HF 1086

as introduced - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am

  1.1                          A bill for an act 
  1.2             relating to retirement; modifying military service 
  1.3             credit purchase provisions in the teachers retirement 
  1.4             association and first class city teacher plans; 
  1.5             providing for compliance with certain provisions of 
  1.6             the Internal Revenue Code related to all retirement 
  1.7             plans; making other clarifying and technical changes; 
  1.8             amending Minnesota Statutes 2002, sections 354.42, 
  1.9             subdivision 7; 354.53; 354.533, subdivision 1; 
  1.10            354A.093; 354A.097, subdivision 1; 356.611, 
  1.11            subdivision 2, by adding a subdivision; proposing 
  1.12            coding for new law in Minnesota Statutes, chapter 356. 
  1.13  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.14     Section 1.  Minnesota Statutes 2002, section 354.42, 
  1.15  subdivision 7, is amended to read: 
  1.16     Subd. 7.  [ERRONEOUS SALARY DEDUCTIONS OR DIRECT PAYMENTS.] 
  1.17  (a) Any deductions taken from the salary of an employee for the 
  1.18  retirement fund in error shall must be refunded to the employee 
  1.19  upon discovery and verification by the employing unit making the 
  1.20  deduction, and the corresponding employer contribution and 
  1.21  additional employer contribution amounts attributable to the 
  1.22  erroneous salary deduction must be refunded to the employing 
  1.23  unit. 
  1.24     (b) If salary deductions and employer contributions were 
  1.25  erroneously transmitted to the retirement fund and should have 
  1.26  been transmitted to another Minnesota public pension plan, the 
  1.27  retirement association must transfer these salary deductions and 
  1.28  employer contributions to the appropriate public pension fund 
  1.29  without interest.  For purposes of this paragraph, a Minnesota 
  2.1   public pension plan means a plan specified in section 356.30, 
  2.2   subdivision 3, or the plan governed by chapter 354B. 
  2.3      (c) Any transfer under paragraph (b) that would cause the 
  2.4   plan to fail to be a qualified plan under section 401(a) of the 
  2.5   Internal Revenue Code, as amended, must not be transferred.  
  2.6   Within 30 days after being notified by the teachers retirement 
  2.7   association, the employer must transmit an amount representing 
  2.8   the applicable salary deductions and employer contributions, 
  2.9   without interest, to the appropriate Minnesota public pension 
  2.10  plan fund.  The pension plan fund which received the erroneous 
  2.11  salary deductions and employer contributions and is unable to 
  2.12  make the transfer must provide a credit for that amount against 
  2.13  future contributions from the employer. 
  2.14     (d) If a salary warrant or check from which a deduction for 
  2.15  the retirement fund was taken has been canceled or the amount of 
  2.16  the warrant or check has been returned to the funds of the 
  2.17  employing unit making the payment, a refund of the amount 
  2.18  deducted, or any portion of it that is required to adjust the 
  2.19  salary deductions, shall be made to the employing unit. 
  2.20     (d) (e) Any erroneous direct payments of member-paid 
  2.21  contributions or erroneous salary deductions that were not 
  2.22  refunded in the regular payroll cycle processing of an employing 
  2.23  unit's annual summary report shall be refunded to the member 
  2.24  with interest computed using the rate and method specified in 
  2.25  section 354.49, subdivision 2. 
  2.26     (f) Any refund under this subdivision that would cause the 
  2.27  plan to which it relates to fail to be a qualified plan under 
  2.28  section 401(a) of the Internal Revenue Code, as amended, shall 
  2.29  not be refunded and shall instead be credited against future 
  2.30  contributions from the employer.  The employer is responsible 
  2.31  for refunding any amount that was erroneously deducted from the 
  2.32  salary of the employee, with interest as specified in paragraph 
  2.33  (e). 
  2.34     Sec. 2.  Minnesota Statutes 2002, section 354.53, is 
  2.35  amended to read: 
  2.36     354.53 [CREDIT FOR MILITARY BREAK IN SERVICE LEAVE OF 
  3.1   ABSENCE TO PROVIDE UNIFORMED SERVICE.] 
  3.2      Subdivision 1.  [EMPLOYEE AND EMPLOYER CONTRIBUTIONS.] (a) 
  3.3   Any employee given a leave of absence to enter military 
  3.4   service teacher who is absent from employment by reason of 
  3.5   service in the uniformed services, as defined in United States 
  3.6   Code, title 38, section 4303(13), and who returns to the 
  3.7   employer providing teaching service upon discharge from military 
  3.8   service as provided in the uniformed service within the time 
  3.9   frames required in United States Code, title 38, section 192.262 
  3.10  4312(e), may obtain service credit for the period of military 
  3.11  such uniformed service but shall not receive credit for any 
  3.12  voluntary extension of military service at the instance of the 
  3.13  member beyond the initial period of enlistment, induction or 
  3.14  call to active duty, as further specified in this section. 
  3.15     (b) The member shall obtain credit by paying into the fund 
  3.16  an employee contribution based upon the contribution rate or 
  3.17  rates in effect at the time that the military uniformed service 
  3.18  was performed multiplied by the years, including fractions of a 
  3.19  year, being purchased multiplied by the annual salary rate of 
  3.20  the member for the year beginning with the date of return from 
  3.21  military service and the number of years of military service 
  3.22  together with interest thereon at an annual rate of 8.5 percent 
  3.23  compounded annually from the time the military service was 
  3.24  rendered to the first date of payment.  The annual salary rate 
  3.25  is the average annual salary during the purchase period that the 
  3.26  teacher would have received if the teacher had continued to 
  3.27  provide teaching service to the employer rather than uniformed 
  3.28  service, or if the determination of that rate is not reasonably 
  3.29  certain, the annual salary rate is the teacher's average salary 
  3.30  rate during the 12-month period immediately preceding such 
  3.31  period, or, if less than 12 months, the period of teacher 
  3.32  employment immediately preceding such period of uniformed 
  3.33  service.  
  3.34     (c) The employer contribution and, if applicable, the 
  3.35  additional contribution provided in section 354.42 must be paid 
  3.36  by the employing unit at as provided in section 354.52, 
  4.1   subdivision 4, using the employer contribution rate or rates in 
  4.2   effect at the time that the military uniformed service was 
  4.3   performed, applied to the same annual salary rate of or rates 
  4.4   used to compute the member for the year beginning with the date 
  4.5   of return from military service, in the manner provided in 
  4.6   section 354.52, subdivision 4 employee contribution. 
  4.7      Subd. 2.  [CALCULATION OF CREDIT.] (a) For purposes of a 
  4.8   money purchase annuity, all payments into the fund pursuant to 
  4.9   under this section shall be considered accumulations after July 
  4.10  1, 1957, for the purpose of computing any annuity in accordance 
  4.11  with under section 354.44, subdivision 2.  
  4.12     (b) For purposes of a formula annuity, if the employee 
  4.13  contributions and interest thereon provided in this section are 
  4.14  not paid in full, the member's formula service credit shall be 
  4.15  calculated prorated by multiplying the number of years including 
  4.16  fractions of a year of military uniformed service eligible for 
  4.17  purchase by the ratio obtained by dividing the total amount paid 
  4.18  and employee contribution received by the maximum amount payable 
  4.19  provided herein total employee contribution otherwise required 
  4.20  under this section. 
  4.21     Subd. 3.  [PAYMENTS ELIGIBLE PAYMENT PERIOD.] Payments 
  4.22  pursuant to this (a) To receive service credit under this 
  4.23  section, the contributions specified in this section shall must 
  4.24  be made within transmitted to the teachers retirement 
  4.25  association during the period beginning with the date the 
  4.26  individual returns to teaching service and whose duration is 
  4.27  three times the length of the uniformed service period, not to 
  4.28  exceed five years from the date of discharge. 
  4.29     (b) If the payment period specified under paragraph (a) is 
  4.30  less than one year, the contributions required under this 
  4.31  section to receive service credit may be made within one year 
  4.32  from the discharge date. 
  4.33     Subd. 4.  [LIMITS OF SERVICE CREDIT PURCHASE.] The service 
  4.34  credit purchase under this section may not exceed five years, 
  4.35  unless a longer purchase period is required under United States 
  4.36  Code, title 38, section 4312. 
  5.1      Subd. 5.  [INTEREST REQUIREMENTS.] The employer shall pay 
  5.2   interest on all employee and employer contribution amounts 
  5.3   payable under this section.  Interest is to be computed at a 
  5.4   rate of 8.5 percent compounded annually from the end of each 
  5.5   fiscal year of the leave or break in service to the end of the 
  5.6   month in which payment is received. 
  5.7      Sec. 3.  Minnesota Statutes 2002, section 354.533, 
  5.8   subdivision 1, is amended to read: 
  5.9      Subdivision 1.  [SERVICE CREDIT PURCHASE AUTHORIZED.] A 
  5.10  teacher who has at least three years of allowable service credit 
  5.11  with the teachers retirement association and who performed 
  5.12  service in the United States armed forces before becoming a 
  5.13  teacher as defined in section 354.05, subdivision 2, or who 
  5.14  failed to obtain service credit for a military leave of absence 
  5.15  under the provisions of section 354.53, is entitled to purchase 
  5.16  allowable and formula service credit for the initial period of 
  5.17  enlistment, induction, or call to active duty without any 
  5.18  voluntary extension, not to exceed ten years, by making payment 
  5.19  under section 356.55 provided the teacher is not entitled to 
  5.20  receive a current or deferred retirement annuity from a United 
  5.21  States armed forces pension plan and has not purchased service 
  5.22  credit from any other defined benefit public employee pension 
  5.23  plan for the same period of service. 
  5.24     Sec. 4.  Minnesota Statutes 2002, section 354A.093, is 
  5.25  amended to read: 
  5.26     354A.093 [MILITARY BREAK IN SERVICE CREDIT TO PROVIDE 
  5.27  UNIFORMED SERVICE.] 
  5.28     Subdivision 1.  [ELIGIBILITY.] Any teacher in the 
  5.29  coordinated program of either the Minneapolis teachers 
  5.30  retirement fund association or the St.  Paul teachers retirement 
  5.31  fund association or any teacher in the new law coordinated 
  5.32  program of the Duluth teachers retirement fund association who 
  5.33  is granted a leave absent from employment by reason of absence 
  5.34  to enter military service in the uniformed services as defined 
  5.35  in United States Code, title 38, section 4303(13) and who 
  5.36  returns to the employer providing active teaching service upon 
  6.1   discharge from military uniformed service as provided in within 
  6.2   the time frames required under United States Code, title 38, 
  6.3   section 192.262 4312(e), shall be entitled to receive allowable 
  6.4   service credit in the applicable association for all or a 
  6.5   portion of the period of military uniformed service but, 
  6.6   provided that the teacher did not for any voluntary extension of 
  6.7   military separate from uniformed service beyond the initial 
  6.8   period of enlistment, induction with a dishonorable or call to 
  6.9   active duty which occurred at the instance of the teacher bad 
  6.10  conduct discharge or under other than honorable conditions. 
  6.11     Subd. 2.  [CONTRIBUTIONS.] If the teacher granted the 
  6.12  military service leave of absence makes the employee 
  6.13  contribution for a period of military service leave of absence 
  6.14  pursuant to service provided to the uniformed services under 
  6.15  this section, the employing unit shall make an employer 
  6.16  contribution on behalf of the teacher to the applicable 
  6.17  association for the period of the military service leave of 
  6.18  absence being purchased in the manner described in section 
  6.19  354A.12, subdivision 2a.  The employee and employer 
  6.20  contributions shall be in an amount equal to the employee and 
  6.21  employer contribution rates in effect for other active members 
  6.22  of the association covered by the same program applied to a 
  6.23  salary figure equal to the teacher's average annual salary 
  6.24  rate at the date of return from military service that the 
  6.25  teacher would have received if the leave or break in service had 
  6.26  not occurred, or if the determination of that average salary 
  6.27  rate is not reasonably certain, on the basis of the teacher's 
  6.28  average salary rate during the 12-month period immediately 
  6.29  preceding such period, or, if less than 12 months, the period of 
  6.30  teacher employment immediately preceding such period of 
  6.31  uniformed service, multiplied by the number of years and 
  6.32  fractions of a year constituting the period of service provided 
  6.33  to the military uniformed service leave of absence which the 
  6.34  teacher seeks is authorized to purchase under this 
  6.35  section.  Payment shall include interest on the amount payable 
  6.36  pursuant to this section at the rate of six percent compounded 
  7.1   annually from the year the military service was rendered to the 
  7.2   date of payment. 
  7.3      Subd. 3.  [PRORATING.] If the payments made by a 
  7.4   teacher pursuant to under this section are less than an the full 
  7.5   amount equal to the applicable contribution rate applied to a 
  7.6   salary figure equal to the teacher's annual salary rate at the 
  7.7   date of return from military service, multiplied by the number 
  7.8   of years constituting the period of the military service leave 
  7.9   of absence determined under subdivision 2, the service credit 
  7.10  shall be prorated.  The prorated service credit shall be 
  7.11  determined by the ratio between the amount of the 
  7.12  actual employee payment which was made and the full contribution 
  7.13  amount payable pursuant to employee payment required under this 
  7.14  section.  In order to be entitled to receive service credit 
  7.15  under this section, payment shall be made within five years from 
  7.16  the date of discharge from military service. 
  7.17     Subd. 4.  [ELIGIBLE PAYMENT PERIOD.] (a) To receive service 
  7.18  credit under this section, the contributions specified in this 
  7.19  section must be transmitted to the applicable first class city 
  7.20  teachers retirement fund association during the period beginning 
  7.21  with the date the individual returns to teaching service and 
  7.22  whose duration is three times the length of the uniformed 
  7.23  service period, not to exceed five years. 
  7.24     (b) If the payment period specified under paragraph (a) is 
  7.25  less than one year, the contributions required under this 
  7.26  section to receive service credit may be made within one year 
  7.27  from the discharge date. 
  7.28     Subd. 5.  [LIMITS ON SERVICE CREDIT PURCHASE.] The service 
  7.29  credit purchase under this section may not exceed five years, 
  7.30  unless a longer purchase period is required under United States 
  7.31  Code, title 38, section 4312. 
  7.32     Subd. 6.  [INTEREST REQUIREMENTS.] The employer shall pay 
  7.33  interest on all employee and employer contribution amounts 
  7.34  payable under this section.  Interest is to be computed at a 
  7.35  rate of 8.5 percent compounded annually from the end of each 
  7.36  fiscal year of the leave or break in service to the end of the 
  8.1   month in which payment is received. 
  8.2      Sec. 5.  Minnesota Statutes 2002, section 354A.097, 
  8.3   subdivision 1, is amended to read: 
  8.4      Subdivision 1.  [SERVICE CREDIT PURCHASE AUTHORIZED.] A 
  8.5   teacher who has at least three years of allowable service credit 
  8.6   with the teachers retirement fund association and who performed 
  8.7   service in the United States armed forces before becoming a 
  8.8   teacher as defined in section 354A.011, subdivision 27, or who 
  8.9   failed to obtain service credit for a military leave of absence 
  8.10  period under section 354A.093, is entitled to purchase allowable 
  8.11  service credit for the initial period of enlistment, induction, 
  8.12  or call to active duty without any voluntary extension, not to 
  8.13  exceed ten years, by making payment under section 356.55, 
  8.14  provided the teacher is not entitled to receive a current or 
  8.15  deferred retirement annuity from a United States armed forces 
  8.16  pension plan and has not purchased service credit from another 
  8.17  defined benefit public employee pension plan for the same period 
  8.18  of service. 
  8.19     Sec. 6.  Minnesota Statutes 2002, section 356.611, 
  8.20  subdivision 2, is amended to read: 
  8.21     Subd. 2.  [FEDERAL COMPENSATION LIMITS.] (a) For members 
  8.22  first contributing to of a covered pension plan enumerated in 
  8.23  section 356.30, subdivision 3, on or after July 1, 1995, 
  8.24  compensation in excess of the limitation set forth specified in 
  8.25  section 401(a)(17) of the Internal Revenue Code, as amended, for 
  8.26  changes in the cost of living under section 401(a)(17)(B) of the 
  8.27  Internal Revenue Code, may not be included for contribution and 
  8.28  benefit computation purposes.  
  8.29     (b) Notwithstanding paragraph (a), for members specified in 
  8.30  paragraph (a) who first contributed to a covered plan before 
  8.31  July 1, 1995, the annual compensation limit set forth specified 
  8.32  in Internal Revenue Code 401(a)(17) on June 30, 1993, applies to 
  8.33  members first contributing before July 1, 1995 if that provides 
  8.34  a greater allowable annual compensation. 
  8.35     Sec. 7.  Minnesota Statutes 2002, section 356.611, is 
  8.36  amended by adding a subdivision to read: 
  9.1      Subd. 3.  [MAXIMUM BENEFIT LIMITATIONS.] A member's annual 
  9.2   benefit shall, if necessary, be reduced to the extent required 
  9.3   by section 415(b) of the Internal Revenue Code, as adjusted by 
  9.4   the United States Secretary of the Treasury under section 415(d) 
  9.5   of the Internal Revenue Code.  For purposes of section 415 of 
  9.6   the Internal Revenue Code, the limitation year of a pension plan 
  9.7   covered by this section shall be the fiscal year or calendar 
  9.8   year of that plan, whichever is applicable.  The accrued benefit 
  9.9   limitation described in section 415(e) of the Internal Revenue 
  9.10  Code shall cease to be effective for limitation years beginning 
  9.11  after December 31, 1999. 
  9.12     Sec. 8.  [356.635] [INTERNAL REVENUE CODE COMPLIANCE.] 
  9.13     Subdivision 1.  [RETIREMENT BENEFIT COMMENCEMENT.] On and 
  9.14  after January 1, 1989, the retirement benefit of a member who 
  9.15  has terminated employment shall begin no later than the later of 
  9.16  April 1 of the calendar year following the calendar year that 
  9.17  the member attains the federal minimum distribution age or April 
  9.18  1 of the calendar year following the calendar year in which the 
  9.19  member terminated employment. 
  9.20     Subd. 2.  [DISTRIBUTIONS.] Distributions on and after 
  9.21  December 31, 1989, shall be made as required under section 
  9.22  401(a)(9) of the Internal Revenue Code and the treasury 
  9.23  regulations adopted under that section, including, but not 
  9.24  limited to, the incidental death benefit provisions of section 
  9.25  401(a)(9)(G) of the Internal Revenue Code. 
  9.26     Subd. 3.  [DIRECT ROLLOVERS.] For distributions on or after 
  9.27  January 1, 1993, a distributee may elect, at the time and in the 
  9.28  manner prescribed by the plan administrator, to have any portion 
  9.29  of an eligible rollover distribution paid directly to an 
  9.30  eligible retirement plan specified by the distributee. 
  9.31     Subd. 4.  [ELIGIBLE ROLLOVER DISTRIBUTION.] An "eligible 
  9.32  rollover distribution" is any distribution of all or any portion 
  9.33  of the balance to the credit of the distributee.  
  9.34     Subd. 5.  [INELIGIBLE AMOUNTS.] An eligible rollover 
  9.35  distribution does not include: 
  9.36     (1) a distribution that is one of a series of substantially 
 10.1   equal periodic payments, receivable annually or more frequently, 
 10.2   that is made for the life or life expectancy of the distributee, 
 10.3   the joint lives or joint life expectancies of the distributee 
 10.4   and the distributee's designated beneficiary, or for a specified 
 10.5   period of ten years or more; 
 10.6      (2) a distribution that is required under section 401(a)(9) 
 10.7   of the Internal Revenue Code; 
 10.8      (3) for distributions prior to January 1, 2002, the portion 
 10.9   of a distribution that is not included in gross income; or 
 10.10     (4) any other exception required by law or the Internal 
 10.11  Revenue Code. 
 10.12     Subd. 6.  [ELIGIBLE RETIREMENT PLAN.] (a) An "eligible 
 10.13  retirement plan" is: 
 10.14     (1) an individual retirement account under section 408(a) 
 10.15  of the Internal Revenue Code; 
 10.16     (2) an individual retirement annuity plan under section 
 10.17  408(b) of the Internal Revenue Code; 
 10.18     (3) an annuity plan under section 403(a) of the Internal 
 10.19  Revenue Code; 
 10.20     (4) a qualified trust plan under section 401(a) of the 
 10.21  Internal Revenue Code that accepts the distributee's eligible 
 10.22  rollover distribution; 
 10.23     (5) for distributions made after December 31, 2001, an 
 10.24  annuity contract under section 403(b) of the Internal Revenue 
 10.25  Code; or 
 10.26     (6) for distributions made after December 31, 2001, an 
 10.27  eligible deferred compensation plan under section 457(b) of the 
 10.28  Internal Revenue Code, which is maintained by a state or local 
 10.29  government and agrees to separately account for amounts 
 10.30  transferred into the plan. 
 10.31     (b) Before January 1, 2002, for eligible rollover 
 10.32  distributions to a surviving spouse, an eligible retirement plan 
 10.33  is limited to an individual retirement account under section 
 10.34  408(a) of the Internal Revenue Code or an individual retirement 
 10.35  annuity plan under section 408(b) of the Internal Revenue Code. 
 10.36     (c) For distributions after December 31, 2001, of after-tax 
 11.1   contributions which are not includable in gross income, the 
 11.2   after-tax portion may be transferred only to an individual 
 11.3   retirement account or annuity described in section 408(a) or (b) 
 11.4   of the Internal Revenue Code, or to a qualified defined 
 11.5   contribution plan described in section 401(a), or section 
 11.6   403(a), of the Internal Revenue Code, that agrees to separately 
 11.7   account for amounts transferred, including separately accounting 
 11.8   for the portion of such distribution which is includable in 
 11.9   gross income and the portion of such distribution which is not 
 11.10  includable. 
 11.11     Subd. 7.  [DISTRIBUTEE.] A "distributee" is an employee or 
 11.12  former employee, the surviving spouse of an employee or former 
 11.13  employee, or the former spouse of the employee or former 
 11.14  employee, who is the alternate payee under a qualified domestic 
 11.15  relations order as defined in section 414(p) of the Internal 
 11.16  Revenue Code, or a court-ordered equitable distribution of 
 11.17  marital property, as provided in section 518.58. 
 11.18     Subd. 8.  [FORFEITURES.] For defined benefit plans, unless 
 11.19  otherwise permitted by section 401(a)(8) of the Internal Revenue 
 11.20  Code, forfeitures may not be applied to increase the benefits 
 11.21  any employee would otherwise receive under the plan. 
 11.22     Subd. 9.  [MILITARY SERVICE.] Effective December 12, 1994, 
 11.23  contributions, benefits, and service credit with respect to 
 11.24  qualified military service will be provided according to section 
 11.25  414(u) of the Internal Revenue Code. 
 11.26     Sec. 9.  [EFFECTIVE DATE.] 
 11.27     Sections 1 to 8 are effective the day following final 
 11.28  enactment.  Section 8 has retroactive application as indicated 
 11.29  within that section.