House Committees Approve Omnibus Pension Bill With Changes for PERA and Other Plans

The bill, which was approved by the Senate in late March, would also require some dissolved relief associations to return unneeded funds to the state.
(Published May 14, 2018)

The omnibus pension bill finally began the committee process in the House as the Government Operations and Elections Policy Committee and the State Government Finance Committee approved the bill last week. The bill will now head to the House Ways and Means Committee before it receives a vote on the House floor this week.

The bill moved very quickly through the Senate, receiving final approval on March 26 on a vote of 66 to 0. The bill includes sustainability changes to the state’s major public pension plans, including the Public Employees Retirement Association (PERA) General Plan and Police & Fire (P&F) Plan.

During a hearing of the House State Government Finance Committee on May 11, Minnesota Management and Budget Commissioner Myron Frans testified that if a “stand-alone” version of the bill is presented to Gov. Dayton, the governor will sign it into law. The commissioner’s reference to a “stand-alone” bill was the result of last year’s merger of the omnibus pension bill with a number of local government pre-emption provisions, which the governor subsequently vetoed.

Relief association amendment

The bill was amended to include a special law for the City of Maplewood due to the recent dissolution of their volunteer fire relief association and also to increase the lump-sum maximum annual benefit to $12,500 for cities that are currently at or above a lump-sum benefit of $9,500.

The amendment also included a requirement that any volunteer fire relief association that is, as of the effective date of the bill, providing an annual lump-sum benefit of $9,500 or more and is dissolved must return unneeded relief association funds to the state general fund if the city has not made a required contribution to the fund in the last 10 years. Based on information from the Pension Commission, only three cities with active relief associations are at the $9,500 annual benefit level—Brainerd, Eden Prairie, and Plymouth.

PERA changes

Of interest to cities, the bill includes a number of PERA General and P&F plan modifications, including employer and employee contribution increases for the PERA P&F Plan participants. Under the bill, employer contributions into the P&F plan will increase by 0.75 percent of salary on Jan. 1, 2019 (to 16.95 percent) and by an additional 0.75 percent of salary on Jan. 1, 2020 (to 17.7 percent). Employee contributions will increase by 0.5 percent in each of those years (to 11.3 percent and then 11.8 percent).

The bill requires $27.2 million in additional spending for the second half (fiscal year 2019) of the current biennium. Of that total, $4.5 million will be directed to the PERA P&F Plan to reduce the need for larger employer and employee contribution increases.

Other pension plans

The other large allocations include roughly $7 million to fund employer contribution increases for state employees in the Minnesota State Retirement System (MSRS) General plan, the State Patrol Plan and Corrections Plan; $10.9 million to fund a general education pension adjustment for school district contributions to the Teachers Retirement Association (TRA) plan; and $5 million to fund a direct contribution to the St. Paul Teachers Retirement Fund.

The estimated state cost of the bill increases substantially in the next biennium to $113.3 million for fiscal year (FY) 2020-2021, which is due, in part, to coverage of two years of operations. However, the increase is also due to a boost in the aid to the PERA P&F Plan and even larger increases in MSRS and TRA costs. The aid to the PERA P&F Plan will increase to $9 million beginning in FY 2020.

For more details about the bill, read a previous Cities Bulletin article.

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