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Spring 2008 Newsletter Index

TRIB Newsletter Masthead Spring 2008

Legislators tackle major pension issues

Bridge collapse relief funding, transportation funding bills and a budget shortfall of $935 million. Since the legislative session began on February 12, Governor Pawlenty and legislators have debated many important issues. As of March 24, the Legislative Commission on Pensions and Retirement (LCPR) has met once. Additional meetings are expected. The bills of most interest to TRA members include:

SF 2969 / HF 3421 — Post Fund restructuring. As discussed in previous issues of the TRIB and on our web site, a joint committee of the three retirement systems (MSRS, PERA and TRA) have proposed legislation that calls for a merger of the Minnesota Post Retirement Investment Fund (Post Fund) with the respective active member funds should the Post Fund funding ratio fall below 80 percent for one year or 85 percent for two consecutive years.

SF 3531 / HF 3415 — A provision of this bill proposes to raise the annual Earnings Limitation for all retirees who return to work to $46,000, rather than using the amount set each year by the Social Security Administration. The bill also proposes a phased retirement program for TRA employers and teachers who retire after age 62. The program gives more flexibility to employers when rehiring TRA annuitants after retirement.

SF 2997 / HF 3926 — Extending the Rule of 90 benefit provision to post-1989 hires. Members hired on or after July 1, 1989 would be eligible for the various early retirement provisions that are currently only available to members hired before July 1, 1989:

  • First eligible to retire at any age with 30 years of service credit

  • Unreduced TRA benefits at age 65, instead of age 66

  • Unreduced TRA benefits when a member’s age + service years equals or exceeds 90

  • Lower early retirement reduction factor

Updates will be posted on the TRA web site (www.minnesotatra.org/Legislative/2008BillTracking.htm) as they occur. Also, an overview of final legislation will be included in the summer issue of the TRIB.

One-half million calls!

On February 14, 2008 at 3:45 pm., TRA reached a milestone and took the 500,000 call from a TRA member since the establishment of our full-time call center.

We’ve come a long way since 1981 when TRA established our toll-free telephone number. At that time, calls were answered by the state operator. The operator would then transfer the call to the TRA receptionist, who would once again transfer it to the appropriate staff person. By 1993, TRA implemented an automated telephone reception service and members could choose from one of five options provided in an automated menu.

In 1996, the Telephone Information Center (TIC) was created and staffed by employees who rotated between their daily duties and answering member calls. One year later, TRA made the decision to staff the phone center with permanent, full-time employees who would be able to devote all of their attention to member questions.

Today, the Customer Service Information Center is staffed by five Customer Service Representatives who are available to answer your questions from Monday through Friday, 7:30 am to 4:30 pm.

When calling TRA, here are a few tips:

  • The best times to call are between 7:30 am and 9:00 am, Tuesday through Friday. The busiest times are the first working day of each month, Mondays, over the lunch hour, and between 3:00 pm and 4:30 pm.

  • Be sure to have your TRA number or Social Security number handy when you call so staff can identify your member account.

  • Specific details about an account can only be provided to the member. Only general information can be provided to a member’s spouse or a financial planner.

Although TRA has experienced many changes over the years, one thing has remained the same: our dedication to providing excellent customer service to our members.

President's column logo and photo of Curtis Hutchens

Major legislation debate

With the 2008 legislative session nearly at the half-way point, the main bill of interest for retirees (SF 2969 / HF 3421) has not had a hearing before the Legislative Commission on Pensions and Retirement (LCPR). However, a hearing is expected in the near future. The bill proposes that the Minnesota Post Retirement Investment Fund (Post Fund) be merged with the respective active member funds if certain funding levels are reached. TRA Executive Director, Laurie Hacking, and staff have been meeting individually with legislators to explain the features of the bill and the interest level is strong and feedback positive.

If the legislation is adopted, TRA retiree assets and liabilities in the Post Fund will be merged with the TRA Active Fund if the Post Fund funding ratio drops to either 80 percent for one year, or less than 85 percent for two consecutive years. If a merger is triggered on June 30, 2008, the asset and liability transfer to TRA would occur on June 30, 2009. If investment markets turn positive and allow funding levels to remain above the merger trigger, the Post Fund will remain as a separate fund.

Since the fiscal year began on July 1, 2007, investment markets have struggled. The Post Fund began the fiscal year with a funding ratio of about 91 percent. With the weak January and February investment markets, we know the Post Fund funding ratio has deteriorated. We will not know the final June 30, 2008 funding ratio until November, but the possibility exists that the Post Fund ratio could fall below 80 percent, thus triggering the merger. An update will be provided in the summer issue of the TRIB.

If you have further questions, the TRA web site contains valuable information on the Post Fund proposal. You may also call our Customer Service Information Center for additional details.

Another retiree bill of interest is a proposed expansion of the salary amount TRA retirees returning to teach can earn after retirement.SF 3531 / HF 3415 proposes to raise the Earnings Limitation to $46,000 annually for retirees under age 65/66. The provision would improve the ability for schools to fill their critical staffing needs with the proven talent of TRA retirees.

In memory of Harvey Schmidt

The Board of Trustees and staff of TRA wish to offer their condolences to the family of Harvey W. Schmidt, who died on February 23. Mr. Schmidt served as Executive Director of TRA from 1965 to 1986 and is fondly remembered.

Mr. Schmidt planned and developed many TRA benefit features that enhanced the retirement security of Minnesota educators. These plan features include the high-five average salary, the Minnesota Post Retirement Fund, and the combined service annuity provision. During his career, the TRA plan transitioned from a defined contribution plan that produced uncertain benefit amounts into the defined benefit plan that provides promised benefits based on age, salary, and years of service. Harvey also worked tirelessly to secure the employer contributions necessary to fund promised benefits. In 1974, TRA was only about 50 percent funded. Today, the TRA Fund is approximately 87 percent funded.

Prior to becoming TRA Executive Director, Mr. Schmidt was Director of Research for the Minnesota Education Association from 1956-1965 and from 1949 to 1956, he taught mathematics as Roseau High School. He served as President of the National Council of Teachers Retirement during 1974-75 and President of the National Conference on Public Employees Retirement Systems from 1981 to 1984.

Harvey will be missed by many. He is survived by his wife, Floy, and sons Harvey Jr. “Bill” and Daniel.


Financial overview for fiscal year 2007

The following information is an excerpt from the TRA Comprehensive Annual Financial Report for 2007, which can be viewed in its entirety on our web site. The net assets available for TRA benefits as of the end of the fiscal year, June 30, 2007, were approximately $19.94 billion based on fair market value.

Operating revenues

The investment portfolios of both the TRA Active and Post Retirement Funds produced strong gains for the fiscal year. Total net investment income was $3.06 billion. Total employee and employer contributions were about $0.41 billion. Total net operating revenues for fiscal year 2007 were $3.47 billion.

Fiscal Year Ending June 30, 2007
(dollars in millions)
 
Post Fund
$1,018.8
 
Active Fund
$2,037.7
 
Employee Contributions
$199.9
 
Employer Contributions
$209.2
 
Other
$7.9
 
Total
$3,473.5
billion
     
2007 TRA Operating Revenues Bar Chart

Operating expenses

Benefit payments were $1.27 billion during fiscal year 2007. During the year, $12.1 million in refunds were paid to members leaving the teaching profession and choosing to withdraw their contributions plus interest. Total administrative expenses for the year were $10.6 million. The fair value of the TRA Fund increased by $2.17 billion during the year.

Fiscal Year Ending June 30, 2007
(dollars in millions)
2008 TRA Operating Expenses Pie Chart
Benefits Paid
$1,273.1
Refunds Paid
12.1
Administrative Expenses
10.6
Other
3.3
   Total
$1,299.1
Increase in Plan Net Assets
$2,174.4
   

Investment performance

Overall, the TRA Active Member Fund produced a very strong 18.5 percent investment return for fiscal year 2007. Over the last 10-year period, the fund has experienced an annualized return of 8.5 percent.

The Post Fund (retired members) portfolio produced a return of 18.2 percent for fiscal year 2007. On January 1, 2008, retirees received an inflation-based increase of 2.5 percent. Since the Post Fund assets are less than its liabilities, no investment-based component was paid.

All TRA assets are invested under the authority and policies of the Minnesota State Board of Investment (SBI). Capital markets were strong during fiscal year 2007. The U.S. stock market increased by 20.1 percent, as measured by the Russell 3000 index.

International stock markets displayed continued strength for the fourth consecutive year. The Morgan Stanley Capital International (MSCI) All Country World Index excluding the United States (ACWI ex U.S.) returned 29.6 percent for the fiscal year.

The U.S. Bond market, as measured by the Lehman Brothers Aggregate Bond Index, rose 6.1 percent during the fiscal year. Alternative assets such as real estate, private equity funds, and natural resource pools produced an investment return of 25.6 percent for the fiscal year.

Actuarial funding

Due to a methodology change authorized by legislative policy in the valuation of assets of the Post Retirement Fund, TRA’s funded ratio declined during the fiscal year despite the strong investment returns noted. As of June 30, 2007, Post Fund assets are valued at fair (market) value, rather than the offsetting liability amount. The June 30, 2007 funded ratio was 87.54 percent, a decline from the June 30, 2006 funded ratio of 92.05 percent. The decline was entirely attributable to the reporting methodology change.

On June 30, 2007, the actuarial value of TRA assets was $18.79 billion and the TRA actuarial liability (the amount needed to pay benefits) to both retired and active fund members was $21.47 billion. The resulting TRA unfunded liability is $2.68 billion. About half, or $1.32 billion of the unfunded liability is attributable to TRA’s share of the retiree deficit within the Post Retirement Fund.

TRA Regponds logo

TRA account information at your fingertips

We all have had that moment late at night when we remember that we should have made a phone call during the day to request information. When that happens, we either write ourselves a note, or unfortunately, the next day we have forgotten about it again.

If you have questions about your TRA account, you don’t need to wait to call, you can access a great wealth of information about your account from the TRA web site. All you need to do is choose “Member Login” from the TRA home page (www.minnesotatra.org). Now proceed to “New Member Registration” to set up your online account and password, if you haven’t done so already, or enter your User ID and Password and choose the Login button. The login portion of the TRA web site is available from 6:00 am to Midnight.

As a retiree, you may want to:

  • Print another copy of your 1099-R tax form

  • View a history of monthly payments

  • Change your direct deposit or tax withholding designation

  • View information about your earnings limitations savings account (ELSA)

  • Look up TRA’s address so you can mail information to us

  • Look up the phone number so you can call TRA during business hours (7:30 am - 4:30 pm)

  • Change your temporary or permanent address. You will be asked to specify a “start” and “end” date for all temporary addresses. Once the temporary address date expires, mailings will be sent to the permanent address listed. This option will be useful if you have more than one residence. Enter your temporary address once, then each year change the effective dates. Entering your temporary address will save TRA extra postage costs that we incur when mailings cannot be automatically forwarded to your temporary address.

If while viewing your online account, you still have questions, you may schedule an appointment for a one-on-one counseling session or note our telephone number so you can contact us during business hours.

Internet account access is available for TRA retirees, but not for members who are active and have had service with the Minneapolis School District. TRA is working to resolve the data compatibility issues that interfere with providing web site account access to all members.

 

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