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Teacher pension fund gets low marks

REUTERS/Jim Young
Teachers deserve serious, unbiased information about their retirement funds. As adults, they can take that information and act on it.

The Teachers Retirement Association (or “TRA) is the pension fund administrator for most of Minnesota’s teacher pension funds. As such, you would expect it to be a very buttoned down, no-nonsense kind of place where teaching professionals would go for straightforward information and advice on their retirement savings. (Think about what your 401k website looks like.)

Kim Crockett
Kim Crockett

Instead, TRA fashions itself as more of a good friend — and an advocacy organization for the cause of getting and keeping defined benefit pensions for its members. The “Winter Newsletter” arrived this month with a column, “Debunking the ‘crisis narrative’ ” from President Martha Lee Zins. In the column, Zins calls out the Center of the American Experiment and others for “exploiting” the pension crisis in places like Detroit and Illinois, calling us relentless (thanks, we will take that as a compliment). She goes on to sing the same old soothing lullaby, full of myths and misstatements, that we have come to expect from TRA and the other players in Minnesota’s pension system.

The TRA website also sports an extraordinary piece of propaganda masquerading as a “Pension IQ Test.” This cutesy “test” is full of jokes and cartoons aimed at convincing the “test taker” that defined benefit pensions are good and 401ks and are bad — smiley faces and frowns all included. Pension critics are alarmist and evil, while the TRA and government pensions are good. You get the idea. If I were a teaching professional I would be insulted by its dumbed-down content and approach. Teachers deserve serious, unbiased information about their retirement funds. As adults, they can take that information and act on it. They do not need to be spoon fed propaganda and pablum from their state retirement fund. Teachers, the TRA is not your BFF!

We have spoken out about the pension crisis for many years, advocating for bold change in hopes that we can get the attention of both elected officials and regular folks — our school teachers especially. Whenever we talk about Detroit or Illinois, we are quick to say that Minnesota has always been more responsible than states like California. But that does not mean we do not have a problem that demands a tough solution. Clearly even the DFL in Minnesota recognizes that we have a problem; the pension commission, run by DFL leader Sandy Pappas has been preoccupied with studying the pension crisis and possible solutions for Minnesota.

This is all for the good but we have to collectively reach a point where the state’s leaders find the political will to face the problem and solve it. I recently spoke to a long-time observer and player on the Minnesota scene. He feels we will need to reach a severe crisis before we act because the public unions exert so much power over both parties.

I would argue that we have reached that crisis but it is silent because it is off the books. Dayton can claim he balanced the budget and even puzzle over what to do with an extra billion dollars! But here are the hard numbers which most experts agree understate the problem: In 2012, the state admitted that it was short by about $16.7 billion and it missed the required contribution by $360 million. In 2013, the state was short by $17.3 billion and missed the required contribution by $398 million despite record gains in the stock market (and an ever-increasing share of the investments in equity and high risk “alternative” investments). Some of the hit came from recognizing big losses in 2009 but the overall health of the funds is in doubt because the liability is only 75% funded. The TRA fund is only about 72% funded. That is not good enough.

You will hear more about this from me in the near future, but a new study out from the Rockefeller Institute at SUNY calls out the United States for having a “deeply flawed funding approach” that traps “pension administrators and government funders in potentially destructive myths and misunderstandings.” That is, we use the wrong measure to determine how much money we need to put away to cover the promises we have made. As a result, we have made promises that are not funded — and we cannot grow our way out of the problem. Something has to give. As the authors note, “the future arrives.”

Everyone who is paying attention agrees that we have a problem though we might differ on its scope and the solutions. We should all agree, however, that a website paid for and sponsored by the state of Minnesota and its school teachers should not be advocating and lobbying for its own bureaucracy. This is not good governance and does not serve the serious purpose of providing retirement services to Minnesota’s teachers.

Kim Crockett is the chief operating officer, EVP and general counsel of the Center of the American Experiment.

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Comments (5)

  1. Submitted by Michael Rothman on 01/29/2014 - 09:08 am.

    TRA

    Kim Crockett has a problem at 5:00 AM. She wants to take away my deferred wages i.e. defined benefit pension and hand over my retirement to the wolves of Wall St. (401K).No, TRA ain’t perfect but it’s better than playing the stock market. And don’t mess with Social Security either. Get some sleep Kim.

  2. Submitted by Kevin Slator on 01/29/2014 - 10:10 am.

    “A Web site paid for and sponsored by the state…”

    How does the State of Minnesota pay for the TRA’s Web site?

  3. Submitted by Steve Titterud on 01/29/2014 - 11:26 am.

    Like a good acolyte for ALEC, Ctr of A.E….

    …attacks Defined Benefits in favor of Defined Contributions.

    You may be certain this is NOT for the benefit of the workers. It is solely for the benefit of the employers.

    A couple interesting things in that Rockefeller Institute report Ms. Crocker highlights:

    1. Unlike Ms. Crocker or the Center for the American Experiment, the report makes positive suggestions for improving the function of the Defined Benefit plans, things like…

    …Suggestion #1: “Pension funds and governments should value liabilities and expenses, for financial reporting purposes, using a discount rate that reflects the riskiness of expected benefit payments. ” and so on.

    The report does not oppose Defined Benefit plans, it wants them improved. Its 5 main suggestions aim at improving the security and stability of public pension plans.

    2. The report suggests regulatory solutions:

    “The federal government should explore options for regulatory action by the Municipal Securities Rulemaking Board and the Securities and Exchange Commission, and Congressional oversight to enhance reporting and transparency.”

    In other words, WE NEED MORE REGULATION !!

    Who’d have thought the Center of the American Experiment would get on the regulation bandwagon ??

  4. Submitted by Tom Anderson on 01/29/2014 - 09:02 pm.

    Crocker! Now that’s funny!

    ” In 2012, the state admitted that it was short by about $16.7 billion and it missed the required contribution by $360 million. In 2013, the state was short by $17.3 billion and missed the required contribution by $398 million despite record gains in the stock market (and an ever-increasing share of the investments in equity and high risk “alternative” investments). Some of the hit came from recognizing big losses in 2009 but the overall health of the funds is in doubt because the liability is only 75% funded. The TRA fund is only about 72% funded.”

    That’s not so funny.

  5. Submitted by Dan Hintz on 01/29/2014 - 09:21 pm.

    Ugh

    “Teachers deserve serious, unbiased information about their retirement funds.”

    That they do, but they sure aren’t getting it from Kim Crockett.

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