SF 2442

as introduced - 88th Legislature (2013 - 2014) Posted on 03/06/2014 04:47pm

A bill for an act
relating to retirement; Minnesota State Retirement System and Teachers
Retirement Association; specifying the interest rate for computing
joint-and-survivor annuities, revising postretirement adjustment trigger
procedures, revising annuity application time period, and revising reemployed
annuitant benefit withholding procedures in certain divorce situations in
various Minnesota State Retirement System plans; expanding and clarifying the
Teachers Retirement Association medical advisor selection and resumption of
teaching provisions; and making a technical revision in a federal compliance
provision; amending Minnesota Statutes 2012, sections 3A.01, subdivision
1a; 352.01, subdivision 12; 352.115, subdivisions 8, 10; 352B.08, subdivision
3; 354.44, subdivision 5; 354.48, subdivision 6a; 356.635, subdivision 6;
490.121, subdivision 2a; Minnesota Statutes 2013 Supplement, sections 352.03,
subdivision 4; 356.415, subdivisions 1a, 1e, 1f; proposing coding for new law in
Minnesota Statutes, chapter 356.

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

ARTICLE 1

MINNESOTA STATE RETIREMENT SYSTEM
INTEREST RATE FOR COMPUTING JOINT AND SURVIVOR ANNUITIES

Section 1.

Minnesota Statutes 2012, section 3A.01, subdivision 1a, is amended to read:

Subd. 1a.

Actuarial equivalent.

new text begin (a) new text end "Actuarial equivalent" means the condition of
one allowance or benefit having an equal actuarial present value to another allowance or
benefit, determined by the actuary retained under section 356.214 as of a given date at a
specified age with each actuarial present value based on the mortality table applicable for
the plan and approved under section 356.215, subdivision 18, and using the applicable
preretirement or postretirement interest rate assumption specified in section 356.215,
subdivision 8.

new text begin (b) For purposes of computing a joint and survivor annuity, the postretirement
interest rate assumption specified in section 356.461 must be used, rather than the
postretirement interest rate specified in section 356.215, subdivision 8.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2014.
new text end

Sec. 2.

Minnesota Statutes 2012, section 352.01, subdivision 12, is amended to read:

Subd. 12.

Actuarial equivalent.

new text begin (a) new text end "Actuarial equivalent" means the condition
of one annuity or benefit having an equal actuarial present value as another annuity or
benefit, determined as of a given date at a specified age with each actuarial present value
based on the appropriate mortality table adopted by the board of directors based on the
experience of the fund as recommended by the actuary retained under section 356.214, and
approved under section 356.215, subdivision 18, and using the applicable preretirement or
postretirement interest rate assumption specified in section 356.215, subdivision 8.

new text begin (b) For purposes of computing a joint and survivor annuity, the postretirement
interest rate assumption specified in section 356.461 must be used, rather than the
postretirement interest rate specified in section 356.215, subdivision 8.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2014.
new text end

Sec. 3.

Minnesota Statutes 2013 Supplement, section 352.03, subdivision 4, is
amended to read:

Subd. 4.

Duties and powers of board of directors.

(a) The board shall:

(1) elect a chair;

(2) appoint an executive director;

(3) establish rules to administer this chapter and chapters 3A, 352B, 352C, 352D,
and 490 and transact the business of the system, subject to the limitations of law;

(4) consider and dispose of, or take any other action the board of directors deems
appropriate concerning, denials of applications for annuities or disability benefits under
this chapter, chapter 3A, 352B, 352C, 352D, or 490, and complaints of employees and
others pertaining to the retirement of employees and the operation of the system;

(5) oversee the administration of the deferred compensation plan established in
section 352.965;

(6) oversee the administration of the health care savings plan established in section;
and

(7) approve early retirement and optional annuity factors new text begin for all plans administered
by the system, including approving retirement annuity factors for the unclassified state
employees program under chapter 352D new text end , subject to review by the actuary retained by
the Legislative Commission on Pensions and Retirement; establish the schedule for
implementation of the approved factors; and notify the Legislative Commission on
Pensions and Retirement of the implementation schedule.

(b) The board shall advise the director on any matters relating to the system and
carrying out functions and purposes of this chapter. The board's advice shall control.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2014.
new text end

Sec. 4.

Minnesota Statutes 2012, section 352B.08, subdivision 3, is amended to read:

Subd. 3.

Optional annuity forms.

new text begin (a) new text end In lieu of the single life annuity provided in
subdivision 2, the member or former member may elect an optional annuity form. The
board of the Minnesota state retirement system shall establish a joint and survivor annuity,
payable to a designated beneficiary for life, adjusted to the actuarial equivalent value of
the single life annuity. The board shall also establish an additional optional annuity with
an actuarial equivalent value of the single life annuity in the form of a joint and survivor
annuity which provides that the elected annuity be reinstated to the single life annuity
provided in subdivision 2, if after commencing the elected joint and survivor annuity, the
designated beneficiary dies before the member, which reinstatement is not retroactive but
takes effect for the first full month occurring after the death of the designated beneficiary.
The board may also establish other actuarial equivalent value optional annuity forms. In
establishing actuarial equivalent value optional annuity forms, each optional annuity form
shall have the same present value as a regular single life annuity using the mortality
table adopted by the board and the interest assumption specified in section 356.215,
subdivision 8 deleted text begin , and deleted text end new text begin .
new text end

new text begin (b) For purposes of computing a joint and survivor annuity, the postretirement
interest rate assumption specified in section 356.461 must be used, rather than the
postretirement interest rate specified in section 356.215, subdivision 8.
new text end

new text begin (c) new text end The board shall obtain the written recommendation of the actuary retained under
section 356.214. These recommendations shall be a part of the permanent records of
the board.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2014.
new text end

Sec. 5.

new text begin [356.461] MINNESOTA STATE RETIREMENT SYSTEM; JOINT AND
SURVIVOR ANNUITY COMPUTATION.
new text end

new text begin Subdivision 1. new text end

new text begin Joint and survivor annuity computation. new text end

new text begin Notwithstanding any
provision of section 356.215, subdivision 8, to the contrary, for purposes of computing joint
and survivor annuities, the applicable postretirement interest assumption is 6.5 percent.
new text end

new text begin Subd. 2. new text end

new text begin Covered plans. new text end

new text begin This section applies to the following retirement plans:
new text end

new text begin (1) the legislators retirement plan, established under chapter 3A, including
constitutional officers as specified in that chapter;
new text end

new text begin (2) the correctional state employees retirement plan of the Minnesota State
Retirement System, established under chapter 352;
new text end

new text begin (3) the general state employees retirement plan of the Minnesota State Retirement
System, established under chapter 352;
new text end

new text begin (4) the State Patrol retirement plan, established under chapter 352B;
new text end

new text begin (5) the unclassified state employees retirement program of the Minnesota State
Retirement System, established under chapter 352D; and
new text end

new text begin (6) the judges retirement plan, established under chapter 490.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2014.
new text end

Sec. 6.

Minnesota Statutes 2012, section 490.121, subdivision 2a, is amended to read:

Subd. 2a.

Actuarial equivalent.

new text begin (a) new text end "Actuarial equivalent" means the condition
of one annuity or benefit having an equal actuarial present value as another annuity or
benefit, determined as of a given date with each actuarial present value based on the
appropriate mortality table adopted by the board of directors of the Minnesota State
Retirement System based on the experience of the fund as recommended by the actuary
retained under section 356.214 and approved under section 356.215, subdivision 18, and
using the applicable preretirement or postretirement interest rate assumption specified in
section 356.215, subdivision 8.

new text begin (b) For purposes of computing a joint and survivor annuity, the postretirement
interest rate assumption specified in section 356.461 must be used, rather than the
postretirement interest rate specified in section 356.215, subdivision 8.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2014.
new text end

ARTICLE 2

MINNESOTA STATE RETIREMENT SYSTEM PLANS
POSTRETIREMENT ADJUSTMENT TRIGGER PROCEDURES

Section 1.

Minnesota Statutes 2013 Supplement, section 356.415, subdivision 1a,
is amended to read:

Subd. 1a.

Annual postretirement adjustments; Minnesota State Retirement
System plans other than State Patrol retirement plan.

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

(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 18 full months before the
January 1 increase; and

(2) for each annuitant or benefit recipient who has been receiving an annuity or
a benefit for at least six full months, 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, effective January 1, following the calendar year in which the person has been
retired for at least six months, but has been retired for less than 18 months.

(b) The increases provided by this subdivision commence on January 1, 2011.
Increases under this subdivision for the general state employees retirement plan, the
correctional state employees retirement plan, or the judges retirement plan terminate on
December 31 of the calendar year in which deleted text begin the deleted text end new text begin two prior consecutive new text end actuarial deleted text begin valuation
deleted text end new text begin valuations new text end 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 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 or the elected state officers retirement plan terminate
on December 31 of the calendar year in which the actuarial valuation 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 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.

(c) 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 July 1, 2014.
new text end

Sec. 2.

Minnesota Statutes 2013 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, 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 18 full months before the January 1
increase; and

(2) for each annuitant or benefit recipient who has been receiving an annuity or a
benefit for at least six full months, 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,
effective January 1, following the calendar year in which the person has been retired for at
least six months, but has been retired for less than 18 months.

(b) The increases provided by this subdivision commence on January 1, 2014.
Increases under paragraph (a) for the State Patrol retirement plan terminate on December
31 of the calendar year in which deleted text begin the deleted text end new text begin two prior consecutive new text end actuarial deleted text begin valuation deleted text end new text begin valuations
new text end 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 and increases
under paragraph (c) recommence 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, 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 18 full months before the January 1
increase; and

(2) for each annuitant or benefit recipient who has been receiving an annuity or a
benefit for at least six full months, 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,
effective January 1, following the calendar year in which the person has been retired for at
least six months, but has been retired for less than 18 months.

(d) Increases under paragraph (c) for the State Patrol retirement plan terminate on
December 31 of the calendar year in which deleted text begin the deleted text end new text begin two prior consecutive new text end actuarial deleted text begin valuation
deleted text end new text begin valuations new text end 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 subdivision 1 recommence after that date.

(e) 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 July 1, 2014.
new text end

Sec. 3.

Minnesota Statutes 2013 Supplement, section 356.415, subdivision 1f, is
amended to read:

Subd. 1f.

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

(a) The increases provided under this subdivision begin
on January 1, 2014, and are in lieu of increases under subdivision 1 or 1a for retirement
annuity, disability benefit, or survivor benefit recipients of the judges retirement plan.

(b) Retirement annuity, disability benefit, or survivor benefit recipients of the
judges retirement plan are entitled to a postretirement adjustment annually on January
1, 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 18 full months before the
January 1 increase; and

(2) for each annuitant or benefit recipient who has been receiving an annuity or a
benefit for at least six full months, 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, effective January 1, following the calendar year in which the person has been
retired for at least six months, but has been retired for less than 18 months.

(c) Increases under this subdivision terminate on December 31 of the calendar
year in which deleted text begin the deleted text end new text begin two prior consecutive new text end actuarial deleted text begin valuation deleted text end new text begin valuations new text end 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. Increases under subdivision 1 or 1a,
whichever is applicable, begin on the January 1 next following that date.

(d) 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 July 1, 2014.
new text end

ARTICLE 3

MISCELLANEOUS PROVISIONS

Section 1.

Minnesota Statutes 2012, section 352.115, subdivision 8, is amended to read:

Subd. 8.

Accrual of annuity.

deleted text begin State employees shall apply for an annuity. deleted text end The
application new text begin for an annuity new text end must not be made more than deleted text begin 90 deleted text end new text begin 60 new text end days before the time the new text begin state
new text end employee deleted text begin is eligible to retire by reason of both age and service requirements deleted text end new text begin or former
state employee elects to begin collecting a retirement annuity new text end . If the director determines an
applicant for annuity has fulfilled the legal requirements for an annuity, the director shall
authorize the annuity payment in accordance with this chapter and payment must be made
as authorized. An annuity shall begin to accrue no earlier than 180 days before the date the
application is filed with the director, but not before the day following the termination of
state service or before the day the employee is eligible to retire by reason of both age and
service requirements. The retirement annuity shall cease with the last payment which had
accrued during the lifetime of the retired employee unless an optional annuity provided in
section 352.116, subdivision 3, had been selected and had become payable. The joint and
last survivor annuity shall cease with the last payment received by the survivor during
the lifetime of the survivor. If a retired employee had not selected an optional annuity, or
a survivor annuity is not payable under the option, and a spouse survives, the spouse is
entitled only to the annuity for the calendar month in which the retired employee died.
If an optional annuity is payable after the death of the retired employee, the survivor is
entitled to the annuity for the calendar month in which the retired employee died.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2014.
new text end

Sec. 2.

Minnesota Statutes 2012, section 352.115, subdivision 10, is amended to read:

Subd. 10.

Reemployment of annuitant.

(a) Except for salary or wages received
as a temporary employee of the legislature during a legislative session, if any retired
employee again becomes entitled to receive salary or wages from any employer who
employs state employees as that term is defined in section 352.01, subdivision 2, in a
position covered by this chapter, the annuity or retirement allowance must cease deleted text begin when deleted text end new text begin the
first of the month following the month that new text end the retired employee has earned an amount
equal to the annual maximum earnings allowable for that age for the continued receipt of
full benefit amounts monthly under the federal old age, survivors, and disability insurance
program as set by the secretary of health and human services under United States Code,
title 42, section 403, in any calendar year. If the retired employee has not yet reached the
minimum age for the receipt of Social Security benefits, the maximum earnings for the
retired employee are equal to the annual maximum earnings allowable for the minimum
age for the receipt of Social Security benefits.

(b) The balance of the annual retirement annuity after cessation must be handled or
disposed of as provided in section 356.47.

(c) The annuity must be resumed deleted text begin when deleted text end new text begin the first of the month following the month
that new text end state service ends, or, if the retired employee is still employed at the beginning of the
next calendar year, at the beginning of that calendar year, and payment must again end
when the retired employee has earned the applicable reemployment earnings maximum
specified in this subdivision. If the retired employee is granted a sick leave without pay,
but not otherwise, the annuity or retirement allowance must be resumed during the period
of sick leave.

(d) No payroll deductions for the retirement fund may be made from the earnings of
a reemployed retired employee.

(e) No change may be made in the monthly amount of an annuity or retirement
allowance because of the reemployment of an annuitant.

(f) If a reemployed annuitant whose annuity is suspended under paragraph (a)
is having insurance premium amounts withheld under section 356.87, subdivision 2,
insurance premium amounts must continue to be withheld and transferred from the
suspended portion of the annuity. The balance of the annual retirement annuity after
cessation, after deduction of the insurance premium amounts, must be treated as specified
in paragraph (b).

new text begin (g) If a reemployed annuitant whose annuity is suspended under paragraph (a)
has a former spouse receiving a portion of the annuity allowable under section 518.58,
subdivision 1, the portion payable to the former spouse must continue to be paid.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively from January 1, 2014.
new text end

Sec. 3.

Minnesota Statutes 2012, section 354.44, subdivision 5, is amended to read:

Subd. 5.

Resumption of teaching service after retirement.

(a) Any person who
retired under the provisions of this chapter and has thereafter resumed teaching in any
employer unit to which this chapter applies is eligible to continue to receive payments
in accordance with the annuity except that all or a portion of the annuity payments must
be deferred during the calendar year immediately following the fiscal year in which the
person's salary from the teaching service is in an amount greater than $46,000. The
amount of the annuity deferral is one-half of the salary amount in excess of $46,000 and
must be deducted from the annuity payable for the calendar year immediately following
the fiscal year in which the excess amount was earned.

(b) If the person is retired for only a fractional part of the fiscal year during the initial
year of retirement, the maximum reemployment salary exempt from triggering a deferral
as specified in this subdivision must be prorated for that fiscal year.

(c) After a person has reached the Social Security normal retirement age, no deferral
requirement is applicable regardless of the amount of salary.

(d) The amount of the retirement annuity deferral must be handled or disposed
of as provided in section 356.47.

(e) For the purpose of this subdivision, salary from teaching service includes new text begin all
salary or income earned as a teacher as defined in section 354.05, subdivision 2, paragraph
(a), clause (1). Salary from teaching service also includes new text end , but is not limited to:

(1) all income for services performed as a consultant deleted text begin or an deleted text end new text begin , new text end independent contractor
deleted text begin for deleted text end new text begin , or third-party supplier, or as a employee of a consultant, independent contractor, or
third-party supplier, to new text end an employer unit covered by the provisions of this chapter; and

(2) the greater of either the income received or an amount based on the rate paid with
respect to an administrative position, consultant, deleted text begin or deleted text end independent contractor new text begin , or third-party
supplier, or as an employee of a consultant, independent contractor, or third-party supplier,
new text end in an employer unit with approximately the same number of pupils and at the same level
as the position occupied by the person who resumes teaching service.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2014.
new text end

Sec. 4.

Minnesota Statutes 2012, section 354.48, subdivision 6a, is amended to read:

Subd. 6a.

Medical adviser; duties.

deleted text begin The state commissioner of health or a
licensed physician on the staff of the Department of Health who is designated by the
commissioner is the medical adviser of deleted text end The executive director new text begin may contract with an
accredited independent organization specializing in disability determinations, licensed
physicians, or physicians on the staff of the commissioner of health as designated by the
commissioner, to be the medical advisor to the executive director new text end . The medical adviser
shall designate licensed physicians, licensed chiropractors, or licensed psychologists with
respect to a mental impairment, who shall examine applicants for disability benefits. The
medical adviser shall pass upon all expert reports based on any examinations performed
in order to determine whether a teacher is totally and permanently disabled as defined in
section 354.05, subdivision 14. The medical adviser shall also investigate all health and
medical statements and certificates by or on behalf of a teacher in connection with a
disability benefit, and shall report in writing to the director setting forth any conclusions
and recommendations on all matters referred to the medical adviser.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2014.
new text end

Sec. 5.

Minnesota Statutes 2012, section 356.635, subdivision 6, is amended to read:

Subd. 6.

Eligible retirement plan.

(a) An "eligible retirement plan" is:

(1) an individual retirement account under section 408(a) or 408A of the federal
Internal Revenue Code;

(2) an individual retirement annuity plan under section 408(b) of the federal Internal
Revenue Code;

(3) an annuity plan under section 403(a) of the federal Internal Revenue Code;

(4) a qualified trust plan under section 401(a) of the federal Internal Revenue Code
that accepts the distributee's eligible rollover distribution;

(5) an annuity contract under section 403(b) of the federal Internal Revenue Code;

(6) an eligible deferred compensation plan under section 457(b) of the federal
Internal Revenue Code, which is maintained by a state or local government and which
agrees to separately account for the amounts transferred into the plan; or

(7) in the case of an eligible rollover distribution to a nonspousal beneficiary, an
individual account or annuity treated as an inherited individual retirement account under
section 402(c)(11) of the federal Internal Revenue Code.

(b) For distributions of after-tax contributions which are not includable in gross
income, the after-tax portion may be transferred only to an individual retirement account
or annuity described in section 408(a) or (b) of the federal Internal Revenue Code, to a
Roth individual retirement account described in section 408A of the federal Internal
Revenue Code, or to a qualified plan described in either section 401(a) new text begin of the federal
Internal Revenue Code new text end or deleted text begin 403(a) deleted text end new text begin to an annuity contract described in section 403(b) new text end of
the federal Internal Revenue Code, that agrees to separately account for the amounts
transferred, including separately accounting for the portion of the distribution which is
includable in gross income and the portion of the distribution which is not includable.

new text begin EFFECTIVE DATE. new text end

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