SF 2672

as introduced - 86th Legislature (2009 - 2010) Posted on 02/16/2010 01:46pm

A bill for an act
relating to retirement; public employees police and fire retirement plan;
eliminating deferred annuities augmentation after 2010; increasing the vesting
period from three years of allowable service for post-2010 hires; increasing
member and employer contributions after calendar year 2010; modifying
postretirement adjustments after calendar year 2010; amending Minnesota
Statutes 2008, sections 353.651, subdivision 1; 353.71, subdivisions 1, 2;
356.30, subdivision 1; Minnesota Statutes 2009 Supplement, sections 353.65,
subdivisions 2, 3; 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 353.65, subdivision 2, is
amended to read:

Subd. 2.

Employee contribution.

new text begin (a) new text end The employee contribution is deleted text begin 9.4 deleted text end new text begin the
following new text end percent of the salary of the member deleted text begin . deleted text end new text begin :
new text end

	new text begin Before January 1, 2011 new text end	new text begin 9.4 percent new text end
	new text begin After December 31, 2010 new text end	new text begin 9.6 percent new text end

new text begin (b) new text end This contribution must be made by deduction from salary in the manner provided
in subdivision 4.

new text begin (c) new text end Where any portion of a member's salary is paid from other than public funds, the
member's employee contribution is based on the total salary received from all sources.

Sec. 2.

Minnesota Statutes 2009 Supplement, section 353.65, subdivision 3, is
amended to read:

Subd. 3.

Employer contribution.

new text begin (a) new text end The employer contribution is deleted text begin 14.1 deleted text end new text begin the
following new text end percent of the salary of the member deleted text begin . deleted text end new text begin :
new text end

	new text begin Before January 1, 2011 new text end	new text begin 14.1 percent new text end
	new text begin After December 31, 2010 new text end	new text begin 14.4 percent new text end

new text begin (b) new text end This contribution must be made from funds available to the employing
subdivision by the means and in the manner provided in section 353.28.

Sec. 3.

Minnesota Statutes 2008, section 353.651, subdivision 1, is amended to read:

Subdivision 1.

Age and allowable service requirements.

new text begin (a) new text end Upon separation from
public service, any police officer or firefighter member who has attained the age of at
least 55 years and who deleted text begin received credit for not less than three years of allowable service deleted text end
new text begin is vested under paragraph (b) new text end is entitled upon application to a retirement annuity deleted text begin . Such
retirement annuity is deleted text end new text begin , to be new text end known as the "normal" retirement annuity.

new text begin (b) A police officer or firefighter member who first became a member before July 1,
2010, is fully vested for any retirement annuity calculated under subdivision 2 with credit
for not less than three years of allowable service. A police officer or firefighter who
first became a member after June 30, 2010, is vested for the specific percentages of any
retirement annuity calculated under subdivision 2 associated with the following length of
allowable service credit:
new text end

new text begin (1) 50 percent with five years of allowable service;
new text end

new text begin (2) 60 percent with six years of allowable service;
new text end

new text begin (3) 70 percent with seven years of allowable service;
new text end

new text begin (4) 80 percent with eight years of allowable service;
new text end

new text begin (5) 90 percent with nine years of allowable service; and
new text end

new text begin (6) 100 percent with ten or more years of allowable service.
new text end

Sec. 4.

Minnesota Statutes 2008, section 353.71, subdivision 1, is amended to read:

Subdivision 1.

Eligibility.

Any person who has been a member of new text begin a retirement
plan administered by new text end the Public Employees Retirement Association, or new text begin a retirement plan
administered by new text end the Minnesota State Retirement System, or the Teachers Retirement
Association, or any other public retirement system in the state of Minnesota having a like
provision, except a fund providing benefits for police officers or firefighters governed by
sections 69.77 or 69.771 to 69.776, deleted text begin shall be deleted text end new text begin is new text end entitled when qualified to an annuity from
each fund if the total allowable service in all funds or in any two of these funds totals deleted text begin three
or more deleted text end new text begin the number of new text end years new text begin of the retirement plan with the longest vesting requirement new text end ,
provided no portion of the allowable service upon which the retirement annuity from one
fund is based is again used in the computation for benefits from another fund and provided
further that the person has not taken a refund from any one of these funds since the person's
membership in that association or system last terminated. The annuity from each fund deleted text begin shall deleted text end
new text begin must new text end be determined by the appropriate provisions of the law except that the requirement
that a person must have at least deleted text begin three deleted text end new text begin a specific number of new text end years of allowable service in
the respective association or system deleted text begin shall deleted text end new text begin must new text end not apply for the purposes of this section
provided the combined service in two or more of these funds equals three or more years.

Sec. 5.

Minnesota Statutes 2008, section 353.71, subdivision 2, is amended to read:

Subd. 2.

Deferred annuity computation; augmentation.

(a) The deferred annuity
accruing under subdivision 1, or under sections 353.34, subdivision 3, and 353.68,
subdivision 4, must be computed on the basis of allowable service deleted text begin prior to deleted text end new text begin before new text end the
termination of public service and augmented as provided in this paragraph.

new text begin (b) new text end The required reserves applicable to a deferred annuity, or to any deferred
segment of an annuity must be determined as of the first day of the month following the
month in which the former member ceased to be a public employee, or July 1, 1971,
whichever is later. deleted text begin These
deleted text end

new text begin (c) Except for former members of the public employees police and fire retirement
plan for deferral periods after December 31, 2010, the new text end required reserves must be
augmented at the rate of five percent annually compounded annually until January 1,
1981, and at the rate of three percent thereafter until January 1 of the year following the
year in which the former member attains age 55 and from that date to the effective date
of retirement, the rate is five percent compounded annually if the employee became an
employee before July 1, 2006, and at 2.5 percent compounded annually if the employee
becomes an employee after June 30, 2006. If a person has more than one period of
uninterrupted service, the required reserves related to each period must be augmented
as specified in this deleted text begin paragraph deleted text end new text begin subdivision new text end .

new text begin (d) new text end The sum of the augmented required reserves is the present value of the annuity.

new text begin (e) new text end Uninterrupted service for the purpose of this subdivision means periods of
covered employment during which the employee has not been separated from public
service for more than two years. If a person repays a refund, the restored service must
be considered as continuous with the next period of service for which the employee has
credit with this association.

new text begin (f) new text end This section must not reduce the annuity otherwise payable under this chapter.

new text begin (g) new text end This deleted text begin paragraph deleted text end new text begin subdivision new text end applies to individuals who become deferred
annuitants on or after July 1, 1971. For a member who became a deferred annuitant before
July 1, 1971, deleted text begin the paragraph deleted text end new text begin this subdivision new text end applies from July 1, 1971, if the former active
member applies for an annuity after July 1, 1973.

deleted text begin (b) deleted text end new text begin (h) new text end The retirement annuity or disability benefit of, or the survivor benefit payable
on behalf of, a former member who terminated service before July 1, 1997, or the
survivor benefit payable on behalf of a basic or police and fire member who was receiving
disability benefits before July 1, 1997, which is first payable 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 and approved
by the actuary retained under section 356.214.

Sec. 6.

Minnesota Statutes 2008, section 356.30, subdivision 1, is amended to read:

Subdivision 1.

Eligibility; computation of annuity.

(a) Notwithstanding any
provisions of the laws governing the retirement plans enumerated in subdivision 3, a
person who has met the qualifications of paragraph (b) may elect to receive a retirement
annuity from each enumerated retirement plan in which the person has at least one-half
year of allowable service, based on the allowable service in each plan, subject to the
provisions of paragraph (c).

(b) A person may new text begin elect to new text end receive, upon retirement, a retirement annuity from each
enumerated retirement plan in which the person has at least one-half year of allowable
service, and augmentation of a deferred annuity calculated at the appropriate rate under
the laws governing each public pension plan or fund named in subdivision 3, based on
the date of the person's initial entry into public employment from the date the person
terminated all public service if:

(1) the person has allowable service totaling an amount that allows the person to
receive an annuity in deleted text begin any two or more of deleted text end the enumerated deleted text begin plans deleted text end new text begin retirement plan with
the longest allowable service vesting requirement or retirement annuity eligibility
requirement new text end ; and

(2) the person has not begun to receive an annuity from any enumerated plan or the
person has made application for benefits from each applicable plan and the effective
dates of the retirement annuity with each plan under which the person chooses to receive
an annuity are within a one-year period.

(c) The retirement annuity from each plan must be based upon the allowable service,
accrual rates, and average salary in the applicable plan except as further specified or
modified in the following clauses:

(1) the laws governing annuities must be the law in effect on the date of termination
from the last period of public service under a covered retirement plan with which the
person earned a minimum of one-half year of allowable service credit during that
employment;

(2) the "average salary" on which the annuity from each covered plan in which
the employee has credit in a formula plan must be based on the employee's highest five
successive years of covered salary during the entire service in covered plans;

(3) the accrual rates to be used by each plan must be those percentages prescribed by
each plan's formula as continued for the respective years of allowable service from one
plan to the next, recognizing all previous allowable service with the other covered plans;

(4) the allowable service in all the plans must be combined in determining eligibility
for and the application of each plan's provisions in respect to reduction in the annuity
amount for retirement prior to normal retirement age; and

(5) the annuity amount payable for any allowable service under a nonformula plan
of a covered plan must not be affected, but such service and covered salary must be used
in the above calculation.

(d) This section does not apply to any person whose final termination from the last
public service under a covered plan was before May 1, 1975.

(e) For the purpose of computing annuities under this section, the accrual rates
used by any covered plan, except the public employees police and fire plan, the judges
retirement fund, and the State Patrol retirement plan, must not exceed the percent specified
in section 356.315, subdivision 4, per year of service for any year of service or fraction
thereof. The formula percentage used by the judges retirement fund must not exceed the
percentage rate specified in section 356.315, subdivision 8, per year of service for any
year of service or fraction thereof. The accrual rate used by the public employees police
and fire plan and the State Patrol retirement plan must not exceed the percentage rate
specified in section 356.315, subdivision 6, per year of service for any year of service or
fraction thereof. The accrual rate or rates used by the legislators retirement plan must not
exceed 2.5 percent, but this limit does not apply to the adjustment provided under section
3A.02, subdivision 1, paragraph (c).

(f) Any period of time for which a person has credit in more than one of the covered
plans must be used only once for the purpose of determining total allowable service.

(g) If the period of duplicated service credit is more than one-half year, or the person
has credit for more than one-half year, with each of the plans, each plan must apply its
formula to a prorated service credit for the period of duplicated service based on a fraction
of the salary on which deductions were paid to that fund for the period divided by the total
salary on which deductions were paid to all plans for the period.

(h) If the period of duplicated service credit is less than one-half year, or when
added to other service credit with that plan is less than one-half year, the service credit
must be ignored and a refund of contributions made to the person in accord with that
plan's refund provisions.

Sec. 7.

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

Subdivision 1.

Annual postretirement adjustments new text begin ; generally new text end .

(a) Retirement
annuity, disability benefit, or survivor benefit recipients of a covered retirement plan new text begin other
than the public employees police and fire retirement plan new text end 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 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. 8.

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

new text begin Subd. 1a. new text end

new text begin Annual postretirement adjustments; PERA-P&F. new text end

new text begin (a) Retirement
annuity, disability benefit, or survivor benefit recipients of the public employees police
and fire retirement plan are entitled to a postretirement adjustment annually on January
1, as follows:
new text end

new text begin (1) for January 1, 2011, and each successive January 1 that follows the loss of
funding stability as defined under paragraph (b) until funding stability as defined under
paragraph (b) is again restored, for each annuitant or benefit recipient who has been
receiving the annuity or benefit for at least 12 full months as of the immediate preceding
June 30, an amount equal to the percentage increase in the Consumer Price Index for urban
wage earners and clerical workers-all items published by the Bureau of Labor Statistics of
the United States Department of Labor between the immediate preceding June 30 and the
June 30 occurring 12 months previous, but not to exceed 1.5 percent;
new text end

new text begin (2) for January 1, 2011, and each successive January 1 that follows the loss of funding
stability as defined under paragraph (b) until funding stability as defined under paragraph
(b) is again restored, for each annuitant or benefit recipient who has been receiving the
annuity or benefit for at least one full month as of the immediate preceding June 30, an
amount equal to 1/12 of the percentage increase in the Consumer Price Index for urban
wage earners and clerical workers-all items published by the Bureau of Labor Statistics of
the United States Department of Labor between the immediate preceding June 30 and the
June 30 occurring 12 months previous for each full month of annuity or benefit receipt,
but not to exceed 1/12 of 1.5 percent for each full month of annuity or benefit receipt;
new text end

new text begin (3) for each January 1 following the restoration of funding stability as defined
under paragraph (b) and during the continuation of funding stability as defined under
paragraph (b), for each annuitant or benefit recipient who has been receiving the annuity
or benefit for at least 12 full months as of the immediate preceding June 30, an amount
equal to the percentage increase in the Consumer Price Index for urban wage earners and
clerical workers-all items published by the Bureau of Labor Statistics of the United States
Department of Labor between the immediate preceding June 30 and the June 30 occurring
12 months previous, but not to exceed 2.5 percent; and
new text end

new text begin (4) for each January 1 following the restoration of funding stability as defined under
paragraph (b) and during the continuation of funding stability as defined under paragraph
(b), for each annuitant or benefit recipient who has been receiving the annuity or benefit
for at least one full month as of the immediate preceding June 30, an amount equal to
1/12 of the percentage increase in the Consumer Price Index for urban wage earners and
clerical workers-all items published by the Bureau of Labor Statistics of the United States
Department of Labor between the immediate preceding June 30 and the June 30 occurring
12 months previous for each full month of annuity or benefit receipt, but not to exceed
1/12 of 2.5 percent for each full month of annuity or benefit receipt.
new text end

new text begin (b) Funding stability is restored when the market value of assets of the public
employees police and fire retirement plan equal or exceed 90 percent of the actuarial
accrued liabilities of the applicable plan in the most recent prior actuarial valuation
prepared under section 356.215 and under the standards for actuarial work of the
Legislative Commission and Pensions and Retirement by the approved actuary retained by
the Public Employees Retirement Association under section 356.214.
new text end

new text begin (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 Public Employees Retirement Association requesting that the
increase not be made.
new text end

Sec. 9. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 8 are effective the day following final enactment.
new text end