09/15/2010 - A Minnesota court on Wednesday will consider whether the state can curtail pension benefits for current retirees from state jobs, in a case that could affect struggling public pension funds nationwide.
States have responded to budget shortfalls by raising the retirement age and cutting pension benefits for new hires. Minnesota last year replaced its previous pension formula, which increased retiree benefits annually based on investment gains and inflation, with a flat 2.5% increase. This May, the state lowered that increase for some retirees and eliminated it for others, until the pension plans are 90% funded, a level that could take decades to reach.
A February report from the Pew Center on the States estimated a trillion-dollar gap between the pension, health-care and other retirement benefits promised to public employees and the money set aside to pay for them. The nonprofit research group ranked Minnesota among 15 states that needed to shore up their pension systems but were not yet "serious concerns."
Read the article Case Tests Retirees' Pension Cuts on the Wall Street Journal Web site.