Omnibus Pension II Bill Update

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.