HF 3360

as introduced - 89th Legislature (2015 - 2016) Posted on 03/17/2016 02:42pm

A bill for an act
relating to retirement; Minnesota State Retirement System financial solvency
measures; increasing member and employer contribution rates; reducing
postretirement adjustment amounts; amending Minnesota Statutes 2014, section
352.04, subdivisions 2, 3, by adding a subdivision; Minnesota Statutes 2015
Supplement, sections 356.215, subdivision 8; 356.415, subdivisions 1a, 1e, 1f;
repealing Minnesota Statutes 2015 Supplement, section 356.415, subdivision 1.

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

Section 1.

Minnesota Statutes 2014, section 352.04, subdivision 2, is amended to read:

Subd. 2.

Employee contributions.

(a) The employee contribution to the fund must
be equal to the following percent of salary:

	deleted text begin from July 1, 2010, to June 30, 2014 deleted text end	deleted text begin 5 deleted text end
	from July 1, 2014, deleted text begin and thereafter deleted text end new text begin to June 30, 2017 new text end	5.5
	new text begin from July 1, 2017, and thereafter new text end	new text begin 6 new text end

(b) These contributions must be made by deduction from salary as provided in
subdivision 4.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective June 30, 2016.
new text end

Sec. 2.

Minnesota Statutes 2014, section 352.04, subdivision 3, is amended to read:

Subd. 3.

Employer contributions.

The employer contribution to the fund must be
equal to the following percent of salary:

	deleted text begin from July 1, 2010, to June 30, 2014 deleted text end	deleted text begin 5 deleted text end
	from July 1, 2014, deleted text begin and thereafter deleted text end new text begin to June 30, 2017 new text end	5.5
	new text begin from July 1, 2017, and thereafter new text end	new text begin 6 new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective June 30, 2016.
new text end

Sec. 3.

Minnesota Statutes 2014, section 352.04, is amended by adding a subdivision
to read:

new text begin Subd. 3a. new text end

new text begin Additional employer contribution; expiration. new text end

new text begin (a) Effective July 1,
2017, an additional employer contribution to the general state employees retirement fund
of the Minnesota State Retirement System must be made equal to one percent of salary.
new text end

new text begin (b) This subdivision expires effective the first day of the fiscal year immediately
following the fiscal year in which the market value of the assets of the general state
employees retirement plan of the Minnesota State Retirement System equals or exceeds
the actuarial accrued liability of the plan as determined by the actuarial valuation prepared
under section 356.215 by the approved actuary retained under section 356.214.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective June 30, 2016.
new text end

Sec. 4.

Minnesota Statutes 2015 Supplement, section 356.215, subdivision 8, is
amended to read:

Subd. 8.

Interest and salary assumptions.

(a) The actuarial valuation must use the
applicable following interest assumption:

(1) select and ultimate interest rate assumption

plan	ultimate interest rate assumption
teachers retirement plan	8.5%

The select preretirement interest rate assumption for the period through June 30,
2017, is eight percent.

(2) single rate interest rate assumption

plan	interest rate assumption
general state employees retirement plan	8%
correctional state employees retirement plan	8
State Patrol retirement plan	8
legislators retirement plan, and for the constitutional officers calculation of total plan liabilities	0
judges retirement plan	8
general public employees retirement plan	8
public employees police and fire retirement plan	8
local government correctional service retirement plan	8
St. Paul teachers retirement plan	8
Bloomington Fire Department Relief Association	6
local monthly benefit volunteer firefighter relief associations	5
monthly benefit retirement plans in the statewide volunteer firefighter retirement plan	6

(b)(1) If funding stability has been attained, the valuation new text begin of each public pension
and retirement plan enumerated in section 356.20, subdivision 2, clauses (2), (4), (8),
(11), and (13), new text end must use a postretirement adjustment rate actuarial assumption equal to
the postretirement adjustment rate specified in section deleted text begin 354A.27, subdivision 7; 354A.29,
subdivision 9; or deleted text end 356.415, subdivision deleted text begin 1 deleted text end new text begin 1b, 1c, 1e, or 1f new text end , whichever applies.

(2) If funding stability has not been attained, the valuation new text begin of each public pension
and retirement plan enumerated in section 356.20, subdivision 2, clauses (2), (4), (8), (11),
and (13), new text end must use a select postretirement adjustment rate actuarial assumption equal to
the postretirement adjustment rate specified in section deleted text begin 354A.27, subdivision 6a; 354A.29,
subdivision 8; or deleted text end 356.415, subdivision deleted text begin 1a, deleted text end 1b, 1c, deleted text begin 1d, deleted text end 1e, or 1f, whichever applies, for a
period ending when the approved actuary estimates that the plan will attain the defined
funding stability measure, and thereafter an ultimate postretirement adjustment rate
actuarial assumption equal to the postretirement adjustment rate under section deleted text begin 354A.27,
subdivision 7; 354A.29, subdivision 9; or deleted text end 356.415, subdivision deleted text begin 1 deleted text end new text begin 1b, 1c, 1e, or 1f new text end , for the
applicable period or periods beginning when funding stability is projected to be attained.

new text begin (3) The valuation of each public pension and retirement plan enumerated in section
356.20, subdivision 2, clauses (1), (3), (5), and (12), must use a postretirement adjustment
rate actuarial assumption equal to the postretirement adjustment rate specified in section
354A.29 or 356.415, subdivision 1a or 1d, whichever applies.
new text end

(c) The actuarial valuation must use the applicable following single rate future salary
increase assumption, the applicable following modified single rate future salary increase
assumption, or the applicable following graded rate future salary increase assumption:

(1) single rate future salary increase assumption

plan	future salary increase assumption
legislators retirement plan		5%
judges retirement plan		2.75
Bloomington Fire Department Relief Association		4

(2) age-related future salary increase age-related select and ultimate future salary
increase assumption or graded rate future salary increase assumption

plan	future salary increase assumption
local government correctional service retirement plan	assumption B
St. Paul teachers retirement plan	assumption A

For plans other than the St. Paul teachers
retirement plan and the local government
correctional service retirement plan, the
select calculation is: during the designated
select period, a designated percentage rate
is multiplied by the result of the designated
integer minus T, where T is the number of
completed years of service, and is added
to the applicable future salary increase
assumption. The designated select period
is ten years and the designated integer is
ten for the local government correctional
service retirement plan and 15 for the St.
Paul Teachers Retirement Fund Association.
The designated percentage rate is 0.2 percent
for the St. Paul Teachers Retirement Fund
Association.

The ultimate future salary increase assumption is:

age	A	B
16	5.9%	8.75%
17	5.9	8.75
18	5.9	8.75
19	5.9	8.75
20	5.9	8.75
21	5.9	8.5
22	5.9	8.25
23	5.85	8
24	5.8	7.75
25	5.75	7.5
26	5.7	7.25
27	5.65	7
28	5.6	6.75
29	5.55	6.5
30	5.5	6.5
31	5.45	6.25
32	5.4	6.25
33	5.35	6.25
34	5.3	6
35	5.25	6
36	5.2	5.75
37	5.15	5.75
38	5.1	5.75
39	5.05	5.5
40	5	5.5
41	4.95	5.5
42	4.9	5.25
43	4.85	5
44	4.8	5
45	4.75	4.75
46	4.7	4.75
47	4.65	4.75
48	4.6	4.75
49	4.55	4.75
50	4.5	4.75
51	4.45	4.75
52	4.4	4.75
53	4.35	4.75
54	4.3	4.75
55	4.25	4.5
56	4.2	4.5
57	4.15	4.25
58	4.1	4
59	4.05	4
60	4	4
61	4	4
62	4	4
63	4	4
64	4	4
65	4	3.75
66	4	3.75
67	4	3.75
68	4	3.75
69	4	3.75
70	4	3.75

(3) service-related ultimate future salary increase assumption

general state employees retirement plan of the Minnesota State Retirement System	assumption A
general employees retirement plan of the Public Employees Retirement Association	assumption B
Teachers Retirement Association	assumption C
public employees police and fire retirement plan	assumption D
State Patrol retirement plan	assumption E
correctional state employees retirement plan of the Minnesota State Retirement System	assumption F

service length	A	B	C	D	E	F
1	10.25%	11.78%	12%	12.75%	7.75%	5.75%
2	7.85	8.65	9	10.75	7.25	5.6
3	6.65	7.21	8	8.75	6.75	5.45
4	5.95	6.33	7.5	7.75	6.5	5.3
5	5.45	5.72	7.25	6.25	6.25	5.15
6	5.05	5.27	7	5.85	6	5
7	4.75	4.91	6.85	5.55	5.75	4.85
8	4.45	4.62	6.7	5.35	5.6	4.7
9	4.25	4.38	6.55	5.15	5.45	4.55
10	4.15	4.17	6.4	5.05	5.3	4.4
11	3.95	3.99	6.25	4.95	5.15	4.3
12	3.85	3.83	6	4.85	5	4.2
13	3.75	3.69	5.75	4.75	4.85	4.1
14	3.55	3.57	5.5	4.65	4.7	4
15	3.45	3.45	5.25	4.55	4.55	3.9
16	3.35	3.35	5	4.55	4.4	3.8
17	3.25	3.26	4.75	4.55	4.25	3.7
18	3.25	3.25	4.5	4.55	4.1	3.6
19	3.25	3.25	4.25	4.55	3.95	3.5
20	3.25	3.25	4	4.55	3.8	3.5
21	3.25	3.25	3.9	4.45	3.75	3.5
22	3.25	3.25	3.8	4.35	3.75	3.5
23	3.25	3.25	3.7	4.25	3.75	3.5
24	3.25	3.25	3.6	4.25	3.75	3.5
25	3.25	3.25	3.5	4.25	3.75	3.5
26	3.25	3.25	3.5	4.25	3.75	3.5
27	3.25	3.25	3.5	4.25	3.75	3.5
28	3.25	3.25	3.5	4.25	3.75	3.5
29	3.25	3.25	3.5	4.25	3.75	3.5
30 or more	3.25	3.25	3.5	4.25	3.75	3.5

(d) The actuarial valuation must use the applicable following payroll growth
assumption for calculating the amortization requirement for the unfunded actuarial
accrued liability where the amortization retirement is calculated as a level percentage
of an increasing payroll:

plan	payroll growth assumption
general state employees retirement plan of the Minnesota State Retirement System	3.5%
correctional state employees retirement plan	3.5
State Patrol retirement plan	3.5
judges retirement plan	2.75
general employees retirement plan of the Public Employees Retirement Association	3.5
public employees police and fire retirement plan	3.5
local government correctional service retirement plan	3.5
teachers retirement plan	3.75
St. Paul teachers retirement plan	4

(e) The assumptions set forth in paragraphs (c) and (d) continue to apply, unless a
different salary assumption or a different payroll increase assumption:

(1) has been proposed by the governing board of the applicable retirement plan;

(2) is accompanied by the concurring recommendation of the actuary retained under
section 356.214, subdivision 1, if applicable, or by the approved actuary preparing the
most recent actuarial valuation report if section 356.214 does not apply; and

(3) has been approved or deemed approved under subdivision 18.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective June 30, 2016.
new text end

Sec. 5.

Minnesota Statutes 2015 Supplement, section 356.415, subdivision 1a, is
amended to read:

Subd. 1a.

Annual postretirement adjustments; Minnesota State Retirement
System plans other than new text begin the new text end State Patrol new text begin and judges new text end retirement deleted text begin plan deleted text end new text begin plans new text end .

(a)
Retirement annuity, disability benefit, or survivor benefit recipients of the legislators
retirement plan, including constitutional officers as specified in chapter 3A, the general
state employees retirement plan, the correctional state employees retirement plan, and
the unclassified state employees retirement program are entitled to a postretirement
adjustment annually on January 1, as follows:

(1) deleted text begin for each successive January 1, if the definition of funding stability under
paragraph (b) has not been met as of the prior July 1 for or with respect to the applicable
retirement plan, deleted text end a postretirement increase of deleted text begin two deleted text end new text begin 1.75 new text end percent must be applied each year,
effective on January 1, to the monthly annuity or benefit of each annuitant or benefit
recipient who has been receiving an annuity or a benefit for at least 12 full months as of
the June 30 of the calendar year immediately before the adjustment; and

(2) deleted text begin for each successive January 1, if the definition of funding stability under
paragraph (b) has not been met as of the prior July 1 for or with respect to the applicable
retirement plan, deleted text end for each annuitant or benefit recipient who has been receiving an annuity
or a benefit for at least one full month, but less than 12 full months as of the June 30 of the
calendar year immediately before the adjustment, an annual postretirement increase of
1/12 of deleted text begin two deleted text end new text begin 1.75 new text end percent for each month that the person has been receiving an annuity or
benefit must be applied.

deleted text begin (b) Increases under this subdivision for the general state employees retirement
plan or the correctional state employees retirement plan terminate on December 31 of
the calendar year in which two prior consecutive actuarial valuations prepared by the
approved actuary under sections 356.214 and 356.215 and the standards for actuarial work
promulgated by the Legislative Commission on Pensions and Retirement indicate that the
market value of assets of the retirement plan equals or exceeds 90 percent of the actuarial
accrued liability of the retirement plan and increases under subdivision 1 recommence
after that date. Increases under this subdivision for the legislators retirement plan
established under chapter 3A, including the constitutional officers specified in that chapter,
and for the unclassified state employees retirement program, terminate on December 31
of the calendar year in which two prior consecutive actuarial valuations prepared by the
approved actuary under sections 356.214 and 356.215 and the standards for actuarial work
promulgated by the Legislative Commission on Pensions and Retirement indicate that the
market value of assets of the general state employees retirement plan equals or exceeds
90 percent of the actuarial accrued liability of the retirement plan and increases under
subdivision 1 recommence after that date.
deleted text end

deleted text begin (c) After having met the definition of funding stability under paragraph (b), the
increase provided in paragraph (a), clauses (1) and (2), rather than an increase under
subdivision 1, for the general state employees retirement plan or the correctional state
employees retirement plan, is again to be applied in a subsequent year or years if the
market value of assets of the applicable plan equals or is less than:
deleted text end

deleted text begin (1) 85 percent of the actuarial accrued liabilities of the applicable plan for two
consecutive actuarial valuations; or
deleted text end

deleted text begin (2) 80 percent of the actuarial accrued liabilities of the applicable plan for the most
recent actuarial valuation.
deleted text end

deleted text begin (d) After having met the definition of funding stability under paragraph (b), the
increase provided in paragraph (a), clauses (1) and (2), rather than an increase under
subdivision 1, for the legislators retirement plan, including the constitutional officers,
and for the unclassified state employees retirement program, is again to be applied in a
subsequent year or years if the market value of assets of the general state employees
retirement plan equals or is less than:
deleted text end

deleted text begin (1) 85 percent of the actuarial accrued liabilities of the applicable plan for two
consecutive actuarial valuations; or
deleted text end

deleted text begin (2) 80 percent of the actuarial accrued liabilities of the applicable plan for the most
recent actuarial valuation.
deleted text end

deleted text begin (e) deleted text end new text begin (b) new text end An increase in annuity or benefit payments under this subdivision must be
made automatically unless written notice is filed by the annuitant or benefit recipient
with the executive director of the applicable covered retirement plan requesting that the
increase not be made.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective June 30, 2016.
new text end

Sec. 6.

Minnesota Statutes 2015 Supplement, section 356.415, subdivision 1e, is
amended to read:

Subd. 1e.

Annual postretirement adjustments; State Patrol retirement plan.

(a) Retirement annuity, disability benefit, or survivor benefit recipients of the State Patrol
retirement plan are entitled to a postretirement adjustment annually on January 1 if the
definition of funding stability under paragraph (b) has not been met, as follows:

(1) a postretirement increase of one percent must be applied each year, effective on
January 1, to the monthly annuity or benefit of each annuitant or benefit recipient who
has been receiving an annuity or a benefit for at least 12 full months as of the June 30 of
the calendar year immediately before the adjustment; and

(2) for each annuitant or benefit recipient who has been receiving an annuity or
a benefit for at least one full month, but less than 12 full months as of the June 30 of
the calendar year immediately before the adjustment, an annual postretirement increase
of 1/12 of one percent for each month that the person has been receiving an annuity or
benefit must be applied.

(b) Increases under paragraph (a) for the State Patrol retirement plan terminate on
December 31 of the calendar year in which two prior consecutive actuarial valuations for
the plan prepared by the approved actuary under sections 356.214 and 356.215 and the
standards for actuarial work promulgated by the Legislative Commission on Pensions
and Retirement indicates that the market value of assets of the retirement plan equals or
exceeds 85 percent of the actuarial accrued liability of the retirement plan. Thereafter,
increases under paragraph (a) become effective again on the December 31 of the calendar
year in which the actuarial valuation, or prior consecutive actuarial valuations for the
plan prepared by the approved actuary under sections 356.214 and 356.215 and the
standards for actuarial work promulgated by the Legislative Commission on Pensions and
Retirement indicates that the market value of the assets of the retirement plan equals or is
less than 80 percent of the actuarial accrued liability of the retirement plan for two years,
or equals or is less than 75 percent of the actuarial accrued liability of the retirement plan
for one year and increases under paragraph (c) commence after that date.

(c) Retirement annuity, disability benefit, or survivor benefit recipients of the State
Patrol retirement plan are entitled to a postretirement adjustment annually on January 1 new text begin if
the definition of funding stability under paragraph (b) has been met new text end , as follows:

(1) a postretirement increase of 1.5 percent must be applied each year, effective on
January 1, to the monthly annuity or benefit of each annuitant or benefit recipient who
has been receiving an annuity or a benefit for at least 12 full months as of the June 30 of
the calendar year immediately before the adjustment; and

(2) for each annuitant or benefit recipient who has been receiving an annuity or
a benefit for at least one full month, but less than 12 full months as of the June 30 of
the calendar year immediately before the adjustment, an annual postretirement increase
of 1/12 of 1.5 percent for each month that the person has been receiving an annuity or
benefit must be applied.

(d) Increases under paragraph (c) for the State Patrol retirement plan terminate on
December 31 of the calendar year in which two prior consecutive actuarial valuations
prepared by the approved actuary under sections 356.214 and 356.215 and the standards
for actuarial work adopted by the Legislative Commission on Pensions and Retirement
indicates that the market value of assets of the retirement plan equals or exceeds 90 percent
of the actuarial accrued liability of the retirement plan and increases under deleted text begin subdivision
1 recommence deleted text end new text begin paragraph (e) commence new text end after that date.

new text begin (e) Retirement annuity, disability benefit, or survivor benefit recipients of the State
Patrol retirement plan are entitled to a postretirement adjustment annually on January 1 if
the definition of funding stability under paragraph (d) has been met, as follows:
new text end

new text begin (1) a postretirement increase of 2.5 percent must be applied each year, effective on
January 1, to the monthly annuity or benefit of each annuitant or benefit recipient who
has been receiving an annuity or a benefit for at least 12 full months as of the June 30 of
the calendar year immediately before the adjustment; and
new text end

new text begin (2) for each annuitant or benefit recipient who has been receiving an annuity or
a benefit for at least one full month, but less than 12 full months as of the June 30 of
the calendar year immediately before the adjustment, an annual postretirement increase
of 1/12 of 2.5 percent for each month that the person has been receiving an annuity or
benefit must be applied.
new text end

deleted text begin (e) deleted text end new text begin (f) new text end An increase in annuity or benefit payments under this subdivision must be
made automatically unless written notice is filed by the annuitant or benefit recipient
with the executive director of the applicable covered retirement plan requesting that the
increase not be made.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective June 30, 2016.
new text end

Sec. 7.

Minnesota Statutes 2015 Supplement, section 356.415, subdivision 1f, is
amended to read:

Subd. 1f.

Annual postretirement adjustments; Minnesota State Retirement
System judges retirement plan.

deleted text begin (a) The increases provided under this subdivision are in
lieu of increases under subdivision 1 or 1a for retirement annuity, disability benefit, or
survivor benefit recipients of the judges retirement plan.
deleted text end

deleted text begin (b) deleted text end new text begin (a) new text end Retirement annuity, disability benefit, or survivor benefit recipients of the
judges retirement plan are entitled to a postretirement adjustment annually on January 1 new text begin if
the definition of funding stability under paragraph (b) has not been met new text end , as follows:

(1) a postretirement increase of 1.75 percent must be applied each year, effective on
January 1, to the monthly annuity or benefit of each annuitant or benefit recipient who
has been receiving an annuity or a benefit for at least 12 full months as of the June 30 of
the calendar year immediately before the adjustment; and

(2) for each annuitant or benefit recipient who has been receiving an annuity or a
benefit for at least one full month, but less than 12 full months as of the June 30 of the
calendar year immediately before the adjustment, an annual postretirement increase of
1/12 of 1.75 percent for each month that the person has been receiving an annuity or
benefit must be applied.

deleted text begin (c) deleted text end new text begin (b) new text end Increases under deleted text begin this subdivision deleted text end new text begin paragraph (a) new text end terminate on December 31
of the calendar year in which two prior consecutive actuarial valuations prepared by the
approved actuary under sections 356.214 and 356.215 and the standards for actuarial work
promulgated by the Legislative Commission on Pensions and Retirement indicates that
the market value of assets of the judges retirement plan equals or exceeds 70 percent of
the actuarial accrued liability of the retirement plan deleted text begin . deleted text end new text begin and new text end increases under deleted text begin subdivision
1 or 1a, whichever is applicable, begin on the January 1 next following deleted text end new text begin paragraph (c)
commence after new text end that date.

new text begin (c) Retirement annuity, disability benefit, or survivor benefit recipients of the judges
retirement plan are entitled to a postretirement adjustment annually on January 1 if the
definition of funding stability under paragraph (d) has not been met, as follows:
new text end

new text begin (1) a postretirement increase of two percent must be applied each year, effective on
January 1, to the monthly annuity or benefit of each annuitant or benefit recipient who
has been receiving an annuity or a benefit for at least 12 full months as of the June 30 of
the calendar year immediately before the adjustment; and
new text end

new text begin (2) for each annuitant or benefit recipient who has been receiving an annuity or a
benefit for at least one full month, but less than 12 full months as of the June 30 of the
calendar year immediately before the adjustment, an annual postretirement increase of
1/12 of two percent for each month that the person has been receiving an annuity or
benefit must be applied.
new text end

new text begin (d) Increases under paragraph (c) terminate on December 31 of the calendar year
in which two prior consecutive actuarial valuations prepared by the approved actuary
under sections 356.214 and 356.215 and the standards for actuarial work adopted by the
Legislative Commission on Pensions and Retirement indicates that the market value of
assets of the judges retirement plan equals or exceeds 90 percent of the actuarial accrued
liability of the retirement plan and increases under paragraph (e) commence after that date.
new text end

new text begin (e) Retirement annuity, disability benefit, or survivor benefit recipients of the judges
retirement plan are entitled to a postretirement adjustment annually on January 1 if the
definition of funding stability under paragraph (d) has been met, as follows:
new text end

new text begin (1) a postretirement increase of 2.5 percent must be applied each year, effective on
January 1, to the monthly annuity or benefit of each annuitant or benefit recipient who
has been receiving an annuity or a benefit for at least 12 full months as of the June 30 of
the calendar year immediately before the adjustment; and
new text end

new text begin (2) for each annuitant or benefit recipient who has been receiving an annuity or
a benefit for at least one full month, but less than 12 full months as of the June 30 of
the calendar year immediately before the adjustment, an annual postretirement increase
of 1/12 of 2.5 percent for each month that the person has been receiving an annuity or
benefit must be applied.
new text end

deleted text begin (d) deleted text end new text begin (f) new text end An increase in annuity or benefit payments under this subdivision must be
made automatically unless written notice is filed by the annuitant or benefit recipient
with the executive director of the applicable covered retirement plan requesting that the
increase not be made.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective June 30, 2016.
new text end

Sec. 8. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2015 Supplement, section 356.415, subdivision 1, new text end new text begin is repealed.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective June 30, 2016.
new text end