Retired teachers seek more pension input
With the ranks of retired teachers swelling, retirees want more input into state pension decisions.
The Legislative Commission on Pensions and Retirement, meeting Wednesday in Bemidji, heard Sen. Mary Olson's bill to add an additional teacher retiree to the Minnesota Teachers Retirement Association which oversees $18 billion in pension funds.
The issue was one of a half-dozen state employee pension issues the panel discussed in its first-ever meeting outside the State Capitol.
The eight-member TRA Board of Trustees has three members appointed by state government, and four members to represent more than 76,000 active teachers and one member to represent more than 48,000 retired teachers receiving benefits.
"We feel there should be more representation" for retirees, Charles Hellie, president of the Retired Educators Association of Minnesota, testified to the panel.
"In 10 to 15 years, there will be one retiree for each active member."
Charles Hutchins, retired teacher and member of REAM and Education Minnesota Retired, presented a study he conducted showing that nearly 22,000 of the state's 77,700 teachers are age 50 or older.
"In the 1970s, one retiree represented 5,000 retired teachers, now it's one retiree for 50,000 retired teachers," Hutchins said. "We don't think asking for one more retiree would create a train wreck. The board has done an excellent job representing taxpayers ... but retirees consider the trustee their representative."
Both retired teacher organizations asked Olson, DFL-Bemidji, and Rep. Michael Nelson, DFL-Brooklyn Park, to carry the bill to add a retiree to the TRA Board, giving it two retiree representatives to four active member representatives.
Laurie Fiori Hacking, executive director of the TRA Board of Trustees, said the board is remaining neutral on the proposed legislation, and asked only if it is passed by the 2010 Legislature that elections for the additional retiree member be held in 2013, when retirees will vote on the current retiree spot.
Olson said another reason for the request is this year's merger of pension funds from the former Post Retirement Investment Fund into TRA, with TRA overseeing the combined fund. The Post Fund was a separate fund of retiree assets which offered annual post-retirement adjustments.
The steep investment losses of earlier this decade put the Post Fund into a deficit condition, so the 2008 Legislature abolished the fund, moving its assets and liabilities on June 30 to the TRA Fund, which until then managed just pension funds for active teachers.
"There is a substantial increase in the number of people in that age (retiree) group," Olson said of the two-fund merger. "We need to put a little bit more emphasis on retirees to reflect the increased numbers of that group."
Pensions panel Chairman Don Betzold, DFL-Fridley, said he was concerned that the move would create a precedence, that other state employee pension fund boards will make similar requests. He also worried about targeting another retiree member might cut across the mission of the TRA Board to represent all members of the fund.
"Would that skew the board and affect its decisions?" Betzold asked. "We need to be cautious. What if the retiree representatives seek a benefit increase and the state has no money?"
He pointed out that by state law, all TRA Board members have a fiduciary responsibility to the fund and all its members, to keep the fund solvent.
According to state law, a TRA Board trustee "shall act in good faith and shall exercise that degree of judgment and care, under the circumstances then prevailing, that persons of prudence, discretion, and intelligence would exercise in the management of their own affairs, not for speculation, considering the probable safety of the plan capital as well as the probable investment return to be derived from the assets."
Dave Bergstrom of the Minnesota State Retirement System -- which represents such state employees as judges, State Patrol troopers and correctional officials -- said his board next month will discuss adding an additional retiree as well as a deferred member to represent the 13,000 former state employees who are vested in the pension fund.
"The retiree group is going to be growing and growing," Hutchins said. "Adding one more representative would add a more equitable presence."
He agreed that all members have a fiduciary responsibility to the fund, but retirees want to know they have more equitable representation. "Retirees look at this a little differently."
"We want to make sure members represent their fiduciary responsibility of the whole fund and that they are not there lobbying for their interests," Betzold said.
The LCPR also talked about the treatment of public pension plan retirement benefits in marriage dissolution martial property division, about the definition of surviving spouse for plan benefits and about designating an interim study on options for the creation of a pension fund consolidation assistance fund.
The matter was laid over until month when the commission meets in St. Paul and more members attend. There were seven legislators who attended the Bemidji meeting of 10 on the panel.
Most of the 25 people attending the hearing at Bemidji City Hall were public retiree group representatives and union leaders. Very few Bemidjians attended.
Scott Vettleson, a retired teacher and mayor of Akeley, testified during the discussion on the division of pension benefits in marriage dissolutions, urging legislation to allow separation of benefits.
He said he and his former wife were both teachers, with his ex-wife retiring a year after he did but six months after the divorce. When married, Vettleson activated a joint and survivor clause which would have his pension continue to his wife when he dies.
The divorce decree ended that clause, but TRA refuses to recognize it, saying legislation is needed to change state law.
"When we divorced, it was like a death -- you get over it and move on," he said. "Now, every time I get my pension check, I revisit it again."
Concerns were also raised by Minneapolis Employees Retirement Fund over proposed legislation to consolidate MERF into the General Employee Retirement Plan of the Public Employees Retirement Association instead of providing state subsidies to MERF.
Olson said she stayed after the hearing to speak to several individuals who came with personal pension issues.
"I think it's interesting for people to come and hear a meeting like this because if nothing else, it brings home the seriousness of the deliberations that go into making decisions related to pensions," Olson said of the four-hour meeting.
"We hear from the people who are overseeing the various pension funds and they usually have lots of meetings and discussions about any particular issue before it even comes to us," she said. "We hear from our experts and we get these very long memos on any particular bill which is not the case with any other committee."
Information includes actuarial impacts and historical background as well as their perspectives and the positions of the different groups involved. Options and potential consequences are also scoped out.
"We do a pretty good job of not making reactionary decisions just based on the persuasiveness of any one particular case," Olson said.
Usually, pension bills are rolled into an omnibus pensions bill that the Legislature considers during its regular session.