1. MESPA Institute 2017 Jay Stoffel, Deputy Executive Director
Jeff Altringer, Member Education Director
February 2 , 2017

2. What is TRA? TRA’s mission:
assist Minnesota education professionals in achieving future income security
support state’s education system by attracting and retaining teachers
Pension Fund Assets: $20 Billion
Annual Benefits Paid: $1.7 billion
Retirement
Beneficiary / Survivor
Disability
What is TRA?
TRA Membership:
Active members
80,500
Benefit recipients
63,500
Inactive members
45,500
Total
189,500

3. Defined Benefit and Defined Contribution
What’s the difference?
Comparison of
Defined Benefit and Defined Contribution
TRA
403b, 401k, 457, IRA
Benefit payout
Lifetime pension
Account value
Investment responsibility
(market & longevity risk)
TRA & State Board of Investment
Individual
Survivor & disability coverage
Monthly benefit
Lump sum
Portability
Minnesota
public employers
Rollovers
Predictable
Yes No

4. Where does TRA fit in my retirement finances?

5. 7.5% of your paycheck = Lifetime Pension!
You have a pension!
7.5% of your paycheck =
Lifetime Pension!

6. During your career…

7. Marriage Children Divorce Disability Retirement Death
Keep TRA in mind when life happens!
Marriage
Children
Divorce
Disability
Retirement
Death

8. MN Public Pension Coverage
TRA:
Education professionals in Minnesota
Public & charter school teacher
MnSCU college faculty
Public school administrator
Social worker, nurse, therapist, etc.
PERA, MSRS:
Minnesota government employment
(city, county, state)
Combined Service Annuity

9. No longer teaching in Minnesota?
Options if you leave Minnesota TRA
Leave money in TRA (defer benefit)
Take a refund/rollover (caution!)
Private schools and other states have their own teacher retirement plans – check with your new employer

10. Leaves of
Absence
If you are going on a leave of absence, check with TRA!
TRA pension may increase with purchase of qualified leaves of absence
(Medical, parental, family, military, union, sabbatical, extended, part-time)

11. TRA pension benefit

12. Pension Milestones TRA Membership Date ‘pre-89’ hires Rule of 90
30 years of service
‘full’ retirement: 65
July 1, 1989
‘post-89’ hires
Age 62 & 30 years service
‘full’ retirement: 66

13. How are TRA benefits calculated?
Retirement benefit formula
Formula multiplier
Years of service
High-5 average salary
Benefit paid
Currently, 1.9% / year
Benefits reduced if you retire before age 65/66

14. Pension is % x $ If Ashley starts her pension at … Age 55 Age 62
Years of service credit 23 30 34
Hi-5 salary
$50,000
$55,000
$60,000
Percentage of Hi-5 salary
(result of age, service credit,
& formula multiplier)
20.1%
47.8%
64.6%
Annual benefit amount
~$10,100
~$26,300
~$38,800
*Based on a teacher who started after 2006 and retires after 2020.

15. Pension is % x $ If Ashley starts her pension at … Age 55 Age 62
Years of service credit 23 30 34
Hi-5 salary
$50,000
$55,000
$60,000
Percentage of Hi-5 salary
(result of age, service credit,
& formula multiplier)
20.1%
47.8%
64.6%
Annual benefit amount
~$10,100
~$26,300
~$38,800
*Based on a teacher who started after 2006 and retires after 2020.

16. Pension is % x $ If Ashley starts her pension at … Age 55 Age 62
Years of service credit 23 30 34
Hi-5 salary
$50,000
$55,000
$60,000
Percentage of Hi-5 salary
(result of age, service credit,
& formula multiplier)
20.1%
47.8%
64.6%
Annual benefit amount
~$10,100
~$26,300
~$38,800
*Based on a teacher who started after 2006 and retires after 2020.

17. High-5 average salary Highest five consecutive years of salary
TRA-eligible salary
Includes:
Does not include:
Gross compensation
Fringe benefits, severance payments, mileage/phone reimbursement, etc.
Salary
Coaching / Extracurricular
Mentoring
Department Chair / Lead Teacher
Summer School
Q Comp
Longevity
No TRA deductions taken
Not included in High-5 average annual salary

18. Service credit
In general, full-time employment earns service credit per school year
K-12: based on school district’s lowest annual base salary
MnSCU: based on percent of contract

19. You’re not going to teach forever…
When you start your TRA benefit:
Always a lifetime payment to the TRA member!
You choose your level of beneficiary coverage:
Limited beneficiary or lifetime survivor options
Acceleration option

20. Social Security SSA is also a lifetime benefit! First eligible age: 62
Full retirement age: between 66 – 67
Medicare insurance eligibility: 65
Go to ssa.gov for more info

21. Best of Both Worlds Monthly Income Avg TRA $2300 Avg SSA $1340
Dependability of lifetime payments from TRA and Social Security- plus any supplemental savings from 403b/457/IRA
Monthly Income
Avg TRA
$2300
Avg SSA
$1340
403b/457/IRA
$ ?
Encore career / part-time work

22. Communicating with TRA

23. www.MinnesotaTRA.org info@minnesotatra.org 800-657-3669
Communicating with TRA
live chat with a TRA counselor Facebook & Twitter TRIB newsletter

24. MyTRA Account
Update contact info
View reported salary & contributions
Calculate benefit estimates
View annual statements
Print beneficiary form
Schedule an appointment
Apply for pension benefit

25. TRA counseling services
Group presentations
School visits!
Webinars
Individual sessions

26. Action Items! NOW! Register for MyTRA account Update beneficiaries
Review annual statement
Before age 50: attend a ‘Paycheck of the Future’ presentation
Someday…
After age 50: attend a ‘Planning for Retirement’ presentation
Schedule an individual session within a few years of retirement

27. How much is a TRA pension worth?
On average, a TRA benefit recipient will receive a payout of between $680,000 and $750,000 over their lifetime
To fund a benefit similar to the average TRA retiree’s (about $2,300 a month), you would need approx.: $450,000 in a 401(k) account (assuming 4% investment return) $550,000 to purchase an annuity from insurance co.

28. Pension advocacy Be informed, engage other teachers about TRA:
Value of pension generating reliable lifetime retirement income
Cost-efficient retirement vehicle that pools market and longevity risk
Minnesota has been disciplined in funding its pensions, proactive in addressing problems, and requires employee/employer cost sharing
For the latest news, follow TRA on Facebook (MinnesotaTRA) & Twitter

29. Pensions help recruit and retain teachers
Teacher shortages have increased – studies show pensions help attract and retain experienced teachers
Recruitment: Among younger workers, 63% say offer of defined benefit (DB) pension important in accepting the job. (Towers Watson, 2012)
Retention: Three-fourths of new hires say DB pension provides compelling reason to stay on the job. (Towers Watson 2012)
Teacher pay gap partly filled by pensions study shows teacher salaries lag those of comparably educated by 17%. (Allegretto and Mishel, 2016)
Teacher effectiveness and productivity improve with experience. (National Bureau of Economic Research, 2006; Milanowski and Odden, 2007)
Teacher turnover costs high – recruitment, hiring, orientation, productivity loss. (Alliance for Excellent Education, and National Institute on Retirement Security, 2011)

30. Push to convert public DB to DC
Considering DC DC
enacted DC
enacted,
blocked
Source: National Association of State Retirement Administrators

31. TRA revenue sources: Investment returns provide most pension funding
TRA Comprehensive Annual Financial Report,
National public pension average: (Source: National Association of State Retirement Administrators, Oct. 2016)

32. State Board of Investment returns
PERIODS ENDING 6/30/16
State
Board of
Investment
MEDIAN PUBLIC FUND
1 year
-0.1%
0.5%
3 years
7.3%
6.4%
5 years
7.7%
10 years
6.5%
5.7%
20 years
7.5%
7.1%
25 years
8.6%
8.1%
Source: NASRA and Callan Associates

33. Recent actuarial analysis about the future
2015 Experience study findings:
Expect lower investment returns – reduce long-term assumption from 8.5% to 8%.
Retirees are living longer – on average an additional 2 years
TRA’s active-member population is 75 percent female
life expectancy is greater in the Midwest
Life expectancy is greater among those more highly educated
Projected TRA life expectancy increased dramatically:
Age 65 female: up from age 88.6 to 90.3
Age 65 male: up from age 86 to 87.7
TRA has 482 benefit recipients age 95+ and 87 are 100+
TRA’s oldest benefit recipient is 111
Average retirement age for TRA members is 62.4.
Benefits will be paid for an average of 27.5 years

34. TRA financial status – negative impact of experience study Assets at
Actuarial Value
7/1/15 valuation
(without experience study recommendations)
7/1/16 valuation
(with experience study recommendations)*
Actuarial Accrued Liability
$25.6 billion
$28.2 billion
Actuarial Value of Assets
$19.7 billion
$20.2 billion
Funded Ratio
77.1%
71.7%
Total Required Contributions as % of Pay
17.87%
21.37%
Employee plus Employer Contributions
15.97%
15.94%
Sufficiency / (Deficiency) as % of pay
(1.90%)
(5.43%)
* Incorporates all assumption changes recommended in experience study including longevity improvements, lower salary/payroll growth, and lower 8% investment assumption.

35. TRA Board’s financial goals + principles
TRA Board guiding principles
Shared commitment – all stakeholders - members, retirees, employers and state share in solution
Intergenerational equity – avoid creating or exacerbating imbalances among generations of members and retirees
Long-term financial stability – achieve full funding in 30 years in order to preserve DB pension for future generations
Maintain recruitment/retention value of TRA pension – experienced teachers benefit students and create high quality education system; need to avoid large cuts in basic pension that would reduce recruitment/retention value of pension

36. TRA 2017 legislative proposal
Actives
Reduce future COLA from 2% to 1.5%
Eliminate trigger for potential 2.5% COLA
Retirees
Reduce COLA from 2% to 1% for 5 years, 1.5% thereafter
COLA changes would reduce liabilities by $1.3 billion
Employers
Increase contribution rate from 7.5% to 9.5%, phased in (½% per year) over 4 years and offset by increased school aid
New Revenue: $22.5 million in FY18, $45 million in FY19 ($67.5 million in FY18-19 biennium);
$90 million per year once fully phased in (FY21).
37%
Without 2017 proposal, at 7.5%
Chart above assumes 8% investment return and implementation of all experience study recommendations.
If investment assumption is lowered to 7.5%, then funded ratio is projected to be 37% without enactment of the 2017 proposal and 70% with enactment of the 2017 proposal.

37. Other elements of TRA’s 2017 proposal
Extend amortization period to 30 years, to June 30, 2047
Require employer contributions on salaries of re-employed retirees
Investment assumption – thorough study needed
TRA board believes a thorough, data-driving study of all economic assumptions should be conducted before the investment assumption is changed. The next experience study, due in 2 years, will look at all inter- dependent economic assumptions (investment return, inflation, wage and payroll growth) in a comprehensive, holistic manner.
As an interim step, TRA board supports lowering the investment return assumption to 7.5% for temporary 3 to 5-year period with the long-term rate remaining at 8% until the study is completed.
Investment assumption is very long-term and used to project liabilities for 50 to 60 years into the future. It should not be overly influenced by short- term volatility nor frequently changed without careful study.

38. TRA contribution rate history
Employer rate
Employee rate
For most of TRA history the employer rate has been higher than the employee rate.

39. Employee contribution rates in MN higher, employer rates in MN lower
Source: NASRA FY2016 for Social Security-covered plans

40. Tradition of careful stewardship to ensure plan stability
Disciplined and proactive management. TRA continuously monitors and proposes adjustments to the fund as conditions warrant.
Proactive pension reforms. Board-proposed 2010 legislation was critical, cost savings: $1.75 billion (TRA).
Modest benefits. The average monthly pension for Minnesota teachers is $2,300.
Relatively low cost. In Minnesota, government pension contributions are only 2.1% of total state and local government spending, compared to an average 4.1% in all other states. (Census Bureau)
Contributions. TRA employees contribute a high percentage, 7.5%, compared to the national average of 6%. The average employer contribution in other states is 12.9% versus TRA’s employer contribution of 7.5%. (NASRA)