broke020409

On the homepage

Sunday's paper

Olympic moms get all-around gold

Out There

Gardens

Her garden became his inspiration

Scanners

Full-body scanners headed for MSP

Home | Local + Metro

Minneapolis pension fund seeking merger with state fund to stay solvent

City Council members support the proposal and would like to see police and fire pensioners to follow suit.

By STEVE BRANDT, Star Tribune

Last update: February 3, 2009 - 7:19 PM

Print this story

Follow local news on Twitter

More from Local + Metro

Faced with going broke in as few as six years, a closed Minneapolis pension fund with thousands of retired city employees is seeking a merger with a statewide public employees pension fund -- and soon.

The merger proposal won endorsement from a City Council committee on Tuesday, which said it wants other closed funds for city cops and firefighters to merge with their state plan too.

The 90-year-old Minneapolis Employees Retirement Fund (MERF) is paying retirees about $155 million annually, with assets of just under $800 million, plus any investment gain, to finance those benefits.

MERF covers city employees who were hired before 1979, so it has 4,600 people drawing pensions while fewer than 200 are still working. The crash in investment markets has cut MERF assets almost in half.

"The longer you wait, the closer you get to the point where it would be a critical problem," said Luther Thompson, MERF's executive director. MERF wants the 2009 Legislature to authorize a merger to take effect in mid-2010.

The advantage for MERF of merging into the statewide Public Employees Retirement Association is that most members of that fund are still working rather than drawing benefits, meaning that substantial contributions are being made by the local governments and the workers themselves. That means that PERA could finance the pensions of Minneapolis employees until investment earnings recover. But statewide funds sometimes resist absorbing poorer-performing local pension funds.

State Rep. Paul Thissen, DFL-Minneapolis, said he's having MERF-PERA merger legislation prepared. He said that PERA may be receptive because the two plans have similar ratios of assets to liabilities. "I actually think that this is a year that this one could get done," he said.

But the state fund hasn't taken a position on merger, according to Mary Most Vanek, its executive director. Its actuary has been collecting data on the MERF situation, and she expects her board will await those findings. MERF is the only stand-alone municipal fund for general city employees in Minnesota. City employees hired after 1978 have been required to join the state fund.

New city firefighters and police also are required to join a statewide fund for police and firefighters. But older police and fire employees belong to two separate Minneapolis plans also dominated by retirees. The police association dates to 1890 and the fire association to 1867.

Vanek said Minneapolis police and fire associations in the past have opposed merging with the state fund, despite a wave of such consolidations in the late 1980s and early 1990s. "We didn't know anything about the meeting today," fire plan administrator Wally Schirmer said Tuesday. He said the plan would oppose any proposal that didn't treat active and retired members equally.

Renee Tessier, the police fund's director, said its board would discuss the matter next week.

Members of the council's intergovernmental committee praised MERF's willingness to seek a merger.

Thompson said that with its investment losses, the fund would need to earn an average market return of 19 percent annually to avoid going broke. An actuary has estimated that money to pay pensioners will be depleted in six to eight years without a merger.

Steve Brandt • 612-673-4438

Recent Local + Metro stories

New legal issue: Payment for child porn victims - February 3, 2009

New legal issue: Payment for child porn victims - It's been more than a decade since "Amy," as she's known in court papers, was first sexually abused by her uncle. The abuse ended long ago and he's in prison, but the pictures he made when she was 8 or 9 are among the most widely circulated child pornography images online. More

Comment on this story | Read all 31 comments | Hide reader comments

More coverage

StarTribune.com: Steals + Deals & Classifieds

Open positions!

A new career awaits. Look through thousands of listings to find your new job. Start now!

Save Money With E-mail Offers

Win tickets to The Midnight Movie Society's screening of cult-classic film "Beyond the Valley of the Dolls" at Red Stag Supperclub.

Vita.mn and DJ Jake Rudh present the first meeting of The Midnight Movie Society at Red Stag Supperclub on Feb. 19, with drinking, dancing and a midnight screening of cult-classic film, "Beyond the Valley of the Dolls."

See all contests