Pensions law especially benefits educators and public safety personnel

Teachers with decades of experience will be able to retire sooner with a lower early retirement reduction from the full retirement benefit they would have received at age 65.

That is a key provision in the omnibus pension and retirement law sponsored by Rep. Leon Lillie (DFL-North St. Paul) and Sen. Nick Frentz (DFL-North Mankato). The new benefit for teachers is effective June 30, 2025.

The law provides about $78 million in pension funding for firefighters, police officers, state patrol, and teachers in the 2026-27 biennium. About half is targeted to the Minnesota Teachers Retirement Association.

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For that pension plan, the law reduces the age at which a member becomes eligible for the enhanced early retirement reduction from 62 to 60 and lowers the associated benefit reduction percentage from 6% to 5% (which is further reduced by the 2.5% or 3% augmentation under current law).

Per a summary from the Legislative Commission on Pensions and Retirement, “This change means that if a member has reached age 60 (instead of 62) with 30 years of service, the member’s retirement benefit is reduced by approximately 2-2.5%.”

Teachers hired before July 1, 1989, have a career “Rule of 90,” meaning they can retire with full pension benefits if their age plus years of service adds up to 90. Educators hired after that date who elect early retirement (before age 65) have their pension reduced for each year that the start of the pension precedes age 65.

The law will also increase employer contributions to the Teachers Retirement Association from 9.5% to 9.81% for each coordinated member and from 13.5% to 13.81% for members who do not receive Social Security based on their teaching service. An appropriation to school districts and other employers in TRA funds the increase. This is effective June 30, 2025.

For public safety personnel who are members of the Public Employees Retirement Association (PERA) Police and Fire Plan, the law reduces the delay in receiving the first cost-of-living adjustment from three years to two. It also provides a one-time, compounded 3% cost-of-living increase in calendar year 2026, which thereafter reverts to the 1% COLA under current law. These changes come with a $17.7 million cost in each fiscal year.

At a cost of $2.3 million per fiscal year, every state patrol retiree will get a 1.25% annual cost of living increase — up from 1%.

Other parts of the law include:

• for peace officers and firefighters who are members of the Police and Fire Plan and who leave active service due to a duty disability, the period of time that that employers must continue health insurance coverage is capped at 60 months, and once a duty disability determination is made, cities and counties are prohibited from challenging the continuation and payment of health coverage;

• increasing the multiplier used to calculate the retirement annuity for members of the Minnesota State Retirement System (MSRS) General State Employees Retirement Plan from1.7% to 1.9% for years of service earned after June 30, 2025;

• effective for cost-of-living adjustments on or after Jan. 1, 2026, increasing the cost-of-living adjustment from 1.5% to 1.75% for the MSRS General Plan, Legislators Plan and Unclassified Employees Retirement Program;

• effective for cost-of-living adjustments on or after Jan. 1, 2026, increasing the maximum cost-of-living adjustment for the PERA General Plan so it is 1% annually unless the Social Security cost-of-living adjustment is greater than 1%, in which case the COLA matches the Social Security adjustment, not to exceed 1.75%;

• upping the cap on employer matching contributions to the Minnesota State higher education supplemental retirement plan from $2,700 to $4,300 per year;

• implementing legislation recommended by the MSRS correctional plan eligibility work group, the amortization work group, and the state auditor’s fire relief association working group, which met during the interim;

• for defined benefit firefighter relief associations, increasing the maximum lump-sum pension amount for each year of service from $15,000 to $20,000 annually;

• adding penalties for noncompliance by employers required to participate in the Minnesota Secure Choice Retirement Program; and

• requiring a working group to be convened to recommend the features of new pension plans to be administered by MSRS and PERA for probation officers and 911 telecommunicators who are public employees. A report is due to the Legislature by Jan. 15, 2026.

HF1889/SF2884*/CH37

SF2884* / HF1889 / CH37