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 Park Board ($1 million.)
That's welcome news for public employers that have had to dig deeper into their pockets since 2010 to help bail out the fund, which in 2009 reported it had would have 56 cents in assets for every $1 in pension benefits it was obligated to pay.
The fund was folded by a 2010 law under the wing of the statewide Public Employees Retirement Association, 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 up the Minneapolis fund.
A booming investment market helped the fund jump from 74 percent funded as of mid-2013 to 82 percent solvent a year later. That met the 80 percent trigger set in a 2010 law for the Minneapolis fund to be absorbed financially within the larger fund.
A special valuation of the former Minneapolis fund as of Jan. 1 found that combined employer and state contributions of $55 million to fully fund the Minneapolis plan could be throttled back to $37 million annually 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. That's the House Republican position, argued with the reasoning that the state shouldn't be financially burdened by paying for a fund that included few state employees..
But after mid-2017, the combined local contribution will drop to $21 million, producing the $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. Although the city led the charge on the revamped funding split, the news is welcome news for the school district, which already faces budget pressures. "It's a good example of local entities working together to solve a problem," said lobbyist Josh Downham.
MERF has been closed to new hires by the local governments since 1978. That makes it a closed fund in which retirees or their spouses are dying faster than the few remaining aging local government employees who are still working retire and collect their checks. Only 42 working MERF members existing as of mid-2014, compared to 3,777 retirees, people on disability or their spouses collecting checks.