On Monday, Feb. 13, the Legislative Commission on Pensions and Retirement heard a bill authored by Senator Jordan Rasmusson (R-Fergus Falls) to protect the pensions of hardworking Minnesotans who carry out the essential work of state and local units of government.

This legislation, SF1377, would reduce the investment return assumption from 7.5% to 7% for major statewide public pension plans. Actuaries use the investment return assumption–sometimes called the interest rate assumption or rate of return assumption–to predict how much pension assets will grow through the investment of assets into the future.

“Our state pension system’s professional advisors are telling us that our 7.5% assumed rate of return is too high,” Rasmusson said. “While reducing the rate of return by 0.5% might not seem like a big deal, this change will re-calculate Minnesota’s pension liabilities by about $5.9 billion. If we don’t make this change, we risk underfunding pension plans and short-changing public employees on promises made to them. This legislation will also help protect taxpayers from unexcepted liabilities.” 

This legislation has broad bipartisan support, with all four pension boards and professional advisors recommending the lower assumed rate of return. It is also important to note that this legislation would not subtract from any benefits and only seeks to ensure an accurate assumed rate of return.

“In the past, Minnesota’s pension system has done unfair things, like having dramatically different benefits based on a single hire date. These types of unfair outcomes come from a mismatch of assets and liabilities. An accurate rate of return helps us match assets and liabilities in a fair way,” Rasmusson concluded.

SF1377 was the first major bill heard during the 2023 legislative session by the Legislative Commission on Pensions and Retirement. Rasmusson’s legislation will now be considered as part of a larger pensions package to be introduced later in session.