Understanding Retirement Benefits
Across the country, there have been efforts to move public workers away from pensions and into 401(k)-style plans. That shift sounds small, but it changes everything.
It means:
• No guaranteed lifetime income
• More market risk on you
• The possibility of running out of money in retirement
• More fees paid to investment firms
Your pension is one of the strongest financial protections you have as a public employee. Here’s why.
1. What Is a Pension?
A pension is a defined benefit plan. That means:
• Your benefit is set in state law.
• You receive a guaranteed monthly payment for life.
• You can choose survivor options for your family.
• The pension system manages investments and risk.
Because pension benefits are written into statute, changes require legislative action. They are stable, predictable, and designed to provide lifetime income.
2. How Is That Different from a 401(k) or 403(b)?
401(k)s and 403(b)s are defined contribution plans:
• You contribute to your own individual account.
• Your retirement income depends on investment performance.
• The account can lose value in downturns.
• The account can run out.
These plans can be helpful as supplemental savings, but they do not provide guaranteed lifetime income like a pension.
3. Which Pension System Are You In?
Most Minnesota public employees are covered by one of these defined benefit systems:
• Public Employees Retirement Association (PERA) – For many city, county, and school employees (non-teachers).
• Minnesota State Retirement System (MSRS)– For state employees and others.
• South Dakota Retirement System (SDRS) – A defined benefit pension for qualifying public employees.
Contribution rates and benefit formulas in these systems are set by statute and cannot be negotiated locally.
4. What About Other Retirement Accounts?
These options can supplement your pension:
• 401(k) – Voluntary pre-tax retirement savings.
• 403(b) – Available to many school employees; similar to a 401(k)
• 457(b) – Available to many public employees. Contributions are pre-tax (or Roth, if offered). You can withdraw funds without early withdrawal penalties when you separate from service (unlike a 401(k) or 403(b) which typically penalize withdrawals before age 59.5)
• Traditional IRA – Individual pre-tax retirement savings.
• Roth IRA / Roth 401(k) – Post-tax contributions with tax-free withdrawals (if qualified).
They are savings tools, not guaranteed pensions.
5. Other Key Benefit Terms
• Premium – The monthly amount you pay for health insurance.
• Aggregate Value of Benefits – The total value of your insurance plan. In Minnesota, reductions trigger negotiation rights under state law.
• VEBA (Voluntary Employees’ Beneficiary Association) – A tax-exempt account for medical expenses that can roll over year to year.
• RFP (Request for Proposal) – Public employers must rebid insurance plans at least every five years under Minnesota law.
The Bottom Line
Your pension provides:
• Guaranteed lifetime income
• Protection from market swings
• Survivor options for your family
• Stability written into law
It is one of the most valuable benefits you have as a public employee and understanding it helps protect it.
AFSCME Council 65 is committed to protecting and strengthening defined benefit pensions. Retirement security earned through years of public service deserves to be protected. Read our full resolution about protecting and enhancing pensions here: