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Changes proposed to stabilize struggling pension plans

published 1/16/2013
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A few state and local pension plans are likely to see changes this session as the House Government Operations Committee works to narrow shortfalls in plan funding.

Committee members received an update on struggling state and local pension plans. Those in the most dire condition include the state patrol’s funding deficiency at 27.2 percent.

In order to stabilize the plan, David Bergstrom, executive director of the Minnesota State Retirement System, proposed increasing employee contribution by 2 percent and employer contributions by 3 percent over the next two biennia. In the proposal, the cost of living adjustments for current and future retirees would also be reduced from 1.5 percent to 1 percent.

Similar increases in judges’ and judicial contributions are also proposed in the that  pension plan.

“It’s quite a change for future judges,” Bergstrom said. “Because their benefits are less, they would pay less.”

The local police and fire pension plan with a funding deficiency of 22 percent is of concern as well, according to Mary Most Vanek, executive director of the Public Employees Retirement Association of Minnesota.

“The police and fire plan is the one we are working most on,” she said. “It’s not necessarily dire but needs to be addressed.”

Contributions would be increased over two years by 1.2 percent for employees and 1.8 percent for employers. The proposal also would cap benefits payable for new enrollees at 99 percent of final average salary. 

Paul Doane, executive director of the St. Paul Teachers’ Retirement Fund Association, also discussed a funding deficiency. He said he’s hopeful the state would add to its current contribution of the plan.

- Liz Stoever


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