1. Senate E-12 Finance March 19, 2018
Jay Stoffel, Executive Director
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2. TRA’s membership and mission
Serving teachers for over 100 years – five generations of teachers
TRA membership – 194,000 people
82,000 active teachers
65,000 retired public school educators, state college faculty
14,000 deferred, vested members
33,000 deferred, non-vested members
TRA assets and benefits
$21 billion in assets
$1.8 billion in annual payments benefit state economy, support 41,839 jobs, generate $6.3 billion in economic activity and $1.4 billion in tax revenue
TRA’s mission:
Retirement security for Minnesota teachers
Support state’s education system by attracting and retaining teachers

3. TRA Board Goals in 2018
Urgent need for a sustainability bill – must follow the guiding principles of the TRA Board
Obtain funding for any employer contribution rate increase
Approve 7.5% investment return assumption along with other economic assumption changes adopted by TRA Board
Pass provisions in the 2016 and 2017 administrative bills

4. Economic Assumption Changes
Approved by TRA Board December 2017, LCPR February 2017
Current Assumption
New Assumption
Long-Term Investment Return
8.5%
7.5%
Price Inflation
3.0%
2.5%
Wage Inflation
0.75%
0.35% next ten years
0.75% thereafter
Payroll Growth
3.5%
Total Salary Increase
Varies with
service
Adjusted by the changes
in wage inflation
The assumptions recommended above were developed by the actuaries to work together as a cohesive set. Because the return assumption is set in law, approval by the TRA Board and by the LCPR of assumptions 2-5 above are effective only if legislation is enacted to lower the investment return assumption to 7.5%.

5. TRA Financial Status July 1, 2017
Using 7.5% investment return assumption and other economic assumptions adopted by LCPR, February 2018
Actuarial accrued liability
$30.3 billion
Assets at market value
$21.3 billion
Unfunded liability
$9.1 billion
Funded ratio in 2017
70.1%
Projected funded ratio in 30 years
52%
Total required contribution, as % of pay
23.07%
Statutory employee + employer contributions
15.93%
Contribution deficiency, as % of pay
(7.14%)
Source: TRA actuary, Cavanaugh MacDonald, FY2017 Valuation Report

7. Investment return assumption = 7.5%
2018 session – SF2620 / HF3053
Investment return assumption = 7.5%
Proposal affecting TRA
Savings/
revenue
as % of pay
Liability Reduction
Impacts
a. COLA: 1.0% for 5 years ( ), then increase by
0.1% per year in each of next five years ( ) to 1.5%
2.80%
$1.682 B
Actives &
Retirees
b. COLA delay to age 66 (eff. 7/1/2024)
(exempt: Rule of 90, disability, survivors, age 62/30 years)
0.29%
$0.120 B
Actives
c. Early retirement – increase penalties, 5-year phase in
(fiscal years ), age 62/30 years exempt
0.25%
$0.118 B
d. Deferred augmentation – reduce to 0% (eff. 7/1/2019)
0.22%
$0.127 B
e. EE contribution increase:
+0.25% beginning in FY2024 (7.5% to 7.75%)
f. ER contribution increases:
+1.25% phased in over 6 years, FY19-24 (7.5% to 8.75%)
1.25%
Employers
g. Re-amortization over 30 years, (2039 to 2048)
1.10%
TOTAL
6.16%
$2.047 B

8. Fiscal impact on public/charter schools of pension bill – SF2620 / HF3053
ER rate change
FY19
FY20
FY21
FY22
FY23
FY24
0.21%
$9.8 m
$10.1 m
$10.35 m
$10.6 m
$10.88 m
$11.15 m
0.20%
1.25%
$20.2 m
$31.1 m
$42.4 m
$54.4 m
$66.9 m
* Covered payroll in FY2018 is $4.9 billion; assumes 2.5% annual payroll growth

10. June 30, 2017 & 30-year projection*
TRA Financial Status
June 30, 2017 & 30-year projection*
Current Status
June 30, 2017
June 30,
SF2620 / HF3053
Actuarial accrued liability
$30.3 billion
$28.3 billion
Assets at market value
$21.3 billion
Unfunded liability
$9.1 billion
$7.0 billion
Funded ratio in 2017
70.1%
75.2%
Projected funded ratio in 30 years
52%
92%
Total required contribution, as % of pay
23.07%
18.44%
Statutory employee + employer contributions
15.93%
17.43%
Contribution deficiency, as % of pay
(7.14%)
(1.01%)
* Using 7.5% investment return assumption and other economic assumptions adopted by LCPR, February 2018
Source: TRA actuary, Cavanaugh MacDonald

11. How MN contribution rates compare
Employee rates higher, employer rates much lower
Source: NASRA Public Fund Survey 2017 for Social Security covered plans
Relatively low cost. In Minnesota, government pension contributions are only 2.3% of total state and local government spending, compared to an average 4.6% in all other states. (NASRA/Census Bureau)

12. TRA contribution rate history
For most of TRA history employer rate higher than employee rate.
Employer rate
Employee rate