2023 Legislative Session Summary
On May 22, the 2023 Minnesota legislative session concluded. Three bills were enacted that directly impact TRA:
- HF2950/SF3016, the Pension and Retirement Omnibus Policy Bill (Policy Bill);
- HF3100/SF3162, the Pension Omnibus Budget Bill (Budget Bill); and
- HF1938/SF1811, the Tax Finance and Policy Bill (Tax Bill).
The Policy Bill
The Policy Bill makes small, administrative adjustments to TRA’s statutes. The most notable change extends the minimum period of time TRA members have to purchase service credit for military leaves of absence from one year to three years.
The Budget Bill
The Budget Bill provides a total of $176 million in direct funding to TRA. $31.1 million of that amount will fund a one-time, lump-sum payment for eligible benefit recipients in early 2024, which will be in addition to the 1.1 percent post-retirement adjustment that will be paid on January 1, 2024. Eligible benefit recipients with Coordinated benefits will receive a 1.4 percent lump-sum payment and those with Basic benefits will receive a 2.9 percent lump-sum payment. The remaining $145 million will help reduce the fund’s unfunded liability.
The Budget Bill also lowers the investment return assumption from 7.5 percent to 7 percent. This change also lowers the interest rate used to calculate certain payments, such as refund repayments and service credit purchases, from 7.5 percent to 7 percent.
The Tax Bill
The governor signed the Tax Bill into law on May 24, 2023, which makes delayed changes to TRA’s normal retirement age (NRA), employer and employee contribution rates, and the pension adjustment revenue to school districts.
Effective July 1, 2025:
- The NRA for active and eligible deferred Tier II members (those hired after June 30, 1989) will be reduced from 66 to 65;
- The employer contribution rate will increase by 0.75 percent, for a total rate of 9.5 percent; and
- The employee contribution rate will increase by 0.25 percent, for a total rate of 8.0 percent.
You May be Wondering….
What is the normal retirement age?
The normal retirement age (NRA) is the age at which a TRA member can begin receiving an unreduced pension benefit. Tier I members, those hired before July 1, 1989, have an NRA of 65. Tier II members, those hired after June 30, 1989, currently have an NRA of 66. Members can retire as early as age 55. However, early retirement benefits are reduced to account for the additional payment years.
If I terminate employment before July 1, 2025, will I be eligible for the new normal retirement age of 65?
If you are a Tier II member who terminated TRA-covered employment on or before May 24, 2023, you must return to service and earn at least one-half year of service credit to be eligible for the 65 normal retirement age.
If you are a Tier II member who terminated service after May 24, 2023, you will qualify without additional service.
Please Note: Resuming employment in a TRA covered position, or any other public employment position, for even one day while deferring your retirement eliminates your eligibility for augmentation. If you are currently deferring your benefit payments and considering a return to public employment, contact TRA to discuss the potential impact on your retirement benefit.
What will my normal retirement age be if I retire before July 1, 2025?
Tier II members who retire before July 1, 2025 have a normal retirement age of 66.
Beginning July 1, 2025, the normal retirement age for all eligible TRA members will be 65. The law change will not apply retroactively to benefits started before July 1, 2025.
How will the normal retirement age change impact my pension contributions?
The Tax Bill increased both the employee and employer contribution rates to provide funding for lowering the normal retirement age. The employer contribution rate increases will be offset by appropriations, either directly to the employer or through the pension revenue adjustment.
TRA Contribution Rates
|Employee Rate||Employer Rate|
|Current Contribution rate||7.75%||8.75%|
|2023 Tax Bill – 65 Normal Retirement Age, effective July 1, 2025||+0.25%||+0.75%|
|Total of Scheduled Increases (as of July 1, 2025)||8.00%||9.50%|
TRA understands how important retirement planning is. We appreciate your patience as we implement these law changes and communicate with members. We will share specific details with impacted membership groups as we begin implementing these changes.
TRA’s 2023 Legislative Agenda
Throughout 2022, TRA Board members heard from many members concerned about inequities between Tier I and Tier II benefits. With these comments in mind, the board began developing its 2023 legislative agenda at the September board meeting.
At the recent January board meeting, the TRA Board approved TRA’s 2023 legislative agenda:
- Revise the statutory qualifications for hiring the Executive Director to ensure the most qualified applicant pool.
- Remove the investment return assumption from statute and move it the Legislative Commission on Pensions and Retirement’s (LCPR) Standards for Actuarial Work.
- Advocate for a comprehensive benefit reform package that includes:
- A one-time, compounded 2.5 percent post-retirement adjustment on January 1, 2024, funded by the State.
- Full, unreduced retirement benefits for members who are at least age 60 with at least 30 years of service, funded by the State or contribution increases.
- Any contribution increase must be split with employees paying 25 percent and employers paying 75 percent. The State must provide the necessary funding to employers for any increase in contribution rates.
- A decrease in the investment return assumption from 7.5 percent to 7 percent.
- An extension of the amortization period from June 30, 2048 to June 30, 2053.
To properly pay for the proposed benefit reform package and ensure TRA’s ongoing financial sustainability, the fund would need an additional $204 million each year for the next 30 years. Under the 25/75 contribution split, employee contributions would increase by 0.87 percent and employer contributions would increase by 2.6 percent. The State would need to provide $153 million each year for the employer increase.
TRA staff presented the proposal three times to the LCPR as well as to individual legislators over the course of several months.