The Teachers Retirement Association (TRA) Board of Trustees approved a legislative proposal Wednesday, November 16, that would lower the annual cost-of-living adjustment (COLA) for retired teachers from 2 percent to 1 percent for 10 years and 1.5 percent thereafter.
The proposal also calls for a 2 percent increase in the employer (school district) contribution rate, from 7.5 percent to 9.5 percent, phased in incrementally. The employer contribution rate increase would be offset by a request for state aid to cover school districts’ pension costs. The active teacher contribution rate would remain unchanged at 7.5 percent.
MSBA Executive Director Kirk Schneidawind cast the lone dissenting vote against the proposal.
Schneidawind expressed serious concern with the proposal to raise employer rates by 2 percent. Schneidawind said that it’s unclear whether state funding will be available for districts to shoulder the increased pension costs, and school districts need to know that their operational and programming budgets will be held harmless.
Schneidawind said the last time TRA sought major financial adjustments in 2010 it was more of a “full partnership.” Even though there was no state aid involved, active teachers did contribute more at that time. (Active teachers’ contribution rates rose from 5.5 percent to 7.5 percent, phased in over four years.)
At its October 24 meeting, the TRA Board discussed the investment return assumption, which is used to project TRA’s long-term financial trends. The board voted to lower the investment return assumption to 7.5 percent for three to five years while a study is conducted; then the rate reverts to 8 percent. Also, the study would evaluate processes and governance structure for changing the investment return assumption.
See https://www.minnesotatra.org/images/pdf/board%20recap%2011%2016%2016.pdf for more details.