There’s some welcome financial news for the city of Minneapolis in the fine print of this year’s omnibus pension law.

Starting in 2017, the city and seven other units of government whose employees made up the former Minneapolis Employees Retirement Fund (MERF) will share in $10 million in pension cost savings.

That’s about $5.4 million in budget relief for the city alone, with smaller amounts for other employers such as Minneapolis schools ($2.3 million) and the Minneapolis Park and Recreation Board ($1 million.)

That’s welcome news for public employers that have had to dig deeper into their pockets since a 2010 law required them to help bail out the fund, which in 2009 reported it would have 56 cents in assets for every $1 in pension benefits it was obligated to pay.

The fund was put under the wing of the statewide Public Employees Retirement Association (PERA), which covers local government workers. But the Minneapolis account remained a separate division so that other PERA members wouldn’t shoulder the burden of propping it up.

A booming investment market helped the Minneapolis fund become 82 percent solvent in mid-2014, which allowed it to be absorbed financially in the larger fund.

A special valuation of the former Minneapolis fund as of Jan. 1 found that combined employer and state contributions could be throttled back from $55 million a year to $37 million and still hit the full funding target date of 2031.

That raised the question of who got the savings.

Under a House-Senate compromise, the state will get all of the savings in the next biennium.

Its bailout contribution of $24 million will drop to $6 million for those two years, while the local employers continue to pay $31 million.

But after mid-2017, the combined local contribution will drop to $21 million, producing $10 million annual savings.

The state will offset that by raising its contribution to $16 million.

“I think people are pleased,” said Rep. Paul Thissen, DFL-Minneapolis, a point person on the issue.

MERF has been closed to new hires by the local governments since 1978.

Only 42 working MERF members remained as of mid-2014, compared to 3,777 retirees, people on disability or their spouses collecting checks.

Other government units with small shares of MERF retirees include the Metropolitan Council, Metropolitan Airports Commission, Hennepin County, Municipal Building Commission, and Minnesota State Colleges and Universities System.

 

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