SF 1179

Introduction - 86th Legislature (2009 - 2010)

Posted on 02/09/2010 02:19 a.m.

A bill for an act
relating to retirement; Public Employees Retirement Association; adding a
statute of limitations for correcting contributions paid on ineligible salary and
for recovering overpaid benefits; revising interest requirements; amending
Minnesota Statutes 2008, section 353.27, subdivisions 7, 7b.

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

Section 1.

Minnesota Statutes 2008, section 353.27, subdivision 7, is amended to read:

Subd. 7.

Adjustment for erroneous receipts or disbursements.

(a) Except
as provided in paragraph (b), erroneous employee deductions and erroneous employer
contributions and additional employer contributions for a person, who otherwise does not
qualify for membership under this chapter, are considered:

(1) valid if the initial erroneous deduction began before January 1, 1990. Upon
determination of the error by the association, the person may continue membership in the
association while employed in the same position for which erroneous deductions were
taken, or file a written election to terminate membership and apply for a refund upon
termination of public service or defer an annuity under section 353.34; or

(2) invalid, if the initial erroneous employee deduction began on or after January 1,
1990. Upon determination of the error, the association shall refund all erroneous employee
deductions and all erroneous employer contributions as specified in paragraph (d). No
person may claim a right to continued or past membership in the association based on
erroneous deductions which began on or after January 1, 1990.

(b) Erroneous deductions taken from the salary of a person who did not qualify
for membership in the association by virtue of concurrent employment before July 1,
1978, which required contributions to another retirement fund or relief association
established for the benefit of officers and employees of a governmental subdivision, are
invalid. Upon discovery of the error, the association shall remove all invalid service and,
upon termination of public service, the association shall refund all erroneous employee
deductions to the person, with interest new text begin as determined new text end under section 353.34, subdivision 2,
and all erroneous employer contributions new text begin without interest new text end to the employer. This paragraph
has both retroactive and prospective application.

(c) new text begin Adjustments to correct new text end employer contributions and employee deductions taken in
error from amounts which are not salary under section 353.01, subdivision 10, deleted text begin are invalid
upon discovery by the association and deleted text end must be deleted text begin refunded deleted text end new text begin made new text end as specified in paragraph
deleted text begin (d) deleted text end new text begin (e), except that the period of adjustment must be limited to the fiscal year in which the
error is discovered by the association and the immediate two preceding fiscal years new text end .

new text begin (d) If there is evidence of fraud or other misconduct on the part of the employee or
the employer, the board of trustees may authorize adjustments to the account of a member
or former member to correct erroneous employee deductions and employer contributions
on invalid salary and the recovery of any overpayments for a period longer than provided
for under paragraph (c).
new text end

deleted text begin (d) deleted text end new text begin (e) new text end Upon discovery of the receipt of erroneous new text begin employee new text end deductions and
new text begin employer new text end contributions under paragraph (a), clause (2), or paragraph (c), the association
must require the employer to discontinue the erroneous employee deductions and
erroneous employer contributions new text begin reported on behalf of a member new text end . Upon discontinuation,
the association deleted text begin either deleted text end must deleted text begin refund deleted text end new text begin : new text end

new text begin (1) for a member, provide a refund or credit to the employer in the amount of new text end the
invalid employee deductions deleted text begin to the person without interest and deleted text end new text begin with interest on the
employee deductions as determined under section 353.34, subdivision 2, and the employer
must pay the refunded employee deductions plus interest to the member;
new text end

new text begin (2) for a former member who:
new text end

new text begin (i) is not receiving a retirement annuity or benefit, return the erroneous employee
deductions to the former member through a refund with interest as determined under
section 353.34, subdivision 2; or
new text end

new text begin (ii) is receiving a retirement annuity or disability benefit, or a person who is
receiving an optional annuity or survivor benefit, for whom it has been determined an
overpayment must be recovered, adjust the payment amount and recover the overpayments
as provided under this section; and
new text end

new text begin (3) return new text end the invalid employer contributions new text begin reported on behalf of a member
or former member new text end to the employer deleted text begin or provide deleted text end new text begin by providing new text end a credit against future
contributions payable by the employer deleted text begin for the amount of all erroneous deductions and
contributions. If the employing unit receives a credit under this paragraph, the employing
unit is responsible for refunding to the applicable employee any amount that had been
erroneously deducted from the person's salary. In the event that a retirement annuity or
disability benefit has been computed using invalid service or salary, the association must
adjust the annuity or benefit and recover any overpayment under subdivision 7b deleted text end .

deleted text begin (e) deleted text end new text begin (f) new text end In the event that a salary warrant or check from which a deduction for the
retirement fund was taken has been canceled or the amount of the warrant or check
returned to the funds of the department making the payment, a refund of the sum
deducted, or any portion of it that is required to adjust the deductions, must be made
to the department or institution.

deleted text begin (f) Any refund to a member under this subdivision that is reasonably determined
to cause the plan to fail to be a qualified plan under section 401(a) of the federal
Internal Revenue Code, as amended, may not be refunded and instead must be credited
against future contributions payable by the employer. The employer receiving the
credit is responsible for refunding to the applicable employee any amount that had been
erroneously deducted from the person's salary.
deleted text end

new text begin (g) If, within three years of the accrual date of any retirement annuity, survivor
benefit, or disability benefit, the association discovers that an overpayment has resulted
by using invalid service or salary, or due to any erroneous calculation procedure, the
association must recalculate the annuity or benefit payable and recover any overpayment
as provided under subdivision 7b.
new text end

new text begin (h) Notwithstanding the provisions of this subdivision, the association may apply the
revenue procedures defined in the Internal Revenue Service Employee Plans Compliance
Resolution System and not issue a refund of erroneous employee deductions and employer
contributions or not recover a small overpayment of benefits if the cost to correct the error
would exceed the amount of the member refund or overpayment.
new text end

new text begin (i) Any fees or penalties assessed by the Internal Revenue Service for any failure
by an employer to follow the statutory requirements for reporting eligible members and
salary must be paid by the employer.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin (a) This section is effective the day following final enactment
except that the statute of limitations under paragraphs (c) and (g) does not apply to any
adjustments or corrections already in process.
new text end

new text begin (b) The interest required on deductions in error as provided in paragraph (e) must
be applied to any refunds paid on or after June 1, 2009.
new text end

Sec. 2.

Minnesota Statutes 2008, section 353.27, subdivision 7b, is amended to read:

Subd. 7b.

new text begin Recovery of new text end overpayments deleted text begin to members deleted text end .

new text begin (a) new text end In the event deleted text begin of an
overpayment to a member, retiree, beneficiary, or other person, deleted text end the executive director deleted text begin shall
recover the overpayment by suspending or reducing the payment of a retirement annuity,
refund, disability benefit, survivor benefit, or optional annuity payable to the applicable
person or the person's estate, whichever applies, under this chapter until all outstanding
money has been recovered. deleted text end new text begin determines that an overpaid annuity or benefit that is the result
of invalid salary included in the average salary used to calculate the payment amount must
be recovered, the association must determine the amount of the employee deductions taken
in error on the invalid salary, with interest as determined under section 353.34, subdivision
2, and must subtract that amount from the total annuity or benefit overpayment, and the
remaining balance of the overpaid annuity or benefit, if any, must be recovered.
new text end

new text begin (b) If the invalid employee deductions plus interest exceed the amount of the
overpaid benefits, the balance must be refunded to the person to whom the benefit or
annuity is being paid.
new text end

new text begin (c) Any invalid employer contributions reported on the invalid salary must be
credited to the employer as provided in subdivision 7, paragraph (e).
new text end

new text begin (d) If a member or former member who is receiving a retirement annuity or
disability benefit for which an overpayment is being recovered dies before recovery of
the overpayment is completed and a joint and survivor optional annuity is payable, the
remaining balance of the overpaid annuity or benefit must continue to be recovered from
the payment to the optional annuity beneficiary.
new text end

new text begin (e) If the association finds that a refund has been overpaid to a former member,
beneficiary, or other person, the amount of the overpayment must be recovered.
new text end

new text begin (f) The board of trustees shall adopt policies directing the period of time and manner
for the collection of any overpaid retirement or optional annuity and survivor or disability
benefit, or a refund that the executive director determines must be recovered as provided
under this section.
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