Keeping the Promise: Minnesota Teacher Pensions Kim crockett, ESQ. Vice president & senior policy fellow

Pension Data and Assumptions (8. 5%/8 Pension Data and Assumptions (8.5%/8.0%) are from LCPR 2017 Valuation Reports (Not Omnibus) “There is a palpable sense of urgency among all stakeholders as they ready themselves for another assault on the complicated politics surrounding public pensions. Everyone agrees that something absolutely needs to be done this year. However that “something” is still rooted in ideas and strategies that expose taxpayers, pension beneficiaries, and future government services to unacceptable risks.” Mark Haveman Minnesota Center for Fiscal Excellence

Conclusion: Even Fully Funded Defined Benefit Plans? Too many teachers left insecure; their contributions used for another’s benefit.

DB Backloading: Josh McGee LCPR January 28, 2014 Benefits are backloaded, meaning that workers accrue most of their retirement benefit in their last few years of work. Backloaded benefits can leave employees on a retirement- insecure savings path through much of their careers. The benefit structure also creates strong financial and psychological incentives in the years around retirement eligibility thresholds. Benefits disproportionately reward those who enter the workforce later and who move into highly paid jobs.

Recommendations KEEPING THE PENSION PROMISE: an ethical imperative Calculate Unfunded Liability (UL) using realistic assumptions Close the DB plans to new entrants Consider further sustainability reforms to DB plans Plan for long-term debt repayment Move new employees into DC Plan like MnSCU DC plans do not have Unfunded Liabilities De-politicize Employee Retirement Consider changes to pension board governance Move UL to the state budget (see bond rating) Enforcement mechanism? Recommendations KEEPING THE PENSION PROMISE: an ethical imperative

Keeping the Promise: Minnesota Teacher Pensions Kim crockett, ESQ. Vice president & senior policy fellow