Pension changes now law (new law)

The state’s pension system will have to assume a lower rate of return on its investments, under a plan that supporters hope will strengthen its long-term financial outlook.

The change is one of a handful of key provisions in this year’s omnibus retirement law. Sponsored by Rep. Morrie Lanning (R-Moorhead) and Sen. Julie Rosen (R-Fairmont), it comprises the work of the bipartisan Legislative Commission on Pensions and Retirement.

Under the provisions, the assumed rate of return used to calculate the fiscal health of the state’s pension funds will be lowered from 8.5 percent to 8 percent for a period of five years, during which time actuarial studies would determine whether further adjustments are needed.

Supporters say the change will ensure the state’s pension funds have a realistic assessment of their unfunded liabilities. Since 1980, the State Board of Investment has produced annualized returns of slightly less than 10 percent; however, in the last 10 years, the rate of return has been just 5.9 percent.

Lowering the assumed rate of return will not directly impact the levels of contributions or benefits affecting current and former public employees. However, since it might increase the state’s unfunded liabilities, adjustments might be needed in the future.

Other provisions in the law include a variety of technical and federal conforming changes and provisions to address a number of specific pension issues around the state.

The law has various effective dates. A more detailed, article-by-article breakdown of its provisions can be found on the commission’s website.

HF2199/ SF1808*/CH286