Jan 9, 2003

Important Pension Questions
and answers!

Q -Post Fund - can this fund be raided by the Legislature? It was rumored that of the $20 Billion in the fund, $6 Billion was surplus.
A - It was true that by actual values the fund had a surplus in 1996 - 2000. With the downturn in the markets there is a deficiency or the market value of the post fund is less than actual reserves. No because the post fund is a creature of the legislature this cannot be penetrated, and by rules of the court cannot be done.

Q - Can current retirees pensions be changed?
A - No - treated like a contract, the courts have ruled on behalf on retirees where this has been tested.

Q- Can current employees (vested) have their pensions lowered prior to retirement?
A - No - the courts "Christensen Case" states that you cannot change a stated agreement. The amounts are secure. However, the future or non-vested members could be impacted through an adjustment to benefits or a change in payment schedules by employees. Note: Benefits can be moved through mutual agreement from salary to pension or vise versa. This would be an entire plan process.


Q. Freeze on employer payments for two years - this would amount to $1.2 Billion from all public sector employees.
- Solvency of plans to meet 2030 requirements would be put in jeopardy.
- Does not change benefits for retirees defined benefit plans. Those public employees (MNScu, others) on defined contribution plans would be negatively impacted as not dollars would be placed in employees IRAP. Legislature could split out the defined contribution plans. This is not a sound precedent overall.
- Future employees/now vested could have employer amount or opt in or out on defined contribution phase. This again is not a sound principle-under defined benefit plan a smooth transition of employees can be determined, under defined contribution, if market does not perform employee can't or won't retire.

- Defined Benefit creates a stable and sound work process.

Q - Lower the payment by employers by 1% on a permanent basis replaced by 1% increase from employees. This would create $100 Million annually for all public sectors.
- This is in fact a surtax on employees in a non-tax atmosphere.

Q - Legislative-pension dollars formula includes per diem payments.
- Session only
- No immediate dollar impact as the monies are taken from the general fund when a legislator retires.
- MSRS Manages the Plan

Q - Savings through a proposed salary freeze on public employees related to pension contribution by employers. Amount would be 5% of $10 Billion. ($6,000,000)x5.85%=$35,100,000

Q - Early Retirement Packages
- The Governor in early reports suggested the possibility of early retirement packages. This appears to have been dropped from the budget plans. It is not considered to be a viable process.
- Questionable actual dollar savings
- Generally the employee is going to leave anyway
- People leaving are the best trained and most reliable
- Become re-employed annuitants after retirement.

Q - Health Insurance for retirees up to age 65.
- The cost is not proportionate to employer benefits. Example: Roseville School District employee age 62 $7,000 in health insurance package with replacement receiving an actual higher dollar package.