Agenda - Council - 05/27/1980 - Laserfiche WebLink

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PERA benefits, financing and administration The adoption in 1973 of the "high five year" benefit formula for PERA has provided very ade- quate pension benefits for career municipal em- ployees. There are a number of related policy issues, however, which have not been dealt with in the law. Therefore, the League strongly urges the legislature to adopt the following policies in the form of amendments to the PERA law: Any increases in PERA general fund bene- fits enacted subsequent to 1973, including any resulting deficits, should be financed by matching contributions, shared equally by employees and public employers, over a period not to exceed 30 years. Any in- creases in benefits under the PERA Police and Fire Fund, including any resulting de- ficits, should be financed 50 percent by employers and $0 percent by employees, over the same amortization period. Since the equal, matching employee and employer contributions to the Coordinated Plan within PERA are sufficient to finance the present benefits and liquidate the exist- ing deficit in less than 30 years, all of the employer's additional contributions (i.e., the 1.5 percent of the salaries of employees under the Coordinated Plan and the 2.5 percent of the salaries of employees under the Basic Plan) should be specifically and exclusively earmarked for the reduction of the actuarial deficit in the PERA Basic Plan. The employers' additional contri- butions should continue until this deficit attributable to present benefits is liqui- dated or until 1997, whichever occurs earlier. Since any increase in benefits enacted for PERA retirees is in essence a gratuity, the resulting cost should not be paid from the PERA Fund, but rather should be financed by a direct appropriation from the State General Fund. The actuarial assumptions concerning the rate of investment earnings and of salary increases should be a conservative reflec- tion of actual experience. The present assumptions concerning the rate of invest- ment earnings and salary increases are outdated. We urge the legislature to exam- ine these assumptions and to determine a means of more accurately reflecting the actual experience during recent years. The League supports the .continuation of the Minnesota Adjustable Fixed Benefit Fund as a means of providing post-retire- ment increases in the pension benefits of retirees under the statewide pension funds. The existing deficit in that fund has in the past, and is likely in the immediate future, to prevent payment of any systematic adjustment to retirees. The League sup- ports state funding of the deficit from gen- eral funds or amortization of the deficits by crediting a reasonable portion of excess earnings to that deficit and payment of the remainder of excess earnings to that deficit and payment of the remainder of excess earnings to retirees as a cost of liv- ing adjustment without establishment of any guaranteed adjustment. (In the event the legislature determines that some mech- anism other than the Adjustable Fixed Benefit Fund is more appropriate for providing retiree inflation protection, or that the Adjustable Fixed Benefit Fund should provide a guaranteed inflation adjustment, the League urges the legisla- ture to provide that: (a) no increases be made during the first three years after retirement or until the Consumer Price Index increases at least ten percent; (b) a specific limit be placed on the increase granted in any one year; and (c) the cost of such increases, including any resulting de- ficits, be financed from the general fund.) Further steps should be taken to integrate the administration of the three statewide pension funds, without combining the funds. The League recommends enactment of enabling legislation to allow the transfer of pension contributions and equal em- ployer contributions plus accrued interest of individual employees, at their request, to and from other states with similar re- ciprocal legislation. -9-