MN pension fund continues to face contribution deficiency

I previously wrote about the $7 billion elephant in the room plaguing Minnesota’s Teacher Retirement Association (TRA) pension fund. As of the plan’s latest valuation study, TRA says its funded ratio is at 79.9 percent, or put another way, only 80 cents on the dollar is available to pay already earned teacher benefits. Its unfunded liability is at $7.1 billion.

The valuation report also reveals that the fund continues to run a contribution deficiency — $81,430,000 for 2024. This means that actual contributions once again fail to meet the required contributions necessary to fully fund the pension plan.

As the chart below shows, it’s not a new problem. Contribution deficiencies affect the plan’s ability to cover the costs of new benefits, pay for all the benefits owed, and pay off unfunded liabilities. Unfunded liabilities lead to high pension costs. And if states continue to promise pensions they can’t afford, these costs and other benefits consume a higher and higher share of teacher compensation.

Billions of dollars in unfunded liabilities is a problem, but so is a system and mismanagement of said system that made the deficits possible and probable in the first place.

Actual Contributions Continually Fail to Make the Required Contributions Necessary to Fully Fund Teachers Retirement Association (TRA)