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SF 4201

as introduced - 91st Legislature (2019 - 2020) Posted on 05/28/2020 09:29am

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - as introduced

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A bill for an act
relating to retirement; Public Employees Retirement Association; privatized medical
facilities; amending augmentation for privatized employees; amending the
calculation of liability for privatizing medical facilities; making administrative
and technical changes; amending Minnesota Statutes 2018, sections 353F.02, by
adding subdivisions; 353F.025, subdivision 1, by adding a subdivision; 353F.04;
Minnesota Statutes 2019 Supplement, section 353F.025, subdivision 2.

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

Section 1.

Minnesota Statutes 2018, section 353F.02, is amended by adding a subdivision
to read:


new text begin Subd. 3a. new text end

new text begin Executive director. new text end

new text begin "Executive director" means the executive director of the
Public Employees Retirement Association.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2020.
new text end

Sec. 2.

Minnesota Statutes 2018, section 353F.02, is amended by adding a subdivision to
read:


new text begin Subd. 4a. new text end

new text begin Medical facility. new text end

new text begin "Medical facility" means a facility that has the primary
purpose of providing medical care and that satisfies the definition of governmental
subdivision under section 353.01, subdivision 6.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2020.
new text end

Sec. 3.

Minnesota Statutes 2018, section 353F.02, is amended by adding a subdivision to
read:


new text begin Subd. 4b. new text end

new text begin Privatization. new text end

new text begin "Privatization" means a medical facility that privatizes when
the facility ceases to be a governmental subdivision for any reason other than that the medical
facility closes or permanently ceases to operate.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2020.
new text end

Sec. 4.

Minnesota Statutes 2018, section 353F.025, subdivision 1, is amended to read:


Subdivision 1.

Eligibility determinationnew text begin and calculation of withdrawal liabilitynew text end.

(a)
new text begin This section applies to any medical facility that privatizes.
new text end

new text begin (b) Before the effective date of privatization, new text endthe chief clerical officer of deleted text beginadeleted text end new text beginthe
new text end governmental subdivision deleted text beginmaydeleted text end new text beginwith control or ownership of a privatizing medical facility
must
new text endsubmit new text beginto the executive director new text enda resolution from the governing body deleted text beginto the executive
director of the Public Employees Retirement Association
deleted text end new text beginof the governmental subdivision
new text end which deleted text beginsupports providing coverage under this chapter for employees of that governmental
subdivision who are privatized,
deleted text end new text beginnotifies the executive director that the medical facility may
privatize
new text endand which states that the governing body will deleted text beginpaydeleted text end new text beginreimburse the Public Employees
Retirement Association
new text endfor deleted text beginactuarial calculationsdeleted text endnew text begin the calculation of withdrawal liabilitynew text end, as
further specified in paragraph deleted text begin(c)deleted text endnew text begin (d)new text end.

deleted text begin (b)deleted text end new text begin(c) new text endThe governing body must also provide a copy of any applicable purchase or lease
agreement and any other information requested by the executive director to allow the
executive director to deleted text beginverifydeleted text end new text begindetermine new text endthat under the proposed deleted text beginemployer changedeleted text endnew text begin privatizationnew text end,
the new employer does not qualify as a governmental subdivision under section 353.01,
subdivision 6
deleted text begin, making the employees ineligible for continued coverage as active members
of the general employees retirement plan of the Public Employees Retirement Association
deleted text end.

deleted text begin (c) Followingdeleted text end new text begin(d) Within 30 days after new text endreceipt of a resolution deleted text beginand a determination bydeleted text end
new text begin under paragraph (b), if new text endthe executive director new text begindetermines new text endthat the new text beginproposed new text endnew employer
is not a governmental subdivision, new text beginthen new text endthe executive director shall direct the consulting
actuary retained under section 356.214 deleted text beginto determine whether the general employees retirement
plan of the Public Employees Retirement Association, if coverage under this chapter is
provided, is expected to receive a net gain or a net loss if privatization occurs. A net gain
is expected if the actuarial liability of the special benefit coverage provided under this
chapter, if extended to the applicable employees under the privatization, is less than the
actuarial gain otherwise to accrue to the plan. A net loss is expected if the actuarial accrued
liability of the special benefit coverage provided under this chapter, if extended to the
applicable employees under the privatization, is more than the actuarial gain otherwise to
accrue to the plan.
deleted text end new text beginto calculate the withdrawal liability incurred by the privatizing medical
facility. The withdrawal liability is equal to the present value of accrued benefits attributable
to the privatizing active employees minus the product of: (1) the present value of accrued
benefits attributable to the privatizing active employees; and (2) the plan's funding ratio. If
the withdrawal liability is a negative number, the withdrawal liability is zero.
new text endThe deleted text begindate of
the actuarial calculations used to make this determination
deleted text end new text beginwithdrawal liability new text endmust be deleted text beginwithin
one year of
deleted text end new text begincalculated using the most recently completed actuarial valuation before new text endthe
effective date of privatization.new text begin The governmental subdivision must reimburse the Public
Employees Retirement Association for the actual cost of calculating the withdrawal liability.
new text end

new text begin (e) The present value of accrued benefits is determined using the actuarial assumptions
under section 356.215, subdivision 8, for the general employees retirement plan of the Public
Employees Retirement Association. The present value of accrued benefits does not include
projected compensation or projected service.
new text end

new text begin (f) In this section, the funding ratio means the market value of assets of the general
employees retirement fund, divided by the present value of accrued benefits for the fund,
expressed as a percentage.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2022.
new text end

Sec. 5.

Minnesota Statutes 2018, section 353F.025, is amended by adding a subdivision
to read:


new text begin Subd. 1a. new text end

new text begin Payment of withdrawal liability. new text end

new text begin No later than six months after the effective
date of privatization, the privatized former public employer must pay the withdrawal liability
calculated under subdivision 1, paragraph (d), to the general employees retirement fund,
unless the privatized former public employer elects a payment plan. In lieu of a single
withdrawal liability payment, the privatized former public employer may elect to pay the
withdrawal liability in equal payments made annually and for a term of ten years. The
determination of the payments must reflect interest compounded annually at the applicable
rate or rates specified in section 356.59, subdivision 3. The obligation to pay under this
subdivision is binding upon the privatized public employer and its successors and assignees.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2022.
new text end

Sec. 6.

Minnesota Statutes 2019 Supplement, section 353F.025, subdivision 2, is amended
to read:


Subd. 2.

Reporting privatizations.

(a) deleted text beginIf the actuarial calculations under subdivision
1, paragraph (c), indicate privatization can be approved because a net gain to the general
employees retirement plan of
deleted text end The Public Employees Retirement Association deleted text beginis expected,
or if paragraph (b) applies, the executive director shall, following acceptance of the actuarial
calculations by
deleted text end new text beginmust maintain a record of the consulting actuary's calculation of withdrawal
liability under subdivision 1, paragraph (d), and any associated report. The calculation and
any associated report must be made available to the public and provided to (1)
new text endthe
new text begin association's new text endboard of trustees, deleted text beginforward notice and supporting documentation, including a
copy of the actuary's report and findings, to
deleted text end new text begin(2) new text endthe chair and the executive director of the
Legislative Commission on Pensions and Retirementnew text begin,new text end and new text begin(3) new text endthe chairs and deleted text beginthedeleted text end ranking
minority members of the new text beginlegislative new text endcommittees with jurisdiction over governmental
operations deleted text beginin the house of representatives and senatedeleted text end.

deleted text begin (b) If the calculations under subdivision 1, paragraph (c), indicate a net loss, the executive
director shall recommend to the board of trustees that the privatization be approved if the
chief clerical officer of the applicable governmental subdivision submits a resolution from
the governing body specifying that a lump sum payment will be made to the Public
Employees Retirement Association equal to the net loss, plus interest. The interest must be
computed using the applicable ultimate investment return assumption under section 356.215,
subdivision 8
, expressed as a monthly rate, from the date of the actuarial valuation from
which the actuarial accrued liability data was used to determine the net loss in the actuarial
study under subdivision 1, to the date of payment, with annual compounding. Payment must
be made on or after the effective date of privatization.
deleted text end

deleted text begin (c)deleted text end new text begin(b) new text endThe Public Employees Retirement Association must maintain a list that includes
the names of all privatized former public employers in the association's comprehensive
annual financial report and on the association's website.new text begin For privatized former public
employers with an effective date of privatization after July 1, 2022, the list must also include
the original withdrawal liability amount and the remaining amount of withdrawal liability
due to be paid, if any, for each privatized former public employer.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2022.
new text end

Sec. 7.

Minnesota Statutes 2018, section 353F.04, is amended to read:


353F.04 AUGMENTATION INTEREST RATES FOR PRIVATIZED FORMER
PUBLIC EMPLOYEES.

Subdivision 1.

Enhanced augmentation rates.

(a) The deferred annuity of a privatized
former public employee is subject to augmentation under section deleted text begin353.71, subdivision 2, of
the edition of Minnesota Statutes published in the year in which the privatization occurred
deleted text endnew text begin
353.34, subdivision 3
new text end, except that the rate of augmentation is as specified in this deleted text beginsubdivisiondeleted text endnew text begin
section
new text end.

(b) This paragraph applies if the effective date of privatization was on or before January
1, 2007, and also applies to Hutchinson Area Health Care with a privatization effective date
of January 1, 2008. For a privatized former public employee, the augmentation rate is 5.5
percent compounded annually until January 1 following the year in which the person attains
age 55. deleted text beginFromdeleted text end new text beginAfter new text endthat date deleted text beginto the effective date of retirementdeleted text end, the augmentation rate is 7.5
percent compounded annually.

(c) If paragraph (b) is not applicable, and if the effective date of the privatization is new text beginafter
January 1, 2007, and
new text endbefore January 1, 2011, new text beginthen new text endthe augmentation rate is four percent
compounded annually until January 1, following the year in which the person attains age
55. deleted text beginFromdeleted text end new text beginAfter new text endthat date deleted text beginto the effective date of retirementdeleted text end, the augmentation rate is six
percent compounded annually.

(d) If the effective date of the privatization is after December 31, 2010, the deleted text beginapplicabledeleted text end
augmentation rate depends on the result of computations specified in section 353F.025,
subdivision 1
. If those computations indicate no loss or a net gain to the fund of the general
employees retirement plan of the Public Employees Retirement Association, the augmentation
rate is two percent compounded annually deleted text beginuntil the effective date of retirementdeleted text end. If the
computations under that subdivision indicate a net loss to the fund if a two percent
augmentation rate is used, but a net gain or no loss if a one percent rate is used, then the
augmentation rate is one percent compounded annually deleted text beginuntil the effective date of retirementdeleted text end.

new text begin (e) Notwithstanding paragraphs (b) to (d), after June 30, 2020, and before January 1,
2024, the augmentation rate for all privatized former public employees under paragraphs
(b) to (d) is two percent compounded annually. After December 31, 2023, no additional
augmentation is applied to the privatized former public employee's deferred annuity.
new text end

Subd. 2.

Exceptions.

The deleted text beginincreaseddeleted text end augmentation rates specified in subdivision 1 do
not apply to a privatized former public employee:

(1) beginning the first of the month in which the privatized former public employee
becomes covered again by a retirement plan enumerated in section 356.30, subdivision 3,
if the employee accrues at least six months of credited service in any single plan enumerated
in section 356.30, subdivision 3, except clause (6);

(2) beginning the first of the month in which the privatized former public employee
becomes covered again by the general employees retirement plan of the Public Employees
Retirement Association;

(3) beginning the first of the month after a privatized former public employee terminates
service with the privatized former public employer; deleted text beginor
deleted text end

(4) if the deleted text beginpersondeleted text end new text beginprivatized former public employee new text endbegins receipt of a retirement annuity
while employed by the deleted text beginemployer which assumed operations of or purchased thedeleted text end privatized
former public employerdeleted text begin.deleted text endnew text begin; or
new text end

new text begin (5) if the effective date of privatization occurs after June 30, 2020.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective July 1, 2020.
new text end