Pensions

The Legislative Commission on Pensions and Retirement (LCPR) received a one-time $31.5 million target to improvement benefits and funding status for teacher pensions. The omnibus pension bill moved up the effective date of the new normal retirement age of 65 years old for members of the Teachers Retirement Association (TRA), temporarily reduced teachers’ pension contributions for members of the St. Paul Teachers Retirement Fund Association (SPTRFA), and subsidized conversions of teacher pensions from Individual Retirement Account Plans (IRAP) into TRA. The pension omnibus also made no-cost changes to other public pension plans to benefit state employees and shows the DFL Senate’s commitment to improving pensions despite a limited budget surplus and pension target.

Teacher Pensions

Last session, the omnibus pension bill reduced the normal retirement age (NRA) for teachers within the TRA system from 66 years of age to 65 years of age effective July 1, 2025. The 2024 omnibus pension bill allows TRA teachers who turned 65 years old after the passage of the 2023 omnibus pension bill to retire without incurring any early retirement offsets (sometimes referred to as early retirement penalties) through a $28 million appropriation to TRA to maintain the financial stability of the plan.

$1.5 million is provided to STPRFA to lower active teachers’ FY25 and FY26 employee contributions, which will allow them to retain more money in take-home pay. St. Paul teacher contribution rates were increased in the 2023 omnibus pension bill from 7.75% to 9% to offset benefit changes; the $1.5 million will help to ease the transition to a higher contribution.

Individual Retirement Account Plans (IRAPs) are defined contribution plans for higher education employees. Many Minnesota State employees in the past have been enrolled in IRAP accounts but were not informed by Minnesota State they were eligible to transfer into TRA, which provides a defined benefit plan. The LCPR has dealt with many individual requests, called special legislation, from higher education employees to transfer since they were not notified of the option. Transfers require employees to make a payment into TRA (purchase past service credit) and require MN State to make up their underpayment before transfer to TRA. A new process, based on the recommendations of a working group, will remove the need for special legislation in the future and up to $10,000 will be transferred from the $1.4 million appropriation to TRA to help employees pay for the service credit purchase into TRA.

Did Not Pass:

Rule of 90 for Teachers

Proposals to reimplement Rule of 90 for teachers hired after June 30, 1989 did not become law this session. Reimplementing Rule of 90 would be cost prohibitive, with estimates as high as $3.3 billion in addition to ongoing costs to pay for the benefit improvement for future teachers. If the increased liabilities for Rule of 90 are not fully addressed through significant increases in employee contributions, employer contributions, and state aid, it would jeopardize the financial stability of the teachers’ pension plan to the detriment of retirees, active and future generations of teachers, and taxpayers.

Senate DFL Media