2025 Legislative Update

The Minnesota legislature approved the 2025 Pension and Retirement Bill, Senate File 2884, and Governor Walz signed the bill on May 23. The bill includes several changes to PERA plans.

Annual Increases

The 2025 Pension and Retirement Bill changes the annual increases of several PERA plans:

• Coordinated, Basic, and MERF benefit recipients: Previously, retirees and recipients would receive 50% of the consumer price index (CPI) that Social Security Administration uses, with a minimum of a 1% annual increase and a maximum of 1.5%. The bill has increased the amount from 50% to 100% of the CPI and increased the maximum annual increase to 1.75% (the minimum remains at 1%).
• Police & Fire benefit recipients: Previously, recipients wait 31–42 months to receive their first annual increase. The bill reduces the waiting period to 19–30 months. Recipients who started benefits on or before January 1, 2025 will receive a 3% increase in 2026. The annual increase will be 1% in 2027 and future years for eligible recipients.

New Working Group for Probation Officers and 911 Telecommunicators

The bill established a working group to consider a new retirement plan for public-safety-adjacent positions, such as probation officers and 911 telecommunicators. This working group must complete their recommendation by January 2026.

Privatization Withdrawal Liability 

Effective July 1, 2027, future privatizing entities will be assessed a withdrawal liability that covers the entity’s unfunded liability.

Amortization Methodology

The bill implemented better amortization methodology for all Minnesota public pension plans. This policy change makes pension costs more transparent and will improve intergenerational equity.

State Aid

The Police & Fire Plan will receive $17.7 million in direct State aid each year until July 1, 2048. The bill extends the direct State aid to the Police & Fire Plan until the plan is 110% funded for three consecutive years.

Other Administrative Changes

The bill makes several administrative changes, including:

• Membership Salary Threshold. The bill clarifies that defined benefit plan membership is mandatory from the date of hire for employees who are expected to earn more than $425 in a month. This means that all full-time and most part-time employees must be enrolled immediately.
• Correctional Duty Disability. The bill provides additional clarification for members who have more than 25 years of service. After June 30, 2025, members with more than 25 years of service will uses a 2.2% multiplier for additional service in the disability benefit calculation.
• Elected Public Officials. The bill amends language so that the 30-day period to elect optional coverage begins when an individual takes office, rather than the date they are elected.
• Membership Election. The bill clarifies the 30-day period for certain membership elections and the timeline to submit the applicable election form.

Reminder: Upcoming Changes to Correctional Plan

As part of the legislation passed during the 2024 session,  

• The Correctional Plan multiplier will increase from 1.9% to 2.2% for service credit earned on or after July 1, 2025. The multiplier for service earned before July 1, 2025 is 1.9%.
• Employer contributions for the Correctional Plan will increase 1.5%, from 8.75% to 10.25%.
• Employee contributions for the Correctional Plan will increase 1%, from 5.83% to 6.83%

The contribution rate increase only impacts active Correctional Plan employees contributing to the plan on or after July 1, 2025. The increase does not impact Correctional members who are already receiving benefits from the plan or members who terminated employment and deferred their benefit. 

Additional Communication

We will provide additional communication about these changes in our upcoming member and employer newsletters.