Glossary of Minnesota Public Pension Plan Terms


This list provides definitions relevant for Minnesota public pension plans and funds. The first section identifies the systems which administer Minnesota's larger pension plans. The second section lists terms relevant for a basic understanding of the types of plans, the financing, and the operation of these plans. This is followed by a section with more general terms that one would encounter in a study of these systems.

Minnesota Pension Systems

The following identifies the major pension systems.


Duluth Teachers Retirement Fund Association. DTRFA administers the pension plan and invests assets for Duluth public school teachers.


Individual Retirement Account Plan. IRAP is a defined contribution plan primarily covering many recently hired state university, community college, and technical college personnel.


Minneapolis Employees Retirement Fund. The MERF administers the pension plan and invests assets for Minneapolis employees hired before July 1, 1978. The plan includes some non-teaching employees of the Minneapolis School District as well as some employees of various Metropolitan Council agencies and entities.


Minnesota Post Retirement Investment Fund. The MPRIF is the joint post retirement adjustment mechanism and retiree asset investment fund for the various statewide pension plans, administered by the SBI. The mechanism provides post retirement increases based in part on increases in the federal Consumer Price Index (CPI) and in part on investment performance in excess of 8.5 percent.


Minnesota State Retirement System. MSRS administers the various pension plans that cover state employees. The MSRS General Plan covers most executive branch employees as well as employees of the State Historical Society, employees of the Metropolitan Council, and administrative and clerical employees of the University of Minnesota. The Unclassified Plan covers legislative staff employees and various unclassified employees in state service. The Legislators Plan and the Judges Plan cover legislators and judges, respectively, while the Elected State Officers Plan covers constitutional officers. The Correctional Plan covers various employees in state correctional institutions who have sufficient inmate contact. The State Patrol Plan covers peace officers employed by the State Patrol, the Bureau of Criminal Apprehension, the Department of Natural Resources Enforcement Division, and the Department of Public Safety Gambling Enforcement Division.


Minneapolis Teachers Retirement Fund Association. The MTRFA administers the pension plan and invests assets for Minneapolis public school teachers.


Public Employees Retirement Association. PERA administers various plans covering local, county, and school district non-teaching employees. The PERA General Plan covers non-public safety employees in these districts. The PERA Police and Fire Plan provides coverage for many police officers and paid firefighters throughout the state. The PERA Defined Contribution Plan provides coverage to certain local elected officials, certain local government physicians, and to certain basic and advanced emergency medical service personnel.


State Board of Investment. The SBI is the constitutionally established board composed of the Governor, Secretary of State, State Auditor, State Treasurer, and Attorney General and is charged with investing state assets, including the pension fund assets of TRA, MSRS, and PERA.


Saint Paul Teachers Retirement Fund Association. The StPTRFA administers the pension plan and invests assets for Saint Paul public school teachers.


Teachers Retirement Association. TRA provides coverage for public school teachers throughout the state, except for teachers in the first class cities, and for some teachers in community colleges, state universities, and technical colleges.

Essential Terms

a. Types of plans. Primary pension plans can be categorized into two broad types, as follows:

Defined Benefit Plans

Under a defined benefit plan, the eventual pension benefit is defined, or determinable, by formulas. These formulas indicate that the benefit an individual will receive at retirement is a portion of the high-five average salary. The high five average salary is generally the average salary in the highest five consecutive salary years. The portion of the high-five average salary that the individual will receive is determined by the benefit accrual rate (the percentage of the high-five the individual will receiver per year of service provided to the employer) times years of service. Most Minnesota public pension plans are defined benefit plans.

Defined Contribution Plans

No specific benefit is specified. Rather, the contributions that must be paid to the fund are specified, with the eventual pension benefit being a function of the overall magnitude of contributions, pre-retirement investment earnings, the age at retirement, and the expected mortality of the recipient. MSRS Unclassified and IRAP are examples of defined contribution plans.

b. Common funding terms. Considerable attention is given to the funding of defined benefit plans to ensure that sufficient assets are being contributed and invested to meet the eventual plan obligations. Terms commonly encountered in studying plan funding are:


Actuarial Accrued Liability

The pension plan liability recognized to date, as determined by the actuarial method used, or alternatively, that portion of the actuarial present value of pension benefits and expenses which are not provided for by future normal costs.

Actuarial Report

A study performed periodically (annually in Minnesota) by an actuary to examine whether the contributions made to a defined benefit plan are likely to be adequate, given the benefits offered, the mortality and other demographic factors of the membership, member terminations and turnover, and pension fund investment performance.

Actuarial Value of Assets

The value of assets used for actuarial valuation purposes, defined for most Minnesota public pension plans as the value of assets at cost plus one third of the difference between the cost value and the market value. Also referred to as "current assets."

Amortization Requirement

The contribution, expressed as a percentage of payroll, which must be made to pay off the unfunded actuarial accrued liability by the full funding date.

Contribution Deficiency

A comparison of required contributions to statutory contributions indicating that current contribution rates are not sufficient to cover expenses, normal cost, and make necessary payments to retire the unfunded actuarial accrued liability by the full funding date.

Contribution Sufficiency

A comparison of required contributions to statutory contributions indicating that current contribution rates are more than sufficient to cover expenses, normal cost, and make necessary payments to retire the unfunded actuarial accrued liability by the full funding date.

Full Funding Date

The target date established for fully amortizing the pension plan unfunded actuarial accrued liability, usually June 30, 2020 for Minnesota public pension plans.

Funding Ratio

Current assets expressed as a percentage of the actuarial accrued liability. A funding ratio of one hundred percent indicates current assets are equal to actuarial accrued liabilities. A funding ratio of less than one hundred percent indicates that the plan has unfunded actuarial accrued liabilities.

Normal Cost

The cost, or additional liability, incurred by covering employees for the current year's operations.

Required Contributions

The level of contributions, often expressed as a percentage of covered salary, determined by the actuary to be necessary to fully fund a pension plan by the full funding date.

Statutory Contributions

Contributions to be paid to a defined benefit plan, generally specified in statute in Minnesota.

Unfunded Actuarial Accrued Liability

Any amount of pension plan accrued liability in excess of the current assets (the actuarial value of assets) of the pension plan.

c. Plan and Member Definitions:

Active Member

Current public employees win pension benefit coverage by the plan.

Deferred Retirees

Employees who terminated service, who are eligible based on the length of their public service for pension benefits other than a refund, but who are not yet receiving benefits, usually because they have not reached the pension plan retirement age.

Pension Fund

The vehicle that receives contributions, and accumulates the assets due to these contributions and the investment income from investing the assets, for purposes of paying the benefits specified by the pension plan.

Pension Plan

The collection of provisions, generally found in state law or nonprofit corporation bylaw which specify: (1) membership eligibility requirements; (2) the contributions required by law from covered employees and employing units; and (3) the level, conditions, and nature of benefits payable at termination, retirement, death, or date of disability.


An former public employee and former active member who is currently receiving pension benefits.

General Terms

The following are some of the more general terms relevant to Minnesota plans which may be encountered.

Active Fund;
Active Employee Assets

The portion of TRA, PERA, or MSRS assets that has not been transferred to the Minnesota Post Retirement Investment Fund and that represents the assets accumulated on behalf of active plan participants. Sometimes referred to as the Basic Retirement Funds.

Asset Allocation

The investment practice of determining what portion of an investment fund ought to be invested in various types of investment securities (e.g. stocks, bonds, cash equivalents, etc.)

Balanced Portfolio

An asset allocation practice emphasizing the investment of significant portions of a fund in the two major asset classes (e.g. debt (bonds) and equity (stocks)).


A debt-related investment security, representing a loan of money in return for an enforceable promise by the debtor to repay the principal amount of the loan and interest on the unpaid principal balance at a stated percentage rate on or before a stated date.

Consumer Price Index

A calculation of the apparent rate of inflation as derived from the comparative costs over time for a group of goods and services which is computed and published by the Bureau of Labor Standards of the U.S. Department of Labor.

Debt Securities

An investment security that represents a loan from the investment fund to some other entity, frequently a corporation, in order to obtain the interest payments on the loan principal balance, rather than to obtain an ownership interest in the entity.

Dedicated Bond Portfolio

An investment strategy where corporate and governmental bonds with various maturity lengths are purchased to match an actuarially determined future stream of retirement annuity payments, including any expected post retirement increases.


Securities whose price is linked to, or derived from, other assets, such as stocks, bonds, currencies, or commodities.

Earnings Potential

The predictable pattern of likely future investment gain attributable to a particular investment security.


Investment securities that represent an ownership interest in the entity issuing the security, that are expected to produce income in the form of shared profits, typically referred to as dividends, and to produce appreciation in value, typically referred to as capital appreciation or capital gain.

Full Funding or
Fully Funded Reserves

A practice in the Minnesota Post Retirement Investment Fund (MPRIF) whereby the entire actuarial present value of a retiree's future pension through death, at a five percent post retirement interest rate, is transferred in cash from the active fund (Basic Fund) to the MPRIF.


The economic impact of increases in the prices of goods and services on the purchasing power of money.

Interest Assumption or Actuarial Interest Assumption

The interest rate used by the actuarial valuation process to discount the amount of future pension or benefit payments in determining its present value.

Investment Performance

The measurement of the net gain or loss produced by an investment portfolio. The measurement can be restricted to realized investment results only (yield) or inclusive of unrealized changes in market value (total rate of return) and can ignore the impact of cash flow (dollar weighted rate of return) or can attempt to correct for cash flow changes (time weighted rate of return.)

Investment Strategy

The plan of an investment fund for purchasing various types of investment securities, attempting to take advantage of the earnings potential of the various types of investment securities, to emphasize safety from risk through diversification, and to accommodate future liquidity and cash flow needs.

Minnesota Adjustable Fixed Benefit Fund

The predecessor to the current Minnesota Post Retirement Investment Fund, that was created in 1969, that functioned in some respects like a variable annuity program, but with a guaranteed benefit floor, and that emphasized stock investments.

Minnesota Post Retirement Investment Fund

The fund which receives the fully funded actuarial reserves for a new retiree’s pension benefit at the time of retirement from the Basic Fund, and which generates the funding for and pays post-retirement adjustments.

Mortality Gain or Loss

An actuarially calculated change in the required reserves in the Minnesota Post Retirement Investment Fund or the Basic Retirement Funds resulting from a greater number or a fewer number of deaths when compared to the mortality actuarial assumptions.

Participation in the Minnesota Post Retirement Investment Fund

The share of the total assets of the Minnesota Post Retirement Investment Fund (MPRIF) attributable to each statewide Minnesota public pension plan (TRA, PERA, or MSRS) based on the amount of fully funded MPRIF reserves attributable to retirees of the respective plan.


The collection of investment securities owned by a pension fund.

Post Fund

The Minnesota Post Retirement Investment Fund.

Post Retirement Increases or Adjustments

The practice of granting additional benefits for retired persons during the course of their retired lifetimes, generally intended to replace all or a portion of inflation.

Post Retirement Interest Actuarial Assumption

The established rate of expected future investment earnings on invested assets attributable to retirees during the period of their retirement for use in actuarial determination.

Pre Retirement Interest Actuarial Assumption

The established rate of expected future investment earnings on invested assets attributable to active members during their active working lifetime for use in actuarial determinations.

Realized Investment Income

The proceeds obtained from investment securities of the pension plan, derived from interest paid on bonds, dividends paid on stocks, and net realized gains or losses on the sale of investments.

Realized Gains or Losses

The positive or negative difference between the cost (purchase price) of an investment security and the sale price of that security.

Required Reserves

The actuarially determined present value of a stream of future benefit payments that is transferred from the active fund of a statewide Minnesota public pension plan to the Minnesota Post Retirement Investment Fund upon retirement.


The equity or ownership interest in a corporation, issued by the corporation in the form of shares, and traded on an exchange or otherwise.

Unrealized Gain or Loss

The positive or negative difference between the cost (purchase price) of an investment security and the current fair market value of that security, which would be obtainable in the event of sale, but without actually selling the security.


The tendency for the fair market value of investment securities, especially equity investments, to vary positively or negatively over a short period of time and within a considerable range.


The investment income obtained or obtainable from an investment security in the form of interest on bonds, dividends on equities, and any net realized gain upon security sale.