Pensions law includes new plans, decreased employee contributions for some members, and other enhanced benefits

This year’s pension and retirement law contains myriad good news, especially for probation officers and 911 telecommunicators, retirees of the Public Employees Police and Fire Plan, members and retirees of the Local Government Correctional Service Retirement Plan, and members of the St. Paul Teachers’ Retirement Fund Association.

The law, enacted on May 19, 2026, consists of 17 bills and many amendments approved by the Legislative Commission on Pensions and Retirement during the 2026 legislative session.

Rep. Leon Lillie (DFL-North St. Paul) and Sen. Nick Frentz (DFL-North Mankato) sponsored the law that checks in at just under $15.37 million in new Fiscal Year 2027 spending and almost $25.4 million more in the 2028-29 biennium. This includes annual state aids to the Police and Fire Plan and St. Paul Teachers Plan, appropriations to several agencies, one-time payments to the two new pension plans, and an increase in the cost to the General Fund due to a change at the State Board of Investment in allocating expenses.

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The 2025 pensions law required the convening of a work group to create pension plans for probation officers and 911 telecommunicators. That has been realized with the creation of the Probation and Telecommunicator Retirement Subplan that’ll be administered by the Minnesota State Retirement System (MSRS) and the Local Government Probation and Telecommunicator Retirement Plan that’ll be administered by the Public Employees Retirement Association (PERA).

Per a commission summary of the 2026 law, “Employees who meet the definition of either “probation officer” or “public safety telecommunicator” are required to participate in the Subplan. Any eligible employee who is currently a member of the MSRS General Plan will be transferred to the Subplan on January 1, 2027, except employees who are age 60 or older with three years of service in the MSRS General Plan on January 1, 2027.” Members of the new MSRS Subplan will be eligible for a full retirement annuity at age 60 rather than age 66, paid for by increased employer and employee contributions.

The PERA Local Government Probation and Telecommunicator Retirement Plan will feature full retirement at age 60 and an increased benefit formula multiplier of 1.9%, up from the General Plan’s 1.7% multiplier, paid for by employee contributions increasing to 8.82% of pay, up from the PERA General Plan’s 6.5%. Probation officers and telecommunicators eligible for the Rule of 90 will stay in the PERA General Plan.

For both newly created plans, employee contributions rates are reduced for the first 20 months (through August 2028).

Per the summary, “For the MSRS Subplan, instead of paying the General Plan rate of 6% of pay plus 2.71% of pay, members will pay the General Plan rate of 6% of pay plus an additional 2% of pay through August 2028. Beginning in September 2028, the total employee contribution rate will increase from 8% of pay to 8.71% of pay….For the PERA Plan, instead of paying 8.82% of pay, members will pay 8% of pay through August 2028. Beginning in September 2028, the employee contribution rate will increase from 8% of pay to 8.82% of pay.”

The new pension plans take effect Jan. 1, 2027.

Another key point of the law is providing $8 million in direct state aid to the Public Employees Police and Fire Plan by Oct. 1, 2026, and each Oct. 1 thereafter to fund reducing a postretirement adjustment — or COLA — delay. This will reduce the waiting period for a retiree to receive a full COLA from 24 months to 12 months. The removal of the COLA delay is effective for COLAs beginning on or after Jan. 1, 2027.

Employees in the Local Government Correctional Service Retirement Plan will see their contribution rate decrease from 6.83% to 6% or pay, the employer contribution rate will decrease from 10.25% to 9% of pay, and the COLA maximum will increase from 2.5% to 3%. The contribution decreases are effective Jan. 1, 2027, and the increased COLA maximum is effective for COLAs beginning on or after Jan. 1, 2027.

The law also includes $3.4 million per fiscal year for lowering by 1% the employee contribution rate for members of the St. Paul Teachers’ Retirement Fund Association. This reduction means that members will contribute 8% of pay, which matches the contribution rate for members of the Teachers Retirement Association (TRA). The employee contribution decrease is effective July 1, 2026.

A pair of work groups are ordered to meet during the interim between the 2026 and 2027 legislative sessions and recommend potential legislation.

Among the charges for the Work Group on Vesting and Emergency Medical Providers in Firefighter Relief Associations and the Statewide Volunteer Firefighter Plan is to shorten the maximum permitted vesting requirement from 20 years to 10 years and require volunteer or paid on-call emergency medical providers to be included in fire relief associations and the Statewide Volunteer Firefighter Plan.

The Work Group on Duty Disability and the Public Safety Officer’s Benefit Account is to make recommendations for reforming the duty disability process for members of the PERA Police & Fire Plan and ensuring plan members who become duty disabled or retire before age 65 have access to affordable health insurance coverage until they are Medicare eligible.

In addition to numerous administrative and technical changes, other aspects of the law that took effect May 20, 2026, unless otherwise noted, include:

• effective July 1, 2026, allowing two deputy state fire marshals who missed making the election for special coverage to make the election and pay the missed employee contributions plus interest—the employer must then pay the missed employer contributions plus interest;

• reducing from 62 to 59 1/2 the age at which a teacher covered by TRA can enter into a return-to-work agreement before the effective date of retirement and still commence receipt of a retirement annuity from TRA;

• upon various effective dates in 2026 and 2027, requiring the employer of a reemployed annuitant (i.e., retirees who receive a government pension but return to public-sector work) to make employer contributions to the applicable pension plan administered by MSRS, PERA, or TRA—employers were previously exempt from making these contributions;

• providing changes associated with the Maple Plain Fire Department terminating its participation in the Statewide Volunteer Firefighter Plan;

• for the Minnesota Secure Choice Retirement Program, eliminating the requirement that employers provide information to employees about the Program and the related penalty and making administrative and operational changes to the statutes governing the Program, which opened for enrollment in January 2026;

• allowing elected officials to participate in the Health Care Savings Plan administered by MSRS by allowing contributions to be defined in a participation plan or resolution of a governing body;

• requiring Minnesota State to locate a specific eligible person's missing IRAP account or pay the eligible person $30,000; and

• upon local approval, requiring the City of Minneapolis to purchase credit for periods of missed service for a former employee.

HF4074*/SF4276/CH106

HF4074* / SF4276 / CH106