|AFSME Local 602 - MSU Moorhead|
How Public Employee Pensions Work in Minnesota
Having a pension available gave Kathy Schlangen the opportunity to retire on her terms. “My pension represents dignity and freedom,” she says.
In some ways, public employee pensions in Minnesota are similar to private-sector retirement plans. In key ways, however, they are very different.
Public-employee pensions are traditional, defined-benefit plans. That means retirees get a defined, monthly payment for as long as they live.
One big difference, however, is that public employees pay half their own pension contribution every paycheck. In the private sector, workers typically pay nothing – the entire pension contribution comes from the employer.
“A lot of people think the state gives us all our pension,” says MnDOT retiree Dennis Kohlgraf. “They only pitch in half.”
“When you talk to the public, they think it’s a giveaway,” says Con Johnson, another MnDOT retiree. “It’s not. It’s not given to us – it’s shared. I worked all my career and paid into it.”
The fact that public employees pay toward their pension is similar to how 401k plans and other defined-contribution retirement plans work. However, with a defined-contribution plan, there is no guaranteed benefit. There is no security. Retirees can live on it only as long as long as the money lasts. “When their money runs out, it’s gone,” Johnson says.
Public employees pay for their pension in other ways, too. “We gave up pay raises in negotiations over many years, or a portion of the pay raise, to go toward health insurance or retirement or things like that,” Johnson says.
Many workers also worked for far less pay than they could have made in the private sector. Kathy Schlangen was a legal secretary for three decades in the attorney general’s office. “For many years, friends told me ‘Go work for a law firm. Make some real money’.” Schlangen says she could have made “minimum, $20,000 more per year, guaranteed. But I chose a lower wage because of the pension, because of the security it gave me, for my future well-being.”
© American Federation of State, County and Municipal Employees, AFL-CIO. All rights reserved.
Photographs and illustrations, as well as text, cannot be used without permission from AFSCME.