HF 3778

as introduced - 91st Legislature (2019 - 2020) Posted on 02/26/2020 02:40pm

A bill for an act
relating to retirement; volunteer firefighters relief associations; implementing the
recommendations of the state auditor's volunteer firefighter working group; revising
the time period for certifying service credit; requiring crediting investment earnings
on defined contribution accounts; changing the methodology for calculating benefit
liabilities; making other clarifying changes; amending Minnesota Statutes 2018,
sections 424A.003; 424A.03, as amended; 424A.092, subdivisions 1, 2; 424A.10,
subdivision 2; Minnesota Statutes 2019 Supplement, sections 424A.014, subdivision
1; 424A.016, subdivisions 4, 6.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2018, section 424A.003, is amended to read:

424A.003 CERTIFICATION OF SERVICE CREDIT.

(a) When a municipal fire department, a joint powers fire department, or an independent
nonprofit firefighting corporation is directly associated with the volunteer firefighters relief
association, the fire chief shall certify annually by March 31 the service credit for the
previous calendar year of each volunteer firefighter rendering active service with the fire
department.

(b) The certification shall be made to an officer of the relief association's board of trustees
and to the municipal clerk or clerk-treasurer of the largest municipality in population served
by the associated fire department.

(c) The fire chief shall notify each volunteer firefighter rendering active service with
the fire department of the amount of service credit rendered by the firefighter for the previous
calendar year. The service credit notification and a description of the process and deadlines
for the firefighter to challenge the fire chief's determination of service credit must be provided
to the firefighter deleted text begin 60 deleted text end new text begin at least 21 new text end days prior to its certification to the relief association and
municipality. If the service credit amount is challenged, the fire chief shall accept and
consider any additional pertinent information and shall make a final determination of service
credit.

(d) The service credit certification must be expressed as the number of completed months
of the previous year during which an active volunteer firefighter rendered at least the
minimum level of duties as specified and required by the fire department under the rules,
regulations, and policies applicable to the fire department. No more than one year of service
credit may be certified for a calendar year.

(e) If a volunteer firefighter who is a member of the relief association leaves active
firefighting service to render active military service that is required to be governed by the
federal Uniformed Services Employment and Reemployment Rights Act, as amended, the
firefighter must be certified as providing service credit for the period of the military service,
up to the applicable limit of the federal Uniformed Services Employment and Reemployment
Rights Act. If the volunteer firefighter does not return from the military service in compliance
with the federal Uniformed Services Employment and Reemployment Rights Act, the service
credits applicable to that military service credit period are forfeited and canceled at the end
of the calendar year in which the time limit set by federal law occurs.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2021.
new text end

Sec. 2.

Minnesota Statutes 2019 Supplement, section 424A.014, subdivision 1, is amended
to read:

Subdivision 1.

Financial report and audit.

(a) The board of the Bloomington Fire
Department Relief Association and each volunteer firefighters relief association with assets
of at least $500,000 or liabilities of at least $500,000 in the prior year or in any previous
year, according to the applicable actuarial valuation or according to the financial report if
no valuation is required, must prepare a financial report covering the special and general
funds of the relief association for the preceding fiscal year, file the financial report, and
submit financial statements.

(b) The financial report must contain financial statements and disclosures that present
the true financial condition of the relief association and the results of relief association
operations in conformity with generally accepted accounting principles and in compliance
with the regulatory, financing, and funding provisions of this chapter and any other applicable
laws. The financial report must be countersigned by:

(1) the municipal clerk or clerk-treasurer of the municipality in which the relief
association is located if the relief association is a firefighters' relief association that is directly
associated with a municipal fire department;

(2) the municipal clerk or clerk-treasurer of the largest municipality in population that
contracts with the independent nonprofit firefighting corporation if the volunteer firefighter
relief association is a subsidiary of an independent nonprofit firefighting corporation, and
by the secretary of the independent nonprofit firefighting corporation; or

(3) the chief financial official of the county in which the volunteer firefighter relief
association is located or primarily located if the relief association is associated with a fire
department that is not located in or associated with an organized municipality.

(c) The financial report must be retained in the office of the Bloomington Fire Department
Relief Association or the volunteer firefighter relief association for public inspection and
must be filed with the governing body of the government subdivision in which the associated
fire department is located after the close of the fiscal year. One copy of the financial report
must be furnished to the state auditor after the close of the fiscal year.

(d) Audited financial statements must be attested to by a certified public accountant or
by the state auditor and must be filed with the state auditor on or before June 30 after the
close of the fiscal year. Audits must be conducted in compliance with generally accepted
deleted text begin governmental deleted text end auditing standards and section 6.65 governing audit procedures. The state
auditor may accept this report in lieu of the report required in paragraph (c).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2019 Supplement, section 424A.016, subdivision 4, is amended
to read:

Subd. 4.

Individual accounts.

(a) An individual account must be established for each
firefighter who is a member of the relief association.

(b) To each individual active member account must be credited an equal share of:

(1) any amounts of fire state aid and police and firefighter retirement supplemental state
aid received by the relief association;

(2) any amounts of municipal contributions to the relief association raised from levies
on real estate or from other available municipal revenue sources exclusive of fire state aid;
and

(3) any amounts equal to the share of the assets of the special fund to the credit of:

(i) any former member who terminated active service with the fire department to which
the relief association is associated before meeting the minimum service requirement provided
for in subdivision 2, paragraph (b), and has not returned to active service with the fire
department for a period no shorter than five years; or

(ii) any retired member who retired before obtaining a full nonforfeitable interest in the
amounts credited to the individual member account under subdivision 2, paragraph (b), and
any applicable provision of the bylaws of the relief association.

new text begin (c) new text end In addition, any investment return on the assets of the special fund must be credited
in proportion to the share of the assets of the special fund to the credit of each individual
active member account new text begin and inactive member account, unless the inactive member is a
deferred member as defined in subdivision 6 new text end .

new text begin (d) new text end Administrative expenses of the relief association payable from the special fund may
be deducted from individual accounts in a manner specified in the bylaws of the relief
association.

deleted text begin (c) If the bylaws so permit and as the bylaws define, the relief association may credit
any investment return on the assets of the special fund to the accounts of inactive members.
deleted text end

deleted text begin (d) deleted text end new text begin (e) new text end Amounts to be credited to individual accounts must be allocated uniformly for
all years of active service and allocations must be made for all years of service, except for
caps on service credit if so provided in the bylaws of the relief association. Amounts forfeited
under paragraph (b), clause (3), before a resumption of active service and membership under
section 424A.01, subdivision 6, remain forfeited and may not be reinstated upon the
resumption of active service and membership. The allocation method may utilize monthly
proration for fractional years of service, as the bylaws or articles of incorporation of the
relief association so provide. The bylaws or articles of incorporation may define a "month,"
but the definition must require a calendar month to have at least 16 days of active service.
If the bylaws or articles of incorporation do not define a "month," a "month" is a completed
calendar month of active service measured from the member's date of entry to the same date
in the subsequent month.

deleted text begin (e) deleted text end new text begin (f) new text end At the time of retirement under subdivision 2 and any applicable provision of the
bylaws of the relief association, a retiring member is entitled to that portion of the assets of
the special fund to the credit of the member in the individual member account which is
nonforfeitable under subdivision 3 and any applicable provision of the bylaws of the relief
association based on the number of years of service to the credit of the retiring member.

deleted text begin (f) deleted text end new text begin (g) new text end Annually, the secretary of the relief association shall certify the individual account
allocations to the state auditor at the same time that the annual financial statement or financial
report and audit of the relief association, whichever applies, is due under section 424A.014.

Sec. 4.

Minnesota Statutes 2019 Supplement, section 424A.016, subdivision 6, is amended
to read:

Subd. 6.

Deferred service pensions.

(a) A new text begin "deferred member" means a new text end member of a
relief association deleted text begin is entitled to a deferred service pension if the member separates deleted text end new text begin who has
separated new text end from active service and membership and has completed the minimum service and
membership requirements in subdivision 2. The requirement that a member separate from
active service and membership is waived for persons who have discontinued their volunteer
firefighter duties and who are employed on a full-time basis under section 424A.015,
subdivision 1.

(b) deleted text begin The deleted text end new text begin A deferred member is entitled to receive a new text end deferred service pension deleted text begin is payable deleted text end
when the deleted text begin former deleted text end member reaches at least age 50, or at least the minimum age specified in
the bylaws governing the relief association if that age is greater than age 50, and deleted text begin when the
former member deleted text end makes a valid written application.

(c) A defined contribution relief association deleted text begin may, if its governing bylaws so provide, deleted text end
new text begin must new text end credit interest or additional investment performance on the deferred lump-sum service
pension during the period of deferral new text begin for all deferred members on or after January 1, 2021 new text end .
deleted text begin If provided for in the bylaws, the deleted text end Interest must be credited new text begin using one of the following
methods, as provided for in the bylaws new text end :

(1) at the investment performance rate actually earned on that portion of the assets if the
deferred benefit amount is invested by the relief association in a separate account established
and maintained by the relief association;

(2) at the investment performance rate actually earned on that portion of the assets if the
deferred benefit amount is invested in a separate investment vehicle held by the relief
association; or

(3) at the investment return on the assets of the special fund of the defined contribution
volunteer firefighters relief association in proportion to the share of the assets of the special
fund to the credit of each individual deferred member account through the accounting date
on which the investment return is recognized by and credited to the special fund.

(d) Unless the bylaws of a relief association that has elected to pay interest or additional
investment performance on deferred lump-sum service pensions under paragraph (c) specifies
a different interest or additional investment performance method, including the interest or
additional investment performance period starting date and ending date, the interest or
additional investment performance on a deferred service pension is creditable as follows:

(1) for a relief association that has elected to credit interest or additional investment
performance under paragraph (c), clause (1) or (3), beginning on the date that the member
separates from active service and membership and ending on the accounting date immediately
before the deferred member commences receipt of the deferred service pension; or

(2) for a relief association that has elected to credit interest or additional investment
performance under paragraph (c), clause (2), beginning on the date that the member separates
from active service and membership and ending on the date that the separate investment
vehicle is valued immediately before the date on which the deferred member commences
receipt of the deferred service pension.

new text begin (e) If the bylaws do not define a method for crediting interest or additional investment
performance, the interest or additional investment performance must be credited using the
method defined in paragraph (c), clause (3).
new text end

new text begin (f) Until December 31, 2020, a defined contribution relief association is permitted, if its
governing bylaws so provide, to credit interest or additional investment performance on the
deferred lump-sum service pension during the period of deferral using the method set forth
in the bylaws applicable on the date on which each deferred member separated from active
service.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 5.

Minnesota Statutes 2018, section 424A.03, as amended by Laws 2019, First Special
Session chapter 6, article 22, section 20, is amended to read:

424A.03 deleted text begin UNIFORMITY OF deleted text end VOLUNTEER FIREFIGHTER SERVICE PENSION
AND RETIREMENT BENEFITS new text begin BASED ON SERVICE new text end .

Subdivision 1.

deleted text begin Limitation on nonuniformity of deleted text end new text begin Service new text end pensions new text begin based on years of
service new text end .

deleted text begin Every partially salaried and partially volunteer firefighters deleted text end new text begin A new text end relief association must
provide service pensions new text begin or retirement benefits new text end to deleted text begin volunteer firefighter deleted text end new text begin its new text end members based
on the years of service of the members new text begin , new text end not on the compensation paid to the members for
deleted text begin firefighting services. Each relief association must provide service pensions to salaried
members as set forth in chapter 424 and applicable special laws deleted text end new text begin their service new text end .

Subd. 2.

deleted text begin Penalties deleted text end new text begin Penalty new text end for deleted text begin violations deleted text end new text begin violation new text end .

deleted text begin A municipality which has a fire
department associated with deleted text end new text begin If new text end a relief association deleted text begin which deleted text end violates deleted text begin the provisions of deleted text end subdivision
1 deleted text begin is directly associated or which contracts with an independent nonprofit firefighting
corporation associated with a relief association which violates the provisions of subdivision
1 is a subsidiary may deleted text end new text begin , the affiliated municipality or municipalities must new text end not be included in
the apportionment of fire state aid and police and firefighter retirement supplemental state
aid payable under chapter 477B and section 423A.022 and deleted text begin may not be included deleted text end in the
apportionment of fire state aid to the various municipalities under section 477B.03.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 6.

Minnesota Statutes 2018, section 424A.092, subdivision 1, is amended to read:

Subdivision 1.

Application.

This section shall apply to any firefighters relief association
specified in section 424A.091, subdivision 1, which pays a lump-sum service pension, but
which does not pay a monthly service pension, to a retiring firefighter when at least the
minimum requirements for entitlement to a service pension specified in section 424A.02 deleted text begin , deleted text end
or any applicable special legislation and the articles of incorporation or bylaws of the relief
association have been met. Each firefighters relief association to which this section applies
shall determine the accrued liability of the special fund of the relief association in accordance
with deleted text begin the accrued liability table set forth in subdivision deleted text end new text begin subdivisions new text end 2 and new text begin 2a, if applicable,
and new text end the financial requirements of the relief association and the minimum obligation of the
municipality in accordance with the procedure set forth in subdivision 3.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 7.

Minnesota Statutes 2018, section 424A.092, subdivision 2, is amended to read:

Subd. 2.

Determination of accrued liability.

(a) new text begin Beginning with the calculation
performed in 2021 for the 2022 calendar year new text end each firefighters relief association which pays
a new text begin lump-sum new text end service pension deleted text begin when a retiring firefighter meets the minimum requirements
for entitlement to a service pension specified in section 424A.02 and which in its articles
of incorporation or bylaws requires service credit for a period of service of at least 20 years
of active service for a totally nonforfeitable service pension deleted text end shall determine the accrued
liability of the special fund of the firefighters relief association relative to each active member
of the relief association, calculated new text begin using the applicable appendix to the standards for actuarial
work established by the Legislative Commission on Pensions and Retirement under section
3.85, subdivision 10.
new text end

new text begin (b) For calendar years before 2022, each firefighters relief association shall determine
the accrued liability of the special fund of the firefighters relief association relative to each
active member of the relief association, calculated new text end individually using the following table:

Cumulative Year	Accrued Liability
............	............
1	$	60
2		124
3		190
4		260
5		334
6		410
7		492
8		576
9		666
10		760
11		858
12		962
13		1070
14		1184
15		1304
16		1428
17		1560
18		1698
19		1844
20		2000
21	and thereafter	100	additional per year

deleted text begin (b) deleted text end As set forth in the table the accrued liability for each member of the relief association
corresponds to the cumulative years of active service to the credit of the member. The
accrued liability of the special fund for each active member is determined by multiplying
the accrued liability from the chart by the ratio of the lump-sum service pension amount
currently provided for in the bylaws of the relief association to a service pension of $100
per year of service.

new text begin (c) new text end If a member has fractional service as of December 31, the figure for service credit
to be used for the determination of accrued liability pursuant to this section shall be rounded
to the nearest full year of service credit. The total accrued liability of the special fund as of
December 31 shall be the sum of the accrued liability attributable to each active member
of the relief association.

deleted text begin (c) deleted text end new text begin (d) new text end To the extent that the state auditor considers it to be necessary or practical, the
state auditor may specify and issue procedures, forms, or mathematical tables for use in
performing the calculations of the accrued liability for deferred members pursuant to this
subdivision.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 8.

Minnesota Statutes 2018, section 424A.10, subdivision 2, is amended to read:

Subd. 2.

Payment of supplemental benefit.

(a) Upon the payment by a volunteer
firefighters relief association or by the voluntary statewide lump-sum volunteer firefighter
retirement plan of a lump-sum distribution to a qualified recipient, the association must pay
a supplemental benefit to the qualified recipient. Notwithstanding any law to the contrary,
the relief association must pay the supplemental benefit out of its special fund and the
voluntary statewide lump-sum volunteer firefighter retirement plan must pay the supplemental
benefit out of the voluntary statewide lump-sum volunteer firefighter retirement plan. This
benefit is an amount equal to ten percent of the regular lump-sum distribution that is paid
on the basis of the recipient's service as a volunteer firefighter. In no case may the amount
of the supplemental benefit exceed $1,000. A supplemental benefit under this paragraph
may not be paid to a survivor of a deceased active or deferred volunteer firefighter in that
capacity.

(b) Upon the payment by a relief association or the retirement plan of a lump-sum
survivor benefit to a survivor of a deceased active volunteer firefighter or of a deceased
deferred volunteer firefighter, the association must pay a supplemental survivor benefit to
the survivor of the deceased active or deferred volunteer firefighter from the special fund
of the relief association and the retirement plan must pay a supplemental survivor benefit
to the survivor of the deceased active or deferred volunteer firefighter from the retirement
fund if chapter 353G so provides. The amount of the supplemental survivor benefit is 20
percent of the survivor benefit, but not to exceed $2,000.

(c) For purposes of this section, the term "regular lump-sum distribution" means the
pretax lump-sum distribution excluding any interest that may have been credited during a
volunteer firefighter's period of deferral.

(d) An individual may receive a supplemental benefit under paragraph (a) or under
paragraph (b), but not under both paragraphs with respect to one lump-sum volunteer
firefighter benefit.

new text begin (e) If a qualified recipient receives more than one lump-sum distribution, the qualified
recipient is eligible to receive a supplemental benefit or supplemental survivor benefit,
whichever is applicable, with each lump-sum distribution. Each supplemental benefit shall
be calculated under paragraph (a) or (b), as applicable, and shall be subject to a separate
limit.
new text end

new text begin (f) Qualified recipients who elect to receive the recipient's lump-sum distribution in
installments under section 424A.016, subdivision 5, or 424A.02, subdivision 8, are eligible
to receive one supplemental benefit calculated on the total lump-sum distribution amount
under paragraph (a) or (b), as applicable.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively for supplemental benefits
paid in 2018 and thereafter.
new text end