. The
bill now goes to the governor for signature.
bill lowers the state’s investment return assumption from 8.5 percent to 8
percent for five years, allowing for study during the five-year “select” period
to determine a long-term rate and whether a reversion to 8.5 percent is
“Members, this change is supported by all the major
funds and we ask you for your support today,” said bill author Rep. Morrie
Lanning, R-Moorhead, in noting the reforms contained in the bill. He added that
a second reform provision of the bill requires Minnesota Management and Budget
to provide more and better information on the financial status of the state’s
Lanning noted that the Legislative Commission on
Pensions and Retirement (LCPR) debated whether to move Minnesota public
employees to a 401(k)-type retirement plan or a hybrid – a combination of
traditional defined-benefit pension and a 401(k) – but determined that such a
plan was not ready to be rolled out. In his opening statement,
LCPR Chair Lanning spoke favorably about past pension reform efforts including
the 2010 law. He mentioned the $6 billion reduction in unfunded pension
liabilities resulting from the 201 law, but said that unfunded liabilities are
still too high and need attention. Lanning said that Minnesota was one of 41
states that pursued reforms in the past two years and that Minnesota is in
better financial shape than many states. Lanning said that although progress
has been made, more reform is needed.
Winkler, D-Golden Valley, said Minnesota’s pension plans are doing well and have
a “pretty good record of fiscal responsibility and restraint.” He said he would
vote against the bill because there’s nothing to justify a change from 8.5
percent to 8 percent. Winkler noted that some pension funds around the country
are lowering their expectations, but those funds tend to be in more difficult
think we should stay the course on our pension systems and let things sort
themselves out as we come through this economic turbulence,” Winkler
investment assumption rate is important to public pension plans because lowering
the rate decreases funded ratios and increases liabilities and projected benefit
Rep. King Banaian, R-St. Cloud, criticized the bill
because it did not go far enough to lower the interest assumption. Nonetheless,
he said he would vote for the bill, recognizing it is the best compromise the
LCPR could produce and that it at least moves in the right
LCPR member, Rep. Mary Kiffmeyer indicated her
opposition to the bill because of one of its provisions that would allow Duluth
Port Authority employees to switch from their current defined contribution
coverage to defined benefit coverage under PERA.
Sometimes called the “discount rate,” the number
reflects the assumed rate of return on investment of pension fund assets managed
by the Minnesota State Board of Investment (SBI). The assumption rate, presently
8.5 percent in Minnesota and set in statute, is also used to discount future
projections of pension fund liabilities. Some states have recently lowered their
has regularly bested 8.5 percent – logging 23.3 percent for fiscal year 2011,
15.2 percent for 2010 and 10.1 percent annually since 1980 – recent market
volatility has raised concerns about the future outlook and whether 8.5 percent
is too optimistic.
How did your Representative Vote?
yes on the Omnibus Pension Bill: Abeler, Allen, D. Anderson, P.
Anderson, Anzelc, Atkins, Banaian, Beard, J. Benson, M.
Benson, Brynaert, Carlson,
Champion, Clark, Cornish, Crawford, Davids, Davnie, Dean,
Drazkowski, Eken, Fabian, Falk, Franson, Fritz, Garofalo,
Gauthier, Gottwalt, Greene,
Greiling, Gunther, Hamilton, Hansen, Hausman, Hilstrom,
Hilty, Hoppe, Hornstein,
Hortman, Hosch, Howes, Huntley, Johnson, Kahn, Kath,
Kelly, Kieffer, Kiel, Knuth,
Kriesel, Laine, Lanning, LeMieur, Lenczewski, Lesch,
Liebling, Lillie, Loeffler, Loon,
Mack, Mariani, Marquart, Mazolrol, McElfatrick,
McFarlane, McNamara, Melin, Moran,
Morrow, Mullery, E. Murphy, M. Murphy, Murray, Myhra,
Nelson, Nornes, Norton,
O’Driscoll, Paymar, Pelowski, Persell, B. Petersen,
Poppe, Rukavina, Sanders, Scalze,
Schomacker, Simon, Slawick, Slocum, Smith, Stensrud,
Swedzinski, Thissen, Tillberry,
Torkelson, Urdahl, Vogel, Wagenius, Ward, Zellers.
Voting no: B. Anderson,
Barrett, Bills, Buesgens, Daudt, Doepke, Downey, Erickson,
Gruenhagen, Hackbarth, Hancock, Holberg, Kiffmeyer,
Leidiger, Lohmer, McDonald,
Peppin, Quam, Runbeck, Scott, Shimanski, Wardlow,
Public Employees are Under Attack on Many Fronts
Click on the link here and read the Wall Street Journal article (if pay wall is up-read comments page) explaining why changes are needed to make public employee pensions similar to the private sector. Note that this particular organization wants people to attend the LCPR meetings. Schedule below!
Join some REAM Board Members at this meeting, but if you can't attend tell other TRA & PERA members about what could happen to their pensions.
Additional members will
help REAM better protect your pension!
Contact your friends and ask them to join REAM.
Pension Committee Meeting Schedule & Agenda
LCPR (pension commission) begins meeting again on Tuesday nights at 5:00 pm, January 31st and throughout the session. Here is the link in case you want to attend.
LETTER SENT FROM PRESIDENT CURT HUTCHENS AND OTHERS REGARDING PENSIONS TO ALL MEMBERS OF THE MINNESOTA SENATE, HOUSE OF REPRESENTATIVES, WITH CC: MARK DAYTON, LPCR MEMBERS, LARRY MARTIN
NEWS REGARDING PUBLIC EMPLOYEE PENSIONS
2012 may be year of change in Farmington
(Farmington - This Week Live © 01/05/2012)
... That relief was short-lived, because by February,
the city was forced to deplete its hard-won $45,841 contingency to cover losses
in the firefighters’ Pension fund. In
March, some council members discussed the possibility of seeking pay
concessions from some senior staff members, including Herlofsky. Under Herlofsky’s
contract, which was up for
TRA leader helped spearhead reform to
save pension fund
(Finance and Commerce © 01/04/2012)
In one sense, you
could say that Laurie Fiori Hacking, executive director of the state Teachers
Retirement Association (TRA), was born to her work. Hacking, 59, says she was a
“late child.” Her fathe
There is hope for 2012, if there is
change in November
(Faribault Daily News © 01/05/2012)
l was that taxes
were not increased. (Thank you, Senator Parry for keeping your word). The
Republican legislature passed major changes that reduced the growth rate in
state employee health care and Pension
costs, and many other reforms. The governor caved in and agreed quietly. The
result was the $5 billion biennium deficit has become an $800 million surplus,
now going to replenish the reserve f
Merger ends Minneapolis pension
Minneapolis Star Tribune
The two pension funds that have been closed to new members for 31 years
also merged Friday into a statewide public safety pension plan. They're
the last of four closed city pension plans that have merged into state
funds in the past six years. ...
Minneapolis fire chief candidate is a
(Minneapolis Star Tribune © 01/05/2012)
Chief nominee John Fruetel Newly nominated Fire Chief John Fruetel is an
experienced hand when it comes to double-dipping -- the fully legal practice of
collecting both a pension and a publi
The Republicans promised significant change in the 2010 elections. 36 members of the MN House of Representatives are new to the chamber, while the MN Senate has 24 new members.
The new majorities in both chambers appear to have the goal of significantly reducing the influence of unions in the MN economy. There was a proposal to submit to the MN voters a constitutional amendment to make MN a ‘Right to Work State’.
There is proposed legislation introduced by Republicans in the MN House to have new teacher hires be paced in a Defined Contribution plan rather than a Defined Benefit plan as provided for current active and retired teachers.
REAM will follow the proposed legislation and inform you, via you REAM directors of the latest developments including dates and times of
* There is a move to broaden the membership on the LCPR. (Legislative Commission on Pension & Retirement.) Currently there are 5 Members from each chamber (MN House & MN Senate). The majority party has had 4 members and the minority has had 1. The legislation would change the membership to 7 from each chamber, with the minority party receiving 2 seats.
Currently the senate has selected its members and they are:
a) Senator Roger C. Chamberlain District 53 R-Lino Lakes
b) Senator Theodore Daley District 38 R-Eagan
c) Senator Julie Rosen District 24 R-Fairmont
d) Senator Scott D. Dibble District 59 DFL-Minneapolis
e) Senator Sandra Pappas District 65 DFL-St Paul
Senators Rosen, Dibble and Pappas have served on the commission previously.
The chair of the commission will be from the MN House of Representatives
and the speculation is that Representative Steve Smith ® from District
33A will be chair.
There may be more to come from the new legislature REAM MUST act to protect our pensions and our profession. We must look on this as an opportunity for us as REAM members to inform
legislators, new and returning the impact pensions have on the Minnesota economy.
Contact your legislators in the MN house and senate, tell them your story about
the need for your TRA benefits, they need to hear from YOU, their
constituents. Call, write, send e-mails or attend legislative meetings when they are
scheduled in your community. See top for link for Minnesota office
holders for contact information.