SF 2499

as introduced - 86th Legislature (2009 - 2010) Posted on 02/09/2010 11:36pm

A bill for an act
relating to retirement; Teachers Retirement Association; increasing member and
employer contribution rates; temporarily suspending and temporarily reducing
postretirement adjustment amounts; reducing interest on refunds; eliminating
interest on reemployed annuitant earnings limitation account deferral amount
payments; reducing deferred annuities augmentation rates; amending Minnesota
Statutes 2008, sections 354.42, subdivision 3, by adding subdivisions; 356.47,
subdivision 3; Minnesota Statutes 2009 Supplement, sections 354.42, subdivision
2; 354.47, subdivision 1; 354.49, subdivision 2; 354.55, subdivision 11; 356.415,
subdivision 1, by adding a subdivision.

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

Section 1.

Minnesota Statutes 2009 Supplement, section 354.42, subdivision 2, is
amended to read:

Subd. 2.

Employee contribution.

(a) For a basic member, the employee
contribution to the fund is 9.0 percent the following percentage of the member's salary.:

	before July 1, 2011	9.0 percent
	from July 1, 2011, until June 30, 2012	9.5 percent
	from July 1, 2012, until June 30, 2013	10.0 percent
	from July 1, 2013, until June 30, 2014	10.5 percent
	after June 30, 2014	11.0 percent

(b) For a coordinated member, the employee contribution is 5.5 percent the following
percentage of the member's salary.:

	before July 1, 2011	5.5 percent
	from July 1, 2011, until June 30, 2012	6.0 percent
	from July 1, 2012, until June 30, 2013	6.5 percent
	from July 1, 2013, until June 30, 2014	7.0 percent
	after June 30, 2014	7.5 percent

(c) When an employee contribution rate changes for a fiscal year, the new
contribution rate is effective for the entire salary paid for each employer unit with the
first payroll cycle reported.

(d) After June 30, 2015, if a contribution rate revision is required under subdivisions
4a, 4b, and 4c, the employee contributions under paragraphs (a) and (b) must be adjusted
accordingly.

(b) (e) This contribution must be made by deduction from salary. Where any portion
of a member's salary is paid from other than public funds, the member's employee
contribution must be based on the entire salary received.

Sec. 2.

Minnesota Statutes 2008, section 354.42, subdivision 3, is amended to read:

Subd. 3.

Employer.

(a) The regular employer contribution to the fund by Special
School District No. 1, Minneapolis, after July 1, 2006, and before July 1, 2007, is an
amount equal to 5.0 percent of the salary of each of its teachers who is a coordinated
member and 9.0 percent of the salary of each of its teachers who is a basic member. After
July 1, 2007, the regular employer contribution to the fund by Special School District No.
1, Minneapolis, is an amount equal to 5.5 percent the applicable following percentage of
salary of each coordinated member and 9.5 percent the applicable following percentage
of salary of each basic member.:

	Period	Coordinated Member		Basic Member
	before July 1, 2011		5.5 percent		9.5 percent
	from July 1, 2011, until June 30, 2012		6.0 percent		10.0 percent
	from July 1, 2012, until June 30, 2013		6.5 percent		10.5 percent
	from July 1, 2013, until June 30, 2014		7.0 percent		11.0 percent
	after June 30, 2014		7.5 percent		11.5 percent

The additional employer contribution to the fund by Special School District No. 1,
Minneapolis, after July 1, 2006, is an amount equal to 3.64 percent of the salary of each
teacher who is a coordinated member or is a basic member.

(b) The employer contribution to the fund for every other employer is an amount
equal to 5.0 percent the applicable following percentage of the salary of each coordinated
member and 9.0 percent the applicable following percentage of the salary of each basic
member before July 1, 2007, and 5.5 percent of the salary of each coordinated member
and 9.5 percent of the salary of each basic member after June 30, 2007.:

	Period	Coordinated Member		Basic Member
	before July 1, 2011		5.5 percent		9.5 percent
	from July 1, 2011, until June 30, 2012		6.0 percent		10.0 percent
	from July 1, 2012, until June 30, 2013		6.5 percent		10.5 percent
	from July 1, 2013, until June 30, 2014		7.0 percent		11.0 percent
	after June 30, 2014		7.5 percent		11.5 percent

(c) When an employer contribution rate changes for a fiscal year, the new
contribution rate is effective for the entire salary paid for each employer unit with the
first payroll cycle reported.

(d) After June 30, 2015, if a contribution rate revision is made under subdivisions
4a, 4b, and 4c, the employer contributions under paragraphs (a) and (b) must be adjusted
accordingly.

Sec. 3.

Minnesota Statutes 2008, section 354.42, is amended by adding a subdivision
to read:

Subd. 4a.

Determination.

(a) For purposes of this section, a contribution
sufficiency exists if the total of the employee contributions, the employer contributions,
and any additional employer contributions, if applicable, exceeds the total of the normal
cost, the administrative expenses, and the amortization contribution of the retirement plan
as reported in the most recent actuarial valuation of the retirement plan prepared by the
approved actuary retained under section 356.214 and prepared under section 356.215
and the standards for actuarial work of the Legislative Commission on Pensions and
Retirement.

(b) For purposes of this section, a contribution deficiency exists if the total of
the employee contributions, the employer contributions, and any additional employer
contributions are less than the total of the normal cost, the administrative expenses, and
the amortization contribution of the retirement plan as reported in the most recent actuarial
valuation of the retirement plan prepared by the approved actuary retained under section
356.214 and prepared under section 356.215 and the standards for actuarial work of the
Legislative Commission on Pensions and Retirement.

Sec. 4.

Minnesota Statutes 2008, section 354.42, is amended by adding a subdivision
to read:

Subd. 4b.

Contribution rate revision.

Notwithstanding the contribution rate
provisions under subdivisions 2 and 3, the employee and employer contribution rates
may be adjusted as follows:

(1) if, after June 30, 2015, the regular actuarial valuation of the plan under section
356.215 indicates that there is a contribution sufficiency under subdivision 4a equal to
or greater than one percent of covered payroll and the sufficiency has existed for at least
two consecutive years, the employee and employer contribution rates for the plan may
each be decreased to a level such that the sufficiency equals no more than one percent of
covered payroll based on the most recent actuarial valuation; or

(2) if, after June 30, 2015, the regular valuation of the plan under section 356.215
indicates that there is a deficiency equal to or greater than 0.25 percent of covered payroll
and the deficiency has existed for at least two consecutive years, the employee and
employer contribution rates for the applicable plan may each be increased by:

(i) 0.25 percent if the deficiency is less than 2.00 percent of covered payroll;

(ii) 0.5 percent if the deficiency is equal to or greater than 2.00 percent of covered
payroll and less than or equal to four percent; and

(iii) 0.75 percent if the deficiency is greater than four percent.

Sec. 5.

Minnesota Statutes 2008, section 354.42, is amended by adding a subdivision
to read:

Subd. 4c.

Contribution sufficiency measures.

(a) A contribution sufficiency of up
to one percent of covered payroll must be held in reserve to be used to offset any future
actuarially required contributions that are more than the total combined employee and
employer contributions being collected.

(b) Before any reduction in contributions to eliminate a sufficiency in excess of one
percent of covered pay may be recommended, the executive director must review any
need for a change in actuarial assumptions, as recommended by the actuary retained
under section 356.214 in the most recent experience study of the retirement plan, that
may result in an increase in the actuarially required contribution and must report to the
Legislative Commission on Pensions and Retirement any recommendation by the board
to use the sufficiency exceeding one percent of covered payroll to offset the impact of
an actuarial assumption change recommended by the actuary retained under section
356.214, subdivision 1, and reviewed by the actuary retained by the commission under
section 356.214, subdivision 4.

(c) A contribution sufficiency in excess of one percent of covered pay must not be
used to increase benefits, and a benefit increase must not be proposed that would initiate
an automatic adjustment under this section to increase contributions. A proposed benefit
improvement must include a recommendation, prepared by the actuary retained under
section 356.214, subdivision 1, and reviewed by the actuary retained by the Legislative
Commission on Pensions and Retirement, as provided under section 356.214, subdivision
4, on the manner in which the benefit modification is to be funded.

Sec. 6.

Minnesota Statutes 2008, section 354.42, is amended by adding a subdivision
to read:

Subd. 4d.

Reporting; commission review.

A contribution rate increase or decrease
under subdivision 4b, as determined by the executive director of the Teachers Retirement
Association, must be reported to the chair and the executive director of the Legislative
Commission on Pensions and Retirement on or before the next February 1 and, if the
Legislative Commission on Pensions and Retirement does not recommend against the rate
change or does not recommend a modification in the rate change, is effective on the next
July 1 following the determination by the executive director that a contribution deficiency
or sufficiency exists based on the most recent actuarial valuation under section 356.215.

Sec.7.

Minnesota Statutes 2009 Supplement, section 354.47, subdivision 1, is amended
to read:

Subdivision 1.

Death before retirement.

(a) If a member dies before retirement
and is covered under section 354.44, subdivision 2, and neither an optional annuity, nor a
reversionary annuity, nor a benefit under section 354.46, subdivision 1, is payable to the
survivors if the member was a basic member, then the surviving spouse, or if there is no
surviving spouse, the designated beneficiary is entitled to an amount equal to the member's
accumulated deductions with interest credited to the account of the member to the date of
death of the member. If the designated beneficiary is a minor, interest must be credited to
the date the beneficiary reaches legal age, or the date of receipt, whichever is earlier.

(b) If a member dies before retirement and is covered under section 354.44,
subdivision 6, and neither an optional annuity, nor reversionary annuity, nor the benefit
described in section 354.46, subdivision 1, is payable to the survivors if the member
was a basic member, then the surviving spouse, or if there is no surviving spouse, then
the designated beneficiary is entitled to an amount equal to the member's accumulated
deductions credited to the account of the member as of June 30, 1957, and from July 1,
1957, to the date of death of the member, the member's accumulated deductions plus six
percent interest compounded annually. a refund equal to the accumulated deductions
credited to the member's account plus interest compounded annually until the member's
date of death using the following interest rates:

(1) before July 1, 1957, no interest accrues;

(2) July 1, 1957, to June 30, 2011, six percent; and

(3) after June 30, 2011, four percent.

(c) If the designated beneficiary under paragraph (b) is a minor, any interest credited
under that paragraph must be credited to the date the beneficiary reaches legal age, or
the date of receipt, whichever is earlier.

(d) The amount of any refund payable under this subdivision must be reduced by
any permanent disability payment under section 354.48 received by the member.

Sec. 8.

Minnesota Statutes 2009 Supplement, section 354.49, subdivision 2, is
amended to read:

Subd. 2.

Calculation.

(a) Except as provided in section 354.44, subdivision 1,
any person who ceases to be a member by reason of termination of teaching service, is
entitled to receive a refund in an amount equal to the accumulated deductions credited
to the account as of June 30, 1957, and after July 1, 1957, the accumulated deductions
with interest at the rate of six percent per annum compounded annually. plus interest
compounded annually using the following interest rates:

(1) before July 1, 1957, no interest accrues;

(2) July 1, 1957, to June 30, 2011, six percent; and

(3) after June 30, 2011, four percent.

For the purpose of this subdivision, interest must be computed on fiscal year end
balances to the first day of the month in which the refund is issued.

(b) If the person has received permanent disability payments under section 354.48,
the refund amount must be reduced by the amount of those payments.

Sec. 9.

Minnesota Statutes 2009 Supplement, section 354.55, subdivision 11, is
amended to read:

Subd. 11.

Deferred annuity; augmentation.

(a) Any person covered under section
354.44, subdivision 6, who ceases to render teaching service, may leave the person's
accumulated deductions in the fund for the purpose of receiving a deferred annuity
at retirement.

(b) The amount of the deferred retirement annuity is determined by section 354.44,
subdivision 6, and augmented as provided in this subdivision. The required reserves for
the annuity which had accrued when the member ceased to render teaching service must
be augmented, as further specified in this subdivision, by the applicable interest rate
compounded annually from the first day of the month following the month during which
the member ceased to render teaching service to the effective date of retirement.

(c) No augmentation is not creditable if the deferral period is less than three months
or if deferral commenced before July 1, 1971.

(d) For persons who became covered employees before July 1, 2006, with a deferral
period commencing after June 30, 1971, the annuity must be augmented using as follows:

(1) five percent interest compounded annually until January 1, 1981, and;

(2) three percent interest compounded annually thereafter from January 1, 1981, until
January 1 of the year following the year in which the deferred annuitant attains age 55.;

From that date (3) five percent interest compounded annually from the date
established in clause (2) to the effective date of retirement, the rate is five percent
compounded annually. or until June 30, 2011, whichever is earlier; and

(4) two percent interest compounded annually after June 30, 2011.

(e) For persons who become covered employees after June 30, 2006, the interest
rate used to augment the deferred annuity is 2.5 percent interest compounded annually
until June 30, 2011, or until the effective date of retirement, whichever is earlier, and two
percent interest compounded annually after June 30, 2011.

(f) If a person has more than one period of uninterrupted service, a separate average
salary determined under section 354.44, subdivision 6, must be used for each period
and the required reserves related to each period must be augmented as specified in this
subdivision. The sum of the augmented required reserves is the present value of the
annuity. For the purposes of this subdivision, "period of uninterrupted service" means a
period of covered teaching service during which the member has not been separated from
active service for more than one fiscal year.

(g) If a person repays a refund, the service restored by the repayment must be
considered as continuous with the next period of service for which the person has
allowable service credit in the Teachers Retirement Association.

(h) If a person does not render teaching service in any one fiscal year or more
consecutive fiscal years and then resumes teaching service, the formula percentages used
from the date of the resumption of teaching service must be those applicable to new
members.

(i) The mortality table and interest rate actuarial assumption used to compute the
annuity must be the applicable mortality table established by the board under section
354.07, subdivision 1, and the interest rate actuarial assumption under section 356.215 in
effect when the member retires.

(j) In no case may the annuity payable under this subdivision be less than the amount
of annuity payable under section 354.44, subdivision 6.

(k) The requirements and provisions for retirement before normal retirement age
contained in section 354.44, subdivision 6, also apply to an employee fulfilling the
requirements with a combination of service as provided in section 354.60.

(l) The augmentation provided by this subdivision applies to the benefit provided
in section 354.46, subdivision 2.

(m) The augmentation provided by this subdivision does not apply to any period
in which a person is on an approved leave of absence from an employer unit covered
by the provisions of this chapter.

(n) The retirement annuity or disability benefit of, or the survivor benefit payable on
behalf of, a former teacher who terminated service before July 1, 1997, which is not first
payable until after June 30, 1997, must be increased on an actuarial equivalent basis to
reflect the change in the postretirement interest rate actuarial assumption under section
356.215, subdivision 8, from five percent to six percent under a calculation procedure and
tables adopted by the board as recommended by an approved actuary and approved by the
actuary retained under section 356.214.

Sec. 10.

Minnesota Statutes 2009 Supplement, section 356.415, subdivision 1, is
amended to read:

Subdivision 1.

Annual postretirement adjustments.

(a) Retirement annuity,
disability benefit, or survivor benefit recipients of a covered retirement plan other than
the Teachers Retirement Association are entitled to a postretirement adjustment annually
on January 1, as follows:

(1) a postretirement increase of 2.5 percent must be applied each year, effective
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 prior to the January 1
increase; and

(2) for each annuitant or benefit recipient who has been receiving an annuity or a
benefit amount for at least one full month, an annual postretirement increase of 1/12 of
2.5 percent for each month the person has been receiving an annuity or benefit must
be applied, effective January 1 following the year in which the person has been retired
for less than 12 months.

(b) The increases provided by this section commence on January 1, 2010.

(c) An increase in annuity or benefit payments under this section must be made
automatically unless written notice is filed by the annuitant or benefit recipient with the
executive director of the covered retirement plan requesting that the increase not be made.

(d) The retirement annuity payable to a person who retires before becoming eligible
for Social Security benefits and who has elected the optional payment as provided in
section 353.29, subdivision 6, or 354.35 must be treated as the sum of a period certain
retirement annuity and a life retirement annuity for the purposes of any postretirement
adjustment. The period certain retirement annuity plus the life retirement annuity must be
the annuity amount payable until age 62 for section 353.29, subdivision 6, or age 62, 65,
or normal retirement age, as selected by the member at retirement, for an annuity amount
payable under section 354.35. A postretirement adjustment granted on the period certain
retirement annuity must terminate when the period certain retirement annuity terminates.

Sec. 11.

Minnesota Statutes 2009 Supplement, section 356.415, is amended by adding
a subdivision to read:

Subd. 1a.

Teachers Retirement Association annual postretirement adjustments.

(a) Retirement annuity, disability benefit, or survivor benefit recipients of the Teachers
Retirement Association are entitled to a postretirement adjustment annually on January
1, as follows:

(1) for January 1, 2011, and January 1, 2012, no postretirement increase is payable;

(2) for January 1, 2013, and each successive January 1 until funding stability is
restored, a postretirement increase of two percent must be applied each year, effective on
January 1, to the monthly annuity or benefit amount of each annuitant or benefit recipient
who has been receiving an annuity or a benefit for at least 12 full months prior to the
January 1 increase;

(3) for January 1, 2013, and each successive January 1 until funding stability is
restored, for each annuitant or benefit recipient who has been receiving an annuity or
a benefit for at least one full month, an annual postretirement increase of 1/12 of two
percent for each month the person has been receiving an annuity or benefit must be
applied, effective January 1, following the year in which the person has been retired
for less than 12 months;

(4) for each January 1 following the restoration of funding stability, a postretirement
increase of 2.5 percent must be applied each year, effective January 1, to the monthly
annuity or benefit amount of each annuitant or benefit recipient who has been receiving an
annuity or a benefit for at least 12 full months prior to the January 1 increase; and

(5) for each January 1 following the restoration of funding stability, for each
annuitant or benefit recipient who has been receiving an annuity or a benefit for at least
one full month, an annual postretirement increase of 1/12 of 2.5 percent for each month
the person has been receiving an annuity or benefit must be applied, effective January 1,
following the year in which the person has been retired for less than 12 months.

(b) Funding stability is restored when the actuarial value of assets of the Teachers
Retirement Association equals or exceeds 80 percent of the actuarial accrued liabilities of
the Teachers Retirement Association in the most recent prior actuarial valuation prepared
under section 356.215 and the standards for actuarial work by the approved actuary
retained by the Teachers Retirement Association under section 356.214.

(c) An increase in annuity or benefit payments under this section must be made
automatically unless written notice is filed by the annuitant or benefit recipient with the
executive director of the Teachers Retirement Association requesting that the increase
not be made.

(d) The retirement annuity payable to a person who retires before becoming eligible
for Social Security benefits and who has elected the optional payment as provided in
section 354.35 must be treated as the sum of a period-certain retirement annuity and a life
retirement annuity for the purposes of any postretirement adjustment. The period-certain
retirement annuity plus the life retirement annuity must be the annuity amount payable
until age 62, 65, or normal retirement age, as selected by the member at retirement, for an
annuity amount payable under section 354.35. A postretirement adjustment granted on
the period-certain retirement annuity must terminate when the period-certain retirement
annuity terminates.

Sec. 12.

Minnesota Statutes 2008, section 356.47, subdivision 3, is amended to read:

Subd. 3.

Payment.

(a) Beginning one year after the reemployment withholding
period ends relating to the reemployment that gave rise to the limitation, and the filing
of a written application, the retired member is entitled to the payment, in a lump sum,
of the value of the person's amount under subdivision 2, plus interest at. Interest is the
compound annual rate of six percent from the date that the amount was deducted from the
retirement annuity to the date of payment for any retirement plan other than the Teachers
Retirement Association. For the Teachers Retirement Association, the interest is the
compound annual rate of six percent until June 30, 2011, or until the date of payment,
whichever is earlier. No interest accrues after June 20, 2011.

(b) The written application must be on a form prescribed by the chief administrative
officer of the applicable retirement plan.

(c) If the retired member dies before the payment provided for in paragraph (a) is
made, the amount is payable, upon written application, to the deceased person's surviving
spouse, or if none, to the deceased person's designated beneficiary, or if none, to the
deceased person's estate.

(d) In lieu of the direct payment of the person's amount under subdivision 2, on
or after the payment date under paragraph (a), if the federal Internal Revenue Code so
permits, the retired member may elect to have all or any portion of the payment amount
under this section paid in the form of a direct rollover to an eligible retirement plan as
defined in section 402(c) of the federal Internal Revenue Code that is specified by the
retired member. If the retired member dies with a balance remaining payable under this
section, the surviving spouse of the retired member, or if none, the deceased person's
designated beneficiary, or if none, the administrator of the deceased person's estate may
elect a direct rollover under this paragraph.

Sec. 13. EFFECTIVE DATE.

Sections 1 to 12 are effective July 1, 2010.