To understand the problem with TRA, you must understand the History of Minnesota TRA. Please feel free to use any of the information below to develop your taking point as you compose your next email.
1989- TRA, the Legislature, and Gov. Perpich approve a new pension Bill that Splits TRA into two groups
Tier I (Current Educators) and Tier II (Future Educators). They give Tier I educators the Rule of 90 as a retirement option and do not include Tier II or future educators.
1997 – TRA Reaches 100% Funding Ratio, decades before the anticipated date.
1998-1999 The Problem starts with the same folks TRA, Legislature, and Gov. approving cutting the contribution rates to an ALL-Time Low. 10% combined
1998-2001 COLAS given to Retired TRA Members increased by over 40% in 4 years. (10 times the current Cola Rate)
2011 – Wisconsin institutes a “Claw Back “ Provision- This allows them to take back excessive Colas given to Retirees; They take the money back from those that got it. Demonstrating fiscal responsibility for the future of their fund and fiduciary responsibility to its stakeholders.
2010 – Minnesota decided to let the retirees keep the COLAS and drastically increased contributions for employees and employers for the future and drastically cut COLAS going into the future. Instead of making those that got the money pay it back, they decided to have current, and future employees pay for it thru contribution rate hikes, Penalties, longer working lives, and minuscule COLAs (1%).
- 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% is NOT paid for by the employee.
Minnesota currently has the 3rd worst Full-Benefit Retirement age (66) in the Nation. The two worse states are Illinois (67) 2011 & South Dakota (67) 2017, and they will not see pushback on their new retirement ages until the 2040s or later. Realistically Minnesota has the worst current age at 66 because folks in Illinois and South Dakota are still retiring in their 50s under their old plans.
If You graduate college at 22 years old and start working in education right away…
In Iowa, you would qualify for a full-benefit retirement @ 55/33 years of age
A Tier II MN Instructor would receive 35% of their Pension in the same situation
In Minnesota (Tier I- Rule of 90), You would qualify for full benefits @ 56/34 years of age
A Tier II MN Educator would receive 39% of their Pension in that same situation
In Wisconsin, You would qualify for your full pension @ 57/35 years of age
A Tier II MN Educator would receive 43% of their Full Pension in the same situation
In North Dakota, You would qualify for your full pension @ 60/38 years of age
A Tier II MN educator would receive 58% of their Full Pension in the same situation
At the Industry Standard (National Average), You would qualify for Benefits @ 59/37
A Tier II MN educator would receive 51% of their Full benefits in the same situation
Minnesota Tier II Educators have paid more in contributions than any group in TRA History yet will be required to work a decade longer than any other group to receive their FULL-Benefits.
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) and essentially 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??
- 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 Employee contributions are 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% is NOT paid for by the employee.