SF 3805

as introduced - 91st Legislature (2019 - 2020) Posted on 05/28/2020 09:34am

A bill for an act
relating to retirement; Teachers Retirement Association; clarifying interest and
service credit provisions; correcting a statutory reference and early retirement
provisions for plan operation compliance; deleting obsolete provisions; making
other changes of an administrative nature; amending Minnesota Statutes 2018,
sections 354.05, subdivisions 2, 41; 354.44, subdivisions 4, 6; 354.46, subdivision
2; 354.49, subdivision 2; 354.543, subdivision 3; repealing Minnesota Statutes
2018, section 354.55, subdivision 10.

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

Section 1.

Minnesota Statutes 2018, section 354.05, subdivision 2, is amended to read:

Subd. 2.

Teacher.

(a) "Teacher" means:

(1) a person who renders service as a teacher, supervisor, principal, superintendent,
librarian, nurse, counselor, social worker, therapist, or psychologist in:

(i) a public school of the state other than in Independent School District No. 625;

(ii) a charter school; new text begin or
new text end

deleted text begin (iii) a charitable, penal, or correctional institution of a governmental subdivision; or
deleted text end

deleted text begin (iv) deleted text end new text begin (iii) new text end the Perpich Center for Arts Education, except that any employee of the Perpich
Center for Arts Education who was covered by the Minnesota State Retirement System
general state employees retirement plan as of July 1, 2018, shall continue to be covered by
that plan and not by the Teachers Retirement Association;

(2) a person who is engaged in educational administration in connection with the state
public school system, whether the position be a public office or as employment;

(3) a person who renders service as a charter school director or chief administrative
officer; provided, however, that if the charter school director or chief administrative officer
is covered by the Public Employees Retirement Association general employees retirement
plan on July 1, 2018, the charter school director or chief administrative officer shall continue
to be covered by that plan and not by the Teachers Retirement Association;

(4) an employee of the Teachers Retirement Association;

(5) a person who renders teaching service on a part-time basis and who also renders
other services for a single employing unit where the teaching service comprises at least 50
percent of the combined employment salary is a member of the association for all services
with the single employing unit or, if less than 50 percent of the combined employment
salary, the executive director determines all of the combined service is covered by the
association; or

(6) a person who is not covered by the plans established under chapter 352D, 354A, or
354B and who is employed by the Board of Trustees of the Minnesota State Colleges and
Universities system in an unclassified position as:

(i) a president, vice-president, or dean;

(ii) a manager or a professional in an academic or an academic support program other
than specified in item (i);

(iii) an administrative or a service support faculty position; or

(iv) a teacher or a research assistant.

(b) "Teacher" does not mean:

(1) a person who works for a school or institution as an independent contractor as defined
by the Internal Revenue Service;

(2) annuitants of the teachers retirement plan who are employed after retirement by an
employing unit that participates in the teachers retirement plan during the course of that
reemployment;

(3) a person who is employed by the University of Minnesota;

(4) a member or an officer of any general governing or managing board or body of an
employing unit that participates in the teachers retirement plan; or

(5) a person employed by Independent School District No. 625 as a teacher as defined
in section 354A.011, subdivision 27.

new text begin EFFECTIVE DATE. new text end

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

Sec. 2.

Minnesota Statutes 2018, section 354.05, subdivision 41, is amended to read:

Subd. 41.

Annual base salary.

(a) "Annual base salary" means:

(1) for an independent school district or educational cooperative, the lowest full-time
Bachelor of Arts (BA) base contract salary for the previous fiscal year for that employing
unit;

(2) for a charter school, the lowest starting annual salary for a full-time deleted text begin licensed deleted text end teacher
employed during the previous fiscal year for that employing unit; and

(3) for a state agency or professional organization, the lowest starting annual salary for
a full-time Teachers Retirement Association covered position for the previous fiscal year
for that employing unit.

(b) If there is no previous fiscal year data because an employer unit is new and paragraph
(c) does not apply, the annual base salary for the first year of operation will be as provided
in paragraph (a), except that the base contract salary for the current fiscal year, rather than
the previous fiscal year, must be used.

(c) For a new employer unit created as a result of a merger or consolidation, the annual
base salary must be the lowest annual base salary as specified in paragraph (a) for any of
the employer units involved in the merger or consolidation.

new text begin EFFECTIVE DATE. new text end

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

Sec. 3.

Minnesota Statutes 2018, section 354.44, subdivision 4, is amended to read:

Subd. 4.

Retirement annuity accrual date.

(a) deleted text begin An annuity payment begins to accrue,
provided that deleted text end new text begin If new text end the new text begin applicable new text end age and service requirements under deleted text begin subdivision 1 deleted text end new text begin this section
new text end are satisfied, deleted text begin after the termination of teaching service, or after the application for retirement
has been filed with the executive director, deleted text end new text begin an annuity payment begins to accrue new text end as follows:

(1) on the day after the termination of teaching service;

(2) on the day of receipt of application if the application is filed with the executive
director after the six-month period that occurs immediately following the termination of
teaching service; new text begin or
new text end

(3) on July 1 for all school principals and other administrators who receive a full annual
contract salary during the fiscal year for performance of a full year's contract duties deleted text begin ; or deleted text end new text begin .
new text end

deleted text begin (4) if an application for retirement is filed with the executive director during the six-month
period that occurs immediately following the termination of teaching service, the annuity
may begin to accrue as if the application for retirement had been filed with the board on the
date teaching service terminated.
deleted text end

(b) A member, or a person authorized to act on behalf of the member, may specify a
different date of retirement from that determined in paragraph (a), as follows:

(1) if the application is filed on or before the date of termination of teaching service, the
accrual date deleted text begin may be a date no deleted text end new text begin must not be new text end earlier than the day after the termination of
teaching service and no later than six months after the termination date; or

(2) if the application is filed during the six-month period that occurs immediately
following the termination of teaching service, the deleted text begin accrual date deleted text end new text begin annuity new text end may begin to accrue
retroactively, but no earlier than the day after new text begin termination of new text end teaching service deleted text begin terminated deleted text end
and no later than six months after the termination date.

new text begin EFFECTIVE DATE. new text end

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

Sec. 4.

Minnesota Statutes 2018, 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.

deleted text begin (e) This paragraph applies to a member 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 shall be paid the normal annuity provided in paragraph
(d) reduced so that the reduced annuity is the actuarial equivalent of the annuity that would
be payable to the employee if the employee deferred receipt of the annuity and the annuity
amount were augmented at an annual rate of three percent compounded annually from the
day the annuity begins to accrue until the normal retirement age 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. Except in regards to section 354.46, this paragraph
remains in effect until June 30, 2015.
deleted text end

deleted text begin (f) Until June 30, 2019, this paragraph applies to a member 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) or (2), as applicable.
deleted text end

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 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) For a member who has not attained age 62 or has fewer than 30 years of service, the
annuity shall be reduced for each year that the member's age of retirement precedes the
normal retirement age by the following early reduction factors:
deleted text end

deleted text begin (i) for the period during which the member is age 55 through age 59, the factor is four
percent; and
deleted text end

deleted text begin (ii) for the period during which the member is age 60 but not yet normal retirement age,
the factor is seven percent.
deleted text end

deleted text begin 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 (g) For members who retire on or after July 1, 2019, deleted text end new text begin (e) new text end 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)
or (2), as applicable.

(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.

(2) For a member who has not attained age 62 or has fewer than 30 years of service, 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 deleted text begin 59 deleted text end new text begin 58 new text end , the factor is
four percent; and

(ii) for the period during which the member is new text begin at least new text end age deleted text begin 60 deleted text end new text begin 59 new text end 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.

deleted text begin (h) After June 30, 2015, and before July 1, 2019, for a person who would have a reduced
retirement annuity under either paragraph (e) or (f) if they were applicable, the employee
is entitled to receive a reduced annuity which must be calculated using a blended reduction
factor augmented monthly by 1/60 of the difference between the reduction required under
paragraph (e) and the reduction required under paragraph (f).
deleted text end

deleted text begin (i) deleted text end new text begin (f) new text end 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 the day following final enactment, except
the amendment to paragraph (g), clause (2), is effective retroactively from June 30, 2018.
new text end

Sec. 5.

Minnesota Statutes 2018, section 354.46, subdivision 2, is amended to read:

Subd. 2.

Surviving spouse survivor coverage.

(a) If the active or deferred member was
at least age 55 and had credit for at least three years of allowable service on the date of
death, the surviving spouse is entitled to the second portion of a 100 percent joint and
survivor annuity specified under section 354.45, based on the age of the active or deferred
member at the time of death and the age of the surviving spouse at the time the benefit
accrues.

(b) If the active or deferred member was under age 55 and had credit for at least 30 years
of allowable service on the date of death, the surviving spouse may elect to receive the
second portion of a 100 percent joint and survivor annuity based on the age of the active or
deferred member on the date of death and the age of the surviving spouse at the time the
benefit accrues. If section 354.44, subdivision 6, applies, the annuity is payable using the
full early retirement reduction under section 354.44, subdivision 6, new text begin paragraph (c), new text end clause
deleted text begin (3)(ii) deleted text end new text begin (2) new text end , to age 55 and one-half of the early retirement reduction from age 55 to the age
payment begins.

(c) If the active or deferred member was under age 55 and had credit for at least three
years of allowable service on the date of death, but did not yet qualify for retirement, the
surviving spouse may elect to receive the second portion of a 100 percent joint and survivor
annuity based on the age of the active or deferred member at the time of death and the age
of the surviving spouse at the time the benefit accrues. If section 354.44, subdivision 6,
applies, the annuity is calculated using the full early retirement reduction under section
354.44, subdivision 6, to age 55 and one-half of the early retirement reduction from age 55
to the age the annuity begins.

(d) The surviving spouse eligible for surviving spouse benefits under this subdivision
may apply for the annuity any time after the member's death. The benefit may not begin to
accrue more than six months before the date the application is filed with the executive
director and may not accrue before the member's death. The benefit is payable for life. Any
benefit under this subdivision is in lieu of benefits under subdivision 1, if applicable, and
in lieu of a refund of accumulated member contributions under section 354.47, subdivision
1.

(e) For purposes of this subdivision, a designated beneficiary must be a former spouse
or a biological or adopted child of the member.

new text begin EFFECTIVE DATE. new text end

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

Sec. 6.

Minnesota Statutes 2018, 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 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;

(3) July 1, 2011, to June 30, 2018, four percent; and

(4) after June 30, 2018, three percent.

For the purpose of this subdivision, interest must be computed on fiscal year end balances
deleted text begin to deleted text end new text begin through new text end the deleted text begin first deleted text end new text begin last new text end day of the month new text begin prior to the month new text end 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.

new text begin EFFECTIVE DATE. new text end

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

Sec. 7.

Minnesota Statutes 2018, section 354.543, subdivision 3, is amended to read:

Subd. 3.

Service credit grant.

Allowable and formula service credit for the purchase
period must be granted by the Teachers Retirement Association to the purchasing teacher
upon receipt of the purchase payment amount. Payment must be made before the teacher's
termination of teaching service. new text begin Purchasing allowable and formula service credit under this
section does not change the date the teacher first became a member of the association for
the purpose of computing an annuity under section 354.44, subdivision 6.
new text end

new text begin EFFECTIVE DATE. new text end

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

Sec. 8. new text begin RETROACTIVE CLARIFICATION RELATING TO THE EARLY
RETIREMENT REDUCTION.
new text end

new text begin Notwithstanding Minnesota Statutes, section 354.44, subdivision 6, paragraph (f), the
references in Minnesota Statutes, section 354.44, subdivision 6, paragraph (f), to "age 59"
shall be read as "age 58" and to "age 60" shall be read as "at least age 59."
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective retroactively from July 1, 2013, to the
day of enactment.
new text end

Sec. 9. new text begin REPEALER.
new text end

new text begin Minnesota Statutes 2018, section 354.55, subdivision 10, 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 the day following final enactment.
new text end

APPENDIX

Repealed Minnesota Statutes: 20-7097

354.55 OPTIONS TO CERTAIN MEMBERS.

Subd. 10.

Reduced benefits.

Any benefit to which any person may be entitled under this chapter may be reduced in amount upon application of the person entitled thereto to the executive director if the person relinquishes in writing all claim to that part of the full benefit which is the difference between the benefit which the person would be otherwise entitled to receive and the benefit which the person will receive after the benefit reduction. The reduced benefit is payment in full of all amounts due under this chapter for the month for which the payment is made and acceptance of the reduced benefit releases the retirement association from all obligation to pay to the person the difference between the amount of the reduced benefit and the full amount of the benefit which the person would otherwise have received. Any benefit reduced under the provisions of this subdivision may not again be restored.