Upcoming PERA Defined Contribution Plan Changes and Election Deadlines

Cities should take note of these changes and determine how they could impact employees and elected officials.

Minnesota Public Employees Retirement Association (PERA) administers several retirement plans for city employees that are dictated by state statute. Most are defined benefits plans (DCP) where employees receive a monthly retirement benefit based on their contributions and years of service.

PERA eligibility, benefits, and contributions are defined by state statutes, and employees do not have an individual choice in participation. For cities, most full-time staff are in either the “coordinated” or “police and fire” defined benefit plans. 

However, some city employees have a choice of participating in a defined contribution plan. PERA’s DCP is voluntary for qualifying enrollees in certain positions including:

• Elected local governmental officials
• City managers/administrators
• Governmental volunteer ambulance service personnel
• Volunteer firefighters

Under a DCP, employees contribute a percentage of their gross salary based on their position and cities may also contribute based on plan provisions. Contributions are invested, and the employee receives a lump-sum payment at retirement. 

Changes to PERA DCP

PERA’s tax counsel recently reviewed PERA’s DCP and identified areas that need to be updated to ensure the plan meets federal Internal Revenue Service requirements. Cities should be aware of the following changes:

• Individuals who were hired, appointed, or took office before Feb. 1, 2024, and had an unlimited or revocable election period can make a final change to start or stop DCP participation. A final decision must be made by July 31, 2024, before the new law takes effect. Valid DCP members who want to remain enrolled do not need to take action.
• Qualified individuals who were hired, appointed, or took office between Feb. 1, 2024, and July 31, 2024, can make a one-time election during October 2024. This includes city managers who wish to revoke their participation in the coordinated plan.
• New hires, effective Aug. 1, 2024. All individuals newly hired or elected to a position eligible for DCP participation must make a one-time election within 30 days of hire. Individuals will no longer be able to make an election more than 30 days after hire. 

If you have questions about these changes, contact PERA’s Employer Response Line at (651) 296-3636. 

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