HF4658

Purpose

• The bill aims to reform certain aspects of retirement for teachers by changing how early retirement is treated, increasing employer contributions, and directing additional funding. It also amends specific Minnesota statutes related to pension adjustment revenue and how districts receive pension-related aid.

Main Provisions

• Early retirement and employer contributions

  • Modifies the factors used to reduce benefits (early retirement reduction factors) when an annuity starts before normal retirement age.
  • Increases employer contributions toward retirement.
  • Includes appropriations to fund the changes.

• Statutory amendments

  • Amends Minnesota Statutes 2025 Supplement sections:
  • 126C.10 subdivision 37 (pension adjustment revenue)
  • 354.44 subdivision 6
  • The change to 126C.10 subdivision 37 creates a detailed formula for pension adjustment revenue (Pension Adjustment Revenue) that districts receive for retirement funding.

• Pension adjustment revenue (Section 126C.10 Subd. 37)

  • The pension adjustment revenue for a school district is the sum of two parts: 1) The greater of zero or:
    • The difference between the district’s pension adjustment per adjusted pupil unit (APU) for FY 2014 and the state average pension adjustment per APU for FY 2014, times the district’s adjusted pupil units for the current fiscal year. 2) The product of:
    • Salaries paid to district employees who were members of the Teachers Retirement Association (TRA) or the St. Paul Teachers Retirement Fund Association (St. Paul TRA) in the prior fiscal year, multiplied by the district’s pension adjustment rate for the current fiscal year.

• Pension adjustment rates by district

  • Independent School District No. 625 (St. Paul):
  • 2.3% for FY 2023
  • 2.5% for FY 2024 and FY 2025
  • 3.25% for FY 2026 and later
  • All other districts:
  • 1.25% for FY 2025
  • 2.31% for FY 2026 and later

• Cap, prorate, and timing rules

  • FY 2025: State total pension adjustment revenue may not exceed the amount calculated for FY 2024; the commissioner must prorate the revenue to stay within the maximum.
  • FY 2026 and FY 2027: The state total pension adjustment revenue is not prorated.
  • FY 2028 and later: The state total pension adjustment revenue may not exceed the amount for FY 2027; the commissioner must prorate to stay within the maximum.

• Cooperative units

  • A cooperative unit (as defined in statute) qualifies for pension adjustment revenue as if it were a district.
  • The aid generated by a cooperative unit is to be paid to the cooperative unit.

Significant Changes to Existing Law

• Establishes a new, detailed formula for pension adjustment revenue calculations, tying district funding to both per-pupil adjustments from 2014 and district salaries of TRA/St. Paul TRA members.
• Sets district-specific pension adjustment rates that differ for St. Paul compared with other districts, and introduces a schedule of rate increases over time.
• Introduces caps and prorating rules for pension adjustment revenue in certain years (with specific treatment for 2025, 2026-27, and 2028+).
• Expands the mechanism to cooperative units, allowing them to receive pension adjustment revenue as if they were districts.

Practical Implications

• Districts’ funding for pension adjustments will be determined partly by a historical per-pupil adjustment comparison and partly by current-year TRA-related salaries, scaled by district-specific rate figures.
• Funding amounts may be capped or prorated in certain years, affecting how much revenue districts receive in those years.
• Cooperative units can access pension adjustment revenue, increasing their funding approach to retirement costs.

Notes

• The summary reflects the bill’s language about pension adjustment revenue, rates, caps, prorating, and cooperative units. Details on the exact behavior of early retirement reduction factors are referenced but not fully specified in the text provided.

Relevant Terms

• pension adjustment revenue
• pension adjustment rate
• Teachers Retirement Association (TRA)
• St. Paul Teachers Retirement Fund Association (St. Paul TRA)
• Independent School District No. 625 (St. Paul)
• adjusted pupil units (APU)
• per adjusted pupil unit
• FY (fiscal year)
• cooperative unit
• prorate
• Minnesota Statutes 2025 Supplement
• section 126C.10 subdivision 37
• section 354.44 subdivision 6
• 127A.50 subdivision 1 (historical adjustment reference)
• district salaries (TRA and St. Paul TRA members)
• aid generated by the district or cooperative unit