Trib-Retiree - Summer 2010

Trib-Actives - Summer 2010

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On May 15, 2010, Governor Tim Pawlenty signed Senate File 2918 ( Omnibus Pension Bill) into law. The bill contains plan provision changes affecting all TRA benefit recipients, active members and employer units. The new law is known as: Laws of Minnesota (2010) Chapter 359.

The law, authored by Senator Don Betzold (DFL-Fridley) and Representative Mary Murphy (DFL-Hermantown) contain changes designed to stabilize and improve TRA’s funding condition. Like most retirement plans, TRA’s funding condition was weakened due to substantial investment losses incurred during 2008 and early 2009.

The bill contains the financial sustainability provisions of employee and employer contribution rate increases and reduced annual retiree benefit increases recommended by the TRA Board of Trustees (see the plan changes listed under the April 30 article below).

The bill also contains a provision requiring the executive directors of the three statewide retirement systems (Minnesota State Retirement System, the Public Employees Retirement Association, and TRA) to jointly conduct a study of defined benefit, defined contribution and other alternative retirement plans for Minnesota public employees.  The study shall include analysis of the feasibility, sustainability, financial impacts, and other design considerations of these retirement plans.  The report is due to the Legislature by June 1, 2011.

More information about the changes for TRA members and benefit recipients will be posted on the TRA web site within the next few weeks. In addition, the Spring/Summer edition of the TRA newsletter will arrive at members’ homes later in June.

If you have any questions, please call us at (651) 296-2409 or toll-free (800) 657-3669. You can also email TRA at: info.tra@state.mn.us

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Spring 2010 Retiree Newsletter

Support for Stability

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Many private sector pension plans have taken a beating in these difficult economic times. Some companies have slashed current and future benefits, frozen employer contributions or dropped plans altogether, continuing a trend that started even before the economic downturn.

With private sector workers shouldering a greater responsibility for retirement savings, it’s not asking too much for Minnesota teachers and school districts to pay a little more to keep their pension fund financially healthy.

A legislative proposal to increase the contributions of school districts and teachers to the statewide retirement fund merits passage. The plan is an equitable way to shore up the pension pot and keep it viable in the future. Modifying the contributions now will ensure that retirement benefits will be available for the 77,000 educators who currently pay into the plan and were promised a modest retirement income as a condition of employment.

Without increased contributions, the fund is in trouble. As of last June, the Minnesota Teacher Retirement Association (TRA) had assets of about $17.8 billion, while liabilities to current and future retirees totaled $23 billion, leaving a $5.2 billion gap.

Fund managers project that without an infusion of new money, the fund will go broke by 2032. That would leave thousands of future retirees without the income they had paid to support during their careers.

The major feature in the legislation would increase both district and teacher contribution rates, which are currently 5.5 percent. Those rates would each rise by 0.5 of a percentage point annually over a four-year period up to 7.5 percent. For the average working educator making about $49,000 per year, that additional payment would be $172 in the first year and $686 in 2014. During the first year, the higher contributions would raise $40 million to $42 million for the TRA fund — half paid by teachers and the other half by school districts.

In addition, the bill would temporarily freeze benefit increases for the 50,000 educators who now receive pension checks. Under current law, retired teachers receive a 2.5 percent annual bump as a cost-of-living increase. Retirees would not get that increase in 2011 and 2012, costing them about $700 per year. In 2013, the raise would be lowered to 2 percent; when the fund is restored to at least a 90 percent level, the 2.5 percent would be reinstated.

Education Minnesota officials have raised concerns about the bill but say their position is more nuanced than flat-out opposition. Tom Dooher, president of the teachers union, said the organization is not necessarily opposed to raising pension contribution rates of teachers, but it wants assurances that educators won’t have to cover the entire pension shortfall if school districts fail to provide additional funding.

Raising contributions and withholding increases spreads the financial pain among the active teachers, school districts and retirees. And in future years, when the market and pension coffers are healthier, adjustments could be made to decrease the contributions.

During the go-go years in the stock market, the teacher pension fund was fully funded between 1997 and 2004. Times were so good that fund operators were able to decrease employee and employer contribution levels. But those rollbacks, combined with sharp market downturns after 9/11, in 2002, 2008 and 2009, depleted the fund.

The shared sacrifice approach outlined in the proposed legislation is a fair way to keep an important public pension plan solvent. Legislators should pass it to protect the current and future retirement incomes for tens of thousands of Minnesotans.

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Senate Status: 3/12/2010:

State and Local Government Operations:  Amended, passed, re-referred to Finance

House Status: 2/18/2010:

State and Local Government Operations hearing scheduled:
8:30 a.m., 200 State Office Bldg.

LCPR Action:   3/5/2010:

Passed as amended; forwarded to the House & Senate Gov Ops Committees
Amendment S2573-5A, reflecting the amendments recommended by the Commission

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On February 26 and March 5, the Legislative Commission on Pensions and Retirement (LCPR) considered SF2499, authored by Senator Don Betzold (DFL-Fridley) and HF2953, authored by Representative Mary Murphy (DFL-Hermantown).   The provisions of these bills contained modifications to TRA benefits and contribution rates, which were recommended by the TRA Board of Trustees at its December 16, 2009 meeting.

The modifications proposed are designed to either increase TRA revenue or decrease fund expenses, in effect, helping to stabilize TRA’s funding status.   As of June 30, 2009, the TRA Fund had a funding ratio of about 60 percent, using the fair market value measurement of assets.   TRA also had a contribution funding deficiency of 11.07 percent.   Mercer Consultants, TRA’s actuary, calculated that using current plan provisions and contribution rates, the TRA Fund assets would be exhausted in the year 2032.  The TRA Board spent many months developing plan modifications that would first and foremost stabilize the fund while improving TRA’s future funding health.

The following plan changes are proposed:

• Member and employer contribution rates, which are currently 5.5 percent, would each rise by 0.5 percent annually over a four-year period beginning July 1, 2011.  On July 1, 2014, the employee and employer rate would each be 7.5 percent.  A contribution rate stabilizer would be implemented that would allow further changes to the contribution rates if needed after 2014.
• A temporary two-year suspension of annual increases for benefit recipients would occur in calendar years 2011 and 2012.   Beginning January 1, 2013, annual increases would be lowered from the current 2.5 percent to 2.0 percent.   Upon reaching a market value funding ratio of 90 percent, the annual adjustment would be restored back to 2.5 percent.
• Members who leave teaching, but opt to receive a refund of their member contributions from TRA would receive a lower interest rate of 4 percent annually on their contributions beginning July 1, 2011.
• Retired members who have returned to teaching and have an Earnings Limitation Savings Account (ELSA) would receive no additional interest on their account balance beginning July 1, 2011.
• Teachers who are deferring receipt of their monthly annuity benefits would receive a lower interest rate of 2 percent on their deferred TRA benefits.   This change would affect deferred benefits after June 30, 2011.

On February 26, 2009, the LCPR heard an overview of TRA’s funding condition and highlights of the proposed legislation, which were presented by Laurie Hacking, TRA Executive Director.   The LCPR also received testimony from various TRA stakeholder groups representing members, employers, and retiree groups.   Stakeholders expressing support for the immediate need for TRA funding reform included the Retired Educators Association of Minnesota (REAM), Minnesota Association of School Administrators (MASA), InterFaculty Organization (IFO), Committee of 13 (Minneapolis retirees and active members), Minnesota Elementary School Principals Association (MESPA),  Minnesota Association of Secondary School Principals (MASSP), Minnesota School Boards Association (MSBA), Minnesota State College Faculty (MSCF) and Minnesota Rural Education Association (MREA).

The LCPR also heard testimony from representatives from Education Minnesota who were concerned that the employee contribution rate increases proposed were an excessive burden on active teachers who were already feeling the effects of frozen salaries and higher health insurance premiums.   Education Minnesota expressed concern about the inequities existing for TRA members first hired after June 30, 1989, who must teach until age 66 in order to receive unreduced retirement benefits and who do not qualify for the “Rule of 90” provision.

At the conclusion of the meeting, the TRA provisions in SF2499/HF2953 were amended into SF2573/HF2952, along with similar funding reforms sought by the Public Employees Retirement Association (PERA) and the Minnesota State Retirement System (MSRS).

At its March 5, 2009 meeting, the LCPR further heard testimony regarding SF2573/HF2952, the financial sustainability bills.   An amendment proposed by Representative Paul Thissen (DFL-Minneapolis) was considered.  Under this amendment, TRA employee and employer contribution rates would have increased 3 percent each (from 5.5 percent to 8.5 percent), phased-in over a six-year period.   TRA benefits would have improved through a higher formula multiplier (1.9 percent per year to 2.1 percent per year) for years of teaching service beginning July 1, 2011.  The benefit provision would have also provided unreduced retirement benefits to all members who attain the age of 62, with 30 years of service.   The amendment also contained authorization for school districts to levy for the cost of TRA retirement contributions.  The amendment was withdrawn by the author and a no vote was not taken for inclusion of the amendment into the pending bills.

Provisions to improve the funding health of the St. Paul Teachers Retirement Fund Association (SPTRFA) and the Duluth Teachers Retirement Fund Association (DTRFA) were also heard and included into SF2573/HF2952.  There are no proposals in the legislation to merge either SPTRFA or DTRFA with TRA.

The LCPR passed the bills on a voice vote.  SF2573/HF2952 will now be referred to the House and Senate Government Operations Committees.   In summary, the bills contain various contribution rate increases and benefit plan changes designed to stabilize and improve the funding conditions of the five largest public pension plans:   TRA, PERA, MSRS, SPTRFA, and DTRFA.

The full Legislature and the Governor must approve any proposed changes to TRA contribution rates and benefit provisions.   The 2010 session is scheduled to end on May 17.

Updates will be posted on the TRA web site (www.tra.state.mn.us) and the Legislative Commission on Pensions and Retirement’s web site:

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Check out winter 2010 newsletters

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See SF2499

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The Committee of Thirteen adopted the following Pension Principles at its December meeting. These principles will be sent to the TRA Trustees and will be a guide for C of 13 lobbyists when representing the interests of Minneapolis active and retired teachers.

Committee of Thirteen Pension Principles:

1. (Immediacy) Problems needs to be addressed this year or it will get worse.

2. (Shared Pain) The solution should involve all; retirees, actives and the employer and if possible the state.

3. Fairness to actives: Phase in contribution increases

4. Fairness to employer: Phase in contribution increases

5. Integrity of plan actives: No reduction in benefits for current actives

6. Integrity to plan retirees: No permanent reduction in retiree COLA. A one- or two-year freeze is an option that may be necessary but with a bounce-back provision to restore the COLA once funding is stabilized.

7. (Protect children) Provide some options for districts to cover employer share through an optional levy or eliminating the prior pension reduction to prevent harm to local education programs.

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NOW IS THE TIME TO ACT…

protect and improve your pension!

Support SF 191 (Betzold) and HF 723 (Murphy):  Omnibus Pension Bill

The Omnibus Pension Bill passed the Pension Commission on March 31 and now must pass committees in both the House and Senate.  Contained in this bill are the Teacher Pension Reform provisions.  Legislators need to hear from you that you want them to support these provisions.

This bill improves teacher pension benefits and restores financial stability to the teacher pension fund.

Please contact your legislator and members of the House and Senate Governmental Operations committees listed at the end of this Get Active. Urge them to support this pension reform proposal.

TALKING POINTS

Benefit Reforms
Benefit improvements mean fairer, better benefits for all teachers.

* Addresses pension benefit differences for teachers hired post-1989
* Benefit improvements
—-Increases formula multiplier from 1.9% to 2.1 % for future years of service
—-Reduces retirement penalties for career teachers working 30+ years
—-Lowers the normal retirement age from 66 to 65
* Improves MN teacher pensions as compared to other states
* Is fair to all teachers

Fiscal Stability
Adverse market conditions have created the need for added funding to keep our teacher pension fund safe.  This bill:
* Puts TRA back on the path for full funding.
* Waiting will cause the problem to get bigger making it harder to solve.
* Now is the time to act.

Fair and Balanced
This is a balanced package with shared employee/employer responsibility
* Builds on past precedents: teachers pay for benefit improvements and employer contributions  stabilize fund
* Phased-in approach balances current economic and fiscal realities with the need for a stable teacher pension fund.

Your simple message:  Please support [SF 191 Betzold/HF723 Murphy] Omnibus Pension Bill.

This bill has passed out of the LCPR, Legislative Commission on Pensions and Retirement).  Now it is on its way to the House and Senate Government Operations Committees.  The members of those two committees are listed below.  Call or write or email from your personal account only. A quick call is best.  Just tell the secretary or administrative asst. who answers the phone:

“I am calling to ask (the legislator) to please support the Omnibus Pension Bill currently in the Gov Op Committee.  Thank you.”

P.S. The MN Taxpayers Association is strongly opposing this bill.  We will need to counteract their attacks on teachers and our rights to a competitive salary and pension in order to succeed.

Senate Government Operations Committee

Chair: Ann H. Rest 651-296-2889
Vice Chair: Tony Lourey DFL 651-296-0293
Ranking Minority Member: Chris Gerlach  R 651-296-4120
Members:
Don Betzold  DFL 651-296-2556
Jim Carlson DFL 651-296-8073
Dick Day R 651-296-9457
Joe Gimse R 651-296-3826
John Marty DFL 651-296-5645
Rick E. Olseen  DFL 651-296-5419
Sandra L. Pappas DFL 651-296-1802
Claire A. Robling R 651-296-4123
Katie Sieben  DFL 651-296-8060
Jim Vickerman  DFL 651-296-5650

House Government Operations Committee

Chair: Pelowski-DFL   651-296-8637
Vice Chair: Poppe-DFL  651-296-4193
Republican Lead: Emmer-R   651-296-4336
Anderson, P.-R   651-296-4317
Buesgens-R 651-296-5185
Gottwalt-R   651-296-6316
Hilty-DFL 651-296-4308
Hornstein-DFL 651-296-9281
Kahn-DFL 651-296-4257
Kalin-DFL  651-296-5317
Kiffmeyer-R  651-296-4237
Lanning-R 651-296-5515
Marquart-DFL 651-296-6829
Morrow-DFL 651-296-8634
Nelson-DFL 651-296-3751
Sanders-R 651-296-4226
Simon-DFL 651-296-9889
Sterner-DFL 651-296-4306
Winkler-DFL 651-296-7026

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TIME TO MAKE ANOTHER CALL ……protect and improve your pension.

SF 191 (Betzold) and HF 723 (Murphy):  Omnibus Pension Bill

After successfully passing the House and Senate Governmental Operations Committees, the Omnibus Pension Bill now goes to the Finance committees in both the House and Senate.  Contained in this bill are the Teacher Pension Reform provisions.  Legislators need to hear from you that you want them to support these provisions.

This bill improves teacher pension benefits and restores financial stability to the teacher pension fund.

Please contact your legislator and members of the House and Finance committees listed at the end of this Get Active. Urge them to support this pension reform proposal.

TALKING POINTS

Benefit Reforms
Benefit improvements mean fairer, better benefits for all teachers.

• Addresses pension benefit differences for teachers hired post-1989
• Benefit improvements

o    Increases formula multiplier from 1.9% to 2.1 % for future years of service
o    Lessens retirement penalties for career teachers working 30+ years
o    Lowers the normal retirement age from 66 to 65

• Improves MN teacher pensions as compared to other states
• Is fair to all teachers

Fiscal Stability
Adverse market conditions have created the need for added funding to keep our teacher pension fund safe.  This bill

• Puts TRA back on the path for full funding.
• Waiting will cause the problem to get bigger making it harder to solve.
• Now is the time to act.
• Fair and Balanced current economic and fiscal realities with the need for a stable teacher pension fund.

Your simple message:  Please support [SF 191 Betzold/HF723 Murphy]

Senate Finance Committee

Chair: Richard J. Cohen
Ranking Minority Member: Dennis R. Frederickson
Member:
Ellen R. Anderson
Linda Berglin
Don Betzold
Dick Day
Steve Dille
Michelle L. Fischbach
Leo T. Foley
Linda Higgins
James P. Metzen
Steve Murphy
Gen Olson
Sandra L. Pappas
Pat Pariseau
Claire A. Robling
LeRoy A. Stumpf
David J. Tomassoni
Jim Vickerman
Charles W. Wiger

House Finance Committee

Chair: Lyndon Carlson        479 SOB    651-296-4255      rep.lyndon.carlson@house.mn
Vice Chair: John Benson        517 SOB    651-296-9934     rep.john.benson@house.mn
Lead-GOP: Mark Buesgens  307 SOB   651-296-5185   rep.mark.buesgens@house.mn
Laura Brod            291 SOB    651-296-4229     rep.laura.brod@house.mn
Bobby Joe Champion        329 SOB    651-296-8659    rep.bobby.champion@house.mn
Karen Clark            471 SOB     651-296-0294      rep.karen.clark@house.mn
Tom Emmer            301 SOB    651-296-4336      rep.tom.emmer@house.mn
Pat Garofalo            221 SOB    651-296-1069     rep.pat.garofalo@house.mn
Mindy Greiling            381 SOB    651-296-5387    rep.mindy.greiling@house.mn
Tom Hackbarth            309 SOB     651-296-2439    rep.tom.hackbarth@house.mn
Alice Hausman            453 SOB    651-296-3824     rep.alice.hausman@house.mn
Bill Hilty            559 SOB    651-296-4308      rep.bill.hilty@house.mn
Larry Howes            201 SOB    651-296-2451     rep.larry.howes@house.mn
Thomas Huntley            585 SOB    651-296-2228    rep.thomas.huntley@house.mn
Al Juhnke            485 SOB    651-296-6206     rep.al.juhnke@house.mn
Phyllis Kahn            365 SOB    651-296-4257     rep.phyllis.kahn@house.mn
Mary Kiffmeyer            229 SOB    651-296-4237     rep.mary.kiffmeyer@house.mn
Kate Knuth            507 SOB    651-296-0141     rep.kate.knuth@house.mn
Paul Kohls            313 SOB    651-296-4282     rep.paul.kohls@house.mn
Ann Lenczewski            509 SOB     651-296-4218    rep.ann.lenczewski@house.mn
Mary Murphy            343 SOB    651-296-2676     rep.mary.murphy@house.mn
Michael Paymar            543 SOB    651-296-4199     rep.michael.paymar@house.mn
Gene Pelowski             491 SOB     651-296-8637     rep.gene.pelowski@house.mn
Joyce Peppin            279 SOB    651-296-7806      rep.joyce.peppin@house.mn
Tom Rukavina            477 SOB    651-296-0170      rep.tom.rukavina@house.mn
Ron Shimanski            227 SOB    651-296-1534      rep.ron.shimanski@house.mn
Steve Simon            375 SOB    651-296-9889      rep.steve.simon@house.mn
Nora Slawik            403 SOB    651-296-7807     rep.nora.slawik@house.mn
Steve Smith            271 SOB    651-296-9188     rep.steve.smith@house.mn
Loren Solberg            443 SOB    651-296-2365     rep.loren.solberg@house.mn
Paul Thissen            351 SOB     651-296-5375     rep.paul.thissen@house.mn
Jean Wagenius            449 SOB     651-296-4200    rep.jean.wagenius@house.mn
Ryan Winkler            25 SOB        651-296-7026      rep.ryan.winkler@house.mn
ex-officio Marty Seifert        267 SOB      51-296-5374    rep.marty.seifert@house.mn

This is a balanced package with shared employee/employer responsibility
•    Builds on past precedents: teachers pay for benefit improvements and employer contributions  stabilize fund
Phased-in approach balances

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See C-13 Bd Minutes for April 28, 2009

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press here to read newsletter

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Some of you no doubt may think that the work of the Committee of Thirteen was done when we merged with TRA.
Think again!

Look at what has happened. An assessment of the pension
landscape in 2009 clearly shows that the economy and the
stock market crash have devastated the earnings of the TRA to a
dangerous level. Our work is never done. If this past year has
shown us nothing else, it has made it obvious that we need to be
active and vigilant and involved in protecting and advocating
for our teacher pensions. The C of 13 lobbied strongly for the
merger of the Post Fund and the Active Fund last session – just
in time to make retiree pensions more secure! Now the immediate and important work of your lobbyists is to advance the new Omnibus Pension Bill this session to increase the funding for retirees and to improve pension benefits for the active teachers.

See Spring 09 Newsletter

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Pensions:

The Omnibus Pension Bill was stripped of the provisions in Article 6 that would have funded the deficit in Teacher Retirement Association Fund and also provide a pension benefit increase targeted for post-89 active teachers. This was done late Sunday night (early morning) in a meeting of the House Rules Committee. The governor had indicated he would veto the entire bill if this provision was in it.  As a result, legislative support for the TRA funding and benefit increases diminished and the decision was made to drop that article in the bill.  The Senate had already passed the bill but with barely enough support after attempts to modify or eliminate that part of the bill that included funding the deficit and the benefit increases for actives.

The biggest issue was how to cover the cost of the $20 million contribution increases required of school districts at a time when there was no increase in funding for education and potential shifts or cuts coming due to the budget shortfall.  Although districts would have had a two-year delay before this was required, legislators were reluctant to obligate the state and districts at this time.  Facing a certain veto  and after spending most of the session making cuts in essential programs, legislators decided to drop this provision in the bill at this time.

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Rose Hemodson, one of our lobbyists received the following letter from TRA.
Please take a moment to read it.

press here: ltr-5-31-2009

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From the Retired Educators Association of Minnesota
January 2010 Newsletter

A very large and growing funding gap that is unprecedented in Teachers Retirement Association (TRA) recent history needs to be addressed by the 2010 Legislature: Over the last two fiscal years (from FY2007 to FY 2009) the fair market value of TRA’s assets has declined by over $6 billion, from $19.9 billion at the end of FY 2007 to approximately $13.8 billion at the end of FY 2009. This represents a loss of nearly one third of the fund assets in a relatively short period of time. The liabilities of the fund, expected to be around $23 billion, have not declined, as no current or future benefits have been reduced.

A July article by Jerry Wedge addressing the TRA pension fund contains information regarding the Minneapolis teacher merger that needs to be clarified.

Many believe that the TRA merger with Minneapolis teachers plan in 2006 produced the funding problems now facing TRA. According to John Wicklund, assistant Executive Director-Administration at TRA, the merger was designed to be cost neutral to TRA and will be funded over the next 27 years through a combination of direct state and local aids of about $20 million per year and an extra contribution of 3.64% by the Minneapolis school district for each active teacher over and above what all other TRA districts pay. TRA needs to insure those promised monies are received as scheduled. However, TRA’s major funding problems resulted from investment losses occurring after the Minneapolis merger, not because of the merger itself.

Also any comparison of Minneapolis Teachers Retirement Fund Association (MTRFA) and TRA benefits must be done understanding the following facts:
1.) Most of the 4,000 retirees from MPLS were BASIC program members and did not get Social Security, these individuals also paid 8.5% of their salary towards their retirement benefit and the district was paying the higher contribution rate as well.
2.) TRA members on the other hand, have contributed 4.5 or 5.0% of their pay (except for a three year period from 1994-1997 when they paid 6.5%) for their benefit. Simply put, some MTRFA benefits were higher because they were required to pay more for them and they do not receive social security. Since 1978, active Minneapolis, are Coordinated Plan members and have the same benefits as all other TRA members.

Laurie Hacking, Executive Director of TRA has spoken to several retire groups, including the REAM and EDMNR Fall conference audiences about the deficiency in TRA. She and the TRA Board are seeking ways to address the roughly $9 billion dollar deficit TRA has accumulated since the market decline began last year with $6 billion of the deficit coming from the Post Fund alone. There is currently NO funding mechanism in place for TRA to take care of the deficit. The other state public employee plans have very similar deficits that may require additional contributions and changes to benefit structures.

The market losses are the real issue. We need all active and retired teachers to be aware of this going forward. Legislators may want to sit on this issue another year, because most of them are up for election next year. But this would cause greater harm to the problem, because of negative compounding of the deficit. Funding deficits not addressed only become worse and harder to fix.

Actives and retirees for the greater good of all may have to share in the pain. We have all worked too hard to maintain a quality retirement for educators in this state to waiver now. Retirees need to be prudent, reasonable, and forward-thinking during these historic economic times. History tells us that Minnesota’s economic prosperity resides in the quality of education we provide our future workers and leaders. In conclusion, please follow the lead of our REAM legislative team if they ask you to contact your local legislators. Stay tuned!

-By Curt Hutchens President elect of REAM and former President of TRA Board of Directors

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Winter 2010 Retiree Newsletter

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Dear Minneapolis Retiree,

As you may remember from a previous C of 13 newsletter, there is an issue we care about as retirees which is increasing the retiree representation on the Board of the Teachers Retirement Association. There is now a bill in the Legislative Commission on Pensions and Retirement to add one more retired member to the TRA Board of Trustees. The hearing on this issue may occur as early as this Friday, February 12, 2010.

The bills are HF 1793 sponsored by Representative Mike Nelson and SF 1601 sponsored by Senator Mary Olson.

The Committee of Thirteen is asking you to contact members of the Commission and ask for their support to add another retiree to the TRA Board. Even if the person is not your Representative or Senator, it is important they know that this issue is important to those of us now retired and those who will be retiring in the future. A list of the Commission Members and their email addresses are below. Their photos are in the most recent C of 13 newsletter.

Some talking points you may wish to use are listed below.

This bill is necessary for the following reasons:

a. Since the 1970’s, the teacher retiree group in MN has grown from 5,000 retires to almost 50,000 in 2010.

b. Currently there are over 25,000 MN teachers over 50 years of age who will retire soon and who should have adequate representation.

c. An additional retiree elected to the board will only change the ratio of the appointive members of the board from 37% to 33%.

d. The TRA administers the fund, the SBI (State Board of Investment) invests the money, and the legislature sets the parameters.

e. The addition of another elected retiree to the TRA Board will provide for more efficient communication to retirees by writing articles for newsletters, and attending retired member meetings.

f. A retiree elected every other year would keep retiree experience on the board regardless of who is elected.

g. There are only TRA administrative costs to add a retiree to the TRA Board for the election, training, travel, etc.

h. We are NOT advocating replacing one of the active members of the TRA Board with a retired member.

i. MSRS (Minnesota State Retirement System) and PERA (Public Employees Retirement Association) have TWO retirees on their boards.

j. Two retired members on the board will allow them to better discuss and have a broader view of information being discussed.

Members of the Legislative Commission on Pensions and Retirement are:

Rep Phyllis Kahn: rep.phyllis.kahn@house.mn Rep Mary Murphy: rep.mary.Murphy@house.mn Rep Michael Nelson: rep.michael.nelson@house.mn Rep Steve Smith: rep.steve.smith@house.mn Rep Paul Thissen: rep,paul.thissen@house.mn Sen Don Betzold: sen.don.betzold@senate.mn Sen Ann Lynch: sen.ann.lynch@senate.mn Sen Mary Olson: sen.mary.olson@senate.mn Sen Sandra Pappas: sen.sandra.pappas@senate.mn Sen Julie Rosen: sen.julie.rosen@senate.mn If you prefer to call, you may also do a computer search for “Minnesota Legislature” and get phone numbers and office addresses.

Please do what you can do to help make contact with these legislators.

Thanks,

Jay C. Ritterson, President

Committee of Thirteen

Questions? Email C of 13 lobbyists: Rose Hermodson MFTRose1@aol.com

or Louise Sundin lsundin@mft59.org

Filed under: LCPR, Legislation, TRA News | Comments Off

PENSIONS: THE NEXT TO GO BUST?

A financial time bomb is ticking away — mostly unheard by taxpayers, government workers and retirees.

Years of off-the-mark investment assumptions, inadequate contributions and generous benefits have left government pension funds in a perilous situation: unable to meet longterm commitments to current and future retirees without major changes.

“It’s a serious problem,” said Sen. Don Betzold, DFL-Fridley, who is working on a plan to shore up the funds.

Minnesota’sretirementfunds and other investment accounts lost $10 billion over the past two years, leaving about $53 billion under state management at the end of 2009. The pension funds have been slightly above or below minimum balances recommended by the federal government.

Only 76 percent of the pension obligations for 636,000 teachers, state and local government employees and retirees were fully funded at the end of last June, leaving their pensions short $12 billion. One smaller local fund could go broke in as few as five years, meaning pension checks wouldn’t be cut, Betzold said.

To deal with the pension problem, legislators are proposing an unusual package of increased government payments, greater contributions from employees and reduced benefits for retirees. Bills in the House and Senate are expected to be acted on this session.

But funding for government pensions also depends heavily on investment returns, which were hammered by the recent stock market decline.

Making matters worse, Minnesota is among five states whose pension funding is based on expected average earnings of 8.5 percent a year, according to the nonprofit Pew Center on the States in a February study. Over the 20 years ending last July, which include the stock boom of the 1990s and the busts of recent years, the state’s return averaged 7.8 percent.

Other states have lowered their expectations to 8 percent or 7.77 percent.

“Some experts believe even those reduced rates are still unrealistically high,” the Pew Center wrote.

Lower the target?

Minnesota pension funds recently considered lowering the investment target, but that would have required even bigger contributions and bigger benefit cuts to meet commitments — both politically unpopular choices.

“They’re betting that going forward they get at least 8.5 percent,” said Edward Burek, deputy director of the Legislative Pension Commission.

Howard Bicker, executive director of the State Board of Investment, which oversees pension earnings, said pension funds in the state earned an average of 9.9 percent a year when taking in the past 30 years.

“History has told us we can do this over long periods of time,” Bicker said. “It’s the short term that you have got to have the staying power for.”

Betzold said the contribution increases and benefit reductions in his bill are needed “even if we get phenomenal returns.”

At a Senate hearing Wednesday, he said that without the proposed changes and at least 8.5 percent annual returns, “these funds are in big trouble. Some would go broke before … 30 years.”

The Teachers Retirement Association (TRA) is in the worst shape, with only 59 percent of its obligations covered. “They would run out of money by the year 2032” without the adjustments, Betzold said.

He acknowledged that the proposal to increase school contributions “is going to cause more stress on school budgets.”

School districts would eventually be paying $90 million more under the Betzold proposal, said Laurie Fiori Hacking, executive director of TRA.

The organization supports increasing payments from teachers and school districts and a suspension and temporary cut in benefits for retirees.

Legislators have complained that Education Minnesota, the state’s largest teachers union, has resisted having its members contribute more to their pension funds.

Education Minnesota President Tom Dooher said the union is willing to have employees pay more as long as school districts also pay more.

But former state Sen. Don Moe, long a critic of Minnesota government pensions, said years of generous benefits have taken their toll on fund balances.

“We’re dealing with hundreds of thousands of public employees, all of whom are, it seems, politically astute and active,” said Moe, a St. Paul DFLer who specialized in pension issues during his two decades in the Legislature. “It’s a very highly politicized system.”

In recent years Education Minnesota has even held out hope for benefit increases, “in spite of the crushing economic problems we have,” Moe said.

‘Insatiable demand’

Even though the pension funds are now calling for curbing benefit increases, Moe sees retirees and employees shifting gears with better investment returns.

“There is an insatiable demand for more benefits,” he said. “It’s difficult to resist in pension policy because you don’t have to pay the bill immediately.”

Retirement bonuses pegged to the stock market boom of the 1990s locked in obligations and helped increase debts when the market sagged and investment income declined, said a report by the nonpartisan Minnesota Taxpayers Association.

In addition to boosting school and teacher contributions and curbing teacher benefits, the proposed legislation would increase contributions by local government employees and 2,000 governments covered by the Public Employees Retirement Association. It also would cut their benefits and those for state workers covered under the Minnesota State Retirement System.

The pensions facing the most serious threat are those of the Minneapolis Employee Retirement Fund. It covers city employees who were hired before 1979, so it has about 5,000 people drawing pensions while about 100 are still working.

“It is expected to run out of money between five and seven years,” Betzold said.

The proposed legislation to save the pension would merge the Minneapolis fund with the larger Public Employees Retirement Association at an eventual cost to the state of $27 million a year.

Pat Doyle • 651-222-1210

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