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Minnesota governor signs pension bill to lower assumed rates of return, COLAs

Gov. Mark Dayton

Four public pension plans in Minnesota will reduce their rate-of-return assumptions to 7.5% because of legislation signed by Gov. Mark Dayton.

The state's 2018 omnibus pension bill lowers the assumption from 8% for the $28.7 billion Minnesota Public Employees Retirement Association, $22 billion Minnesota State Retirement System and the $956 million St. Paul Teachers' Retirement Fund Association, all of St. Paul, according to the website of the Minnesota Legislative Commission on Pensions and Retirement.

The $20 billion Minnesota Teachers Retirement Association, St. Paul, will have its return assumption lowered from 8.5%.

Cost-of living increases, currently varied by plan, would be reduced to 1.5% after five years for the state plans. For the St. Paul teachers' plan, COLAs would be eliminated for two years and thereafter be set annually at 1%.

Employee contribution rates will increase by a range of 0.25% to 1% of pay, depending on the plan, by fiscal year 2020, while employer contribution increases will range from 0.75% to 2.5% of pay.

The changes will mean total savings of $6.1 billion over the next 30 years, according to the commission's website.

The Minnesota Senate approved the bill March 26; the state House of Representatives passed the legislation May 20. The bill was signed into law May 31.

The three state plans' assets are managed by the $93.5 billion Minnesota State Board of Investment, St. Paul; the St. Paul teachers plan oversees its own investments.