Shared by Jason Savage.
Had a friend ask me to give him some talking points regarding the need for tier II pension reform…
Tier II Pension Reform Talking Points
- Minnesota’s Full Benefit Retirement Age for Educators is over 7 Years behind the Industry Standard for Educators in the United States.
- The Industry Standard for Full Benefit Retirement Age in the US is just under 59 years of age (MN 66 years of age)
- We are not regionally competitive when compared with other states. Iowa & WI Educators retire about a decade sooner with full benefits, and North Dakota 6 years earlier.
- Tier I (Rule of 90) educators starting their career straight out of college could retire at 56 years of age. Tier II educators cannot retire with full benefits until 66 (Yes, a decade longer)
- The Mythical MN 1.9% per year Factor for retirement (you will not receive 1.9 unless you wait until 66 to retire). TRA says we have the 62/30 option, which comes with a minimum penalty of 14.5% for the rest of your life, effectively making your factor 1.59%. Yes, you work six years longer than a Tier I educator but receive a smaller factor per year!!!
- Tier I educators can return to work and still draw their retirement (I do not believe they are paying any TRA contributions) Tier I retirees can draw a 50,000 retirement and a full salary without TRA contributions. Tier II would have to wait until 62 (take a penalty) or 66. Do you think folks will return to work after 45 years in the classroom or well into their 60s??
- Minnesota Teachers deserve the Industry Standard (average) full benefit retirement age (or better) and a decent factor (not a 1.59 at 62 years of age).
- Minnesota Educators (Employee Contributions) required contributions are well above the national average
- Minnesota Employer (state) Contributions are well below the national average
- Actuaries estimate that an educator’s retirement benefit is worth 9.5% of their yearly salary (normal cost). An educator in MN has 7.75% removed from their paycheck to pay for their retirement plan, so only 1.75% annually is NOT paid for by the employee.
Minnesota Educators DESERVE and have paid for a better-than-average Full-Benefit Retirement AGE. When this is explained to MN Educators, they comment that it feels and looks like an employer-forced savings account with huge early withdrawal penalties. Mn Educators pay over 80% of their own pension but cannot access it until 66 without penalty.