Mpls: Pension Fund Bill Would Benefit Taxpayers

The City of Minneapolis claims that a bill that would merge closed Minneapolis police and fire fighter pension funds with a statewide fund would protect taxpayers from rising property taxes. But it appears some details of the proposed consolidation still need to be worked out.

Legislation aimed at consolidating two closed Minneapolis pension funds was introduced in the state Senate on Wednesday, the City of Minneapolis announced.

The bill would merge the Minneapolis Police Relief Association (MPRA) and the Minneapolis Fire Relief Association (MFRA) with the Public Employees Retirement Association (PERA)-which administers statewide plans for employees of local governments and school districts, as well as the Minneapolis Employees Retirement Fund.

Most municipal funds were merged with the state's PERA system in the 1970s, but the MPRA and the MFRA weren't, according to the city. The two funds were closed to new members in 1980, and city employees who would've otherwise been eligible to enroll in the two funds were instead enrolled in PERA.

According to the city, the two closed funds “retained an unusual administrative structure that allows beneficiaries of the funds to run the funds and calculate their own benefits.” The state auditor told the city in 2004 that the closed funds had overcharged the city's taxpayers, and the city took the funds to court.

Hennepin County District Court in 2009 ruled that the funds had overcharged taxpayers by roughly $76 million since 2000-and it froze all benefit levels, which allowed the city to cut property taxes for 2010 by $10 million, the city said. The funds were ordered to form a plan to recoup the overpayments, but they've ignored the order pending appeal.

The city claims that the proposed consolidation would “protect Minneapolis taxpayers from skyrocketing costs and recover taxpayer overpayments to the funds.” It attributes a recent boost in property taxes to its obligations to the funds.

According to the city, merging the closed funds into PERA-whose investments are managed by the state-would provide increased transparency and accountability. The merger would be subject to approval from each of the funds' boards and the city.

In a statement posted on the PERA's Web site, Executive Director Mary Vanek wrote that the statewide fund is “examining the legislation closely.” The bill calls for additional city contributions to PERA to meet any unfunded liabilities the two closed funds would bring to the PERA.

The bill-which is authored by Democratic Senator Scott Dibble and co-sponsored by Senator Larry Pogemiller-contains some blank fields, including the base salary for members of the police and fire funds on which pensions would be based. It doesn't specify employer contributions either. Neither Dibble nor Pogemiller were available on Thursday morning to comment on the bill.

A report by the Star Tribune indicates that the portions of the bill that are left blank reflect ongoing negotiations between the parties involved.