News from the Director | St. Paul Teachers' Retirement Fund Association (SPTRFA) | St. Paul Teachers' Retirement Fund Association

SPTRFA’s legislation initiative, aimed at removing the System’s 6.4% funding deficiency through a combination of further cost savings, contribution increases by both employer and employees and an expanded annual State aid program, has advanced two more steps in the Legislative process. The Bill had been combined with other pension related matters into the annual Omnibus Pension II Bill following favorable endorsement by the joint Pension Commission on Pensions and Retirement (LCPR) earlier this month. This past week, the Senate Local Government Committee, chaired by Vice Chairman Senator Chris Eaton, gave its approval to the Pension Bill and sent it along to Senate Finance Committee. St. Paul Senator Richard Cohen heads up that panel with a hearing scheduled for mid-month. Favorable reception is expected although up to this point, the Bill has been advancing with only the support of the majority DFL legislators.

On the House side, its Government Operations Committee, led by Representative Mike Nelson, gave a favorable nod to the Pension Bill, again on a strict party line “voice” vote and sent the proposal to the House Rules Committee.
Given the attachment of increased State aid to both Saint Paul and the Duluth Teachers’ Retirement Fund (DTRFA), the Governor and Senator Pappas may opt to attach a provision that would ask those teacher systems to examine the matter of merging into the State Teacher Fund (TRA). Draft language, scheduled to be reviewed at the April Board of Trustees meeting will call for a six month study by the three systems (SPTRFA, DTRFA and TRA) into the costs, merits and all other considerations involved with entertaining a possible merger. The St. Paul Trustees have not favored a merger with TRA and the significantly higher costs of such a proposal compared to maintaining its independence have been well noted during testimony this year.

At this point, the initial Omnibus Pension Bill II has been split into both a House and a Senate version, which are currently identical. If Senator Pappas, at the urging of the Governor, applies the merger study on the Senate side, it could result in the eventual need for a Compromise Committee to resolve any differences between the versions, once each House has acted favorably on their separate versions. Representative Mary Murphy, a lead House sponsor, does not favor the merger study at this point and is not expected to incorporate that element into the House version.

It is expected that the Bill will be approved during this Session. Among its features is an additional $7 million in annual State aid to SPTRFA, contribution increases stretched out over the next four years that will bring employee contributions to 7.5% of salary, parity with TRA employees. There are also cost saving changes to the Fund’s “Return to Work Program” along with a revision to the Early Retirement reduction table aimed to accommodate new mortality assumptions while adjusted to favor longer tenured workers.

The St. Paul Teachers’ Retirement Fund Association is pleased to report that our legislation, Bill S.F. 1249, was approved by the Legislative Commission on Pensions and Retirement (LCPR) last evening. The SPTRFA bill now moves on to the next step in the process which will be a hearing before the Government Operations Committee. The Chair of House Government Ops is Representative Mike Nelson, our lead House sponsor. After Government Ops the bill will be heard by the Finance Committees in both chambers, Dick Cohen in the Senate and Mary Murphy in the House. Senator Pappas and Representative Murphy have acted to place money in the budget for the proposals from both St. Paul and Duluth. Following Ways and Means hearings, the bill will move on to the floors of both Houses.

Our proposal has been made part of the major (or Omnibus) Pension Bill 2. There are two “Omnibus” bills this year. The LCPR chose to go the “two” route, dividing the more individual related bills from those that pertain more to broad changes in the State’s major pension plans. There is an advantage in being part of this much larger bill in that the association will have many advocates, both legislators as well as the potential beneficiaries that will be working to shepherd it successfully through the Legislative maze.

In the package are the modifications to the Return to Work Program that will allow the Fund to recoup the normal Employer contributions from participants under age 67 PLUS a further 2.5% of the employee share, that will be covered by the SPPS. Additionally, the break in service is increased from 30-90 days and excess earnings balances will be retained by the Fund. Employee contribution rates will increase an additional 1% over a two year period (FY 2016-2017) while the Employer additional 1% is phased in over a three year period, ½% the first of those years, and ¼% the last two. The retirement multiplier will increase 0.2x for Tier I and Tier II employees (from 1.2-1.4x and from 1.7-1.9x) starting with service in school year 2015 and beyond. Finally, the State will contribute an additional $7 million/year for the next twenty five years (or upon achieving full funding whichever comes sooner) in State Aid.

It’s a balanced, fair package with the burden shared. It will close the current deficiency gap and place the Fund on an even more firm footing going forward.

The LCPR committee will be meeting during the Legislative off-season. Senator Pappas and Executive Director Paul Doane will continue discussion on pursuing various items related to pensions expecting that there will be further proposals aimed at addressing the State’s long term liabilities. No doubt that there will be continuing talk about consolidations, hybrid plans, COLAs, etc. However, last night was an important step in the St. Paul Teachers’ Retirement Fund Association’s history and continued success.

Omnibus Pension II Bill Update

Bill S.F. 1249 Voted through the LCPR Committee