Police, Fire Pension Shortfall Would be Helped by Insurance Surcharge

Updated: 04/03/2013 12:52 PM KSTP.com By: Mark Albert

A new, $5 surcharge would be placed on automobile and homeowners insurance policies to help pull the state police and fire pension plans out of a deep shortfall, according to a bill that has shown support from House and Senate committees and lawmakers of both parties.

Under the proposal (HF857), the surcharge would contribute $23 million annually to the Public Employees Retirement Association's Police and Fire Plan.

The Senate version as amended in the Commerce committee (SF935) replaced the surcharge idea with a straight allocation from the general fund.

The PERA plan is projected to have a $64 million a year funding shortfall for the next quarter century - until 2038.

Another $66 million, according to PERA estimates, would be generated annually by cutting retiree benefits, increasing contributions, and raising the penalty for early retirement among other reforms, that passed the Legislative Commission on Pensions and Retirement Thursday evening.

"If they hadn't been willing to do most of the heavy lifting and literally come up with 80% of the solution on their own, I wouldn't be the author of this bill," declared Rep. Joe Atkins (DFL-Inver Grove Heights), the bill's chief author in the House.

The Insurance Federation of Minnesota opposes the bill for a host of reasons, including the added cost - insurance policy holders already pay a percentage of their premiums into the pension funds - and the pool of who would pay.

"Really, it's a very small number of people who are being asked to pay for this when it should be everybody," explained Insurance Federation spokesman Mark Kulda, who called the legislation "a very bad idea" and "bad public policy."

"What we're worried about... is that it won't be $5, it'll be $10, $20, $50. There's nothing stopping them from increasing the amount once they get the surcharge in place," Kulda warned.

The Federation is considering a statewide advertising campaign to oppose the bill, Kulda said.

Click here to learn more about the bill.