Governor Dayton Vetoes 2016 Pension Bill

Governor Mark Dayton vetoed the 2016 omnibus pension bill (Chapter 177, Senate File 588). 

The bill contained a provision to reduce the 2017 cost-of-living adjustment (COLA) from 2% to 1.75% for retirees in the following MSRS pension plans: General Plan, Correctional Plan, Unclassified Plan, and Legislator’s Plan.This one-year COLA reduction would have lowered MSRS’ liabilities by $18 million.

Although the House of Representatives and the Senate passed the pension bill with strong bipartisan support, it was vetoed by Dayton because it placed sole responsibility for reducing pension plan liabilities on current retirees.

The original sustainability plan recommended by the MSRS Board of Directors did reflect a shared responsibility. The proposal featured not only a reduced COLA for retirees, but also an employee and employer contribution rate increase. The contribution increases were not included in the final bill.

Dayton explained his rationale for the veto in a letter to the legislature.
 

Legislative Update - May 23, 2016

The 2016 Omnibus Pension Bill passed the State Legislature on Sunday. The bill is now headed to the Governor’s desk for a signature. The bill passed with strong bipartisan support in both the House of Representatives (129 – 3) and the Senate (61 – 1). There were no substantive changes made to the bill following its passage by the Legislative Commission on Pensions and Retirement (LCPR).

 

Funding Provisions
The Legislature chose not to include the funding changes proposed by the MSRS Board of Director’s. Instead, the Legislature passed a stopgap measure which will lower the COLA for calendar year 2017 from 2% to 1.75%. The COLA would then return to 2% in 2018 if a comprehensive funding package isn’t agreed to.  A similar stopgap measure was passed for the Teacher’s Retirement Association (TRA) which will lower their COLA to 1% for 2017. The Public Employee Retirement Association (PERA) did not introduce a funding proposal this year and is currently paying a 1% COLA to its members.

 In addition to the one year COLA reduction, this year’s bill permanently removes the COLA triggers which would automatically increase the COLA from 2% to 2.5% once MSRS reached a 90% funded ratio for two consecutive years. This provision was proposed by the MSRS Board of director’s because the fund was not projected to reach 90% funded for more than 20 years; the board believes the triggers were providing false hope to retirees of a COLA increase; and keeping the triggers would have required significant contribution rate increases.

 Both of these changes apply to retirees of the General Plan, Correctional Plan, Unclassified Plan, and Legislator’s Plan.

Other Provisions
The other provisions included in the 2016 Omnibus Pension bill were administrative. These included a handful of small clarifications and a comprehensive update to the procedures for appealing staff benefit decisions. Not included in the bill was a provision which would have lowered the deferred augmentation rate for a group of former University of Minnesota Employees. For a complete summary of the 2016 Omnibus Pension Bill, click here

 

Legislative Update - May 19, 2016

The Legislative Commission on Pensions and Retirement (LCPR) passed the 2016 Omnibus Pension Bill on Tuesday, May 17. The bill passed the senate today, May 19, on a 61 – 1 vote.

 The bill does not include the Board’s proposed funding package. Instead, the LCPR chose to include a stopgap measure which will lower the Cost of Living Increase (COLA) from 2% to 1.75% for one year. The bill also includes a provision which permanently removes the COLA triggers that would increase the COLA to 2.5% automatically once the fund is 90% funded. These provisions apply to retirees from the General Plan, Correctional Plan, Unclassified Plan, and Legislator’s Plan. The bill did not include a reduction in the augmentation rate provided to former University of Minnesota Hospital employees. 

The 2016 Omnibus Pension Bill is scheduled to be heard before the floor of the House of Representatives in the next couple days.
 

 

Legislative Update - March 16, 2016

MSRS is pursuing a comprehensive legislative agenda for the 2016 session. The biggest item on the agenda is a funding package designed to address longer life expectancies for our members. (Click here to learn more about the impact of longer life expectancies). The MSRS Board proposed a legislative package designed to put the plan back on course towards reaching full funding.  The funding package includes three provisions which impact retirees, employees and employers:

  • Increases employee and employer contribution rates from 5.5% to 6%. This pays for the cost of longer life expectancies for current employees and is effective July 1, 2017.

  • Adds a 1% additional employer contribution which pays for half of the cost of longer life expectancies for retirees and deferred members. This would also be effective July 1, 2017.

  • Reduces the current COLA from 2% to 1.75% effective January 1, 2017. This provision also removes a requirement that the COLA increase to 2.5% once the plan reaches 90% funded. This provision applies to the MSRS General and Correctional Plans.

To read more about any of these provisions, click here.

The MSRS Board of Directors is also pursuing a few additional pieces of legislation this session:

  • A reduction in the augmentation rate provided to 1,400 former employees of the University of Minnesota Hospitals and Clinics. The current rate is 5.5% per year for deferred members under age 55 and 7.5% per year for deferred members over age 55. The proposed legislation would reduce the augmentation rate to 2% effective January 1, 2017. This is the rate that all other deferred members receive.

  • An increase in the time allowed to file for disability benefits if the disability is cognitive in nature.

  • Several administrative provisions including an updated appeal procedure for appealing staff decisions to the Board of Directors. For the complete text of the MSRS administrative bill, click here.

As of 3/16/2016 all of the above items were before the Legislative Commission on Pensions and Retirement (LCPR). The LCPR typically assembles the legislative items into an omnibus pension bill which will then make its way through the Minnesota House and Senate. You can follow the LCPR at the LCPR Website link above.