Pension policy, budget modifications

Seventeen bills, along with substantive amendments, initially approved on a bipartisan vote by the Legislative Commission on Pensions and Retirement have become the 2024 pension and retirement law.

The finished product includes changes to the Minnesota State Retirement System, Teachers Retirement Association, St. Paul Teachers Retirement Fund Association, Public Employees Retirement Association, and volunteer firefighter relief associations.

Rep. Kaohly Vang Her (DFL-St. Paul) and Sen. Nick Frentz (DFL-North Mankato) sponsored the law that took effect May 16, 2024, unless otherwise noted.

A one-time $31.46 million appropriation is the law’s spending.

Of that, $28.46 million will fund the acceleration by one year — from July 1, 2025, to July 1, 2024 — of the effective date for changes made to lower the normal retirement age from 66 to 65 for Teachers Retirement Association members hired after June 30, 1989. Teachers who leave teaching service on or after May 24, 2023, are eligible for the earlier retirement age.

Effective July 1, 2024, the St. Paul Teachers Retirement Fund Association will receive a $1.54 million one-time appropriation to fund an employee contribution decrease of 0.25% of salary for the next two years.

The remaining $1.46 million will be directed to a newly established account, which will help participants in the Minnesota State Higher Education Individual Retirement Account Plan (IRAP) who elect to transfer retirement coverage to the Teachers Retirement Association and purchase service credit toward a TRA pension. An IRAP participant is eligible to transfer retirement coverage to TRA if the participant did not receive the notice of the right to elect a transfer when initially entitled to do so. This takes effect Jan. 1, 2025.

Among other changes, the law will:

• increase the multiplier used to calculate a retirement annuity for members of the Public Employees Retirement Association correctional plan from 1.9% to 2.2% for service earned after June 30, 2025, which matches the multiplier for the Minnesota State Retirement System correctional plan, allowing pensions for local correctional employees to compete with pensions for state correctional employees;

• fund the foregoing multiplier increase with a 1% of pay increase in the employee contribution rate for members of the Public Employees Retirement Association correctional plan and a 1.5% of pay increase in the employer contribution rate, effective July 1, 2025;

• extend a 2022 law that temporarily suspended the earnings limitation for retirees of TRA and St. Paul Teachers who return to teaching service through 2028.

• establish a work group to recommend legislation by Jan. 10, 2025, that will correct deficiencies in the process for adding positions for coverage by the Minnesota State Retirement System correctional plan;

• based on recommendations from the State Auditor’s Fire Relief Association Working Group, provide largely noncontroversial updates and changes to volunteer firefighter relief associations, most of which are effective Jan. 1, 2025;

• add a defined contribution plan to the Public Employees Retirement Association statewide volunteer firefighter plan;

• make technical changes to plans administered by the Public Employees Retirement Association, the Minnesota State Retirement System, and the St. Paul Teachers Retirement Fund Association;

• codify and amend a program permitting members of the State Patrol Plan to separate from service, begin to receive a retirement annuity, and return to work for their unit until age 60 without being penalized by earning caps;

• permit home and community-based services employees to participate in the Minnesota Secure Choice Retirement Program;

• revise requirements for supplemental retirement plans available to public employees, including authorizing public employers who sponsor a deferred compensation plan to contribute a matching contribution based on an employee’s student loan payments;

• revise and update statutes require compliance with applicable Internal Revenue Code requirements and expand the authority of the pension fund executive directors to correct operational errors as permitted by the IRS’ self-correction program;

• establish a work group to recommend legislation by Jan. 10, 2025, that will update statutes dictating amortization periods, to “conform to actuarial best practices for amortizing liabilities;”

• revise the expiration date for state aid paid to pension plans;

• change the process for setting the salary of the executive directors of the Public Employees Retirement Association, the Teachers Retirement Association, and the Minnesota State Retirement System; and

• remove or revise obsolete statutory references and allow reports and investment disclosure forms to be delivered to the Commission electronically.

HF5040*/SF4643/CH102

HF5040* / SF4643 / CH102