The $210 million Duluth (Minn.) Teachers' Retirement Fund Association could be merged into the $18 billion Minnesota Teachers Retirement Association, St. Paul, as a result of legislation signed last week by Minnesota Gov. Mark Dayton.
The merger is pending approval of the two pension funds' boards and Duluth Teachers plan participants. The Minnesota TRA is expected to approve the merger, according to a statement on its website. The Duluth Teachers' board approved the initial idea when it was proposed last year.
The $69 billion Minnesota State Board of Investment, St. Paul, which currently manages the assets of the state teachers pension fund, would manage the assets of the Duluth teachers pension fund.
As part of the merger, the state would pay the Minnesota TRA $14 million annually until the Duluth plan is fully funded, as recommended in a January report by the state's Legislative Commission on Pensions and Retirement. The Duluth plan had a 55% funded status as of June 30, according to TRA data.
The commission report was requested last year by the state legislators, asking the commission to look at combining the assets and administration of the Duluth plan as well as the $926 million St. Paul Teachers' Retirement Fund Association into the state teachers fund. It also asked the boards of the Duluth and St. Paul teachers pension funds to vote on whether they approved of a merger; the Duluth fund's board voted in favor while the St. Paul fund opposed such a move.
The Duluth board wanted the merger to reduce its liabilities. “To close the gap … we can't invest our way out of it,” J. Michael Stoffel, deputy executive director at TRA and former executive director of the Duluth plan, said in an interview last September. The St. Paul board said at the time the merger would be too costly.
However, St. Paul Teachers will get $7 million a year from the state beginning Oct. 1, 2015, to help improve its funded status, as part of the bill signed by Mr. Dayton. That pension fund was 64% funded as of June 30.