In limbo

Legal battle continues over $1.5 million trust set up by directors of Minneapolis Teachers Retirement Fund Association

A court fight over a $1.5 million trust set up by board members of the Minneapolis teachers pension fund continued to wage on earlier this month.

So far, there has been no settlement reached in Hennepin County District Court.

Directors of the Minneapolis Teachers Retirement Association set up the trust in June - just days before the fund merged with the Minnesota Teachers' Retirement Association on June 30. As part of a deal approved by the Legislature this year, the merger will cost the state $18 million annually for 30 years.

Attorney General Mike Hatch and State Auditor Patricia Anderson have argued the fund is illegal. Attorney Tom Heffelfinger, a former U.S. attorney representing the Minneapolis trust fund, meanwhile, has maintained the trust fund is legal and was established in case of outstanding debts or lawsuits.

Anderson said subpoenaed documents show that the trust fund's directors took illegal steps to set up the fund.

&#8220The trust was set up to benefit the individuals of the board or to pay any liability,” she said. &#8220The law is pretty clear that it wasn't legal to set it up in the first place.”

Earlier this year, lawmakers criticized the creation of the trust fund in a hearing held by the House State Government Finance Committee on June 29.

Waiting for a legal resolution will require patience. So far, there's been no agreement on the &#8220validity of liquefying the trust,” said Luther Thompson, an official with the Minnesota Teachers' Retirement Association.

&#8220We're trying to get the court to revoke it, but nothing has changed yet,” he said, adding, &#8220It just takes time.”

Thompson said the merger of the Minneapolis and state pension funds has been the main priority. So far, the process has been smooth. Checks have been issued to about 4,000 retired Minneapolis teachers.

&#8220It went just fine. Checks went out to the retirees, and it's progressing. TRA has assumed responsibility for staff, contracts and debts,” he said.

The Minneapolis pension fund has transferred $783 million to the state pension fund. The Minneapolis teacher pension had been failing since the 1920s because of changing funding formulas and, later, the state's unfunded takeover of the fund. As a result, the declining fund has relied on active members' contributions to compensate for current retirees.

Anna Pratt can be reached at apratt@mnpubs.com and 436-4391.