The state should disclose all financial and other data necessary for policymakers, school districts and the general public to have a clear and accurate depiction of the current standing and future health of the system. State teacher retirement systems als
Teachers, policymakers and taxpayers deserve accurate and reliable information about the costs and benefits of the public pension systems they support.
Just as teachers can easily obtain their salary schedules, they should have access to information about pensions so that they can make informed decisions about their career and retirement futures. While Minnesota provides teachers with an annual benefits statement, the report includes very limited information about the value of pension benefits. Minnesota does not provide teachers with information on how their benefits accrue for each year of service, the amount contributed each year by teachers and employers on behalf of teachers, or the projected value of a teacher's contributions based on different assumptions about the rate of return expected (e.g. 4%, 6%, and 8%). While the state reports the monthly benefit amount for a couple key points in the teacher's career related to retirement eligibility, it would be better if it also reported the value of the stream of benefits that might accrue over one's expected lifetime for all or most points in the future for a teacher's career. Minnesota also does not provide teachers with transparent information about the opportunity cost of leaving contributions in the system by reporting how much might be earned if teachers were to put contributions into a personal retirement savings account.
Teachers in Minnesota enroll in a final-salary DB plan, which means that employee and employer contributions should be sufficient to pre-fund the employee's pension. As Minnesota has a multi-tier pension system, contributions that exceed the normal cost may be used to fund other teachers' benefits (so-called legacy costs). Minnesota, however, does not provide teachers with clear information about how their contributions are being used, including the extent to which current employer contributions are being used to subsidize the retirement benefits of teachers under other tiers as well as how benefits are distributed across teachers of different cohorts and teachers with different career lengths.
Public disclosures on teacher pensions in Minnesota also lack transparency. Minnesota reports projections for future contributions required to fully amortize the system's total unfunded liabilities, and it also report these projections under a range of assumptions about the rate of return on investments, not just under the system's own assumption. This allows stakeholders in Minnesota to appropriately assign risk to the system's obligations and provide clarity about potential unfunded liabilities facing taxpayers.
The Government Accountability Standards Board (GASB) requires public retirement systems to disclose who makes employer contributions, and the proportion of total contributions for which each contributor is responsible. Although all states' pension systems collect this information, Minnesota does not make these data readily available.
Minnesota, like most states, reports the portion of total pension contributions that is normal cost and the proportion that is amortization cost. However, the state does not report information about whether it has taken on debt in order to pay for current or future retiree benefits (e.g. through pension obligation bonds or other instruments for raising capital). Even if the state has not taken on debt, it should disclose this information to the public as it is an important indicator of the state'
Minnesota Teachers Retirement Association, Actuarial Valuation Report for fiscal year ended June 30, 2015. Cavanaugh Macdonald Consulting, LLC, Projection of Future Actuarial Results, January 27, 2016.
Provide teachers with the information necessary to understand their retirement benefits.
Minnesota should provide much more detailed information to teachers about how their benefits accrue at different points during their careers, as well as information about the opportunity costs related to any contributions made into the system. Because the system has multiple tiers, the plan should also disclose to teachers how their contributions are being used (i.e. whether they all are directed at prefunding their own retirement, or whether a portion of their contributions are used to help pay for retirement benefits of other members). Moreover, Minnesota could provide detailed information about how employer contributions are used - e.g. to what extent the employer contributions for an individual teacher are used to subsidize teachers in different tiers and teachers with different tenure.
Report to policymakers and the public data that give a complete representation of the system's financial health.
GASB requires systems to disclose who makes the employer contributions, and Minnesota should make this report available on its web site. Finally, the state should disclose in its reports whether or not the system has taken debt service to pay for retirement benefits.
Minnesota was helpful in providing information that enhanced this analysis.