Background Page 1

Pre69 Background Information

In Minnesota the Teachers� Retirement Association (TRA) administers the pensions of all public school teachers except those who teach in Duluth, Minneapolis, and St. Paul.

In 1969 the State Legislative Commission on Pensions and Retirements made it a priority to build a better financial foundation for TRA. Members of the Commission developed a bill and the legislature passed it--the �Teachers Retirement Improvement Act of 1969.� This legislation created five retirement plan choices for teachers who were teaching or who were on an official leave in 1968-69.

Here is a summary of the five plans as created in 1969:

� Improved Money Plan (IMP). An improvement of the then-current plan. At retirement the total of the employee�s contribution, the school district�s matching contribution, and the interest earned is calculated. Then an additional 20% of that total is added in, and this amount is used to purchase a retirement annuity.
� Career Average Formula. In 1969 this pension was calculated using a formula dependent upon a member�s �career average salary� and the number of years of service. A member qualified for a full pension at age 65. In 1973 the Career Average Formula Program was changed; the teacher�s highest five successive yearly salaries were used in place of his �career average salary� to calculate the pension. This new program was called the �High 5 Formula Program�. A member qualified for a full pension when the member�s age plus years of service equals 90).
� 4/7 Improved Money Plan and 3/7 Variable Annuity Plan. The amount of the employee�s contribution is split in these proportions and the pension is calculated using the appropriate formulas.
� 4/7 Career Average Formula and 3/7 Variable Annuity Plan. The amount of the employee�s contribution is split in these proportions and the pension is calculated using the appropriate formulas.
� Total Variable Annuity Plan. The member�s contributions and the employer�s matching contributions accumulate in the employee�s account. Each year, based on the rate of return on investments in the stock and bond markets, real estate, and government notes (managed by the State Investment Board), investment returns are credited to the employees account. Upon retirement, an annuity would be purchased using the total amount in the account.