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HF 4156

as introduced - 92nd Legislature (2021 - 2022) Posted on 03/23/2022 12:32pm

KEY: stricken = removed, old language.
underscored = added, new language.
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A bill for an act
relating to retirement; Teachers Retirement Association and St. Paul Teachers
Retirement Fund Association; reinstating the rule of 90; amending Minnesota
Statutes 2020, section 354.44, subdivision 6; Minnesota Statutes 2021 Supplement,
section 354A.31, subdivision 7.

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

Section 1.

Minnesota Statutes 2020, section 354.44, subdivision 6, is amended to read:


Subd. 6.

Computation of formula program retirement annuity.

(a) The formula
retirement annuity must be computed in accordance with the applicable provisions of the
formulas stated in paragraph (b) or (d) on the basis of each member's average salary under
section 354.05, subdivision 13a, for the period of the member's formula service credit.

(b) This paragraph, in conjunction with paragraph (c), applies to a person who first
became a member of the association or a member of a pension fund listed in section 356.30,
subdivision 3
, before July 1, 1989, unless paragraph (d), in conjunction with paragraph (e),
produces a higher annuity amount, in which case paragraph (d) applies. The average salary
as defined in section 354.05, subdivision 13a, multiplied by the following percentages per
year of formula service credit shall determine the amount of the annuity to which the member
qualifying therefor is entitled for service rendered before July 1, 2006:

Period
Coordinated Member
Basic Member
Each year of service
during first ten
1.2 percent per year
2.2 percent per year
Each year of service
thereafter
1.7 percent per year
2.7 percent per year

For service rendered on or after July 1, 2006, by a member other than a member who
was a member of the former Duluth Teachers Retirement Fund Association between January
1, 2006, and June 30, 2015, and for service rendered on or after July 1, 2013, by a member
who was a member of the former Duluth Teachers Retirement Fund Association between
January 1, 2013, and June 30, 2015, the average salary as defined in section 354.05,
subdivision 13a
, multiplied by the following percentages per year of service credit, determines
the amount the annuity to which the member qualifying therefor is entitled:

Period
Coordinated Member
Basic Member
Each year of service
during first ten
1.4 percent per year
2.2 percent per year
Each year of service after
ten years of service
1.9 percent per year
2.7 percent per year

(c)(1) This paragraph applies only to a person who first became a member of the
association or a member of a pension fund listed in section 356.30, subdivision 3, before
July 1, 1989, and whose annuity is higher when calculated under paragraph (b), in conjunction
with this paragraph than when calculated under paragraph (d), in conjunction with paragraph
(e).

(2) Where any member retires prior to normal retirement age under a formula annuity,
the member shall be paid a retirement annuity in an amount equal to the normal annuity
provided in paragraph (b) reduced by one-quarter of one percent for each month that the
member is under normal retirement age at the time of retirement except that for any member
who has 30 or more years of allowable service credit, the reduction shall be applied only
for each month that the member is under age 62.

(3) Any member whose attained age plus credited allowable service totals 90 years is
entitled, upon application, to a retirement annuity in an amount equal to the normal annuity
provided in paragraph (b), without any reduction by reason of early retirement.

(d) This paragraph applies to a member who has become at least 55 years old and first
became a member of the association after June 30, 1989, and to any other member who has
become at least 55 years old and whose annuity amount when calculated under this paragraph
and in conjunction with paragraph (e), is higher than it is when calculated under paragraph
(b), in conjunction with paragraph (c).

(1) For a basic member, the average salary, as defined in section 354.05, subdivision
13a
, multiplied by 2.7 percent for each year of service for a basic member determines the
amount of the retirement annuity to which the basic member is entitled. The annuity of a
basic member who was a member of the former Minneapolis Teachers Retirement Fund
Association as of June 30, 2006, must be determined according to the annuity formula under
the articles of incorporation of the former Minneapolis Teachers Retirement Fund Association
in effect as of that date.

(2) For a coordinated member, the average salary, as defined in section 354.05,
subdivision 13a
, multiplied by 1.7 percent for each year of service rendered before July 1,
2006, and by 1.9 percent for each year of service rendered on or after July 1, 2006, for a
member other than a member who was a member of the former Duluth Teachers Retirement
Fund Association between January 1, 2006, and June 30, 2015, and by 1.9 percent for each
year of service rendered on or after July 1, 2013, for a member of the former Duluth Teachers
Retirement Fund Association between January 1, 2013, and June 30, 2015, determines the
amount of the retirement annuity to which the coordinated member is entitled.

(e) This paragraph applies to a person who has become at least 55 years old and first
becomes a member of the association after June 30, 1989, and to any other member who
has become at least 55 years old and whose annuity is higher when calculated under
paragraph (d) in conjunction with this paragraph than when calculated under paragraph (b)
in conjunction with paragraph (c). An employee who retires under the formula annuity
before the normal retirement age is entitled to receive the normal annuity provided in
paragraph (d), reduced as described in clause (1) ornew text begin without reduction as described in clausenew text end
(2), as applicable.

deleted text begin (1) For a member who is at least age 62 and has at least 30 years of service, the annuity
shall be reduced by an early reduction factor of six percent for each year that the member's
age of retirement precedes the normal retirement age. The resulting reduced annuity shall
be further adjusted to take into account the increase in the monthly amount that would have
occurred had the member retired early and deferred receipt of the annuity until normal
retirement age and the annuity was augmented during the deferral period at 2.5 percent, if
the member commenced employment after June 30, 2006, or at three percent, if the member
commenced employment before July 1, 2006, compounded annually.
deleted text end

deleted text begin (2)deleted text endnew text begin (1)new text end For a member who deleted text beginhas not attained age 62 or has fewer than 30 years of servicedeleted text endnew text begin
is not entitled to a retirement annuity under clause (2)
new text end, the annuity shall be reduced for each
year that the member's age of retirement precedes normal retirement age by the following
early reduction factors:

(i) for the period during which the member is age 55 through age 58, the factor is four
percent; and

(ii) for the period during which the member is at least age 59 but not yet normal retirement
age, the factor is seven percent.

The resulting annuity shall be further adjusted to take into account the increase in the
monthly amount that would have occurred had the member retired early and deferred receipt
of the annuity until normal retirement age and the annuity was augmented during the deferral
period at the applicable annual rate, compounded annually. The applicable annual rate is
the rate in effect for the month that includes the member's effective date of retirement and
shall be considered as fixed for the member for the period until the member reaches normal
retirement age. The applicable annual rate for June 2019 is 2.5 percent, if the member
commenced employment after June 30, 2006, or three percent, if the member commenced
employment before July 1, 2006, compounded annually, and decreases each month beginning
July 2019 in equal monthly increments over the five-year period that begins July 1, 2019,
and ends June 30, 2024, to zero percent effective for July 2024 and thereafter.

After June 30, 2024, the reduced annuity commencing before normal retirement age
under this clause shall not take into account any augmentation.

new text begin (2) A member whose attained age plus credited allowable service totals 90 years is
entitled, upon application, to a retirement annuity in an amount equal to the normal annuity
provided in paragraph (d) without any reduction by reason of early retirement.
new text end

(f) No retirement annuity is payable to a former employee with a salary that exceeds 95
percent of the governor's salary unless and until the salary figures used in computing the
highest five successive years average salary under paragraph (a) have been audited by the
Teachers Retirement Association and determined by the executive director to comply with
the requirements and limitations of section 354.05, subdivisions 35 and 35a.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2022.
new text end

Sec. 2.

Minnesota Statutes 2021 Supplement, section 354A.31, subdivision 7, is amended
to read:


Subd. 7.

Reduction for early retirement.

(a) This subdivision applies to a person who
has become at least 55 years old and first becomes a coordinated member after June 30,
1989, and to any other coordinated member who has become at least 55 years old and whose
annuity is higher when calculated using the retirement annuity formula percentage in
subdivision 4, paragraph (d), in conjunction with this subdivision than when calculated
under subdivision 4, paragraph (c), in conjunction with subdivision 6. An employee who
retires under the formula annuity before the normal retirement age shall be paid the normal
annuity reduced as described in paragraph (b) if the person retires on or after July 1, 2019,
or in paragraph (c) if the person retires before July 1, 2019, as applicable.

(b) A coordinated member who retires before the normal retirement age and on or after
July 1, 2019, is entitled to receive a retirement annuity calculated using the retirement
annuity formula percentage in subdivision 4, paragraph (d), reduced as described in clause
(1) or new text beginwithout reduction as described in clause new text end(2), as applicable.

(1) Ifnew text begin upon retirementnew text end the member deleted text beginretires when the member is younger than age 62 or
with fewer than 30 years of service
deleted text endnew text begin is not entitled to a retirement annuity under clause (2)new text end,
the annuity must be reduced by an early reduction factor for each year that the member's
age of retirement precedes normal retirement age. The early reduction factors are four
percent per year for members whose age at retirement is at least 55 but not yet 59 and seven
percent per year for members whose age at retirement is at least 59 but not yet normal
retirement age. The resulting annuity must be further adjusted to take into account
augmentation as if the employee had deferred receipt of the annuity until normal retirement
age and the annuity were augmented at the applicable annual rate, compounded annually,
from the day the annuity begins to accrue until normal retirement age. The applicable annual
rate is the rate in effect on the employee's effective date of retirement and shall be considered
as fixed for the employee. The applicable annual rates are the following:

(i) until June 30, 2019, 2.5 percent;

(ii) a rate that changes each month, beginning July 1, 2019, through June 30, 2024, which
is determined by reducing the rate in item (i) to zero in equal monthly increments over the
five-year period; and

(iii) after June 30, 2024, zero percent.

After June 30, 2024, the reduced annuity commencing before normal retirement age
under this clause shall not take into account any augmentation.

(2) deleted text beginIf the member retires when the member is at least age 62 or older and has at least 30
years of service, the member is entitled to receive a retirement annuity calculated using the
retirement annuity formula percentage in subdivision 4, paragraph (d), multiplied by the
applicable early retirement factor specified for members "Age 62 or older with 30 years of
service" in the table in paragraph (c).
deleted text endnew text begin Any coordinated member whose attained age plus
credited allowable service totals 90 years is entitled, upon application, to a retirement annuity
in an amount equal to the normal annuity provided in subdivision 4, paragraph (d), without
any reduction by reason of early retirement.
new text end

(c) A coordinated member who retires before the normal retirement age and before July
1, 2019, is entitled to receive a retirement annuity calculated using the retirement annuity
formula percentage in subdivision 4, paragraph (d), multiplied by the applicable early
retirement factor specified below:

Under age 62
Age 62 or older
or less than 30 years of service
with 30 years of service
Normal retirement age:
65
66
65
66
Age at retirement
55
0.5376
0.4592
56
0.5745
0.4992
57
0.6092
0.5370
58
0.6419
0.5726
59
0.6726
0.6062
60
0.7354
0.6726
61
0.7947
0.7354
62
0.8507
0.7947
0.8831
0.8389
63
0.9035
0.8507
0.9246
0.8831
64
0.9533
0.9035
0.9635
0.9246
65
1.0000
0.9533
1.0000
0.9635
66
1.0000
1.0000

For normal retirement ages between ages 65 and 66, the early retirement factors must
be determined by linear interpolation between the early retirement factors applicable for
normal retirement ages 65 and 66.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2022.
new text end