Public Pension Restructuring

The Legislative Commission on Pensions and Retirement will be chaired by the Senate this upcoming session, but it is still unclear who will be the new chair. With the Commission controlled solely by Republicans this biennium, it is possible drastic pension restructuring will be brought forward despite the high costs associated with converting defined benefit pensions to defined contribution pensions. Republicans generally oppose defined benefit pensions because they have the potential to incur future liabilities for governments (that require state aid) and are unsustainable.

  • The Senate DFL understands the need for both defined benefit and defined contribution pension plans. Defined benefit plans provide guaranteed benefits for retirees, while defined contribution plans provide more flexibility when transitioning from job-to-job.
  • Previous nonpartisan studies have concluded the cost of transitioning defined benefit plans to defined contribution plans is prohibitively expensive and the process would be destabilizing.
  • Any efforts to attack retirees due to the type of plan they have or attempts to transition defined benefit plans to defined contribution plans will be opposed.

Pension State Aid

Currently, all of the major state pension plans receive state aid to supplement active member contributions, employee contributions, and investment returns. These payments are due to various financial issues for the pension plans, including aid to the Public Employee Retirement Association because they agreed to take on management of the Minneapolis Employee Retirement Fund. The General Fund aid payments to the Teachers’ Retirement Association and the St. Paul Teachers’ Retirement Fund Association may be targeted for reductions, since each plan receives $29 million and $9.8 million per year, respectively.

  • The DFL supports healthy and sustainable pension plans, and will fight to block unnecessary and inequitable cuts to Minnesota retirees.
  • State aid payments to pension plans are provided for various reasons and are not due to the current management of the pension plans.
  • Cutting annual pension aid payments will hurt retired teachers, along with state and municipal retirees, due to no fault of their own, since they paid into their plans what was asked of them.

Pension Plan Sustainability Measures

The 2016 Pension Bill was vetoed by Gov. Dayton in part due to the lack of shared sacrifice from all stakeholders involved in public pensions. The initial sustainability packages from the major pension plans included increased employee and employer pension contributions in addition to COLA reductions, but these reforms were not included in the final bill. The Governor did not sign the bill because it only required retirees to shoulder the financial burden of the increased pension liabilities due to retirees living longer than previously assumed. Further attempts may be undertaken by the Republican majority to criticize the sustainability of state pension plans but only require employees and retirees to be responsible for measures to improve the plans’ financial stability.

  • The DFL supports shared-sacrifice relative to pension plan sustainability measures, which includes increased employee and employer contributions, and cost-of-living-adjustments from retirees.
  • The pension sustainability plans from 2016 were supported by all stakeholders before employers were removed from the solution.
  • Efforts to blame or force retirees to shoulder the entire burden of pension sustainability will be opposed by the DFL.
Senate DFL Media