How are post-retirement increases determined?
The law provides for an annual retirement benefit increase. Beginning January 1, 2011, the annual benefit increases are as follows:

• all retirement plans administered by MSRS, with the exception of the State Patrol Retirement Plan, will be 2 percent
• State Patrol annual increase will be 1.5 percent

The increase is prorated based on the number of months you were retired during the previous fiscal year, which ends June 30.

When is the post-retirement increase paid?
Each January you will receive a post-retirement increase. A letter will be sent to you several weeks before the increase to notify you of the adjusted amount.

Why didn't I receive the full 2 percent increase?
The increase is prorated based on the number of months you were retired during the previous fiscal year. To qualify for the full increase, you must be retired for the entire previous fiscal year (July 1 through June 30).

My benefit increase will impact the amount of taxes I must pay. Can I adjust the tax withholding amount on my pension benefits ?
Yes, there are three ways to adjust your tax withholding amount:

• Online on this website
• By phone. Call MSRS at 651-296-2761 or 1-800-657-5757; or
• In writing by completing the W-4P form, which can be obtained by calling MSRS or by downloading from this website

Given the fact there is a deficit, are the retirement systems in any jeopardy of missing a benefit payment?
No, certainly not at this time. There are sufficient assets to pay benefit payments for many years.

I retired in 2003 and expected to enjoy increases similar to those received by state employees who retired earlier. What happened?
The increases granted in the late 1990s and early 2000s were aberrations produced by the run-up of the stock market during the 1990s. The bull market was followed by a severe downturn in the markets in 2000-2002, the worst since the Great Depression. This downturn created a large deficit in the Post Fund and starting January 1, 2003 through 2010, that deficit limited annual adjustments to 2.5 percent.

To provide a means to reduce the impact of investment return volatility, investment gains and losses are spread over a five-year period. During periods of normal market fluctuation, the formula provides a smoothing of annual adjustments. The problem is that the market experienced extreme volatility. The market experienced its longest extended period of economic growth during the 1990s, followed by the sharpest market downturn in over 60 years. During the late 1990s, the Post Fund built up a substantial sufficiency in addition to awarding very generous increases. The Board attempted to pass legislation in the late 1990s to reserve some of the excess assets for the down markets, but the legislation did not pass. Successive years of substantial market losses with negative investment returns quickly wiped out the sufficiency and left the Post Fund with a deficit.

What was the Post Fund?
The Post Fund consisted of assets dedicated to the payment of retirement benefits to over 130,000 retired public employees or their survivors. This included benefit recipients from the three statewide retirement systems -- MSRS, Public Employees Retirement Association (PERA) and Teachers Retirement Association (TRA). At retirement, each retirement system transferred a one-time lump sum dollar amount from its active fund to the Post Fund.

The Post Fund was dissolved on June 30, 2009 and the assets in the fund were merged with the active fund of each of the individual statewide retirement systems.

Why did the Post Fund dissolve?
The Legislature adopted a bill during the 2008 session to revamp the Post Fund structure. The Fund would be dissolved if its funded ratio dropped below 85 percent for two consecutive years or 80 percent for one year. The purpose of this safeguard was to protect the financial security of the retirement system by providing a larger pool of assets from which to pay benefits and to avoid future contribution rate increases.

On June 30, 2009, after the funded ratio dropped below 80 percent for one year, the Post Fund was dissolved and the three statewide retirement systems - MSRS, Public Employees Retirement Association (PERA) and Teachers Retirement Association (TRA) - took their portion of the Post Fund and merged it into their Active Fund.

The advantages of each retirement system joining their share of the Post Fund with their own active fund allows financing the deficit over a longer time period and provides a continual source of revenue from employer and new employees participating in the retirement plan for 20 to 30 years of their employment.