Sizable omnibus pension and retirement funding investment

A large state investment aims to help ensure state pensions remain healthy and strong, in part, by buying down unfunded liabilities.

Sponsored by Rep. Kaohly Vang Her (DFL-St. Paul) and Sen. Nick Frentz (DFL-North Mankato), a new law, checks in at $600 million in one-time funding, including $485.9 million in fiscal year 2024 for the state pension plans and $100 million associated with a duty disability law enacted in 2023.

It mostly takes effect July 1, 2023.

A onetime non-compounded cost of living adjustment will be a benefit to all members of the statewide pension plans and the St. Paul Teachers Retirement Fund Association in a lump sum by March 31, 2024. To be eligible, retirees must’ve received at least 12 months of pension payments as of June 30, 2023; for Police and Fire PERA plan enrollees the threshold is 12 months of a COLA.

Additionally, $5 million will go to the PERA Statewide Volunteer Firefighter Plan to start an incentive program for volunteer firefighter relief associations to join the statewide plan, and $100,000 in fiscal year 2024 is directed to the Legislative Commission on Pensions and Retirement to provide funding for additional independent actuarial cost assessments for the commission to make informed decisions on pension policy and legislation.

Other bill provisions include:

• reducing the rate of actuarial assumption for investment return from 7.5% to 7% for all state pension plans;

• reducing employee contributions to the Minnesota State Retirement System General and Unclassified plans from 6% of pay to 5.5% of pay during the 2024-25 biennium;

• reducing from five to three the years of service required for full vesting for members of the MSRS and PERA general plans to put them on the same vesting schedule as the teacher plans;

• revising the expiration date for supplemental employer contributions to the MSRS Correctional Plan and the State Patrol Plan and the annual state aid of $6 million to the Judges Plan, essentially extending each for three years;

• revising the COLA for PERA correctional plans to restore the 2.5% cap if the funded status improves; and

• increasing the employee contribution rate by 1% beginning July 1, 2025, for St. Paul Teachers Retirement Fund Association members to help fund a new benefit that kicks in July 1, 2023. It’ll allow a member at least age 62 with 30 or more years of service to receive an unreduced retirement annuity.

HF3100*/SF3162/CH45

HF3100* / SF3162 / CH45