Pension Commission Reviews PERA COLA Increases

Lawmakers considered postretirement benefit increases to the Public Employees Retirement Association General Plan and Police & Fire Plan.

On April 1, the Legislative Commission on Pensions and Retirement reviewed two bills aimed at increasing the cost-of-living adjustment (COLA) for retirees on the Public Employees Retirement Association (PERA) General Plan and Police & Fire Plan.

PERA Police & Fire Plan COLA increase

HF 139/SF 1122, sponsored by Rep. Tim O’Driscoll (R-Sartell) and Sen. Nick Frentz (DFL-North Mankato), would adjust the current COLA structure for the Police & Fire Plan. This would allow for an increase of 1% to 2%, depending on the Social Security COLA increase, and reduce the waiting period from 36 months to 12 months.

Currently, retirees on the plan are eligible for a fixed 1% COLA after a 36-month waiting period. During the hearing, Doug Anderson, executive director of PERA, testified that the proposed change would cost approximately $44 million annually. He expressed PERA’s support for the bill, contingent on upon a new ongoing state appropriation to cover the cost.

Sen. Frentz noted that the bill would only be included in the upcoming pensions omnibus bill if the commission’s budget target includes funding to cover the annual increase.  

The bill was laid over for further consideration, pending budget decisions.

View the commission’s summary of HF 139/SF 1122 (pdf).

PERA General Plan COLA increase

HF 2821/SF 3192, also sponsored by Rep. O’Driscoll and Sen. Frentz, would update the COLA formula for members of the PERA General Plan.

Currently, the COLA for the PERA General Plan is 1%, unless the Social Security COLA is greater than 2%, in which case the COLA is 50% of the Social Security COLA, not to exceed 1.5%. Under the bill, the COLA for the PERA General Plan is 1% unless the Social Security COLA is greater than 1%, in which case the COLA is the same as the Social Security COLA, not to exceed 1.75%.

Current law also requires employers to contribute 7.5% of an employee’s salary until the plan is 100% funded (projected to occur in 2034), when the employer match will return to 6.5%. To ensure that the employer match does not extend beyond 2034, the legislation would reduce the requirement that the PERA General Plan be fully funded at 100% to 98%. This would keep the same projected date of 2034 for the plan to be fully funded, allowing for the employer contribution to return to 6.5%.

Anderson also testified in support of the bill, saying that changes would improve retiree benefits without impacting the employer contribution rates.

The commission approved the bill for inclusion in the pension omnibus bill.

View the commission’s summary of HF 2821/SF 3192 (pdf).

What’s next?

Because a pension omnibus bill is not subject to committee deadlines, the commission can pass a final bill any time before the May 19 session deadline. Once legislative leaders agree on a joint budget target for pensions, the commission will begin assembling its final omnibus bill package for consideration by the full Legislature.

Read more news articles.