Minneapolis Discovers A Way To Boost Pensions Payouts And The Solvency Horizon

Mayor R.T. Rybak

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Here in Minneapolis, the geniuses in charge of their underfunded police and fireman’s pensions came up with this brilliant idea to merge their pensions into a different entity:

The deal would allow the city to slash its police and fire pension liability. That’s partly because it would switch them to the actuarial assumptions of the state fund, which assume higher investment returns and lower pension increases. It’s also because the deal would give the city 11 more years than it has under current law to fully fund the two plans’ deficits…

However, the deal would come with several costs for taxpayers. First, the city agreed not to oppose a firefighter bid for a last-minute boost in their pensions to bring them to parity with police. That would cost the city $7 million in future pension costs, figured in today’s dollars.

Moreover, the deal would substantially boost the checks for police and fire pensioners, all of whom were hired before mid-1980. The police pension would jump by 43 per cent to $64,000 in 2015, for example.

So, they actually increase their liability, but increase their assets via more optimistic return assumptions. That a bunch of adults find this solution attractive is rather disturbing.

This post was published at Falkenblog.