as introduced - 83rd Legislature (2003 - 2004) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to retirement; modifying military service 1.3 credit purchase provisions in the teachers retirement 1.4 association and first class city teacher plans; 1.5 providing for compliance with certain provisions of 1.6 the Internal Revenue Code related to all retirement 1.7 plans; making other clarifying and technical changes; 1.8 amending Minnesota Statutes 2002, sections 354.42, 1.9 subdivision 7; 354.53; 354.533, subdivision 1; 1.10 354A.093; 354A.097, subdivision 1; 356.611, 1.11 subdivision 2, by adding a subdivision; proposing 1.12 coding for new law in Minnesota Statutes, chapter 356. 1.13 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.14 Section 1. Minnesota Statutes 2002, section 354.42, 1.15 subdivision 7, is amended to read: 1.16 Subd. 7. [ERRONEOUS SALARY DEDUCTIONS OR DIRECT PAYMENTS.] 1.17 (a) Any deductions taken from the salary of an employee for the 1.18 retirement fund in errorshallmust be refunded to the employee 1.19 upon discovery and verification by the employing unit making the 1.20 deduction, and the corresponding employer contribution and 1.21 additional employer contribution amounts attributable to the 1.22 erroneous salary deduction must be refunded to the employing 1.23 unit. 1.24 (b) If salary deductions and employer contributions were 1.25 erroneously transmitted to the retirement fund and should have 1.26 been transmitted to another Minnesota public pension plan, the 1.27 retirement association must transfer these salary deductions and 1.28 employer contributions to the appropriate public pension fund 1.29 without interest. For purposes of this paragraph, a Minnesota 2.1 public pension plan means a plan specified in section 356.30, 2.2 subdivision 3, or the plan governed by chapter 354B. 2.3 (c) Any transfer under paragraph (b) that would cause the 2.4 plan to fail to be a qualified plan under section 401(a) of the 2.5 Internal Revenue Code, as amended, must not be transferred. 2.6 Within 30 days after being notified by the teachers retirement 2.7 association, the employer must transmit an amount representing 2.8 the applicable salary deductions and employer contributions, 2.9 without interest, to the appropriate Minnesota public pension 2.10 plan fund. The pension plan fund which received the erroneous 2.11 salary deductions and employer contributions and is unable to 2.12 make the transfer must provide a credit for that amount against 2.13 future contributions from the employer. 2.14 (d) If a salary warrant or check from which a deduction for 2.15 the retirement fund was taken has been canceled or the amount of 2.16 the warrant or check has been returned to the funds of the 2.17 employing unit making the payment, a refund of the amount 2.18 deducted, or any portion of it that is required to adjust the 2.19 salary deductions, shall be made to the employing unit. 2.20(d)(e) Any erroneous direct payments of member-paid 2.21 contributions or erroneous salary deductions that were not 2.22 refunded in the regular payroll cycle processingof an employing2.23unit's annual summary reportshall be refunded to the member 2.24 with interest computed using the rate and method specified in 2.25 section 354.49, subdivision 2. 2.26 (f) Any refund under this subdivision that would cause the 2.27 plan to which it relates to fail to be a qualified plan under 2.28 section 401(a) of the Internal Revenue Code, as amended, shall 2.29 not be refunded and shall instead be credited against future 2.30 contributions from the employer. The employer is responsible 2.31 for refunding any amount that was erroneously deducted from the 2.32 salary of the employee, with interest as specified in paragraph 2.33 (e). 2.34 Sec. 2. Minnesota Statutes 2002, section 354.53, is 2.35 amended to read: 2.36 354.53 [CREDIT FORMILITARYBREAK IN SERVICELEAVE OF3.1ABSENCETO PROVIDE UNIFORMED SERVICE.] 3.2 Subdivision 1. [EMPLOYEE AND EMPLOYER CONTRIBUTIONS.] (a) 3.3 Anyemployee given a leave of absence to enter military3.4serviceteacher who is absent from employment by reason of 3.5 service in the uniformed services, as defined in United States 3.6 Code, title 38, section 4303(13), and who returns to the 3.7 employer providing teaching service upon discharge frommilitary3.8 serviceas providedin the uniformed service within the time 3.9 frames required in United States Code, title 38, section192.2623.10 4312(e), may obtain service credit for the period ofmilitary3.11 such uniformed servicebut shall not receive credit for any3.12voluntary extension of military service at the instance of the3.13member beyond the initial period of enlistment, induction or3.14call to active duty, as further specified in this section. 3.15 (b) The member shall obtain credit by paying into the fund 3.16 an employee contribution based upon the contribution rate or 3.17 rates in effect at the time that themilitaryuniformed service 3.18 was performed multiplied by the years, including fractions of a 3.19 year, being purchased multiplied by the annual salary rateof3.20the member for the year beginning with the date of return from3.21military service and the number of years of military service3.22together with interest thereon at an annual rate of 8.5 percent3.23compounded annually from the time the military service was3.24rendered to the first date of payment. The annual salary rate 3.25 is the average annual salary during the purchase period that the 3.26 teacher would have received if the teacher had continued to 3.27 provide teaching service to the employer rather than uniformed 3.28 service, or if the determination of that rate is not reasonably 3.29 certain, the annual salary rate is the teacher's average salary 3.30 rate during the 12-month period immediately preceding such 3.31 period, or, if less than 12 months, the period of teacher 3.32 employment immediately preceding such period of uniformed 3.33 service. 3.34 (c) The employer contribution and, if applicable, the 3.35 additional contribution provided in section 354.42 must be paid 3.36 by the employing unitatas provided in section 354.52, 4.1 subdivision 4, using the employer contribution rate or rates in 4.2 effect at the time that themilitaryuniformed service was 4.3 performed, applied to the same annual salary rateofor rates 4.4 used to compute themember for the year beginning with the date4.5of return from military service, in the manner provided in4.6section 354.52, subdivision 4employee contribution. 4.7 Subd. 2. [CALCULATION OF CREDIT.] (a) For purposes of a 4.8 money purchase annuity, all payments into the fundpursuant to4.9 under this section shall be considered accumulations after July 4.10 1, 1957, for the purpose of computing any annuityin accordance4.11withunder section 354.44, subdivision 2. 4.12 (b) For purposes of a formula annuity, if the employee 4.13 contributionsand interest thereonprovided in this section are 4.14 not paid in full, the member's formula service credit shall be 4.15calculatedprorated by multiplying the number of years including 4.16 fractions of a year ofmilitaryuniformed service eligible for 4.17 purchase by the ratio obtained by dividing the totalamount paid4.18andemployee contribution received by themaximum amount payable4.19provided hereintotal employee contribution otherwise required 4.20 under this section. 4.21 Subd. 3. [PAYMENTSELIGIBLE PAYMENT PERIOD.]Payments4.22pursuant to this(a) To receive service credit under this 4.23 section, the contributions specified in this sectionshallmust 4.24 bemade withintransmitted to the teachers retirement 4.25 association during the period beginning with the date the 4.26 individual returns to teaching service and whose duration is 4.27 three times the length of the uniformed service period, not to 4.28 exceed five yearsfrom the date of discharge. 4.29 (b) If the payment period specified under paragraph (a) is 4.30 less than one year, the contributions required under this 4.31 section to receive service credit may be made within one year 4.32 from the discharge date. 4.33 Subd. 4. [LIMITS OF SERVICE CREDIT PURCHASE.] The service 4.34 credit purchase under this section may not exceed five years, 4.35 unless a longer purchase period is required under United States 4.36 Code, title 38, section 4312. 5.1 Subd. 5. [INTEREST REQUIREMENTS.] The employer shall pay 5.2 interest on all employee and employer contribution amounts 5.3 payable under this section. Interest is to be computed at a 5.4 rate of 8.5 percent compounded annually from the end of each 5.5 fiscal year of the leave or break in service to the end of the 5.6 month in which payment is received. 5.7 Sec. 3. Minnesota Statutes 2002, section 354.533, 5.8 subdivision 1, is amended to read: 5.9 Subdivision 1. [SERVICE CREDIT PURCHASE AUTHORIZED.] A 5.10 teacher who has at least three years of allowable service credit 5.11 with the teachers retirement association and who performed 5.12 service in the United States armed forces before becoming a 5.13 teacher as defined in section 354.05, subdivision 2, or who 5.14 failed to obtain service credit for a military leave of absence 5.15 under the provisions of section 354.53, is entitled to purchase 5.16 allowable and formula service credit for the initial period of 5.17 enlistment, induction, or call to active dutywithout any5.18voluntary extension, not to exceed ten years, by making payment 5.19 under section 356.55 provided the teacheris not entitled to5.20receive a current or deferred retirement annuity from a United5.21States armed forces pension plan andhas not purchased service 5.22 credit from any other defined benefit public employee pension 5.23 plan for the same period of service. 5.24 Sec. 4. Minnesota Statutes 2002, section 354A.093, is 5.25 amended to read: 5.26 354A.093 [MILITARYBREAK IN SERVICECREDITTO PROVIDE 5.27 UNIFORMED SERVICE.] 5.28 Subdivision 1. [ELIGIBILITY.] Any teacher in the 5.29 coordinated program of either the Minneapolis teachers 5.30 retirement fund association or the St. Paul teachers retirement 5.31 fund association or any teacher in the new law coordinated 5.32 program of the Duluth teachers retirement fund association who 5.33 isgranted a leaveabsent from employment by reason ofabsence5.34to enter militaryservice in the uniformed services as defined 5.35 in United States Code, title 38, section 4303(13) and who 5.36 returns to the employer providing active teaching service upon 6.1 discharge frommilitaryuniformed serviceas provided inwithin 6.2 the time frames required under United States Code, title 38, 6.3 section192.2624312(e), shall be entitled to receive allowable 6.4 service credit in the applicable association for all or a 6.5 portion of the period ofmilitaryuniformed servicebut, 6.6 provided that the teacher did notfor any voluntary extension of6.7militaryseparate from uniformed servicebeyond the initial6.8period of enlistment, inductionwith a dishonorable orcall to6.9active duty which occurred at the instance of the teacherbad 6.10 conduct discharge or under other than honorable conditions. 6.11 Subd. 2. [CONTRIBUTIONS.] If the teachergranted the6.12military service leave of absencemakes the employee 6.13 contribution for a period ofmilitary service leave of absence6.14pursuant toservice provided to the uniformed services under 6.15 this section, the employing unit shall make an employer 6.16 contribution on behalf of the teacher to the applicable 6.17 association for the periodof the military service leave of6.18absencebeing purchased in the manner described in section 6.19 354A.12, subdivision 2a. The employee and employer 6.20 contributions shall be in an amount equal to the employee and 6.21 employer contribution rates in effect for other active members 6.22 of the association covered by the same program applied to a 6.23 salary figure equal to the teacher's average annual salary 6.24 rateat the date of return from military servicethat the 6.25 teacher would have received if the leave or break in service had 6.26 not occurred, or if the determination of that average salary 6.27 rate is not reasonably certain, on the basis of the teacher's 6.28 average salary rate during the 12-month period immediately 6.29 preceding such period, or, if less than 12 months, the period of 6.30 teacher employment immediately preceding such period of 6.31 uniformed service, multiplied by the number of years and 6.32 fractions of a year constituting the period of service provided 6.33 to themilitaryuniformed serviceleave of absencewhich the 6.34 teacherseeksis authorized to purchase under this 6.35 section.Payment shall include interest on the amount payable6.36pursuant to this section at the rate of six percent compounded7.1annually from the year the military service was rendered to the7.2date of payment.7.3 Subd. 3. [PRORATING.] If the payments made by a 7.4 teacherpursuant tounder this section are less thananthe full 7.5 amountequal to the applicable contribution rate applied to a7.6salary figure equal to the teacher's annual salary rate at the7.7date of return from military service, multiplied by the number7.8of years constituting the period of the military service leave7.9of absencedetermined under subdivision 2, the service credit 7.10 shall be prorated. The prorated service credit shall be 7.11 determined by the ratio between the amount of the 7.12 actual employee payment which was made and the fullcontribution7.13amount payable pursuant toemployee payment required under this 7.14 section.In order to be entitled to receive service credit7.15under this section, payment shall be made within five years from7.16the date of discharge from military service.7.17 Subd. 4. [ELIGIBLE PAYMENT PERIOD.] (a) To receive service 7.18 credit under this section, the contributions specified in this 7.19 section must be transmitted to the applicable first class city 7.20 teachers retirement fund association during the period beginning 7.21 with the date the individual returns to teaching service and 7.22 whose duration is three times the length of the uniformed 7.23 service period, not to exceed five years. 7.24 (b) If the payment period specified under paragraph (a) is 7.25 less than one year, the contributions required under this 7.26 section to receive service credit may be made within one year 7.27 from the discharge date. 7.28 Subd. 5. [LIMITS ON SERVICE CREDIT PURCHASE.] The service 7.29 credit purchase under this section may not exceed five years, 7.30 unless a longer purchase period is required under United States 7.31 Code, title 38, section 4312. 7.32 Subd. 6. [INTEREST REQUIREMENTS.] The employer shall pay 7.33 interest on all employee and employer contribution amounts 7.34 payable under this section. Interest is to be computed at a 7.35 rate of 8.5 percent compounded annually from the end of each 7.36 fiscal year of the leave or break in service to the end of the 8.1 month in which payment is received. 8.2 Sec. 5. Minnesota Statutes 2002, section 354A.097, 8.3 subdivision 1, is amended to read: 8.4 Subdivision 1. [SERVICE CREDIT PURCHASE AUTHORIZED.] A 8.5 teacher who has at least three years of allowable service credit 8.6 with the teachers retirement fund association and who performed 8.7 service in the United States armed forces before becoming a 8.8 teacher as defined in section 354A.011, subdivision 27, or who 8.9 failed to obtain service credit for a military leave of absence 8.10 period under section 354A.093, is entitled to purchase allowable 8.11 service credit for the initial period of enlistment, induction, 8.12 or call to active dutywithout any voluntary extension, not to 8.13 exceed ten years, by making payment under section 356.55, 8.14 provided the teacheris not entitled to receive a current or8.15deferred retirement annuity from a United States armed forces8.16pension plan andhas not purchased service credit from another 8.17 defined benefit public employee pension plan for the same period 8.18 of service. 8.19 Sec. 6. Minnesota Statutes 2002, section 356.611, 8.20 subdivision 2, is amended to read: 8.21 Subd. 2. [FEDERAL COMPENSATION LIMITS.] (a) For members 8.22first contributing toof a covered pension plan enumerated in 8.23 section 356.30, subdivision 3,on or after July 1, 1995,8.24 compensation in excess of the limitationset forthspecified in 8.25 section 401(a)(17) of the Internal Revenue Code, as amended, for 8.26 changes in the cost of living under section 401(a)(17)(B) of the 8.27 Internal Revenue Code, may not be included for contribution and 8.28 benefit computation purposes. 8.29 (b) Notwithstanding paragraph (a), for members specified in 8.30 paragraph (a) who first contributed to a covered plan before 8.31 July 1, 1995, the annual compensation limitset forthspecified 8.32 in Internal Revenue Code 401(a)(17) on June 30, 1993, appliesto8.33members first contributing before July 1, 1995if that provides 8.34 a greater allowable annual compensation. 8.35 Sec. 7. Minnesota Statutes 2002, section 356.611, is 8.36 amended by adding a subdivision to read: 9.1 Subd. 3. [MAXIMUM BENEFIT LIMITATIONS.] A member's annual 9.2 benefit shall, if necessary, be reduced to the extent required 9.3 by section 415(b) of the Internal Revenue Code, as adjusted by 9.4 the United States Secretary of the Treasury under section 415(d) 9.5 of the Internal Revenue Code. For purposes of section 415 of 9.6 the Internal Revenue Code, the limitation year of a pension plan 9.7 covered by this section shall be the fiscal year or calendar 9.8 year of that plan, whichever is applicable. The accrued benefit 9.9 limitation described in section 415(e) of the Internal Revenue 9.10 Code shall cease to be effective for limitation years beginning 9.11 after December 31, 1999. 9.12 Sec. 8. [356.635] [INTERNAL REVENUE CODE COMPLIANCE.] 9.13 Subdivision 1. [RETIREMENT BENEFIT COMMENCEMENT.] On and 9.14 after January 1, 1989, the retirement benefit of a member who 9.15 has terminated employment shall begin no later than the later of 9.16 April 1 of the calendar year following the calendar year that 9.17 the member attains the federal minimum distribution age or April 9.18 1 of the calendar year following the calendar year in which the 9.19 member terminated employment. 9.20 Subd. 2. [DISTRIBUTIONS.] Distributions on and after 9.21 December 31, 1989, shall be made as required under section 9.22 401(a)(9) of the Internal Revenue Code and the treasury 9.23 regulations adopted under that section, including, but not 9.24 limited to, the incidental death benefit provisions of section 9.25 401(a)(9)(G) of the Internal Revenue Code. 9.26 Subd. 3. [DIRECT ROLLOVERS.] For distributions on or after 9.27 January 1, 1993, a distributee may elect, at the time and in the 9.28 manner prescribed by the plan administrator, to have any portion 9.29 of an eligible rollover distribution paid directly to an 9.30 eligible retirement plan specified by the distributee. 9.31 Subd. 4. [ELIGIBLE ROLLOVER DISTRIBUTION.] An "eligible 9.32 rollover distribution" is any distribution of all or any portion 9.33 of the balance to the credit of the distributee. 9.34 Subd. 5. [INELIGIBLE AMOUNTS.] An eligible rollover 9.35 distribution does not include: 9.36 (1) a distribution that is one of a series of substantially 10.1 equal periodic payments, receivable annually or more frequently, 10.2 that is made for the life or life expectancy of the distributee, 10.3 the joint lives or joint life expectancies of the distributee 10.4 and the distributee's designated beneficiary, or for a specified 10.5 period of ten years or more; 10.6 (2) a distribution that is required under section 401(a)(9) 10.7 of the Internal Revenue Code; 10.8 (3) for distributions prior to January 1, 2002, the portion 10.9 of a distribution that is not included in gross income; or 10.10 (4) any other exception required by law or the Internal 10.11 Revenue Code. 10.12 Subd. 6. [ELIGIBLE RETIREMENT PLAN.] (a) An "eligible 10.13 retirement plan" is: 10.14 (1) an individual retirement account under section 408(a) 10.15 of the Internal Revenue Code; 10.16 (2) an individual retirement annuity plan under section 10.17 408(b) of the Internal Revenue Code; 10.18 (3) an annuity plan under section 403(a) of the Internal 10.19 Revenue Code; 10.20 (4) a qualified trust plan under section 401(a) of the 10.21 Internal Revenue Code that accepts the distributee's eligible 10.22 rollover distribution; 10.23 (5) for distributions made after December 31, 2001, an 10.24 annuity contract under section 403(b) of the Internal Revenue 10.25 Code; or 10.26 (6) for distributions made after December 31, 2001, an 10.27 eligible deferred compensation plan under section 457(b) of the 10.28 Internal Revenue Code, which is maintained by a state or local 10.29 government and agrees to separately account for amounts 10.30 transferred into the plan. 10.31 (b) Before January 1, 2002, for eligible rollover 10.32 distributions to a surviving spouse, an eligible retirement plan 10.33 is limited to an individual retirement account under section 10.34 408(a) of the Internal Revenue Code or an individual retirement 10.35 annuity plan under section 408(b) of the Internal Revenue Code. 10.36 (c) For distributions after December 31, 2001, of after-tax 11.1 contributions which are not includable in gross income, the 11.2 after-tax portion may be transferred only to an individual 11.3 retirement account or annuity described in section 408(a) or (b) 11.4 of the Internal Revenue Code, or to a qualified defined 11.5 contribution plan described in section 401(a), or section 11.6 403(a), of the Internal Revenue Code, that agrees to separately 11.7 account for amounts transferred, including separately accounting 11.8 for the portion of such distribution which is includable in 11.9 gross income and the portion of such distribution which is not 11.10 includable. 11.11 Subd. 7. [DISTRIBUTEE.] A "distributee" is an employee or 11.12 former employee, the surviving spouse of an employee or former 11.13 employee, or the former spouse of the employee or former 11.14 employee, who is the alternate payee under a qualified domestic 11.15 relations order as defined in section 414(p) of the Internal 11.16 Revenue Code, or a court-ordered equitable distribution of 11.17 marital property, as provided in section 518.58. 11.18 Subd. 8. [FORFEITURES.] For defined benefit plans, unless 11.19 otherwise permitted by section 401(a)(8) of the Internal Revenue 11.20 Code, forfeitures may not be applied to increase the benefits 11.21 any employee would otherwise receive under the plan. 11.22 Subd. 9. [MILITARY SERVICE.] Effective December 12, 1994, 11.23 contributions, benefits, and service credit with respect to 11.24 qualified military service will be provided according to section 11.25 414(u) of the Internal Revenue Code. 11.26 Sec. 9. [EFFECTIVE DATE.] 11.27 Sections 1 to 8 are effective the day following final 11.28 enactment. Section 8 has retroactive application as indicated 11.29 within that section.