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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

  

                         Laws of Minnesota 1989 

                        CHAPTER 319-S.F.No. 783 
           An act relating to retirement; making a variety of 
          changes in the laws governing benefits, contributions, 
          and administrators of various statewide and local 
          public pension plans; use of state aid and payment of 
          postretirement adjustments to Minneapolis police and 
          firefighters; amending Minnesota Statutes 1988, 
          sections 3A.01, subdivision 7, and by adding a 
          subdivision; 3A.02, subdivisions 1, 1b, and 4; 11A.01; 
          11A.04; 11A.07, subdivision 4; 11A.09; 11A.13, 
          subdivision 1; 11A.18, subdivisions 9 and 10; 11A.19, 
          by adding a subdivision; 43A.316, subdivision 9; 
          43A.44, subdivision 2; 69.031, subdivision 5; 69.77, 
          subdivisions 2b and 2g; 69.775; 136.80, subdivision 1; 
          136.81, subdivision 1; 136.82, subdivision 1 and 2; 
          136.84; 352.01, subdivisions 11, 19, and by adding a 
          subdivision; 352.021, subdivision 5; 352.03, 
          subdivisions 7 and 11; 352.04, subdivisions 2 and 3; 
          352.113, subdivisions 1 and 12; 352.115, subdivisions 
          1, 2, and 3; 352.116; 352.12, subdivisions 1, 2, and 
          6; 352.22, subdivisions 1, 2, 2a, and 3; 352.72, 
          subdivisions 1, 2, and 5; 352.85, subdivision 1; 
          352.92, by adding a subdivision; 352.93, subdivisions 
          1, 2, 3, and by adding a subdivision; 352.95, 
          subdivisions 1, 2, and 5; 352.96, subdivision 3; 
          352B.01, subdivision 11; 352B.03, subdivision 1; 
          352B.08, subdivision 1, 2, 3, and by adding a 
          subdivision; 352B.10, subdivisions 1, 2, and 5; 
          352B.11, subdivisions 1 and 2; 352B.30, subdivision 1; 
          352C.091, subdivision 1; 352D.04, subdivision 1; 
          352D.06, subdivision 1; 352D.075, subdivision 2; 
          352D.09, subdivision 1; 353.01, subdivisions 2a, 2b, 
          10, and by adding subdivisions; 353.03, subdivision 1; 
          353.27, subdivisions 2 and 12; 353.28, subdivisions 5 
          and 6; 353.29, subdivisions 1, 2, 3, 4, and 7; 353.30; 
          353.32, subdivisions 1 and 1a; 353.33, subdivisions 1, 
          2, 3, 5, 6, 7, and 11; 353.34, subdivisions 1, 2, 3, 
          and 3a; 353.35; 353.64, subdivisions 1, 2, 3, and by 
          adding a subdivision; 353.65, subdivisions 1, 6, and 
          by adding a subdivision; 353.651, subdivisions 1, 2, 
          3, and by adding a subdivision; 353.656, subdivisions 
          1, 3, and 4; 353.657, subdivisions 2, 2a, and 3; 
          353.71, subdivisions 1, 2, and 5; 353C.06, 
          subdivisions 1, 2, and 4; 353C.08, subdivision 5; 
          354.05, subdivisions 2a, 5, 35, 37, and by adding a 
          subdivision; 354.06, subdivision 1; 354.07, 
          subdivision 3; 354.091; 354.092; 354.10, subdivision 
          2; 354.35; 354.41, subdivision 3; 354.42, subdivision 
          7; 354.44, subdivisions 1, 1a, 3, 5, 6, 7, 8, and by 
          adding a subdivision; 354.45, subdivision 1, and by 
          adding a subdivision; 354.46, subdivision 2; 354.47, 
          subdivisions 1 and 2; 354.48, subdivisions 1, 2, 3, 
          and 10; 354.49, subdivisions 2 and 3; 354.50, by 
          adding a subdivision; 354.55, subdivision 11; 354.60; 
          354.62, subdivision 2, and by adding a subdivision; 
          354.65; 354.66, subdivision 2; 354A.011, subdivision 
          20, and by adding a subdivision; 354A.021, subdivision 
          6; 354A.21; 354A.31, subdivisions 1, 3, 4, 5, 6, and 
          by adding a subdivision; 354A.32, subdivision 1, and 
          by adding a subdivision; 354A.35, subdivisions 1 and 
          2; 354A.36, subdivisions 1, 3, and 10; 354A.37, 
          subdivisions 2, 3, and 4; 354A.39; 354B.02; 354B.04, 
          subdivision 2; 354B.05, subdivisions 3 and 4; 355.90, 
          subdivisions 3 and 4; 356.215, subdivisions 4d and 4g; 
          356.216; 356.24; 356.30, subdivisions 1, 2, and 3; 
          356.302, subdivision 7; 356.303, subdivision 4; 
          356.32, subdivision 1; 356.371, subdivision 3; 356.80, 
          subdivisions 1 and 3; 422A.05, subdivisions 2a and 2d; 
          423.374; 423.45; 423.805; 423A.01, subdivision 2; 
          423A.21, subdivision 4; 424.06; 424A.001, subdivision 
          7; 424A.01, subdivision 2; 424A.02, subdivisions 1, 2, 
          7, and 13; 424A.04, subdivision 2; 424A.10; 490.122; 
          490.124, subdivision 12; proposing coding for new law 
          in Minnesota Statutes, chapters 3A; 352; 353; 354; 
          354A; 354B; 355; 356; 356A; and 490; repealing 
          Minnesota Statutes 1988, sections 136.88, subdivision 
          3; 352.03, subdivision 13; 352.73, subdivision 3; 
          353.01, subdivision 2c; 353.661; 353.662; 354.41, 
          subdivision 3; 354.531; 354.532; 354.55, subdivision 
          5; 354.56; 354A.32, subdivision 2; and 424A.01, 
          subdivision 3a; amending Laws 1955, chapter 151, 
          section 13, as amended; Laws 1965, chapter 446, 
          sections 2 and 3; Laws 1980, chapter 595, section 2, 
          subdivision 4; Laws 1982, chapter 574, section 5, as 
          amended; Laws 1985, chapter 11, section 12, 
          subdivision 3; and Laws 1988, chapter 709, article 3, 
          section 1, subdivision 4; repealing Laws 1967, chapter 
          815; Laws 1978, chapter 683; and Laws 1981, chapter 
          224, sections 2 and 5. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                                ARTICLE 1

                   MINNESOTA STATE RETIREMENT SYSTEM
    Section 1.  Minnesota Statutes 1988, section 43A.44, 
subdivision 2, is amended to read: 
    Subd. 2.  [BENEFITS.] Employees in shared positions shall 
be eligible for the following benefits and subject to the 
following obligations: 
    (a) (1) Membership in the Minnesota state retirement 
system, the teachers retirement association or the state patrol 
retirement fund, whichever is appropriate, except that, 
notwithstanding any provision of section 352.01, subdivisions 11 
and 16; 352B.01, subdivision 3; 354.05, subdivisions 13 and 25; 
or 354.091, employees shall have allowable service for the 
purpose of meeting the minimum service requirements for 
eligibility to a retirement annuity or other retirement benefit 
credited in full, but shall have benefit accrual service for the 
purpose of computing a retirement annuity or other retirement 
benefit credited on a fractional basis either weekly or annually 
based upon the relationship that the number of hours of service 
bears to either 40 hours per week or 2,080 hours per year, with 
any salary paid for the fractional service credited on the basis 
of the rate of salary applicable for a full-time week or a 
full-time year.; 
    (b) (2) Vacation and sick leave accruals shall be prorated 
in accordance with the pertinent collective bargaining agreement 
or plan covering the position; 
    (c) (3) Employee dental, medical and hospital benefits 
coverage shall be available of the same type and coverage 
afforded to comparable full-time employees.  Employees in shared 
positions who elect such coverage shall pay, by payroll 
deduction, the difference between the actual cost to the 
employer and the appropriate shared time percent of the actual 
cost.  The remaining percent shall be paid by the employer.  
Employee life insurance coverage shall be available to employees 
in shared positions on the same terms as for comparable 
full-time employees; 
    (d) (4) Dependent life insurance coverage shall be 
available to employees in shared positions on the same terms as 
for comparable full-time employees.  Dependent medical, hospital 
and dental benefits coverage shall be available to employees in 
shared positions of the same type and coverage afforded to 
comparable full-time employees, except that the employer shall 
contribute the appropriate shared time percent of the dollar 
amount contributed for comparable full-time employees electing 
the same program, the remainder to be paid by payroll deduction 
by the employee electing such coverage; 
    (e) (5) Employees in shared positions shall be entitled to 
the prorated holiday provisions of the applicable collective 
bargaining agreement or plan covering the position; 
    (f) (6) Employees in shared positions shall accrue 
seniority time in every relevant category at the same rate 
accorded to comparable full-time employees.  No full-time 
employee accepting a shared position shall suffer any loss of or 
gap in seniority time in the relevant categories applicable to 
the full-time employment; and 
    (g) (7) Any other benefits of employment for employees in 
shared positions shall be prorated at a rate of the appropriate 
shared time percent of those available to comparable full-time 
employees, whenever the benefits are divisible.  Contributions 
by the employer toward the benefits, if any, shall be equal to 
the appropriate shared time percent of the full-time benefits.  
When not divisible, the cost of the full-time benefits normally 
allocable to the employer shall be allocated, the appropriate 
shared time percent to the employee in a shared position, by 
payroll deduction, and the remaining percent to the employer. 
    Sec. 2.  Minnesota Statutes 1988, section 352.01, 
subdivision 11, is amended to read: 
    Subd. 11.  [ALLOWABLE SERVICE.] "Allowable service" means:  
     (1) Service by an employee for which on or before July 1, 
1957, the employee was entitled to allowable service credit on 
the records of the system by reason of employee contributions in 
the form of salary deductions, payments in lieu of salary 
deductions, or in any other manner authorized by Minnesota 
Statutes 1953, chapter 352, as amended by Laws 1955, chapter 239.
     (2) Service by an employee for which on or before July 1, 
1961, the employee chose to obtain credit for service by making 
payments to the fund under Minnesota Statutes 1961, section 
352.24. 
     (3) Except as provided in clauses (9) and (10), service by 
an employee after July 1, 1957, for any calendar month in which 
the employee is paid salary from which deductions are made, 
deposited, and credited in the fund, including deductions made, 
deposited, and credited as provided in section 352.041. 
     (4) Except as provided in clauses (9) and (10), service by 
an employee after July 1, 1957, for any calendar month for which 
payments in lieu of salary deductions are made, deposited, and 
credited in the fund, as provided in section 352.27 and 
Minnesota Statutes 1957, section 352.021, subdivision 4. 
     For purposes of clauses (3) and (4), except as provided in 
clauses (9) and (10), any salary paid for a fractional part of 
any calendar month is deemed the compensation for the entire 
calendar month. 
     (5) The period of absence from their duties by employees 
who are temporarily disabled because of injuries incurred in the 
performance of duties and for which disability the state is 
liable under the workers' compensation law until the date 
authorized by the director for the commencement of payments of a 
total and permanent disability benefit from the retirement fund. 
     (6) The unused part of an employee's annual leave allowance 
for which the employee is paid salary. 
     (7) Any service covered by a refund repaid as provided in 
section 352.23 or 352D.05, subdivision 4, except service 
rendered as an employee of the adjutant general for which the 
person has credit with the federal civil service retirement 
system. 
     (8) Any service before July 1, 1978, by an employee of the 
transit operating division of the metropolitan transit 
commission or by an employee on an authorized leave of absence 
from the transit operating division of the metropolitan transit 
commission who is employed by the labor organization which is 
the exclusive bargaining agent representing employees of the 
transit operating division, which was credited by the 
metropolitan transit commission-transit operating division 
employees retirement fund or any of its predecessor plans or 
funds as past, intermediate, future, continuous, or allowable 
service as defined in the metropolitan transit 
commission-transit operating division employees retirement fund 
plan document in effect on December 31, 1977. 
    (9) Service after July 1, 1983, by an employee who is 
employed on a part-time basis for less than 50 percent of full 
time, for which the employee is paid salary from which 
deductions are made, deposited, and credited in the fund, 
including deductions made, deposited, and credited as provided 
in section 352.041 or for which payments in lieu of salary 
deductions are made, deposited, and credited in the fund as 
provided in section 352.27 shall be credited on a fractional 
basis either by pay period, monthly, or annually based on the 
relationship that the percentage of salary earned bears to a 
full-time salary, with any salary paid for the fractional 
service credited on the basis of the rate of salary applicable 
for a full-time pay period, month, or a full-time year.  For 
periods of part-time service that is duplicated service credit, 
section 356.30, subdivision 1, clauses (i) and (j), govern. 
    (10) Any service by an employee in the Minnesota 
demonstration job-sharing program under sections 43A.40 to 
43A.465 which is less than 40 hours per week or 2,080 hours per 
year and for which the employee is paid salary from which 
deductions are made, deposited and credited in the fund, shall 
be credited on a fractional basis either weekly or annually 
based on the relationship that the number of hours of service 
bears to either 40 hours per week or 2,080 hours per year, with 
any salary paid for the fractional service credited on the basis 
of the rate of salary applicable for a full-time week or a 
full-time year.  
    The allowable service determined and credited on a 
fractional basis under clauses (9) and (10) shall be used in 
calculating the amount of benefits payable, but service as 
determined on a fractional basis must not be used in determining 
the length of service required for eligibility for benefits.  
    (11) (10) Any period of authorized leave of absence without 
pay that does not exceed one year and for which the employee 
obtained credit by payment to the fund in lieu of salary 
deductions.  To obtain credit, the employee shall pay an amount 
equal to the employee and employer contribution rate in section 
352.04, subdivisions 2 and 3, multiplied by the employee's 
hourly rate of salary on the date of return from leave of 
absence and by the days and months of the leave of absence 
without pay for which the employee wants allowable service 
credit.  The employing department, at its option, may pay the 
employer amount on behalf of its employees.  Payments made under 
this clause shall include interest at the rate of six percent 
per year from the date of termination of the leave of absence to 
the date payment is made unless payment is completed within one 
year of the return from leave of absence. 
    Sec. 3.  Minnesota Statutes 1988, section 352.021, 
subdivision 5, is amended to read: 
    Subd. 5.  [CONTINUING COVERAGE.] Any state employee who has 
made contributions to the retirement fund for a period of one 
year and who, continuing in state service after that year, 
becomes eligible for membership in the state teachers retirement 
association as a full-time teacher, as defined in section 
354.05, subdivision 2, may continue coverage under the system by 
filing in its office written notice of election to continue.  
The election to be covered by the system under this subdivision 
or section 352.01, subdivision 2b, clause (3), must be made on a 
form approved by the director within 90 days after appointment 
to the position.  If the option is exercised, the employee is 
not thereafter entitled to membership in the teachers retirement 
association while employed by the state in a position that 
entitled the employee to make this election.  
    Sec. 4.  Minnesota Statutes 1988, section 352.03, 
subdivision 11, is amended to read: 
    Subd. 11.  [LEGAL ADVISER, ATTORNEY GENERAL.] The attorney 
general shall be the legal adviser of the board and of the 
director.  The board may sue or be sued or petitioned under this 
section in the name of the board of directors of the system.  In 
actions brought by it or against it, the board shall be 
represented by the attorney general. and, except as provided in 
section 5, subdivision 9, venue of actions shall be in the 
Ramsey county district court. 
    Sec. 5.  [352.031] [APPEALS PROCEDURE.] 
    Subdivision 1.  [DEFINITIONS.] Unless the language or 
context clearly indicates that a different meaning is intended, 
for the purpose of this section, the following terms have the 
meanings given them. 
    (a) "Board" means the board of directors of the Minnesota 
state retirement system. 
    (b) "Documentation" includes, but is not limited to: 
    (1) sworn and notarized affidavits made on the personal 
knowledge of any person; 
    (2) official letters or documents; 
    (3) documents from the file of the petitioner; and 
    (4) other relevant documents that are admissible as 
evidence in a court of law. 
    (c) "Executive director" means the executive director of 
the Minnesota state retirement system. 
    (d) "Person" includes any state agency or other 
governmental unit that employs persons covered under statutes 
listed in subdivision 2. 
    (e) "Record" means the petition and the documentation that 
the petitioners submit with the petition; the executive 
director's answer to the petition and documentation submitted 
with it; and any documentation the board allows to be submitted 
at or after the meeting at which the petition is considered. 
    Subd. 2.  [NOTICE OF TERMINATION OR DENIAL.] If the 
executive director terminates a benefit or denies an application 
or a written request of any person claiming a right under 
chapter 352, other than sections 352.96 and 352.97; chapters 3A, 
352B, 352C, and 352D; sections 490.121 to 490.133; or the 
applicable sections of chapters 355 and 356, the executive 
director must serve upon that person written notice containing: 
    (1) the reasons for the termination or denial; 
    (2) notice that the person may petition the board for a 
review of the termination or denial and that the petition for 
review must be filed within 60 days of the receipt of the 
written notice; 
    (3) a statement that failure to petition the board within 
60 days will preclude the person from contesting in any other 
court procedure or administrative hearing, the issues determined 
by the executive director; and 
    (4) a copy of this section. 
    Subd. 3.  [PETITION FOR REVIEW.] A person who claims a 
right under subdivision 2 and whose benefit has been terminated 
or whose application or written request has been denied may 
petition for a review of that decision by the board.  A petition 
under this section must be served upon the executive director 
personally, or by mail postmarked no later than 60 days after 
the petitioner received the notice required by subdivision 2.  
The petition must include the sworn, notarized statement of the 
reasons the petitioner believes the decision of the executive 
director should be reversed or modified and may include relevant 
documentation. 
     Subd. 4.  [ANSWER; RECORD FOR HEARING.] Within a reasonable 
time after receiving a petition, the executive director must 
serve the petitioner with an answer to the petition with all 
relevant documentation and with notice of the time and place of 
the regular or special board meeting at which the board will 
consider the petition.  The documentation need not duplicate the 
documentation submitted by the petitioner.  Not later than ten 
days before the board meeting at which the petition will be 
heard, the executive director must, personally or by mail, 
deliver a copy of the relevant documentation to each board 
member.  Each board member who participates in the decision on 
the petition must be familiar with all relevant documentation. 
    Subd. 5.  [HEARING.] The board shall hold a timely hearing 
on a petition for review.  The board shall make its decision on 
a petition solely on the relevant documentation as submitted and 
the proceedings of the hearing.  At the hearing, the petitioner, 
the petitioner's attorney, and the executive director may state 
and discuss with the board their positions with respect to the 
petition.  The board may allow further documentation to be 
placed in the record at or subsequent to the board meeting at 
which the petition is considered.  If the board allows 
additional documentation into the record at or subsequent to the 
board meeting, it may make a final determination on the petition 
at that board meeting only upon the agreement of both the 
petitioner and the executive director. 
     Subd. 6.  [TERMINATION OF BENEFITS.] If the executive 
director proposes to terminate a benefit that is being paid to 
any person, before terminating the benefit, the executive 
director must, in addition to the other procedures prescribed 
herein, give the person written or oral notice of the proposed 
termination.  The notice must explain the reason for the 
proposed termination.  The person must be given an opportunity, 
verbally or in writing, to explain why the benefit should not be 
terminated:  if the executive director is unable to contact the 
person and the executive director determines that a failure to 
terminate the benefit might result in unauthorized payment by 
the association, the executive director may terminate the 
benefit with only a written notice containing the information 
required by subdivision 2, mailed to the address to which the 
benefit was last sent and, if that address is a financial 
institution, to the last known address of the person. 
    Subd. 7.  [MEDICAL ADVISOR ACTION.] If a person petitions 
the board to reverse or modify a determination by the executive 
director finding that the petitioner, for medical reasons, does 
not or has ceased to qualify for a disability benefit, the board 
may resubmit the matter to the medical advisor for 
reconsideration, with or without instructions to obtain further 
medical examinations.  The board may make a determination 
contrary to the recommendation of the medical advisor only if 
there is expert medical evidence in the record to support its 
contrary decision.  If there is no medical opinion contrary to 
the opinion of the medical advisor in the record and the medical 
advisor asserts that the decision was made in accordance with 
the disability standard in sections 352.01, subdivision 17; 
352B.10; or 490.121, subdivision 13, the board must follow the 
determination of the medical advisor.  The board may make a 
determination different from the recommendation of the medical 
advisor on issues that do not involve a medical opinion. 
     Subd. 8.  [BOARD FINDINGS.] After the board has made a 
decision on a petition, the executive director must prepare 
findings of fact, the board's reasons for its conclusions, and 
the board's final order for the signature of the chair or other 
board member as the board, by resolution, may designate.  The 
executive director shall serve the findings, conclusions, and 
order on the petitioner by certified mail. 
     Subd. 9.  [APPEALS.] Within 30 days of receipt of the 
findings, conclusions, and final order, the petitioner may 
appeal the board's decision by writ or certiorari to the court 
of appeals.  Failure to appeal to that court within the 30 days 
precludes the petitioner from later raising, in any court 
procedure or administrative hearing, those substantive and 
procedural issues that reasonably should have been raised upon 
appeal. 
    Subd. 10.  [REFERRAL FOR ADMINISTRATIVE 
HEARING.] Notwithstanding sections 14.03; 14.06; and 14.57 to 
14.69, a challenge to a determination of the executive director 
must be conducted exclusively under the procedures in this 
section.  The board in its sole discretion may refer a petition 
brought under this section to the office of administrative 
hearings for a contested case hearing under sections 14.57 to 
14.69. 
    Subd. 11.  [PETITIONS WITHOUT NOTICE.] A person who is not 
entitled to a review under this section may nevertheless receive 
review of the decision of the executive director which affects 
the person's rights by petitioning the board under this section 
within 60 days of the time the person knew or should have known 
of the disputed decision. 
    Sec. 6.  Minnesota Statutes 1988, section 352.116, 
subdivision 3, is amended to read: 
    Subd. 3.  [OPTIONAL ANNUITIES.] The board shall establish 
an optional retirement annuity in the form of a joint and 
survivor annuity.  The board may also establish an optional 
annuity in the form of an annuity payable for a period certain 
and for life thereafter or establish an optional annuity which 
takes the form of a joint and survivor annuity providing that, 
if after the joint and survivor annuity becomes payable, the 
person with the designated remainder interest in the annuity 
dies before the former member, the annuity amount must be 
reinstated to a normal single life annuity amount as of the 
first day of the month after the day the person dies.  In 
addition, the board may also establish an optional annuity that 
takes the form of an annuity calculated on the basis of the age 
of the retired employee at retirement and payable for the period 
before the retired employee becomes eligible for social security 
old age retirement benefits in a greater amount than the amount 
of the annuity calculated under subdivision 2 on the basis of 
the age of the retired employee at retirement but equal so far 
as possible to the social security old age retirement benefit 
and the adjusted retirement annuity amount payable immediately 
after the retired employee becomes eligible for social security 
old age retirement benefits and payable for the period after the 
retired employee becomes eligible for social security old age 
retirement benefits in an amount less than the amount of the 
annuity calculated under subdivisions 2 and 3.  The social 
security leveling option may be calculated based on broad 
average social security old age retirement benefits.  For each 
year that the retiring employee is under age 62, up to five 
percent of the total single life annuity required reserves may 
be used to accelerate the optional retirement annuity.  This 
greater amount shall be paid until the end of the month in which 
the retired employee reaches age 62, at which time the annuity 
shall be reduced.  The optional forms must be actuarially 
equivalent to the normal single life annuity forms provided in 
sections 352.115 and 352.116, whichever applies.  
    Sec. 7.  Minnesota Statutes 1988, section 352.22, 
subdivision 1, is amended to read: 
    Subdivision 1.  [SERVICE TERMINATION.] Any employee who 
ceases to be a state employee by reason of termination of state 
service or layoff is entitled to a refund provided in 
subdivision 2 or a deferred retirement annuity as provided in 
subdivision 3.  Application for a refund may be made 30 or more 
days after the termination of state service or layoff if the 
applicant has not again become a state employee required to be 
covered by the system.  
    Sec. 8.  Minnesota Statutes 1988, section 352.22, 
subdivision 2a, is amended to read: 
    Subd. 2a.  [AMOUNT OF CERTAIN REFUND REPAYMENTS 
PROHIBITED.] For any employee who is entitled to a refund under 
subdivision 1 and who, before July 1, 1978, was a member of the 
metropolitan transit commission-transit operating division 
employees retirement fund, the refund for contributions made 
before July 1, 1978, must equal the following amounts: 
    (a) For any employee contributions made before January 1, 
1950, the amount equal to one-half of the employee contributions 
without interest; 
    (b) For any employee contributions made after December 31, 
1949, but before January 1, 1975, the amount of the employee 
contributions plus simple interest at the rate of two percent 
per year; and 
    (c) For any employee contributions made after December 31, 
1974, but before July 1, 1978, the amount of the employee 
contributions plus simple interest at the rate of 3-1/2 percent 
per year.  The refund of contributions made on or after July 1, 
1978, must be determined under subdivision 2.  Interest must be 
computed to the first day of the month in which the refund is 
processed and must be based on fiscal year balances.  No refunds 
of contributions made to the metropolitan transit 
commission-transit operating division employees retirement fund 
received before July 1, 1978, or for service rendered before 
July 1, 1978, may be repaid.  
    Sec. 9.  Minnesota Statutes 1988, section 352.93, 
subdivision 3, is amended to read: 
    Subd. 3.  [PAYMENTS; DURATION AND AMOUNT.] The annuity 
under this section shall begin to accrue as provided in section 
352.115, subdivision 8, and must be paid for an additional 84 
full calendar months or to the first of the month following the 
month in which the employee becomes age 65, whichever occurs 
first, except that payment must not cease before the first of 
the month following the month in which the employee becomes 62.  
It must then be reduced to the amount as calculated under 
section 352.115, except that if this amount, when added to the 
social security benefit based on state service the employee is 
eligible to receive at the time, is less than the benefit 
payable under subdivision 2, the retired employee shall receive 
an amount that when added to the social security benefit will 
equal the amount payable under subdivision 2.  
    When an annuity is reduced under this subdivision, the 
percentage adjustments, if any, that have been applied to the 
original annuity under section 11A.18, before the reduction, 
must be compounded and applied to the reduced annuity.  A former 
correctional employee employed by the state in a position 
covered by the regular plan or the unclassified employees 
retirement program between the ages of 58 and 65 shall receive a 
partial return of correctional contributions at retirement with 
five percent interest based on the following formula: 
 
 Employee contributions             Years and complete    
 contributed as a                   months of regular     
 correctional employee              service between       
 in excess of the                   ages 58 and 65        
 contributions the         X        ....................  
 employee would have                       7 
 contributed as a 
 regular employee 
    Sec. 10.  Minnesota Statutes 1988, section 352B.08, 
subdivision 3, is amended to read: 
    Subd. 3.  [OPTIONAL ANNUITY FORMS.] In lieu of the single 
life annuity provided in subdivision 2, the member or former 
member with ten five years or more of service may elect an 
optional annuity form.  The board of the Minnesota state 
retirement system shall establish a joint and survivor annuity, 
payable to a designated beneficiary for life, adjusted to the 
actuarial equivalent value of the single life annuity.  The 
board shall also establish an additional optional annuity with 
an actuarial equivalent value of the single life annuity in the 
form of a joint and survivor annuity which provides that the 
elected annuity be reinstated to the single life annuity 
provided in subdivision 2, if after commencing the elected joint 
and survivor annuity, the designated beneficiary dies before the 
member, which reinstatement is not retroactive but takes effect 
for the first full month occurring after the death of the 
designated beneficiary.  The board may also establish other 
actuarial equivalent value optional annuity forms.  In 
establishing actuarial equivalent value optional annuity forms, 
each optional annuity form shall have the same present value as 
a regular single life annuity using the mortality table adopted 
by the board and the interest assumption specified in section 
356.215, subdivision 4d, and the board shall obtain the written 
recommendation of the commission-retained actuary.  These 
recommendations shall be a part of the permanent records of the 
board.  
    Sec. 11.  Minnesota Statutes 1988, section 352B.10, 
subdivision 5, is amended to read: 
    Subd. 5.  [OPTIONAL ANNUITY.] A disabled member not 
eligible for may, in lieu of survivorship coverage under section 
352B.11, subdivision 2, may choose the normal disability benefit 
or an optional annuity as provided in section 352B.08, 
subdivision 2.  The choice of an optional annuity must be made 
before commencement of payment of the disability benefit.  It is 
effective 30 days after receipt of this choice or on the date on 
which the disability benefit begins to accrue, whichever is 
later.  Upon becoming effective, the optional annuity begins to 
accrue on the date provided for the disability benefit.  
    Sec. 12.  Minnesota Statutes 1988, section 352B.11, 
subdivision 2, is amended to read: 
    Subd. 2.  [DEATH; PAYMENT TO SPOUSE AND CHILDREN.] If a 
member serving actively as a member, a member receiving the 
disability benefit provided by section 352B.10, subdivision 1, 
or a former member receiving a disability benefit as provided by 
section 352B.10, subdivision 3 2, dies from any cause, the 
surviving spouse and dependent children are entitled to benefit 
payments as follows: 
    (a) A member with at least five years of allowable service 
or a former member with at least 20 years of allowable service 
is deemed to have elected a 100 percent joint and survivor 
annuity payable to a surviving spouse only on or after the date 
the member or former member became or would have become 55. 
    (b) The surviving spouse of a member who had credit for 
less than five years of service shall receive, for life, a 
monthly annuity equal to 20 percent of that part of the average 
monthly salary of the member from which deductions were made for 
retirement.  If the surviving spouse remarries, the annuity 
shall cease as of the date of the remarriage. 
    (c) The surviving spouse of a member who had credit for at 
least five years service and who died after attaining 55 years 
of age, may elect to receive a 100 percent joint and survivor 
annuity, for life, notwithstanding a subsequent remarriage, in 
lieu of the annuity prescribed in paragraph (b). 
    (d) The surviving spouse of any member who had credit for 
five years or more and who was not 55 years of age at death, 
shall receive the benefit equal to 20 percent of the average 
monthly salary as described in clause (b) until the deceased 
member would have reached the age of 55 years, and beginning the 
first of the month following that date, may elect to receive the 
100 percent joint and survivor annuity.  If the surviving spouse 
remarries before the deceased member's 55th birthdate, benefits 
or annuities shall cease as of the date of remarriage.  
Remarriage after the deceased member's 55th birthday shall not 
affect the payment of the benefit. 
     (e) Each dependent child shall receive a monthly annuity 
equal to ten percent of that part of the average monthly salary 
of the former member from which deductions were made for 
retirement.  A dependent child over 18 and under 22 years of age 
also may receive the monthly benefit provided in this section, 
if the child is continuously attending an accredited school as a 
full-time student during the normal school year as determined by 
the director.  If the child does not continuously attend school 
but separates from full-time attendance during any part of a 
school year, the annuity shall cease at the end of the month of 
separation.  In addition, a payment of $20 per month shall be 
prorated equally to surviving dependent children when the former 
member is survived by one or more dependent children.  Payments 
for the benefit of any qualified dependent child must be made to 
the surviving spouse, or if there is none, to the legal guardian 
of the child.  The maximum monthly benefit must not exceed 40 
percent of the average monthly salary for any number of children.
    (f) If the member dies under circumstances that entitle the 
surviving spouse and dependent children to receive benefits 
under the workers' compensation law, the workers' compensation 
benefits received by them must not be deducted from the benefits 
payable under this section. 
    (g) The surviving spouse of a deceased former member who 
had credit for five or more years of allowable service, but not 
the spouse of a former member receiving a disability benefit 
under section 352B.10, subdivision 3 2, is entitled to receive 
the 100 percent joint and survivor annuity at the time the 
deceased member would have reached the age of 55 years, if the 
surviving spouse has not remarried before that date.  If a 
former member dies who does not qualify for other benefits under 
this chapter, the surviving spouse or, if none, the children or 
heirs are entitled to a refund of the accumulated deductions 
left in the fund plus interest at the rate of five percent per 
year compounded annually.  
    Sec. 13.  Minnesota Statutes 1988, section 352D.04, 
subdivision 1, is amended to read: 
    Subdivision 1.  (a) An employee exercising an option to 
participate in the retirement program provided by this chapter 
may elect to purchase shares in one or a combination of the 
income share account, the growth share account, the money market 
account, the bond market account, the guaranteed return account, 
or the common stock index account established in section 
11A.17.  The employee may elect to participate in one or more of 
the investment accounts in the fund by specifying, on a form 
provided by the executive director, the percentage of the 
employee's contributions provided in subdivision 2 to be used to 
purchase shares in each of the accounts. 
    (b) Twice in any calendar year, a participant may indicate 
in writing on forms provided by the Minnesota state retirement 
system a choice of options for subsequent purchases of shares.  
Until a different written indication is made by the participant, 
the executive director shall purchase shares in the supplemental 
fund as selected by the participant.  If no initial option is 
chosen, 100 percent income shares must be purchased for a 
participant.  A change in choice of investment option is 
effective no later than the first pay date first occurring after 
30 days following the receipt of the request for a change. 
    (c) One month before the start of a new guaranteed 
investment contract, a participant or former participant may 
elect to transfer all or a portion of the participant's shares 
previously purchased in the income share, growth share, common 
stock index, bond market, or money market accounts to the new 
guaranteed investment contract in the guaranteed return 
account.  If a partial transfer is made, a minimum of $1,000 
must be transferred and a minimum balance of $1,000 must remain 
in the previously selected investment options.  Upon expiration 
of a guaranteed investment contract, the participant's shares 
attributable to that contract must be transferred to a new 
guaranteed investment contract unless the executive director is 
otherwise directed by the participant.  Shares in the guaranteed 
return account may not be withdrawn from the fund or transferred 
to another account until the guaranteed investment contract has 
expired, unless the participant qualifies for withdrawal under 
section 352D.05 or for benefit payments under sections 352D.06 
to 352D.075. 
    (d) Twice in any calendar year a participant or former 
participant may also change the investment options selected for 
all or a portion of the participant's shares previously 
purchased in accounts other than the guaranteed return account.  
However, if a partial transfer is made a minimum of $1,000 must 
be transferred and a minimum balance of $1,000 must remain in 
the previously selected investment option.  Changes in 
investment options for the participant's shares must be effected 
as soon as cash flow to an account practically permits, but not 
later than six months after the requested change. 
    Sec. 14.  Minnesota Statutes 1988, section 352D.06, 
subdivision 1, is amended to read: 
    Subdivision 1.  When a participant attains at least age 58 
55, is retired from covered service, and applies for a 
retirement annuity, the cash value of the participant's shares 
shall be transferred to the Minnesota postretirement investment 
fund and used to provide an annuity for the retired employee 
based upon the participant's age when the benefit begins to 
accrue according to the reserve basis used by the state 
employees retirement fund in determining pensions and reserves.  
    Sec. 15.  Minnesota Statutes 1988, section 352D.075, 
subdivision 2, is amended to read: 
    Subd. 2.  If a participant dies leaving a spouse and there 
is no named beneficiary who survives to receive payment or the 
spouse is named beneficiary, the spouse may receive: 
    (1) The value of the participant's total shares; 
    (2) The value of one-half of the total shares and beginning 
at age 58 55 or thereafter receive an annuity based on the value 
of one-half of the total shares, provided that if the spouse 
dies before receiving any annuity payments the value of said 
shares shall be paid to the spouse's children in equal shares, 
but if no such children survive then to the parents of the 
spouse in equal shares, but if no such children or parents 
survive, then to the estate of the spouse; or 
    (3) Beginning at age 58 55 or thereafter receive an annuity 
based on the value of the total shares, provided that if the 
spouse dies before receiving any annuity payments the value of 
said shares shall be paid to the spouse's children in equal 
shares, but if no such children survive then to the parents of 
the spouse in equal shares, but if no such children or parents 
survive, then to the estate of the spouse; and further provided, 
if said spouse dies after receiving annuity payments but before 
receiving payments equal to the value of the employee shares, 
the value of the employee shares remaining shall be paid to the 
spouse's children in equal shares, but if no such children 
survive then to the parents of the spouse in equal shares, but 
if no such children or parents survive, then to the estate of 
the spouse.  
    Sec. 16.  [DEADLINE EXTENSION IN CERTAIN INSTANCES.] 
    Notwithstanding any provision of Minnesota Statutes, 
section 352D.12, to the contrary, a participant on the effective 
date of this section may transfer prior service contributions or 
repay any refund under that section by September 30, 1989, or 
within one year of the person's participation, whichever is 
later. 
    Sec. 17.  [REPEALER.] 
    Minnesota Statutes 1988, sections 352.03, subdivision 13; 
and 352.73, subdivision 3, are repealed. 
    Sec. 18.  [EFFECTIVE DATES.] 
    Sections 1 to 15 and 17 are effective July 1, 1989.  
Section 16 is effective the day following final enactment. 

                               ARTICLE 2

                   TEACHERS' RETIREMENT ASSOCIATIONS 
    Section 1.  Minnesota Statutes 1988, section 136.81, 
subdivision 1, is amended to read: 
    Subdivision 1.  There shall be deducted from the salary of 
each person described in section 136.80, subdivision 1, a sum 
equal to five percent of the portion of the person's annual 
salary paid between $6,000 and $15,000.  The deduction is to be 
made in the same manner as other retirement deductions are made 
from the salary of the person only after the first $6,000 has 
been paid in a fiscal year.  The state employer shall make a 
contribution to the plan on behalf of every covered person in an 
amount equal to the deductions made from the salary of the 
person.  The moneys so deducted and the state employer 
contribution shall be deposited to the credit of the state 
university and community college supplemental retirement plan 
account of the teachers retirement fund.  The account is hereby 
established and shall be separate and distinct from other funds, 
accounts, or assets of the teachers retirement fund.  The money 
required to meet the obligation of the state as provided in this 
subdivision shall be contributed to the executive director of 
the teachers retirement association by the state.  Two percent 
of the amount of the salary deductions and employer 
contributions must be credited to the administrative expense 
reserve account of the supplemental retirement plan and must be 
used for payment of necessary and reasonable administrative 
expenses of the supplemental retirement plan as provided in 
section 354.65. 
    Any deductions which are taken from the salary of a person 
for the supplemental retirement plan in error shall upon 
discovery and verification be refunded to the person.  Any 
related employer contributions must be refunded to the 
employer.  The retirement board executive director shall 
establish a reserve which shall must reflect any gains or losses 
realized due to the purchase and redemption of shares 
representing salary deductions and state employer contributions 
which were made in error.  The balance of the reserve shall 
remaining after the refund of contributions made in error must 
be credited annually to the cancellation reserve established 
pursuant to section 136.82, subdivision 1, clause 
(5) administrative expense reserve account. 
    If any payroll salary deductions which are required 
pursuant to under this section are omitted, the amount of the 
omitted salary deductions shall may be remitted by the person to 
the supplemental retirement plan investment account of the 
teachers retirement association within one year from the end of 
the fiscal year in which the deductions were due, and at the 
time of the receipt of 90 days following the association's 
written notification to the person of the omission, but not 
thereafter.  If the omitted salary deductions are received from 
the person, the required state employer contribution shall then 
must be made paid by the employer within 30 days after the 
association's written notification to the employer of the amount 
due. 
    Sec. 2.  Minnesota Statutes 1988, section 136.82, 
subdivision 1, is amended to read: 
    Subdivision 1.  [GENERALLY.] (a) The executive director of 
the teachers retirement fund shall redeem shares in the accounts 
of the Minnesota supplemental retirement investment fund 
standing in an employee's share account record under the 
following circumstances, but always in accordance with the laws 
and rules governing the Minnesota supplemental retirement 
investment fund: 
     (b) The executive director shall redeem shares under this 
subdivision when requested to do so in writing on forms provided 
by the executive director by a person having shares to the 
credit of the employee's share account record if the person is 
age 55 or older and is no longer employed by the state 
university board or state board for community colleges.  In such 
case the person must receive the cash realized on the redemption 
of the shares.  The person may direct the redemption of not more 
than 20 percent of the person's shares in the employee's share 
account record in any one year and may not direct more than one 
redemption in any one calendar month; provided, however, that 
the state university board or its designee, in the case of a 
person employed by the state university board, and the state 
board for community colleges or its designee, in the case of a 
person employed by the state board for community colleges, may, 
upon application, at their sole discretion, permit greater 
withdrawals in any one year. 
     (c) The executive director shall redeem shares under this 
subdivision when requested to do so in writing, on forms 
provided by the executive director, by a person having shares to 
the credit of the employee's share account record if the person 
has left employment by the state university board or state board 
for community colleges because of a total and permanent 
disability as defined in section 354.05, subdivision 14.  If the 
executive director finds that the person is totally and 
permanently disabled and will as a result be unable to return to 
similar employment, the person must receive the cash realized on 
the redemption of the shares.  The person may direct the 
redemption of not more than 20 percent of the shares in the 
employee's share account record in any one year and may not 
direct more than one redemption in any one calendar month; 
provided, however, that the state university board or its 
designee, in the case of a person employed by the state 
university board, and the state board for community colleges or 
its designee, in the case of a person employed by the state 
board for community colleges, may, upon application, at their 
sole discretion, permit greater withdrawals in any one year.  If 
the person returns to good health, the person owes no 
restitution to the state or a fund established by its laws for a 
redemption under this paragraph. 
     (d) The executive director shall redeem shares under this 
subdivision in the event of the death of a person having shares 
to the credit of the employee's share account record and leaving 
a surviving spouse, when requested to do so in writing, on forms 
provided by the executive director, by the surviving spouse.  
The surviving spouse must receive the cash realized on the 
redemption of the shares.  The surviving spouse may direct the 
redemption of not more than 20 percent of the shares in the 
deceased spouse's employee's share account record in any one 
year and may not direct more than one redemption in any one 
calendar month; provided, however, that the state university 
board or its designee, in the case of a person employed by the 
state university board, and the state board for community 
colleges or its designee, in the case of a person employed by 
the state board for community colleges, may, upon application, 
at their sole discretion, permit greater withdrawals in any one 
year.  In that case the surviving spouse must receive the cash 
realized from the redemption of the shares.  Upon the death of 
the surviving spouse any shares remaining in the employee's 
share account record must be redeemed by the executive director 
and the cash realized from the redemption must be distributed to 
the estate of the surviving spouse. 
     (e) In the event of the death of a person having shares to 
the credit of the employee's share account record and leaving no 
surviving spouse, the executive director shall redeem all shares 
to the credit of the employee's share account record and pay the 
cash realized from the redemption to the estate of the deceased 
person. 
    (f) The executive director shall redeem shares under this 
subdivision when requested to do so in writing, on forms 
provided by the executive director, by a person having shares to 
the credit of the employee's share account record if the person 
is no longer employed by the state university board or state 
board for community colleges, but does not qualify under the 
provisions of paragraphs (b) to (e).  In that case, the person 
is entitled upon application to receive one-half of the cash 
realized on the redemption of shares must be received by the 
person and one-half becomes the property must be credited to the 
administrative expense reserve account of the supplemental 
retirement plan account of the teachers retirement fund for 
payment of necessary and reasonable administrative expenses of 
the supplemental retirement plan as provided in section 354.65.  
Annually on July 1 the cancellations of the previous 12 months 
must be prorated among the employees share accounts in 
proportion to the value that each account bears to the total 
value of all share accounts. 
    Sec. 3.  Minnesota Statutes 1988, section 136.82, 
subdivision 2, is amended to read: 
    Subd. 2.  [REDEMPTION OF SHARES AS AN ANNUITY.] A person 
who has shares to the credit of the employee's share account 
record, who is 55 years of age or older and who is no longer 
employed by the state university board or the state board for 
community colleges or who is totally and permanently disabled 
pursuant to subdivision 1, paragraph (2) (c), or who has the 
status of a surviving spouse of a person who has shares to the 
credit of the employee's share account pursuant to subdivision 
1, paragraph (3) (d), may redeem all or part of the shares to 
purchase an annuity by depositing the cash realized upon 
redemption with the executive director of the teachers 
retirement fund and receive in exchange an annuity for life or 
an optional annuity as hereinafter provided.  The election to 
purchase an annuity may be made only once by any individual.  If 
an election is made before the date on which the person is 
entitled to request redemption, the redemption shall not be made 
prior to the date upon which the person would be entitled to 
make the request.  The annuity purchase rates shall be based on 
the annuity table of mortality adopted by the board of trustees 
of the teachers retirement fund for the fund as provided in 
section 354.07, subdivision 1, using the interest assumption 
specified in section 356.215, subdivision 4d.  The amount of the 
annuity for life shall be that amount which has a present value 
equal to the cash realized on the redemption of the shares as of 
the first day of the month next following the date of the 
election to purchase an annuity.  The board of trustees of the 
teachers retirement fund shall establish an optional joint and 
survivor annuity, an optional annuity payable for a period 
certain and for life thereafter, and an optional guaranteed 
refund annuity paying the annuitant a fixed amount for life with 
the guarantee that in the event of death the balance of the cash 
realized from the redemption of shares is payable to the 
designated beneficiary.  The optional forms of annuity shall be 
actuarially equivalent to the single life annuity as defined in 
section 354.05, subdivision 7.  In establishing these optional 
forms, the board of trustees shall obtain the written 
recommendation of the actuary retained by the legislative 
commission on pensions and retirement, and these recommendations 
shall be a part of the permanent records of the board of 
trustees.  
    Sec. 4.  Minnesota Statutes 1988, section 354.05, 
subdivision 35, is amended to read: 
    Subd. 35.  [SALARY.] (a) "Salary" means the compensation 
paid to a teacher excluding, upon which member contributions are 
required and made, that is paid to a teacher before any 
allowable reductions permitted under the federal Internal 
Revenue Code of 1986, as amended through December 31, 1988, for 
employee selected fringe benefits, tax sheltered annuities, 
deferred compensation, or any combination of these items. 
     (b) "Salary" does not mean: 
     (1) lump sum annual or leave payments; 
     (2) lump sum sick leave payments and all; 
    (3) payments in lieu of any employer paid group insurance 
coverage, including the difference between single and 
family premium rates, that may be paid to a member with single 
coverage. "Salary" does not mean; 
    (4) any form of payment made in lieu of any other employer 
paid fringe benefit or expense, or; 
    (5) any form of severance payments; 
    (6) workers' compensation payments; or 
    (7) disability insurance payments including self-insured 
disability payments. 
    Subd. 35a.  [SEVERANCE PAYMENTS.] Severance payments 
include, but are not limited to: 
    (a) (1) payments to an employee to terminate employment; 
    (b) (2) payments, or that portion of payments, that are not 
clearly for the performance of services by the employee to the 
employer; and 
    (c) (3) payments to an administrator or former 
administrator serving as an advisor to a successor or as a 
consultant to the employer under an agreement to terminate 
employment within two years or less of the execution of the 
agreement for compensation that is significantly different than 
the most recent contract salary; and 
     (4)  payments under a procedure that allows the employee to 
designate the time of payment if the payments are made during 
the period of formula service credit used to compute a benefit 
or annuity under section 354.44, subdivision 6 or 7; 354.46, 
subdivision 1 or 2; or 354.48, subdivision 3. 
    Sec. 5.  Minnesota Statutes 1988, section 354.05, 
subdivision 37, is amended to read: 
    Subd. 37.  [TERMINATION OF TEACHING SERVICE.] "Termination 
of teaching service" means the withdrawal of a member from 
active teaching service by resignation or the termination of the 
member's teaching contract by the employer.  A member is not 
considered to have terminated teaching service, if before the 
effective date of the termination or retirement, the member has 
entered into a contract to resume teaching service with an 
employing unit covered by the provisions of this chapter. 
    Sec. 6.  Minnesota Statutes 1988, section 354.07, 
subdivision 3, is amended to read: 
    Subd. 3.  The attorney general shall be legal advisor to 
the board and the executive director.  The board may sue or be 
sued or petitioned under section 7 in the name of the board of 
trustees of the teachers retirement fund and.  In all actions 
brought by or against it the board shall be represented by the 
attorney general.  Except as provided in section 7, subdivision 
9, venue of all actions is in the Ramsey county district court. 
    Sec. 7.  [354.071] [APPEALS PROCEDURE.] 
    Subdivision 1.  [DEFINITIONS.] Unless the language or 
context clearly indicates that a different meaning is intended, 
for the purpose of this section, the following terms have the 
meanings given. 
    (a) "Documentation" includes but is not limited to: 
    (1) sworn and notarized affidavits made on the personal 
knowledge of any person; 
    (2) official letters or documents; 
    (3) documents from the file of the petitioner; and 
    (4) other relevant documents that are admissible as 
evidence in a court of law. 
    (b) "Executive director" means the executive director of 
the teachers retirement association. 
    (c) "Person" includes any state institution, school 
district, or other governmental unit that employs persons 
covered under statutes listed in subdivision 2. 
    (d) "Record" means the petition and the documentation that 
the petitioners submit with the petition, the executive 
director's answer to the petition and documentation submitted 
with it, and any documentation the board allows to be submitted 
at or after the meeting at which the petition is considered. 
    Subd. 2.  [NOTICE OF TERMINATION OR DENIAL.] If the 
executive director terminates a benefit or denies an application 
or a written request of any person claiming a right under this 
chapter or the applicable sections of chapters 136, 355, and 
356, the executive director must serve upon that person a 
written notice.  The notice must contain: 
    (1) the reasons for the termination or denial; 
    (2) notice that the person may petition the board for a 
review of the termination or denial and that the petition for 
review must be filed within 60 days of the receipt of the 
written notice; 
    (3) a statement that failure to petition the board within 
60 days will preclude the person from contesting in any other 
court procedure or administrative hearing, the issues determined 
by the executive director; and 
    (4) a copy of this section. 
    Subd. 3.  [PETITION FOR REVIEW.] A person who claims a 
right under subdivision 2 and whose benefit has been terminated 
or whose application or written request has been denied may 
petition for a review of that decision by the board.  A petition 
under this section must be served upon the executive director 
personally, or by mail postmarked no later than 60 days after 
the petitioner received the notice required by subdivision 2.  
The petition must include the sworn, notarized statement of the 
reasons the petitioner believes the decision of the executive 
director should be reversed or modified and may include relevant 
documentation. 
    Subd. 4.  [ANSWER; RECORD FOR HEARING.] Within a reasonable 
time after receiving a petition, the executive director must 
serve the petitioner with an answer to the petition with all 
relevant documentation and with notice of the time and place of 
the regular or special board meeting at which the board will 
consider the petition.  The documentation need not duplicate the 
documentation submitted by the petitioner.  Not later than ten 
days before the board meeting at which the petition will be 
heard and at the time the petition is considered by the board, 
the executive director must, personally or by mail, deliver a 
copy of the relevant documentation to each board member.  Each 
board member who participates in the decision on the petition 
must be familiar with all relevant documentation. 
    Subd. 5.  [HEARING.] The board shall hold a timely hearing 
on a petition for review.  The board shall make its decision on 
a petition solely on the relevant documentation as submitted and 
the proceedings of the hearing.  At the hearing the petitioner, 
the petitioner's attorney, and the executive director may state 
and discuss with the board their positions with respect to the 
petition.  The board may allow further documentation to be 
placed in the record at or subsequent to the board meeting at 
which the petition is considered.  If the board allows 
additional documentation into the record at or subsequent to the 
board meeting, it may make a final determination on the petition 
at that board meeting only upon the agreement of both the 
petitioner and the executive director. 
    Subd. 6.  [TERMINATION OF BENEFITS.] If the executive 
director proposes to terminate a benefit that is being paid to 
any person, before terminating the benefit the executive 
director must, in addition to the other procedures prescribed 
herein, give the person written or oral notice of the proposed 
termination.  The notice must explain the reason for the 
proposed termination.  The person must be given an opportunity, 
verbally or in writing, to explain why the benefit should not be 
terminated.  If the executive director is unable to contact the 
person and the executive director determines that a failure to 
terminate the benefit might result in unauthorized payment by 
the association, the executive director may terminate the 
benefit with only a written notice containing the information 
required by subdivision 2, mailed to the address to which the 
benefit was last sent and, if that address is a financial 
institution, to the last known address of the person. 
    Subd. 7.  [MEDICAL ADVISOR ACTION.] If a person petitions 
the board to reverse or modify a determination by the executive 
director finding that the petitioner, for medical reasons, does 
not or has ceased to qualify for a disability benefit, the board 
may resubmit the matter to the medical advisor for 
reconsideration, with or without instructions to obtain further 
medical examinations.  The board may make a determination 
contrary to the recommendation of the medical advisor only if 
there is expert medical evidence in the record to support its 
contrary decision.  If there is no medical opinion contrary to 
the opinion of the medical advisor in the record and the medical 
advisor asserts that the decision was made in accordance with 
the disability standard in section 354.05, subdivision 14, the 
board must follow the determination of the medical advisor.  The 
board may make a determination different from the recommendation 
of the medical advisor on issues that do not involve a medical 
opinion. 
    Subd. 8.  [BOARD FINDINGS.] After the board has made a 
decision on a petition, the executive director must prepare 
findings of fact, the board's reasons for its conclusions, and 
the board's final order for the signature of the chair or other 
board member as the board, by resolution, may designate.  The 
executive director must serve the findings, conclusions, and 
order on the petitioner by certified mail. 
    Subd. 9.  [APPEALS.] Within 30 days of receipt of the 
findings, conclusions, and final order, the petitioner may 
appeal the board's decision by writ of certiorari to the court 
of appeals.  Failure to appeal to that court within the 30 days 
precludes the petitioner from later raising, in any court 
procedure or administrative hearing, those substantive and 
procedural issues that reasonably should have been raised upon 
appeal. 
    Subd. 10.  [REFERRAL FOR ADMINISTRATIVE 
HEARING.] Notwithstanding sections 14.03, 14.06, and 14.57 to 
14.69, a challenge to a determination of the executive director 
must be conducted exclusively under the procedures in this 
section.  The board in its sole discretion may refer a petition 
brought under this section to the office of administrative 
hearings for a contested case hearing under sections 14.57 to 
14.69. 
    Subd. 11.  [PETITION WITHOUT NOTICE.] A person who is not 
entitled to notice of a right of review under this section may 
nevertheless receive review of a decision of the executive 
director which affects the person's rights by petitioning the 
board under this section within 60 days of the time the person 
knew or should have known of the disputed decision. 
    Sec. 8.  Minnesota Statutes 1988, section 354.091, is 
amended to read: 
    354.091 [SERVICE CREDIT.] 
    In computing the time of service of a teacher, the length 
of a legal school year in the district or institution where such 
service was rendered shall constitute a year under sections 
354.05 to 354.10, provided such year is not less than the legal 
minimum school year of this state.  No person shall be allowed 
credit for more than one year of teaching service for any fiscal 
year.  Commencing July 1, 1969 1961 (1) if a teacher teaches 
only a fractional part of a day, credit shall be given for a day 
of teaching service for each five hours taught, and (2) if a 
teacher teaches at least 170 full days in any fiscal year credit 
shall be given for a full year of teaching service, and (3) if a 
teacher teaches for only a fractional part of the year credit 
shall be given for such fractional part of the year as the term 
of service rendered bears to 170 days.  Teaching service 
performed prior to July 1, 1969 1961 shall be computed pursuant 
to the law in effect at the time it was rendered. 
    In no event shall any teacher lose or gain retirement 
service credit as a result of the employer converting to a four 
day work week.  If the employer does convert to a four day work 
week, the forms for reporting and procedures for determining 
service credit shall be determined by the executive director 
with the approval of the board of trustees.  
    Sec. 9.  Minnesota Statutes 1988, section 354.092, is 
amended to read: 
    354.092 [SABBATICAL LEAVE.] 
    A member who is granted a sabbatical leave may receive 
allowable service credit not exceeding three years in any ten 
consecutive years toward a retirement annuity by paying into the 
fund employee contributions during the period of leave.  The 
employee contribution shall be based upon the appropriate rate 
of contributions and the salary received during the year 
immediately preceding the leave.  This payment shall be made by 
the end of the fiscal year following the fiscal year in which 
the leave of absence terminated, and shall be without interest.  
A member shall not accrue more than three years allowable 
service by reason of this section unless the allowable service 
credit was paid for by the member prior to July 1, 1962.  A 
sabbatical leave for the purpose of this section shall be 
compensated by a minimum of one-third of the salary the member 
received for a comparable period during the prior fiscal year.  
Before the end of the fiscal year during which any sabbatical 
leave begins, the employing unit granting the leave must certify 
the leave to the association on a form specified by the 
executive director.  Deductions for employee contributions at 
the applicable rate specified in section 354.42 must be made by 
the employing unit from salary paid to the member for a 
sabbatical leave.  The member may also make direct payment of 
employee contributions at the appropriate rates specified in 
section 354.42 based upon the difference between the salary 
received for the sabbatical leave and the salary received for a 
comparable period during the year immediately preceding the 
leave.  This direct payment must be made by the end of the 
fiscal year following the fiscal year in which the leave of 
absence terminated and must be without interest.  If the 
employee contributions during the period of the leave made under 
this section are less than the employee contributions based on 
the salary received made for a comparable period during the year 
immediately preceding the leave, the allowable and formula 
service credit of the member shall be prorated according to 
section 354.05, subdivision 25, clause (3), except that if the 
member is paid full salary for any sabbatical leave of absence, 
either past or prospective, the allowable and formula service 
credit shall not be prorated.  A member may not receive more 
than three years of allowable service credit in any ten 
consecutive years under this section unless the allowable 
service credit was paid for by the member before July 1, 1962.  
For sabbatical leaves taken that begin after June 30, 1986, the 
required employer contribution, including the amortization 
amount contributions specified in section 354.42, subdivisions 3 
and 5, shall must be paid by the employing unit within 30 days 
after the association's written notification by the 
association to the employing unit of the amount due.  
    Sec. 10.  Minnesota Statutes 1988, section 354.10, 
subdivision 2, is amended to read: 
    Subd. 2.  [AUTOMATIC DEPOSITS.] The board may pay an 
annuity or benefit to a banking institution, qualified under 
chapter 48, that is a trustee for a person eligible to receive 
such the annuity or benefit.  Upon completion of the proper 
forms as provided by the board executive director, the annuity 
or benefit amount may be electronically transferred or the 
annuity or benefit check may be mailed to a banking institution, 
savings association or credit union for deposit to the 
recipient's individual account or joint account with a the 
recipient's spouse. The board shall prescribe the conditions 
which shall govern these procedures.  
    Sec. 11.  Minnesota Statutes 1988, section 354.35, is 
amended to read: 
    354.35 [RETIREMENT BEFORE BECOMING ELIGIBLE FOR SOCIAL 
SECURITY OPTIONAL ACCELERATED RETIREMENT ANNUITY BEFORE AGE 65.] 
    Any coordinated member who retires before becoming eligible 
for social security retirement benefits age 65, may elect to 
receive an optional accelerated retirement annuity from the 
association which provides for different annuity amounts over 
different periods of retirement.  The election of this 
optional accelerated retirement annuity shall be exercised by 
making an application to the board on a form provided by the 
board.  The optional accelerated retirement annuity shall take 
the form of an annuity payable for the period before the member 
attains the age of 65 years in a greater amount than the amount 
of the annuity calculated under section 354.44 on the basis of 
the age of the member at retirement but equal insofar as 
possible to the social security old age retirement benefit and 
the adjusted retirement annuity amount payable immediately after 
the annuitant becomes eligible for social security old age 
retirement benefits in an amount less than the amount of the 
annuity calculated under section 354.44 on the basis of the age 
of the member at retirement.  The social security leveling 
option may be calculated based on broad average social security 
old age retirement benefits. the optional accelerated retirement 
annuity shall must be the actuarial equivalent of the member's 
annuity computed on the basis of the member's age at 
retirement.  The greater amount shall must be paid until the 
member retiree reaches the age of 65 and at which that 
time the payment from the association shall must be reduced.  
For each year the retiree is under age 65, up to five percent of 
the total life annuity required reserves may be used to 
accelerate the optional retirement annuity under this section.  
The method of computing the optional accelerated retirement 
annuity provided in this section shall be established by the 
board of trustees.  In establishing the method of computing the 
optional accelerated retirement annuity, the board of trustees 
shall must obtain the written recommendation approval of the 
commission-retained actuary.  The recommendations shall written 
approval must be a part of the permanent records of the board of 
trustees.  
    Sec. 12.  Minnesota Statutes 1988, section 354.42, 
subdivision 7, is amended to read: 
    Subd. 7.  [ERRONEOUS SALARY DEDUCTIONS OR DIRECT PAYMENTS.] 
(1) (a) Any deductions taken from the salary of an employee for 
the retirement fund in error shall, be refunded to the employee 
upon discovery and verification by the school district or 
institution employing unit making the deduction, be refunded to 
the employee and the corresponding employer contribution and 
additional employer contribution amounts attributable to the 
erroneous salary deduction must be refunded to the employing 
unit. 
    (2) In the event (b) If salary deductions and employer 
contributions were erroneously transmitted to the retirement 
fund and should have been transmitted to another public pension 
fund enumerated in section 356.30, subdivision 3, the retirement 
fund must transfer these salary deductions and employer 
contributions to the appropriate public pension fund without 
interest. 
     (c) If a salary warrant or check from which a deduction for 
the retirement fund was taken has been canceled or the amount of 
the warrant or check has been returned to the funds of the 
school district or institution employing unit making the 
payment, a refundment refund of the sum so amount deducted, or 
any portion of it as that is required to adjust the salary 
deductions, shall be made to the school district or institution 
provided application for it is made on a form furnished by the 
retirement board employing unit. 
    (d) Any erroneous direct payments of member paid 
contributions or erroneous salary deductions that were not 
refunded in the regular processing of an employing unit's annual 
summary report shall be refunded to the member with interest 
computed using the rate and method specified in section 354.49, 
subdivision 2.  
    Sec. 13.  Minnesota Statutes 1988, section 354.44, 
subdivision 3, is amended to read: 
    Subd. 3.  [APPLICATION FOR RETIREMENT.] Retirement may 
Application for retirement must be made upon application of by 
the member or of by someone acting authorized to act in the 
member's behalf.  Application must be made on a form prescribed 
by the executive director. 
    Sec. 14.  Minnesota Statutes 1988, section 354.44, 
subdivision 5, is amended to read: 
    Subd. 5.  [RESUMPTION OF TEACHING SERVICE AFTER 
RETIREMENT.] Any person who retired under any provision of any 
retirement law applicable to schools and institutions covered by 
the provisions of this chapter and has thereafter resumed 
teaching in any school or institution employer unit to which 
this chapter applies shall is eligible to continue to receive 
payments in accordance with the annuity except that annuity 
payments must be reduced during any the calendar year 
immediately following any calendar year in which the person's 
income from the teaching service is in an amount equal to or 
greater than the annual maximum earnings allowable for that age 
for the continued receipt of full benefit amounts monthly under 
the federal old age, survivors and disability insurance program 
as set by the secretary of health and human services pursuant to 
the provisions of under United States Code, title 42, section 
403.  The amount of the reduction must be one-half of the amount 
in excess of the applicable reemployment income maximum 
specified in this subdivision and must be deducted from the 
annuity payable for the calendar year immediately following the 
calendar year in which the excess amount was earned.  If the 
person has not yet reached the minimum age for the receipt of 
social security benefits, the maximum earnings for the person 
must be equal to the annual maximum earnings allowable for the 
minimum age for the receipt of social security benefits.  
    If the person is retired for only a fractional part of the 
calendar year during the initial year of retirement, the maximum 
reemployment income specified in this subdivision must be 
prorated for that calendar year.  
    After a person has reached the age of 70, no reemployment 
income maximum is applicable regardless of the amount of income. 
For the purpose of this subdivision, income from teaching 
service shall include includes, but is not limited to:  
    (a) all income for services performed as a consultant or an 
independent contractor for an employer unit covered by the 
provisions of this chapter; and 
    (b) the greater of either the income received or an amount 
based on the rate paid with respect to an administrative 
position, consultant, or independent contractor in an employer 
unit with approximately the same number of pupils and at the 
same level as the position occupied by the person who resumes 
teaching service.  
    In the event that the person has not yet reached the 
minimum age for the receipt of social security benefits, the 
maximum earnings for the person shall be equal to the annual 
maximum earnings allowable for the minimum age for the receipt 
of social security benefits.  The amount in excess of the 
applicable reemployment income maximum specified in this 
subdivision shall be deducted from the annuity payable for the 
year immediately following the year in which the excess amount 
was earned.  After a person has reached the age of 70, the 
person shall receive the annuity in full regardless of the 
amount of income. 
    Sec. 15.  Minnesota Statutes 1988, section 354.44, is 
amended by adding a subdivision to read: 
    Subd. 5a.  [EXEMPTION FOR INTERIM SUPERINTENDENT.] A person 
who performs services as an interim superintendent because of 
the death, disability, termination, or resignation of the 
previous superintendent is exempt from the earnings limitations 
and reductions in annuity payments in subdivision 5 for up to 90 
working days of service as an interim superintendent.  During 
this period of up to 90 working days, the school board may pay 
the interim superintendent at any rate, up to the rate paid to 
the previous superintendent.  This exemption applies only if the 
school board hiring the interim superintendent submits an 
application for the exemption to the executive director, and the 
executive director approves the application before the services 
as interim superintendent begin.  The application must certify 
that the school board has unanimously approved the exemption 
from the earnings limitations and reductions.  The executive 
director may prescribe a form for the application.  A school 
board may not apply for more than one exemption in a fiscal 
year.  No more than three exemptions may be approved for any 
person.  Only one exemption may be approved for any person in a 
fiscal year. 
    Sec. 16.  Minnesota Statutes 1988, section 354.44, 
subdivision 8, is amended to read: 
    Subd. 8.  [ANNUITY PAYMENT; EVIDENCE OF RECEIPT.] Payment 
of An annuity or benefit for a given month shall must be paid 
during the first week of that month.  Evidence of receipt of the 
check issued or acknowledgment of the amount electronically 
transferred in payment of an annuity or benefit shall be 
submitted by may be required from the payee or a banking 
institution on a form prescribed by the executive director.  The 
evidence of receipt form shall may be submitted required 
periodically at times specified by the board.  In the event 
the required evidence of receipt form is not submitted required, 
future annuities or benefits shall must be withheld until the 
form is submitted. 
    Sec. 17.  Minnesota Statutes 1988, section 354.47, 
subdivision 2, is amended to read: 
    Subd. 2.  [BENEFITS OF $500 $1,500 OR LESS.] If a member or 
a former member dies without having a surviving designated a 
beneficiary, or if the beneficiary should die before making 
application for the refundment and the amount to the credit of 
such deceased member or former member, and the amount of the 
benefit the decedent is $500 $1,500 or less, the retirement 
board of trustees may 90 days after the date of death of the 
member or former member, in the absence of probate proceedings, 
make payment to the surviving spouse of the deceased member or 
former members, or, if none to the next of kin under the laws of 
descent of the state of Minnesota and such decedent.  This 
payment shall be a bar to recovery of this payment from the 
association by any other person or persons.  Any accrued 
retirement allowance or annuity which shall have accrued at the 
time of death of an annuitant, disability, or survivor benefit, 
may be paid in like the same manner. 
    Sec. 18.  Minnesota Statutes 1988, section 354.48, 
subdivision 1, is amended to read: 
    Subdivision 1.  [AGE, SERVICE AND SALARY REQUIREMENTS.] Any 
A member who became is totally and permanently disabled after 
and has at least five years of credited allowable service shall 
be at the time that the total and permanent disability begins is 
entitled to a disability benefit based on this allowable service 
in an amount provided in subdivision 3.  If such the disabled 
person's member's teaching service has terminated at any time, 
at least three of the required five years of allowable service 
must have been rendered after last becoming a member.  Any 
member whose average salary is less than $75 per month shall is 
not be entitled to disability benefits. 
    Sec. 19.  Minnesota Statutes 1988, section 354.48, 
subdivision 2, is amended to read: 
    Subd. 2.  [APPLICATIONS.] Any person described in 
subdivision 1, or another person authorized to act on behalf of 
the person; may make application for a total and permanent 
disability benefit only within the 18 months month period 
following the termination of teaching service but not 
thereafter.  This benefit shall begin to accrue accrues from the 
day following the commencement of disability or the day 
following the date on last day for which salary ceases is paid, 
whichever is later, but shall may not begin to accrue more than 
90 days prior to before the date the application is filed with 
the board.  If salary is being received for either annual or 
sick leave during the period, payments shall accrue from the 
date day following the last day for which this salary ceases is 
paid. 
    Sec. 20.  Minnesota Statutes 1988, section 354.65, is 
amended to read: 
    354.65 [ADMINISTRATIVE EXPENSES.] 
    Necessary and reasonable administrative expenses incurred 
by the teachers retirement association shall must be prorated 
and allocated to the teachers retirement fund, and the 
organization's participation in both the Minnesota variable 
annuity investment fund, the Minnesota postretirement investment 
fund and the Minnesota supplemental investment retirement fund 
in accordance with policies and procedures established by the 
board of trustees of the teachers retirement association.  
    Sec. 21.  [354A.095] [MATERNITY LEAVE.] 
    A basic or coordinated member of the St. Paul teachers' 
retirement fund association and old or new coordinated members 
of the Duluth teachers' retirement fund association, who are 
granted parental or maternity leave of absence by the employing 
authority, are entitled to obtain service credit not to exceed 
one year for the period of leave upon payment to the applicable 
fund by the end of the fiscal year in which the leave of absence 
terminated.  The amount of the payment must include the total 
required employee and employer contributions for the period of 
leave prescribed in section 354A.12.  Payment must be based on 
the member's average monthly salary upon return to teaching 
service, and is payable without interest.  Payment must be 
accompanied by a certified or otherwise adequate copy of the 
resolution or action of the employing authority granting or 
approving the leave.  
    Sec. 22.  Minnesota Statutes 1988, section 354A.31, 
subdivision 3, is amended to read: 
    Subd. 3.  [RESUMPTION OF TEACHING AFTER COMMENCEMENT OF A 
RETIREMENT ANNUITY.] Any person who retired and is receiving a 
coordinated program retirement annuity under the provisions of 
sections 354A.31 to 354A.41 and who has resumed teaching service 
for the school district in which the teachers retirement fund 
association exists shall be is entitled to continue to receive 
retirement annuity payments except that for any person under the 
age of 72 years during any quarter in which the person's 
compensation for the teaching service is in an amount equal to 
or greater than the quarterly maximum earnings allowable for 
that age for the continued receipt of full benefit amounts 
monthly under the federal old age, survivors and disability 
insurance program as set by the secretary of health and human 
services pursuant to the provisions of United States Code, title 
42, section 403.  In the event that the person has not yet 
reached the minimum age for the receipt of social security 
benefits, the maximum earnings for the person shall be equal to 
the quarterly maximum earnings allowable for the minimum age for 
the receipt of social security benefits.  The amount in excess 
of the applicable reemployment income maximum specified in this 
subdivision shall be deducted from the retirement annuity 
payment payable for the quarter immediately following the 
quarter in which the excess amount was earned.  Any person to 
whom this subdivision applies who has reached the age of at 
least 72 years shall be entitled to continue to receive 
retirement annuity payments in full that annuity payments must 
be reduced during the calendar year immediately following the 
calendar year in which the person's income from the teaching 
service is in an amount greater than the annual maximum earnings 
allowable for that age for the continued receipt of full benefit 
amounts monthly under the federal old age, survivors and 
disability insurance program as set by the secretary of health 
and human services under the provisions of United States Code, 
title 42, section 403.  The amount of the reduction must be 
one-half the amount in excess of the applicable reemployment 
income maximum specified in this subdivision and must be 
deducted from the annuity payable for the calendar year 
immediately following the calendar year in which the excess 
amount was earned.  If the person has not yet reached the 
minimum age for the receipt of social security benefits, the 
maximum earnings for the person must be equal to the annual 
maximum earnings allowable for the minimum age for the receipt 
of social security benefits. 
    If the person is retired for only a fractional part of the 
calendar year during the initial year of retirement, the maximum 
reemployment income specified in this subdivision must be 
prorated for that calendar year. 
    After a person has reached the age of 70, no reemployment 
income maximum is applicable regardless of the amount of any 
compensation received for teaching service for the school 
district in which the teachers retirement fund association 
exists. 
    Sec. 23.  Minnesota Statutes 1988, section 356.30, 
subdivision 2, is amended to read: 
    Subd. 2.  [REPAYMENT OF REFUNDS.] Any A person who is 
employed has service credit in a position covered by one of the 
funds enumerated in subdivision 3 and who is employed or was 
formerly employed in a position covered by one of these funds 
but also has received a refund from any other of such these 
funds, may repay such the refund to the respective fund under 
such terms and conditions as that are consistent with the laws 
governing such the other fund, except that the person need not 
be a currently contributing member of the fund to which the 
refund is repaid at the time the repayment is made.  Unless 
otherwise provided by statute, the repayment of a refund under 
this subdivision may only be made within six months following 
termination of employment from a position covered by one of the 
funds enumerated in subdivision 3 or before the date of 
retirement from the fund to which the refund is repaid, 
whichever is earlier. 
    Sec. 24.  Minnesota Statutes 1988, section 356.371, 
subdivision 3, is amended to read: 
    Subd. 3.  [REQUIREMENT OF NOTICE TO MEMBER'S SPOUSE.] If a 
public pension fund provides optional retirement annuity forms 
which include a joint and survivor optional retirement annuity 
form potentially applicable to the surviving spouse of a member, 
the chief administrative officer of the public pension fund 
shall send a copy of the written statement required by 
subdivision 2 to the spouse of the member prior to before the 
member's election of an optional retirement annuity.  
    Following the election of an optional retirement annuity 
form by the member, a copy of the completed retirement annuity 
application shall and retirement annuity beneficiary form must 
be sent by certified mail by the public pension fund to the 
spouse of the retiring member.  A signed acknowledgment must be 
required from the spouse confirming receipt of a copy of the 
completed retirement annuity application and retirement annuity 
beneficiary form.  If the required signed acknowledgment is not 
received from the spouse within 30 days, the public pension fund 
must send another copy of the completed retirement annuity 
application and retirement annuity beneficiary form to the 
spouse by certified mail. 
    Sec. 25.  Minnesota Statutes 1988, section 356.80, 
subdivision 1, is amended to read: 
    Subdivision 1.  [INFORMATION FOR A PENDING MARRIAGE 
DISSOLUTION.] (a) Upon written request by a person with access 
to the data under subdivision 3 who cites this statute, a public 
or private pension plan administrator must provide the court and 
the parties to a marriage dissolution action involving a plan 
member or former plan member with information regarding pension 
benefits or rights of the plan member or former plan member.  
The pension plan shall provide this information upon request of 
the court or a party to the action without requiring a signed 
authorization from the plan member or former plan member. 
    (b) The information must include the pension benefits or 
rights of the plan member or former plan member as of the first 
day of the month following the date of the request, or as of the 
end of the previous fiscal year for the plan, and as of the date 
of valuation of marital assets under section 518.58, if the 
person requesting the information specifies that date.  The 
information must include the accrued service credit of the 
person, the credited salary of the person for the most current 
five-year period, a summary of the benefit plan, and any other 
information relevant to the calculation of the present value of 
the benefits or rights. 
    Sec. 26.  Minnesota Statutes 1988, section 356.80, 
subdivision 3, is amended to read: 
    Subd. 3.  [ACCESS TO DATA.] Notwithstanding any provision 
of chapter 13 to the contrary, an administrator may release 
private or confidential data on individuals to the court, the 
parties to a marriage dissolution, their attorneys, and an 
actuary appointed under section 518.582, to the extent necessary 
to comply with this section, but only if the administrator has 
received a copy of the legal petition showing that an action for 
marriage dissolution has commenced and a copy of the affidavit 
of service showing that the petition has been served on the 
responding party to the action. 
    Sec. 27.  [356.81] [REPAYMENT OF REFUNDS.] 
    Repayment of a refund and interest on that refund permitted 
under laws governing any public pension plan in Minnesota may be 
made with funds distributed from a plan qualified under the 
federal Internal Revenue Code of 1986, as amended through 
December 31, 1988, section 401(a) or an annuity qualified under 
the federal Internal Revenue Code of 1986, section 403(a).  
Repayment may also be made with funds distributed from an 
individual retirement account used solely to receive a 
nontaxable rollover from that type of a plan or annuity.  The 
repaid refund must be separately accounted for as member 
contributions not previously taxed.  Before accepting any 
transfers to which this subdivision applies, the executive 
director must require the member to provide written 
documentation to demonstrate that the amounts to be transferred 
are eligible for a tax-free rollover and qualify for that 
treatment under the federal Internal Revenue Code of 1986.  
    Sec. 28.  [REPEALER.] 
    Minnesota Statutes 1988, sections 136.88, subdivision 3; 
354.41, subdivision 3; 354.531; 354.532; 354.55, subdivision 5; 
and 354.56, are repealed.  
    Sec. 29.  [EFFECTIVE DATE.] 
    Sections 2 to 13 and 15 to 28 are effective the day 
following final enactment.  Section 1 is effective July 1, 
1989.  Section 14 is effective January 1, 1989. 

                               ARTICLE 3

                                 PERA 
    Section 1.  Minnesota Statutes 1988, section 353.01, 
subdivision 2a, is amended to read: 
    Subd. 2a.  [INCLUDED EMPLOYEES.] The following persons are 
included in the meaning of "public employee": 
    (1) elected or appointed officers and employees of elected 
officers; 
    (2) district court reporters; 
    (3) officers and employees of the public employees 
retirement association; 
    (4) employees of the league of Minnesota cities; 
    (5) employees of the association of metropolitan 
municipalities; 
    (6) officers and employees of public hospitals owned or 
operated by, or an integral part of, a governmental subdivision 
or governmental subdivisions; 
    (6) (7) employees of a school district who receive separate 
salaries for driving their own buses; 
    (7) (8) employees of the association of Minnesota counties; 
    (8) (9) employees of the metropolitan intercounty 
association; 
    (9) (10) employees of the Minnesota municipal utilities 
association; 
    (10) (11) employees of the Minnesota association of 
townships when the board of the association, at its option, 
certifies to the executive director that its employees are to be 
included for purposes of retirement coverage, in which case 
coverage of all employees of the association is permanent; 
     (12)  employees of the metropolitan airports commission if 
employment initially commenced after June 30, 1979; 
    (11) (13) employees of the Minneapolis employees retirement 
fund, if employment initially commenced after June 30, 1979; 
    (12) (14) employees of the range association of 
municipalities and schools; 
    (13) (15) employees of the soil and water conservation 
districts; 
    (14) (16) employees of a county historical society who are 
county employees; 
    (15) (17) employees of a county historical society located 
in the county whom the county, at its option, certifies to the 
executive director to be county employees for purposes of 
retirement coverage under this chapter, which status must be 
accorded to all similarly situated county historical society 
employees and, once established, must continue as long as a 
person is an employee of the county historical society and is 
not excluded under subdivision 2b; 
    (16) (18) employees of an economic development authority 
created under sections 458C.01 to 458C.23; 
    (17) (19) employees of the department of military affairs 
of the state of Minnesota who are full-time firefighters; and 
    (20) employees who became members before July 1, 1988, 
based on the total salary of positions held in more than one 
governmental subdivision. 
    Sec. 2.  Minnesota Statutes 1988, section 353.01, 
subdivision 2b, is amended to read: 
    Subd. 2b.  [EXCLUDED EMPLOYEES.] (a) The following persons 
are excluded from the meaning of "public employee": 
    (1) persons who are employed for professional services 
where the service is incidental to regular professional duties, 
determined on the basis that compensation for the service 
amounts to no more than 25 percent of the person's total annual 
gross earnings for all professional duties; 
    (2) election officers; 
    (3) independent contractors and their employees; 
    (4) patient and inmate help personnel who perform services 
in governmental subdivision charitable, penal, and or 
correctional institutions of a governmental subdivision; 
    (5) members of boards, commissions, bands, and others who 
serve the a governmental subdivision intermittently; 
    (6) employees whose employment is not expected to continue 
for a period longer than six consecutive months;, unless it 
involves employment for a probationary period that is part of a 
permanent position.  Immediately following the expiration of a 
six-month period of employment, if the employee continues in 
public service and earns more than $425 from one governmental 
subdivision in any one calendar month, the department head shall 
report the employee for membership and require employee 
deductions be made on behalf of the employee in accordance with 
section 353.27, subdivision 4.  Membership eligibility of an 
employee who holds concurrent temporary employment of six months 
or less and part-time positions in one governmental subdivision 
must be determined by the salary of each position.  Membership 
eligibility of an employee who holds nontemporary positions in 
one governmental subdivision must be determined by the total 
salary of all positions; 
    (7) part-time employees who receive monthly compensation 
from a one governmental subdivision not exceeding $425, and 
part-time employees and elected officials whose annual 
compensation from a one governmental subdivision is stipulated 
in advance, in writing, to be not more than $5,100 per calendar 
year or per school year for school employees for employment 
expected to be of a full year's duration or more than the 
prorated portion of $5,100 per employment period for employment 
expected to be of less than a full year's duration, except that 
members continue their membership until termination of public 
service;.  Membership eligibility of an employee who holds 
concurrent part-time positions under this clause must be 
determined by the total salary of all such positions in one 
governmental subdivision.  If compensation from one governmental 
subdivision to an employee under this paragraph exceeds $5,100 
per calendar year or school year after being stipulated in 
advance not to exceed that amount, the stipulation is no longer 
valid and contributions must be made on behalf of the employee 
in accordance with section 353.27, subdivision 12, from the 
month in which the employee's earnings first exceeded $425; 
    (8) persons who first occupy an elected office after July 
1, 1988, the compensation for which does not exceed $425 per 
month; 
    (9) emergency employees who are employed by reason of work 
caused by fire, flood, storm, or similar disaster; 
    (10) employees who by virtue of their employment as an 
officer or employee of a in one governmental subdivision are 
required by law to be a member of and to contribute to any of 
the plans or funds administered by the state employees 
retirement system, the teachers retirement fund, the state 
patrol retirement fund, the Duluth teachers retirement fund 
association, the Minneapolis teachers retirement fund 
association, the St. Paul teachers retirement fund association, 
the Minneapolis employees retirement fund, the Minnesota state 
retirement system correctional officers retirement plan, or any 
police or firefighters relief association governed by section 
69.77 that has not consolidated with the public employees police 
and fire fund and for which the employee has not elected 
coverage by the public employees police and fire fund benefit 
plan as provided in sections 353A.01 to 353A.10, other than as 
an act of the legislature has specifically enabled participation 
by employees of a designated governmental subdivision in a plan 
supplemental to the public employees retirement association; 
Minnesota state retirement system, the teachers retirement 
association, the Duluth teachers retirement fund association, 
the Minneapolis teachers retirement association, the St. Paul 
teachers retirement fund association, the Minneapolis employees 
retirement fund, or any police or firefighters relief 
association governed by section 69.77 that has not consolidated 
with the public employees police and fire fund, or any police or 
firefighters relief association that has consolidated with the 
public employees retirement association but whose members have 
not elected coverage by the public employees police and fire 
fund as provided in sections 353A.01 to 353A.10.  This clause 
must not be construed to prevent a person from being a member of 
and contributing to the public employees retirement association 
and also belonging to and contributing to another public pension 
fund for other service occurring during the same period of 
time.  A person who meets the definition of "public employee" in 
subdivision 2 by virtue of other service occurring during the 
same period of time shall become a member of the association 
unless contributions are made to another public retirement fund 
on the salary based on the other service or to the teachers 
retirement association by a teacher as defined in section 
354.05, subdivision 2; 
    (11) police matrons who are employed in a police department 
of a city who are transferred to the jurisdiction of a joint 
city and county detention and corrections authority; 
    (12) persons who are excluded from coverage under the 
federal old age, survivors, disability, and health insurance 
program for the performance of service as specified in United 
States Code, title 42, section 410(a) (8) (A), as amended 
through January 1, 1987; 
    (13) full-time students who are enrolled and are regularly 
attending classes at an accredited school, college, or 
university and who are not employed full time by a governmental 
subdivision; 
    (14) resident physicians, medical interns, and pharmacist 
residents and interns who are serving in a degree or residency 
program in public hospitals and students who are serving in an 
internship or residency program sponsored by an accredited 
educational institution; 
    (15) appointed or elected officers, who are paid entirely 
on a fee basis, and who were not members on June 30, 1971; 
    (16) persons holding who hold a part-time adult 
supplementary technical institute license who render part-time 
teaching service in a technical institute if the service is 
incidental to the person's regular nonteaching occupation, the 
applicable technical institute stipulates annually in advance 
that the part-time teaching service will not exceed 300 hours in 
a fiscal year, and the part-time teaching service actually does 
not exceed 300 hours in a fiscal year; and; 
    (17) persons exempt from licensure under section 125.031; 
    (18) except as provided in section 353.86, volunteer 
ambulance service personnel, as defined in subdivision 35, but 
persons who serve as volunteer ambulance service personnel may 
still qualify as public employees under subdivision 2 and may be 
members of the public employees retirement association and 
participants in the public employees retirement fund or the 
public employees police and fire fund on the basis of 
compensation received from public employment service other than 
service as volunteer ambulance service personnel; and 
    (19) except as provided in section 353.87, volunteer 
firefighters, as defined in subdivision 36, engaging in 
activities undertaken as part of volunteer firefighter duties; 
provided that a person who is a volunteer firefighter may still 
qualify as a public employee under subdivision 2 and may be a 
member of the public employees retirement association and a 
participant in the public employees retirement fund or the 
public employees police and fire fund on the basis of 
compensation received from public employment activities other 
than those as a volunteer firefighter. 
    (b) Immediately following the expiration of a six-month 
period of employment by an employee covered by paragraph (a), 
clause (6), if the employee continues in public service and 
earns more than $425 from a governmental subdivision in any one 
calendar month, the department head shall report the employee 
for membership and cause employee contributions to be made on 
behalf of the employee in accordance with section 353.27, 
subdivision 4, and the employee remains a member until 
termination of public service.  This paragraph may not be 
construed to exclude an employee from membership whose 
employment is expected to continue for more than six months but 
who is serving a probationary period. 
    (c) If compensation from a governmental subdivision to an 
employee covered by paragraph (a), clause (7), exceeds $5,100 
per calendar year or school year after being stipulated in 
advance, the stipulation is no longer valid and contributions 
must be made on behalf of the employee in accordance with 
section 353.27, subdivision 12, from the month in which the 
employee first exceeded $425. 
    (d) Paragraph (a), clause (10), does not prevent a person 
from being a member of and contributing to the public employees 
retirement association and also belonging to or contributing to 
another public pension fund for other service occurring during 
the same period of time.  A person who meets the definition of 
"public employee" in subdivision 2, by virtue of other service 
occurring during the same period of time shall become a member 
of the association unless contributions are made to another 
public retirement fund on the salary based on the other service 
or to the teachers retirement association in accordance with 
section 354.05, subdivision 2. 
    Sec. 3.  Minnesota Statutes 1988, section 353.01, 
subdivision 10, is amended to read: 
    Subd. 10.  [SALARY.] "Salary" means the periodical 
compensation of a public employee, before deductions for 
deferred compensation, supplemental retirement plans, or other 
voluntary salary reduction programs, and also means "wages" and 
includes net income from fees.  Fees paid to district court 
reporters are not considered a salary.  Lump sum annual or lump 
sum sick leave payments, severance payments, and all payments in 
lieu of any employer-paid group insurance coverage, including 
the difference between single and family rates that may be paid 
to a member with single coverage, are not deemed to be salary.  
Before the time that all sick leave has been used, amounts paid 
to an employee under a disability insurance policy or program 
where the employer paid the premiums are considered salary, and, 
after all sick leave has been used, the payment is not 
considered salary.  Workers' compensation payments are not 
considered salary.  Except as provided in sections 353.86 or 
353.87, compensation of any kind paid to volunteer ambulance 
service personnel or volunteer firefighters, as defined in 
subdivisions 35 and 36, is not considered salary.  For a public 
employee who has prior service covered by a local police or 
firefighters relief association that has consolidated with the 
public employees police and fire fund and who has elected 
coverage by the public employees police and fire fund benefit 
plan as provided in section 353A.08 following the consolidation, 
"salary" means the rate of salary upon which member 
contributions to the special fund of the relief association were 
made prior to the effective date of the consolidation as 
specified by law and by bylaw provisions governing the relief 
association on the date of the initiation of the consolidation 
procedure and the actual periodical compensation of the public 
employee after the effective date of the consolidation. 
    Sec. 4.  Minnesota Statutes 1988, section 353.01, is 
amended by adding a subdivision to read: 
    Subd. 11a.  [TERMINATION OF PUBLIC SERVICE.] An officer or 
employee who terminates employment but within 30 days returns to 
employment in the same governmental subdivision or begins 
employment in another position otherwise excluded from 
membership is considered a member from the beginning of the 
reemployment unless the total period covered by all periods of 
employment is less than six months or the amount earned does not 
exceed the dollar limitations in subdivision 2b, clause (7). 
     Sec. 5.  Minnesota Statutes 1988, section 353.01, is 
amended by adding a subdivision to read: 
    Subd. 35.  [VOLUNTEER AMBULANCE SERVICE 
PERSONNEL.] "Volunteer ambulance service personnel," for 
purposes of this chapter, are basic and advanced life support 
emergency medical service personnel employed by or providing 
services for any public ambulance service or privately operated 
ambulance service that receives an operating subsidy from a 
governmental entity. 
    Sec. 6.  Minnesota Statutes 1988, section 353.01, is 
amended by adding a subdivision to read: 
     Subd. 36.  [VOLUNTEER FIREFIGHTER.] For purposes of this 
chapter, a person is considered a "volunteer firefighter" for 
all service for which the person receives credit in an 
association or fund operating under chapter 424A. 
    Sec. 7.  Minnesota Statutes 1988, section 353.27, 
subdivision 12, is amended to read: 
    Subd. 12.  [OMITTED SALARY DEDUCTIONS; OBLIGATIONS.] In the 
case of omission of required deductions from salary of an 
employee, past due for 60 days or less, the head of the 
department shall deduct from the employee's next salary payment 
and remit to the executive director the amount of the employee 
contribution delinquency, with the department head shall 
immediately, upon discovery, report the employee for membership 
and require employee deductions be made in accordance with 
subdivision 4.  Omitted employee deductions due for the 60-day 
period preceding enrollment must be deducted from the employee's 
next salary payment and remitted to the association.  The 
employer shall pay any remaining omitted employee deductions 
past due and any omitted employer contributions, plus cumulative 
interest at the rate of six percent a year, compounded annually, 
from the date or dates each delinquent omitted employee 
contribution was first payable.  The interest must be paid by 
the employer.  Omitted required deductions past due for a period 
in excess of 60 days are the sole obligation of the governmental 
subdivision from the time the deductions were first payable, 
together with interest as specified in this subdivision.  Any 
amount so due, together with employer and additional employer 
contributions at the rates and in the amounts specified in 
subdivisions 3 and 3a, with interest at the rate of six percent 
compounded annually from the date they were first payable, from 
the employer must be paid from the proceeds of a tax levy made 
under section 353.28 or from other funds available to the 
employer.  Unless otherwise indicated, An employer shall not 
hold an employee liable for omitted employee deductions due for 
more than the 60-day period preceding enrollment nor attempt to 
recover from the employee those employee deductions paid by the 
employer.  Neither an employer nor an employee is responsible to 
pay omitted employee deductions when an employee terminates 
public service before making payment of omitted employee 
deductions to the association, but the employer remains liable 
to pay omitted employer contributions plus interest at the rate 
of six percent compounded annually from the date the 
contributions were first payable.  This subdivision has both 
retroactive and prospective application, and the governmental 
subdivision is liable retroactively and prospectively for all 
amounts due under it.  No action for the recovery of omitted 
employee and employer contributions or interest on contributions 
may be commenced and no payment of omitted contributions may be 
made or accepted unless the association has already commenced 
action for recovery of omitted contributions, The association 
may not commence action for the recovery of omitted employee 
deductions and employer contributions after the expiration of 
three calendar years after the calendar year in which the 
contributions and deductions were omitted.  No payment may be 
made or accepted unless the association has already commenced 
action for recovery of omitted deductions.  An action for the 
recovery of omitted contributions or interest commences five 
calendar days after on the date of the mailing of any written 
correspondence from the association requesting information from 
the governmental unit that may lead to a recovery of omitted 
contributions subdivision upon which to determine whether or not 
omitted deductions occurred. 
    Sec. 8.  Minnesota Statutes 1988, section 353.28, 
subdivision 5, is amended to read: 
    Subd. 5.  Any amount which becomes due and payable pursuant 
to this section or section 353.27, subdivision 4, shall bear 
compound interest at the rate of six percent per year from the 
date due for the next five calendar days, and compound interest 
at the rate of ten percent per year for amounts past due in 
excess of five calendar days until the date payment is actually 
received in the office of the association, with a minimum charge 
of $10.  Interest for past due payments of excess police state 
aid under section 69.031, subdivision 5, must be charged at a 
rate of six percent compounded annually. 
    Sec. 9.  Minnesota Statutes 1988, section 353.28, 
subdivision 6, is amended to read: 
    Subd. 6.  If the governmental subdivision fails to pay 
amounts due under this chapter or fails to make payments of 
excess police state aid to the public employees police and fire 
fund under section 69.031, subdivision 5, the executive director 
shall certify those amounts to the governmental subdivision for 
payment.  If the governmental subdivision fails to remit the sum 
so due in a timely fashion, the executive director shall certify 
amounts to the county auditor for collection.  The county 
auditor shall collect such amounts out of the revenue of the 
governmental subdivision, or shall add them to the levy of the 
governmental subdivision and make payment directly to the 
association.  This tax shall be levied, collected and 
apportioned in the manner other taxes are levied, collected and 
apportioned. 
    Sec. 10.  Minnesota Statutes 1988, section 353.29, 
subdivision 4, is amended to read: 
    Subd. 4.  [APPLICATION FOR ANNUITY.] Application for a 
retirement annuity may be made by a member or by a person 
authorized to act on behalf of the member.  Every application 
for retirement shall be made in writing on a form prescribed by 
the executive director and shall be substantiated in writing by 
written proof of the member's age of the member and 
identity.  No application for a retirement annuity may be 
considered complete until all necessary supporting documents are 
received by the executive director. 
    Sec. 11.  Minnesota Statutes 1988, section 353.29, 
subdivision 7, is amended to read: 
    Subd. 7.  [ANNUITIES; ACCRUAL.] Except as to elected public 
officials, all retirement annuities granted under the provisions 
of this chapter shall commence with the first day of the first 
calendar month next succeeding the date of termination of public 
service and shall be paid in equal monthly installments, but no 
payment shall accrue beyond the end of the month, in which 
entitlement to such annuity has terminated.  If the annuitant 
dies prior to negotiating the check for the month in which death 
occurs, payment will be made to the surviving spouse or if none 
to the designated beneficiary or if none to the estate.  Any 
annuity granted to an elective public official shall accrue on 
the day following expiration of the public office held or right 
thereto, and the annuity for that month shall be prorated 
accordingly.  No annuity, once granted, shall be increased, 
decreased, or revoked except as provided in this chapter.  No 
annuity payment shall be made retroactive for more than three 
months prior to that month in which application therefor shall 
be filed with the association a complete application is received 
by the executive director as provided in subdivision 4. 
    Sec. 12.  Minnesota Statutes 1988, section 353.33, 
subdivision 1, is amended to read: 
    Subdivision 1.  [AGE, SERVICE, AND SALARY REQUIREMENTS.] 
Any member who becomes totally and permanently disabled before 
age 65 and after five years of allowable service shall be 
entitled to a disability benefit in an amount provided in 
subdivision 3.  If such the disabled person's public service has 
terminated at any time, at least three of the required five 
years of allowable service must have been rendered after last 
becoming a member.  Any member whose average salary is less than 
$75 per month shall not be entitled to a disability benefit.  No 
repayment of a refund otherwise authorized pursuant to section 
353.34 and A repayment of a refund may be made before the 
effective date of disability benefits under subdivision 2.  No 
purchase of prior service or payment made in lieu of salary 
deductions otherwise authorized pursuant to section 353.01, 
subdivision 16, 353.017, subdivision 4, or 353.36, subdivision 
2, may be made after the occurrence of the disability for which 
an application pursuant to this section is filed.  
    Sec. 13.  Minnesota Statutes 1988, section 353.33, 
subdivision 2, is amended to read: 
    Subd. 2.  [APPLICATIONS; ACCRUAL OF BENEFITS.] Every claim 
or demand for a total and permanent disability benefit 
shall must be initiated by written application in the manner and 
form prescribed by the executive director, filed in the office 
of the retirement association, showing compliance with the 
statutory conditions qualifying the applicant for a total and 
permanent disability benefit and filed with the executive 
director.  A member or former member who became totally and 
permanently disabled during a period of membership may file 
application for total and permanent disability benefits within 
three years next following termination of public service, but 
not thereafter.  This benefit shall begin to accrue the day 
following the commencement of disability, 90 days preceding the 
filing of the application, or, if annual or sick leave is paid 
for more than the said 90 day period, from the date salary 
ceased whichever is later.  No payment shall accrue beyond the 
end of the month in which entitlement has terminated.  If the 
disabilitant dies prior to negotiating the check for the month 
in which death occurs, payment will be made to the surviving 
spouse, or if none, to the designated beneficiary, or if none, 
to the estate.  An applicant for total and permanent disability 
benefits may file a retirement annuity application under section 
353.29, subdivision 4, simultaneously with an application for 
total and permanent disability benefits.  The retirement annuity 
application is void upon the determination of the entitlement 
for disability benefits by the executive director.  If 
disability benefits are denied, the retirement annuity 
application must be initiated and processed. 
    Sec. 14.  Minnesota Statutes 1988, section 353.33, 
subdivision 5, is amended to read: 
    Subd. 5.  [BENEFITS PAID UNDER WORKERS' COMPENSATION LAW.] 
Disability benefits paid shall be reimbursed and future benefits 
shall be reduced by coordinated with any amounts received or 
receivable, including under workers' compensation law, such as 
temporary total, permanent total, temporary partial or, 
permanent partial, or economic recovery compensation benefits, 
in either periodic or lump sum payments from the employer under 
applicable workers' compensation laws, after deduction of amount 
of attorney fees, authorized under applicable workers' 
compensation laws, paid by a disabilitant.  If the total of the 
single life annuity actuarial equivalent disability benefit and 
the workers' compensation benefit exceeds:  (1) the salary the 
disabled member received as of the date of the disability or (2) 
the salary currently payable for the same employment position or 
an employment position substantially similar to the one the 
person held as of the date of the disability, whichever is 
greater., the disability benefit must be reduced to that amount 
which, when added to the workers' compensation benefits, does 
not exceed the greater of the salaries described in clauses (1) 
and (2). 
    Sec. 15.  Minnesota Statutes 1988, section 353.33, 
subdivision 6, is amended to read: 
    Subd. 6.  [CONTINUING ELIGIBILITY FOR BENEFITS.] The 
eligibility for continuation of disability benefits shall be 
determined by the association, which has authority to require 
periodic examinations and evaluations of disabled members as 
frequently as deemed necessary.  Disability benefits are 
contingent upon a disabled person's participation in a 
vocational rehabilitation program if the executive director 
determines that the disabled person may be able to return to a 
gainful occupation.  If a member is found to be no longer 
totally and permanently disabled and is reinstated to the 
payroll, payments shall be made for no more than 60 days. 
    Sec. 16.  Minnesota Statutes 1988, section 353.33, 
subdivision 7, is amended to read: 
    Subd. 7.  [PARTIAL REEMPLOYMENT.] If, following a work or 
nonwork-related injury or illness, a disabled person resumes a 
gainful occupation from which earnings are less than the salary 
at the date of disability or the salary currently paid for 
similar positions, the board shall continue the disability 
benefit in an amount that, when added to the earnings and 
workers' compensation benefit, does not exceed the salary at the 
date of disability or the salary currently paid for similar 
positions, whichever is higher, provided the disability benefit 
does not exceed the disability benefit originally allowed, plus 
any postretirement adjustments payable after December 31, 1988, 
in accordance with section 11A.18, subdivision 10.  No 
deductions for the retirement fund may be taken from the salary 
of a disabled person who is receiving a disability benefit as 
provided in this subdivision. 
    Sec. 17.  Minnesota Statutes 1988, section 353.34, 
subdivision 1, is amended to read: 
    Subdivision 1.  [REFUND OR DEFERRED ANNUITY.] Any member 
who ceases to be a public employee by reason of termination of 
public service, or who is on a continuous layoff for more than 
120 calendar days, shall be entitled to a refund of accumulated 
deductions as provided in subdivision 2, or to a deferred 
annuity as provided in subdivision 3.  An active member of a 
fund enumerated in section 356.30, subdivision 3, clause (7), 
(8), or (14), who terminates public service in any of those 
funds and becomes a member of another fund enumerated in those 
clauses may receive a refund of employee contributions plus five 
percent interest compounded annually from the fund in which the 
member terminated service.  Application for a refund may not be 
made prior to date of termination of public service, or the 
expiration of 120 days of layoff, and a refund shall be paid 
within 120 days following receipt of application, provided 
applicant has not again become a public employee required to be 
covered by the association. 
    Sec. 18.  Minnesota Statutes 1988, section 353.35, is 
amended to read: 
    353.35 [CONSEQUENCES OF REFUND; REPAYMENT, RIGHTS 
RESTORED.] 
    When any former member accepts a refund, all existing 
service credits and all rights and benefits to which the person 
was entitled prior to the acceptance of such the refund shall 
terminate and shall not again be restored until the person 
acquires not less than 18 months allowable service credit 
subsequent to after taking the last refund and repays all 
refunds taken and interest received under section 353.34, 
subdivisions 1 and 2, plus interest at six percent per annum 
compounded annually.  If more than one refund has been 
taken, all refunds must be repaid by the person may repay all 
refunds or only the refund for the fund in which the person had 
most recently been a member, with interest at six percent per 
annum compounded annually.  All refunds must be repaid within 
three months of the last date of termination of public service.  
    Sec. 19.  Minnesota Statutes 1988, section 353.64, 
subdivision 1, is amended to read: 
    Subdivision 1.  [POLICE AND FIRE FUND MEMBERSHIP.] Any 
person who prior to July 1, 1961, was a member of the police and 
fire fund, by virtue of being a police officer or firefighter, 
shall as long as the person remains in either position, be 
deemed to continue membership in the fund.  Any person who was 
employed by a governmental subdivision as a police officer and 
was a member of the police and fire fund on July 1, 1978, by 
virtue of being a police officer as defined by this section on 
that date shall be entitled, if employed by the same 
governmental subdivision in a position in the same department in 
which the person was employed on that date, to continue 
membership in the fund whether or not that person has the power 
of arrest by warrant after that date.  Any person who was 
employed by a governmental subdivision as a police officer or a 
firefighter, whichever applies, was an active member of the 
local police or salaried firefighters relief association located 
in that governmental subdivision by virtue of that employment as 
of the effective date of the consolidation as authorized by 
sections 353A.01 to 353A.10, and has elected coverage by the 
public employees police and fire fund benefit plan, shall be 
considered to be a member of the police and fire fund after that 
date if employed by the same governmental subdivision in a 
position in the same department in which the person was employed 
on that date.  Any other employee serving on a full-time basis 
as a police officer or firefighter on or after July 1, 1961, 
shall become a member of the public employees police and fire 
fund.  Any employee serving on less than a full-time basis as a 
police officer shall become a member of the public employees 
police and fire fund only after a resolution stating that the 
employee should be covered by the police and fire fund is 
adopted by the governing body of the governmental subdivision 
employing the person declaring that the position which the 
person holds is that of a police officer.  Any employee serving 
on less than a full-time basis as a firefighter, other than a 
volunteer firefighter, shall become a member of the public 
employees police and fire fund only after a resolution stating 
that the employee should be covered by the police and fire fund 
is adopted by the governing body of the governmental subdivision 
employing the person declaring that the position which the 
person holds is that of a firefighter.  Any police officer or 
firefighter, other than a volunteer firefighter, employed by a 
governmental subdivision who by virtue of that employment is 
required by law to be a member of and to contribute to any 
police or firefighter relief association governed by section 
69.77 which has not consolidated with the public employees 
police and fire fund and any police officer or firefighter of a 
relief association that has consolidated with the association 
for which the employee has not elected coverage by the public 
employees police and fire fund benefit plan as provided in 
sections 353A.01 to 353A.10 other than a volunteer firefighters 
relief association to which sections 69.771 to 69.776 apply 
shall not be a member of this fund. 
    Sec. 20.  Minnesota Statutes 1988, section 353.64, 
subdivision 2, is amended to read: 
    Subd. 2.  Before a governing body may declare a position to 
be that of a police officer, the duties of the person so 
employed shall must, as a minimum, include services employment 
as an officer of a designated police department or sheriff's 
office or person in charge of a designated police department or 
sheriff's office whose primary job it is to enforce the law, who 
is licensed by the Minnesota board of peace officer standards 
and training under sections 626.84 to 626.855, who is engaged in 
the hazards of protecting the safety and property of others, and 
who has the power to arrest by warrant.  A police officer who is 
periodically assigned to employment duties not within the scope 
of this subdivision may contribute to the public employees 
police and fire fund for all service, if a resolution declaring 
that the primary position held by the person is that of a police 
officer, is adopted by the governing body of the department, and 
is promptly submitted to the executive director. 
    Sec. 21.  Minnesota Statutes 1988, section 353.64, 
subdivision 3, is amended to read: 
    Subd. 3.  Before a governing body may declare a position to 
be that of a firefighter, the duties of the person so employed 
shall must, as a minimum, include services as an employee of a 
designated fire company or person in charge of a designated fire 
company or companies who is engaged in the hazards of fire 
fighting.  A firefighter who is periodically assigned to 
employment duties outside the scope of firefighting may 
contribute to the public employees police and fire fund for all 
service, if a resolution declaring that the primary position 
held by the person is that of a firefighter, is adopted by the 
governing body of the company or companies, and is promptly 
submitted to the executive director. 
    Sec. 22.  Minnesota Statutes 1988, section 353.656, 
subdivision 4, is amended to read: 
    Subd. 4.  No member shall receive any disability benefit 
payment when there remains to the member's credit unused annual 
leave or sick leave or under any other circumstances, when, 
during the period of disability, there has been no impairment of 
salary and.  Should such the member resume a gainful occupation 
with earnings less than the salary earned at the date of 
disability or the salary currently paid for similar positions, 
the association shall continue the disability benefit in an 
amount which when added to such workers' compensation benefits 
and actual earnings does not exceed the salary earned at the 
date of disability or the salary currently paid for similar 
positions, whichever is higher, provided.  In no event may the 
disability benefit in such case does not exceed the disability 
benefit originally allowed.  In the event that the total amount 
is higher, the executive director shall reduce the disability 
benefit by the amount of the excess. 
     Sec. 23.  [353.86] [VOLUNTEER AMBULANCE SERVICE PERSONNEL; 
PARTICIPATION; ELECTION; LIMITATION; AND COMPENSATION.] 
     Subdivision 1.  [PARTICIPATION.] Volunteer ambulance 
service personnel, as defined in section 353.01, subdivision 35, 
who are or become members of and participants in the public 
employees retirement fund or the public employees police and 
fire fund and make contributions to either of those funds based 
on compensation for service other than volunteer ambulance 
service may elect to participate in that same fund with respect 
to compensation received for volunteer ambulance service, 
provided that the volunteer ambulance service is not credited to 
another public or private pension plan including the public 
employees retirement plan established by chapter 353D and 
provided further that the volunteer ambulance service is 
rendered for the same governmental unit for which the 
nonvolunteer ambulance service is rendered. 
     Subd. 2.  [ELECTION.] Volunteer ambulance service personnel 
to whom subdivision 1 applies may exercise the election 
authorized under subdivision 1 within the earlier of the 
one-year period beginning on July 1, 1989, and extending through 
June 30, 1990, or the one-year period commencing on the first 
day of the first month following the start of employment in a 
position covered by the public employees retirement fund or the 
public employees police and fire fund.  The election must be 
exercised by filing a written notice on a form prescribed by the 
executive director of the association. 
    Subd. 3.  [LIMITATION.] Volunteer ambulance service 
personnel to whom subdivision 1 applies who exercise their 
option in accordance with subdivision 2 and their governmental 
employers are not required to pay omitted deductions and 
contributions under section 353.27, subdivision 12, for 
volunteer ambulance service rendered before July 1, 1989. 
    Subd. 4.  [COMPENSATION.] Notwithstanding section 353.01, 
subdivision 10, compensation received for service rendered by 
volunteer ambulance service personnel to whom subdivision 1 
applies who exercise their option in accordance with subdivision 
2 shall be considered salary.  
    Sec. 24.  [353.87] [VOLUNTEER FIREFIGHTERS; PARTICIPATION; 
LIMITATION; AND REFUND.] 
    Subdivision 1.  [PARTICIPATION.] Except as provided in 
subdivision 2, a volunteer firefighter, as defined in section 
353.01, subdivision 36, who, on June 30, 1989, was a member of, 
and a participant in, the public employees retirement fund or 
the public employees police and fire fund and was making 
contributions to either of those funds based, at least in part, 
on compensation for services performed as a volunteer 
firefighter shall continue as a member of, and a participant in, 
the public employees retirement fund or the public employees 
police and fire fund and compensation for services performed as 
a volunteer firefighter shall be considered salary. 
    Subd. 2.  [OPTION.] A volunteer firefighter to whom 
subdivision 1 applies has the option to terminate membership and 
future participation in the public employees retirement fund or 
the public employees police and fire fund upon filing of a 
written notice of intention to terminate participation.  Notice 
must be given on a form prescribed by the executive director of 
the association and must be filed in the offices of the 
association not later than June 30, 1990. 
    Subd. 3.  [LIMITATION.] No volunteer firefighter to whom 
subdivision 1 applies or the governmental employer of the 
volunteer firefighter is required to make back contributions to 
the public employees retirement association for volunteer 
firefighter services rendered before July 1, 1989, 
notwithstanding the provisions of section 353.27, subdivision 12.
    Subd. 4.  [REFUND.] Upon timely filing of a valid notice of 
termination of participation in accordance with subdivision 2, a 
volunteer firefighter to whom subdivision 1 applies must be 
given a refund of all past employee contributions made on 
account of volunteer firefighter service with five percent 
interest compounded annually. 
     Subd. 5.  [FURTHER OPTION.] A volunteer firefighter, as 
defined in section 353.01, subdivision 36, who is or becomes a 
member of, and a participant in, the public employees retirement 
fund or the public employees police and fire fund and makes 
contributions to either of those funds based on compensation for 
services other than services as a volunteer firefighter shall 
have the option of making contributions to the same fund for 
service performed as a volunteer firefighter with compensation 
received for those volunteer firefighter services considered 
salary, provided that the volunteer firefighter is not a 
participant in, or covered under, a local volunteer firefighter 
plan and notwithstanding the fact that the volunteer firefighter 
service is performed for one governmental unit and the 
nonvolunteer firefighter service is performed for another 
governmental unit. 
    Sec. 25.  Laws 1985, chapter 11, section 12, subdivision 3, 
is amended to read:  
    Subdivision 3.  [ELECTION PROCEDURES.] The board shall 
accept filings for one elected position on the board in November 
1985 and shall conduct an election for that position in January 
1986.  The board shall accept filings for two elected positions 
on the board in November 1986 and shall conduct an election for 
those positions in January 1987.  Notwithstanding the four-year 
term of office specified in Minnesota Statutes, section 353.03, 
subdivision 1, the term of office for the January 1986 elected 
position extends through January 1991, so that all three elected 
positions are four-year terms which begin and end at the same 
time.  Thereafter, the board shall follow the election 
procedures described in Minnesota Statutes, section 353.03, 
subdivision 1, as necessary to fill the positions of elected 
trustees. 
    Sec. 26. [REPEALER.] 
    Minnesota Statutes 1988, sections 353.01, subdivision 2c; 
353.661; and 353.662, are repealed. 
    Sec. 27.  [EFFECTIVE DATE.] 
    (a) Sections 1 to 26 are effective July 1, 1989.  
    (b) The past due excess police state aid interest charge 
provided for in section 8 is retroactive to July 1, 1989. 

                                ARTICLE 4 

                    PURCHASE OF PRIOR SERVICE CREDIT
    Section 1.  [PURCHASE OF CREDIT FOR CERTAIN PRIOR SERVICE.] 
    Subdivision 1.  [HIGHLAND GOLF COURSE EMPLOYEE.] A person 
who was born on October 1, 1925, who was a member of the public 
employees retirement association as of December 1, 1988, who is 
a seasonal employee of the city of St. Paul at the Highland golf 
course, and who was employed in that capacity between June 25, 
1979, and July 31, 1984, is entitled to purchase allowable 
service credit from the public employees retirement association 
for that period of service if not otherwise credited as 
allowable service by the public employees retirement association.
    Subd. 2.  [RAMSEY COUNTY COURT COMMISSIONER.] A member of 
the public employees retirement association with prior service 
as an elected court commissioner in Ramsey county between 
January 1, 1963, and December 31, 1974, may purchase allowable 
service credit in the association for that period of service. 
    Subd. 3.  [HENNEPIN COUNTY EMPLOYEE.] Notwithstanding the 
limitations in Minnesota Statutes, section 353.36, subdivision 
2, a person whose employment with Hennepin county began in July 
1973, but for whom no salary deductions were taken out for the 
public employees retirement association between October 1973 and 
July 1976, may purchase credit for the prior public service for 
which salary deductions were omitted. 
    Subd. 4.  [DAKOTA COUNTY RECORDER.] A member of the public 
employees retirement association with prior service as an 
elected county recorder in Dakota county between January 1, 
1983, and December 31, 1987, may purchase allowable service 
credit in the association for that period of service. 
    Subd. 5.  [BLOOMINGTON CITY EMPLOYEE.] A person who was 
born on May 11, 1927, whose employment by the city of 
Bloomington began in March 1960 and continued during the years 
1960 and 1961, and for whom no salary deductions were taken for 
the public employees retirement association may purchase credit 
for that service from the public employees retirement 
association. 
     Subd. 6.  [PURCHASE OF PRIOR SERVICE CREDIT FOR CERTAIN 
MINNEAPOLIS EMPLOYEES.] Notwithstanding any law to the contrary, 
a person who was born on March 3, 1949, who was employed by the 
city of Minneapolis as an urban corps intern in August, 1976, 
who was employed in the unclassified service of the city of 
Minneapolis as an assistant to an alderman with substantially 
the same duties as performed during the internship on August 25, 
1978, and who is currently employed in that position and is a 
member of the Minneapolis employees retirement fund may purchase 
credit in that retirement fund for service during that 
internship.  Eligibility to make the purchase of prior service 
credit expires on June 30, 1989. 
     Subd. 6a. [WHITE BEAR TOWNSHIP.] A person who is a town 
board supervisor of White Bear township and who is or becomes a 
member of the public employees retirement association on or 
after the effective date of this act may purchase credit from 
the association for all prior service as a town board supervisor.
    Subd. 7.  [CITY OF CRYSTAL COUNCIL MEMBER.] A person who 
was born on April 20, 1928, who was a member of the public 
employees retirement association with prior service as an 
elected official on the city of Crystal's planning commission 
and city council, may purchase credit for the prior service for 
which salary deductions were omitted. 
    Subd. 8.  [CITY OF SPRING LAKE PARK COUNCIL MEMBER.] A 
person who was born on April 5, 1934, or April 4, 1932, may 
purchase credit for prior service from the public employees 
retirement association for the period when the person served on 
the city council of the city of Spring Lake Park during which no 
salary deductions were taken. 
    Subd. 9.  [PURCHASE PAYMENT AMOUNT.] For a person eligible 
to purchase credit for prior service under subdivisions 1 to 8, 
there must be paid to the applicable fund an amount equal to the 
present value, on the date of payment, of the amount of the 
additional retirement annuity that would be obtained by virtue 
of the purchase of the additional service credit, using the 
preretirement interest rate specified in Minnesota Statutes, 
section 356.215, subdivision 4d, and the mortality table adopted 
for the fund and assuming continuous future service in the fund 
or association until, and retirement at, the age at which the 
minimum requirements of the retirement association for normal 
retirement or retirement with an annuity unreduced for 
retirement at an early age, including Minnesota Statutes, 
section 356.30, are met with the additional service credit 
purchased, and also assuming a future salary history that 
includes annual salary increases at the salary increase rate 
specified in Minnesota Statutes, section 356.215, subdivision 
4d.  The person requesting the purchase of prior service shall 
establish in the records of the fund or association proof of the 
service for which the purchase of prior service is requested.  
The manner of the proof of service must be in accordance with 
procedures prescribed by the executive director of the fund or 
association. 
    Subd. 10.  [PAYMENT; CREDITING SERVICE.] Payment must be 
made in one lump sum, unless the executive director of the fund 
or association agrees to accept payment in installments over a 
period not to exceed three years from the date of the agreement, 
with interest at a rate deemed appropriate by the executive 
director.  The period of allowable service may be credited to 
the account of the person only after receipt of full payment by 
the executive director. 
    Subd. 11.  [OPTIONAL EMPLOYER PARTIAL PAYMENT.] Payment 
must be made by the person entitled to purchase prior service.  
However, the current or former employer of a person specified in 
subdivisions 1 to 8, may, at its discretion, pay all or any 
portion of the payment amount that exceeds an amount equal to 
the employee contribution rates in effect during the period or 
periods of prior service applied to the actual salary rates in 
effect during the period or periods of prior service, plus 
interest at the rate of six percent a year compounded annually 
from the date on which the contributions would otherwise have 
been made to the date on which the payment is made. 
    Sec. 2.  Laws 1988, chapter 709, article 3, section 1, 
subdivision 4, is amended to read: 
    Subd. 4.  [OPTIONAL EMPLOYER PARTIAL PAYMENT.] Payment must 
be made by the person entitled to purchase prior service.  
However, the current or former employer of a person specified in 
subdivision 1, clause (1), (2), (4), (5), (6), or (7) may, at 
its discretion, and the metropolitan sports facilities 
commission for a person specified in subdivision 1, clause (3), 
shall pay all or any portion of the payment amount that exceeds 
an amount equal to the employee contribution rates in effect for 
the retirement fund during the period or periods of prior 
service applied to the actual salary rates in effect during the 
period or periods of prior service, plus interest at the rate of 
six percent a year compounded annually from the date on which 
the contributions would otherwise have been made to the date on 
which the payment is made. 
    Sec. 3.  [PURCHASE AMOUNT.] 
    Notwithstanding Laws 1988, chapter 709, article 3, section 
1, subdivision 2, the amounts required to purchase credit for 
prior service under Laws 1988, chapter 709, article 3, section 
1, subdivision 1, clause (3), must be calculated assuming the 
affected employees will retire at age 65.  Notwithstanding any 
contrary provision in Minnesota Statutes, section 352.116, if an 
employee who purchases service under Laws 1988, chapter 709, 
article 3, section 1, subdivision 1, clause (3) retires before 
age 65, the annuity must be reduced so that the reduced annuity 
is the actuarial equivalent of the annuity that would be payable 
if the employee deferred receipt from the day the annuity begins 
to accrue to age 65. 
    Sec. 4.  [EFFECTIVE DATE.] 
    Sections 1 to 3 are effective the day following final 
enactment.  Section 2 applies retroactively to May 4, 1988.  

                               ARTICLE 5

                        OTHER RETIREMENT ISSUES
    Section 1.  Minnesota Statutes 1988, section 353.01, 
subdivision 2b, is amended to read: 
    Subd. 2b.  [EXCLUDED EMPLOYEES.] (a) The following persons 
are excluded from the meaning of "public employee": 
    (1) persons employed for professional services where the 
service is incidental to regular professional duties, determined 
on the basis that compensation for the service amounts to no 
more than 25 percent of the person's total annual gross earnings 
for all professional duties; 
    (2) election officers; 
    (3) independent contractors and their employees; 
    (4) patient and inmate help in governmental subdivision 
charitable, penal, and correctional institutions; 
    (5) members of boards, commissions, bands, and others who 
serve the governmental subdivision intermittently; 
    (6) employees whose employment is not expected to continue 
for a period longer than six consecutive months; 
    (7) part-time employees who receive monthly compensation 
from a governmental subdivision not exceeding $425, and 
part-time employees and elected officials whose annual 
compensation from a governmental subdivision is stipulated in 
advance, in writing, to be not more than $5,100 per calendar 
year or per school year for school employees for employment 
expected to be of a full year's duration or more than the 
prorated portion of $5,100 per employment period for employment 
expected to be of less than a full year's duration, except that 
members continue their membership until termination of public 
service; 
     (8) persons who first occupy an elected office after July 
1, 1988, the compensation for which does not exceed $425 per 
month; 
     (9) emergency employees who are employed by reason of work 
caused by fire, flood, storm, or similar disaster; 
     (10) employees who by virtue of their employment as an 
officer or employee of a governmental subdivision are required 
by law to be a member of and to contribute to any of the plans 
or funds administered by the state employees retirement system, 
the teachers retirement fund, the state patrol retirement fund, 
the Duluth teachers retirement fund association, the Minneapolis 
teachers retirement fund association, the St. Paul teachers 
retirement fund association, the Minneapolis employees 
retirement fund, the Minnesota state retirement system 
correctional officers retirement plan, or any police or 
firefighters relief association governed by section 69.77 that 
has not consolidated with the public employees police and fire 
fund and for which the employee has not elected coverage by the 
public employees police and fire fund benefit plan as provided 
in sections 353A.01 to 353A.10, other than as an act of the 
legislature has specifically enabled participation by employees 
of a designated governmental subdivision in a plan supplemental 
to the public employees retirement association; 
    (11) police matrons employed in a police department of a 
city who are transferred to the jurisdiction of a joint city and 
county detention and corrections authority; 
    (12) persons who are excluded from coverage under the 
federal old age, survivors, disability, and health insurance 
program for the performance of service as specified in United 
States Code, title 42, section 410(a) (8) (A), as amended 
through January 1, 1987; 
    (13) full-time students who are enrolled and are regularly 
attending classes at an accredited school, college, or 
university and who are not employed full time by a governmental 
subdivision; 
    (14) resident physicians, medical interns, and pharmacist 
interns who are serving in public hospitals; 
    (15) appointed or elected officers, paid entirely on a fee 
basis, who were not members on June 30, 1971; 
    (16) persons holding a part-time adult supplementary 
technical institute license who render part-time teaching 
service in a technical institute if the service is incidental to 
the person's regular nonteaching occupation, the applicable 
technical institute stipulates annually in advance that the 
part-time teaching service will not exceed 300 hours in a fiscal 
year, and the part-time teaching service actually does not 
exceed 300 hours in a fiscal year; and 
    (17) persons exempt from licensure under section 125.031; 
and 
    (18) persons employed by the Minneapolis community 
development agency. 
    (b) Immediately following the expiration of a six-month 
period of employment by an employee covered by paragraph (a), 
clause (6), if the employee continues in public service and 
earns more than $425 from a governmental subdivision in any one 
calendar month, the department head shall report the employee 
for membership and cause employee contributions to be made on 
behalf of the employee in accordance with section 353.27, 
subdivision 4, and the employee remains a member until 
termination of public service.  This paragraph may not be 
construed to exclude an employee from membership whose 
employment is expected to continue for more than six months but 
who is serving a probationary period. 
    (c) If compensation from a governmental subdivision to an 
employee covered by paragraph (a), clause (7), exceeds $5,100 
per calendar year or school year after being stipulated in 
advance, the stipulation is no longer valid and contributions 
must be made on behalf of the employee in accordance with 
section 353.27, subdivision 12, from the month in which the 
employee first exceeded $425. 
    (d) Paragraph (a), clause (10), does not prevent a person 
from being a member of and contributing to the public employees 
retirement association and also belonging to or contributing to 
another public pension fund for other service occurring during 
the same period of time.  A person who meets the definition of 
"public employee" in subdivision 2, by virtue of other service 
occurring during the same period of time shall become a member 
of the association unless contributions are made to another 
public retirement fund on the salary based on the other service 
or to the teachers retirement association in accordance with 
section 354.05, subdivision 2. 
    Sec. 2.  Minnesota Statutes 1988, section 355.90, 
subdivision 3, is amended to read: 
    Subd. 3.  [REFERENDUM.] A referendum on the question of 
extending the provisions of United States Code, title 42, 
sections 426, 426-1, and 1395c, must be held for each public 
employee pension plan listed in section 356.30, subdivision 3, 
except clauses (5) and (6), that has current members or 
participants who do not have coverage by the federal old age, 
survivors, and disability insurance program for the employment 
giving rise to that pension plan membership.  The state agency 
shall supervise the referendum in accordance with United States 
Code, title 42, section 418, on the date or dates set by the 
governor for each pension plan.  The notice of the referendum 
provided to each employee must contain a statement sufficient to 
inform the person of the rights available to the person as an 
employee in Medicare qualified government employment and the 
employee contribution rates applicable to the program.  The 
referendum is approved if a majority of the members or 
participants indicate their desire to have the coverage on a 
form prescribed by the state agency.  If the referendum is 
approved, The referendum must permit each employee the 
opportunity to select or reject Medicare coverage.  The governor 
shall certify that fact to the Secretary of Health and Human 
Services, and the that the conditions specified in United States 
Code, title 42, section 418(d)(7) have been met.  Coverage is 
effective for all members or participants of the plan who select 
it on the first of the month after the certification unless the 
participant or member elects coverage effective retroactively to 
April 1, 1986. 
    Sec. 3.  Minnesota Statutes 1988, section 355.90, 
subdivision 4, is amended to read: 
    Subd. 4.  [EMPLOYEE AND EMPLOYER CONTRIBUTIONS.] (a) If the 
referendum is approved, Beginning on the first of the month 
after the certification of approval by the governor, the 
employer of each member or participant covered by selecting 
coverage under the referendum shall deduct from the wages of the 
employee an amount equal to the tax that would be imposed under 
United States Code, title 26, section 3101(b), if the services 
of the employee for which wages were paid constituted employment 
as defined in United States Code, title 26, section 3121. 
    (b) In addition to the deduction specified in paragraph 
(a), the employer of each member or participant covered by the 
referendum shall also pay an amount equal to the tax that would 
be imposed under United States Code, title 26, section 3111(b), 
on the same wage base specified in paragraph (a). 
    (c) The amounts under paragraphs (a) and (b) shall be paid 
by the employer to the Secretary of the Treasury in the manner 
required by the secretary. 
    Sec. 4.  Minnesota Statutes 1988, section 356.30, 
subdivision 3, is amended to read: 
    Subd. 3.  [COVERED FUNDS.] The provisions of This 
section shall apply applies to the following retirement funds: 
    (1) state employees retirement fund established pursuant to 
chapter 352; 
    (2) correctional employees retirement program, established 
pursuant to chapter 352; 
    (3) unclassified employees retirement plan, established 
pursuant to chapter 352D; 
    (4) state patrol retirement fund, established pursuant to 
chapter 352B; 
    (5) legislators' retirement plan, established pursuant to 
chapter 3A; 
    (6) elective state officers' retirement plan, established 
pursuant to chapter 352C; 
    (7) public employees retirement association, established 
pursuant to chapter 353; 
    (8) public employees police and fire fund, established 
pursuant to chapter 353; 
    (9) teachers retirement fund, established pursuant to 
chapter 354; 
    (10) Minneapolis employees retirement fund, established 
pursuant to chapter 422A; 
    (11) Minneapolis teachers retirement fund association, 
established pursuant to chapter 354A; 
    (12) St. Paul teachers retirement fund association, 
established pursuant to chapter 354A; 
    (13) Duluth teachers retirement fund association, 
established pursuant to chapter 354A; 
    (14) public employees local government correctional service 
retirement plan established by sections 353C.01 to 353C.10; and 
    (15) judges' retirement fund, established by sections 
490.121 to 490.132. 
    Sec. 5.  Minnesota Statutes 1988, section 356.302, 
subdivision 7, is amended to read: 
    Subd. 7.  [COVERED RETIREMENT PLANS.] This section applies 
to the following retirement plans: 
    (1) state employees retirement fund, established by chapter 
352; 
    (2) unclassified employees retirement plan, established by 
chapter 352D; 
    (3) public employees retirement association, established by 
chapter 353; 
    (4) teachers retirement fund, established by chapter 354; 
    (5) Duluth teachers retirement fund association, 
established by chapter 354A; 
    (6) Minneapolis teachers retirement fund association, 
established by chapter 354A; 
    (7) St. Paul teachers retirement fund association, 
established by chapter 354A; 
    (8) Minneapolis employees retirement fund, established by 
chapter 422A; 
    (9) correctional employees retirement plan, established by 
chapter 352; 
    (10) state patrol retirement fund, established by chapter 
352B; and 
    (11) public employees police and fire fund, established by 
chapter 353; and 
    (12) judges' retirement fund, established by sections 
490.121 to 490.132. 
    Sec. 6.  Minnesota Statutes 1988, section 356.303, 
subdivision 4, is amended to read: 
    Subd. 4.  [COVERED RETIREMENT PLANS.] This section applies 
to the following retirement plans: 
    (1) legislators retirement plan, established by chapter 3A; 
    (2) state employees retirement fund, established by chapter 
352; 
    (3) correctional employees retirement plan, established by 
chapter 352; 
    (4) state patrol retirement fund, established by chapter 
352B; 
    (5) elective state officers retirement plan, established by 
chapter 352C; 
    (6) unclassified employees retirement plan, established by 
chapter 352D; 
    (7) public employees retirement association, established by 
chapter 353; 
    (8) public employees police and fire fund, established by 
chapter 353; 
    (9) teachers retirement fund, established by chapter 354; 
    (10) Duluth teachers retirement fund association, 
established by chapter 354A; 
    (11) Minneapolis teachers retirement fund association, 
established by chapter 354A; 
    (12) St. Paul teachers retirement fund association, 
established by chapter 354A; and 
    (13) Minneapolis employees retirement fund, established by 
chapter 422A; and 
    (14) judges' retirement fund, established by sections 
490.121 to 490.132. 
    Sec. 7.  Minnesota Statutes 1988, section 490.124, 
subdivision 12, is amended to read: 
    Subd. 12.  [REFUND.] (a) Any person who ceases to be a 
judge but who does not qualify for a retirement annuity or other 
benefit under section 490.121 shall be entitled to a refund in 
an amount equal to all the person's contributions to the judges' 
retirement fund plus interest computed to the first day of the 
month in which the refund is processed based on fiscal year 
balances at the rate of five percent per annum compounded 
annually.  
    (b) A refund of contributions under paragraph (a) 
terminates all service credits and all rights and benefits of 
the judge and the judge's survivors.  A person who becomes a 
judge again after taking a refund under paragraph (a) may 
reinstate previously terminated service credits, rights, and 
benefits by repaying all refunds.  A repayment must include 
interest at six percent per annum, compounded annually. 
    Sec. 8.  Laws 1980, chapter 595, section 2, subdivision 4, 
is amended to read: 
    Subd. 4.  All employees of the agency shall be considered 
employees of the housing and redevelopment authority and not the 
city of Minneapolis for the purposes of exclusion from 
membership in the public employee retirement association.  An 
employee of the agency or the Minneapolis housing and 
redevelopment authority who is transferred to employment of the 
department or agency or the Minneapolis industrial development 
commission or the city of Minneapolis shall elect one of the 
following options with respect to retirement programs within six 
months after the date of transfer: 
    (a) The employee may continue as a member of the retirement 
program established by the Minneapolis housing and redevelopment 
authority and in effect on the date of transfer, and the agency 
or department or the city of Minneapolis shall make the 
necessary employer contributions to the program instead of 
becoming a member of the public employees retirement association.
    (b) The employee may become a member of the public 
employees retirement association. 
    An employee of the city of Minneapolis who is transferred 
to employment of the agency or the Minneapolis housing and 
redevelopment authority shall remain a member of the retirement 
fund to which the employee belonged prior to the transfer, 
during the employment.  An employee of the city of Minneapolis 
who is a member of the Minneapolis municipal employees 
retirement fund who is transferred to employment of the agency 
shall remain a member of the fund during the employment. 
    Sec. 9.  [REFUND OF EXCESS EMPLOYEE CONTRIBUTIONS.] 
    A former employee of the bureau of health of the city of 
Saint Paul who, under Laws 1973, chapter 767, section 4, elected 
to retire with benefits calculated in accordance with Minnesota 
Statutes, chapter 425, as modified by Laws 1969, chapter 1102, 
may, upon application to the executive director of the public 
employees retirement association or a form prescribed by the 
executive director, receive a refund of excess employee 
contributions to the bureau of health pension fund.  The amount 
to be refunded is the difference between the amount actually 
deducted from the employee's monthly pay from the effective date 
of Laws 1969, chapter 1102, to the effective date of Laws 1973, 
chapter 767, and an amount equal to six percent of the monthly 
salary of a health sanitarian in the employment of the city of 
Saint Paul on January 1, 1969, plus interest at the rate of six 
percent a year compounded annually.  The refund is payable from 
the public employees retirement fund. 
    Sec. 10.  [PAYMENT OF REFUNDS BY ASSOCIATION.] 
    The executive director of the public employees retirement 
association shall notify each former employee of the bureau of 
health of the city of Saint Paul covered by section 1 who is 
receiving a retirement annuity from the public employees 
retirement association of the person's right to apply for a 
refund of excess contributions under that section.  Application 
must be made within 60 days following notice, or eligibility for 
the refund expires.  Upon receipt of an application for a refund 
from a person, the executive director of the association shall 
pay to the person a refund calculated in accordance with section 
1. 
    Sec. 11.  [EFFECTIVE DATE.] 
    Sections 1 and 8 are effective upon approval by the city 
council of the city of Minneapolis and upon compliance with 
Minnesota Statutes, section 645.021, subdivision 3, and apply 
retroactively to July 13, 1980.  Sections 2 to 7 are effective 
the day following final enactment.  Sections 4, 5, and 6 apply 
retroactively to August 1, 1987.  Sections 9 and 10 are 
effective July 1, 1989. 

                               ARTICLE 6

                      Public Employees Insurance 
    Section 1.  Minnesota Statutes 1988, section 43A.316, 
subdivision 9, is amended to read: 
    Subd. 9.  [INSURANCE TRUST FUND.] An insurance trust fund 
is established in the state treasury.  The deposits consist of 
the premiums received from employers participating in the 
plan and transfers from the public employees insurance reserve 
holding account established by section 353.65, subdivision 7.  
All money in the fund is appropriated to the commissioner to pay 
insurance premiums, approved claims, refunds, administrative 
costs, and other related service costs.  The commissioner shall 
reserve an amount of money to cover the estimated costs of 
claims incurred but unpaid.  The state board of investment shall 
invest the money according to section 11A.24.  Investment income 
and losses attributable to the fund shall be credited to the 
fund.  
    Sec. 2.  Minnesota Statutes 1988, section 69.031, 
subdivision 5, is amended to read: 
    Subd. 5.  [DEPOSIT OF STATE AID.] (1) The municipal 
treasurer, on receiving the fire state aid, shall within 30 days 
after receipt transmit it to the treasurer of the duly 
incorporated firefighters' relief association if there is one 
organized and the association has filed a financial report with 
the municipality; but if there is no relief association 
organized, or if any association dissolve, be removed, or has 
heretofore dissolved, or has been removed as trustees of state 
aid, then the treasurer of the municipality shall keep the money 
in the municipal treasury as provided for in section 424A.08 and 
shall be disbursed only for the purposes and in the manner set 
forth in that section. 
    (2) The municipal treasurer, upon receipt of the police 
state aid, shall disburse the police state aid in the following 
manner: 
    (a) For a municipality in which a local police relief 
association exists and all peace officers are members of the 
association, the total state aid shall be transmitted to the 
treasurer of the relief association within 30 days of the date 
of receipt, and the treasurer of the relief association shall 
immediately deposit the total state aid in the special fund of 
the relief association; 
     (b) For a municipality in which police retirement coverage 
is provided by the public employees police and fire fund and all 
peace officers are members of the fund, the total state aid 
shall be applied toward the municipality's employer contribution 
to the public employees police and fire fund pursuant to section 
353.65, subdivision 3, and any state aid in excess of the amount 
required to meet the employer's contribution pursuant to section 
353.65, subdivision 3, shall also be contributed to the public 
employees police and fire fund and credited in the manner to be 
specified by the board of trustees of the public employees 
retirement association deposited in the public employees 
insurance reserve holding account of the public employees 
retirement association; or 
    (c) For a municipality in which both a police relief 
association exists and police retirement coverage is provided in 
part by the public employees police and fire fund, the 
municipality may elect at its option to transmit the total state 
aid to the treasurer of the relief association as provided in 
clause (a), to use the total state aid to apply toward the 
municipality's employer contribution to the public employees 
police and fire fund subject to all the provisions set forth in 
clause (b), or to allot the total state aid proportionately to 
be transmitted to the police relief association as provided in 
this subdivision and to apply toward the municipality's employer 
contribution to the public employees police and fire fund 
subject to the provisions of clause (b) on the basis of the 
respective number of active full-time peace officers, as defined 
in section 69.011, subdivision 1, clause (g). 
    (3) The county treasurer, upon receipt of the police state 
aid for the county, shall apply the total state aid toward the 
county's employer contribution to the public employees police 
and fire fund pursuant to section 353.65, subdivision 3, and any 
state aid in excess of the amount required to meet the 
employer's contribution pursuant to section 353.65, subdivision 
3, shall also be contributed to the public employees police and 
fire fund and credited in the manner to be specified by the 
board of trustees of the public employees retirement association 
deposited in the public employees insurance reserve holding 
account of the public employees retirement association. 
    Sec. 3.  Minnesota Statutes 1988, section 353.65, 
subdivision 1, is amended to read: 
    Subdivision 1.  There is a special fund known as the 
"public employees police and fire fund."  In that fund there 
shall be deposited employee contributions, employer 
contributions other than the excess contribution established by 
section 69.031, subdivision 5, paragraph (2), clauses (b) and 
(c), and paragraph (3), and other amounts authorized by law 
including all employee and employer contributions of members 
transferred.  Within the public employees police and fire fund 
are accounts for each municipality known as the "local relief 
association consolidation accounts," which are governed by 
section 353A.09.  
    Sec. 4.  Minnesota Statutes 1988, section 353.65, 
subdivision 6, is amended to read: 
    Subd. 6.  All contributions other than the excess 
contribution established by section 69.031, subdivision 5, 
paragraph (2), clauses (b) and (c), and paragraph (3) shall be 
credited to the fund and all interest and other income of the 
fund shall be credited to said fund.  The retirement fund shall 
be disbursed only for the purposes herein provided.  The 
expenses of said fund and the annuities herein provided upon 
retirement shall be paid from said fund.  
    Sec. 5.  Minnesota Statutes 1988, section 353.65, is 
amended by adding a subdivision to read: 
    Subd. 7.  The public employees insurance reserve holding 
account is established in the public employees retirement 
association.  Excess contributions established by section 
69.031, subdivision 5, paragraph (2), clauses (b) and (c), and 
paragraph (3) must be deposited in the account.  These 
contributions and all investment earnings associated with them 
must be regularly transferred to the insurance trust fund 
established by section 43A.316, subdivision 9. 

                               ARTICLE 7 
 MINNESOTA PUBLIC PENSION PLAN
 FIDUCIARY RESPONSIBILITY AND LIABILITY ACT
    Section 1.  [356A.01] [DEFINITIONS.] 
    Subdivision 1.  [SCOPE.] For purposes of this chapter, the 
following terms have the meanings given them in this section. 
    Subd. 2.  [BENEFIT.] "Benefit" means an amount, other than 
an administrative expense, paid or payable from a pension plan, 
including a retirement annuity, service pension, disability 
benefit, survivor benefit, death benefit, funeral benefit, or 
refund. 
    Subd. 3.  [BENEFIT PROVISIONS.] "Benefit provisions" means 
the portion of a pension plan that deals specifically with the 
benefit coverage provided by the plan, including the kinds of 
coverage, the eligibility for and entitlement to benefits, and 
the amount of benefits. 
    Subd. 4.  [BENEFIT RECIPIENT.] "Benefit recipient" means a 
person who has received a benefit from a pension plan or to whom 
a benefit is payable under the terms of the plan document of the 
pension plan. 
    Subd. 5.  [CHIEF ADMINISTRATIVE OFFICER.] "Chief 
administrative officer" means the person who has primary 
responsibility for the execution of the administrative or 
management affairs of a pension plan. 
    Subd. 6.  [COFIDUCIARY.] "Cofiduciary" means a fiduciary of 
a pension plan, other than a fiduciary directly undertaking a 
fiduciary activity or directly and primarily responsible for a 
fiduciary activity. 
    Subd. 7.  [COVERED GOVERNMENTAL ENTITY.] "Covered 
governmental entity" means a governmental subdivision or other 
governmental entity that employs persons who are plan 
participants in a covered pension plan and who are eligible for 
that participation because of their employment. 
    Subd. 8.  [COVERED PENSION PLAN.] "Covered pension plan" 
means a pension plan or fund listed in section 356.20, 
subdivision 2, or 356.30, subdivision 3. 
    Subd. 9.  [COVERED PENSION PLAN OTHER THAN A STATEWIDE 
PLAN.] "Covered pension plan other than a statewide plan" means 
a pension plan not included in the definition of a statewide 
plan in subdivision 24. 
    Subd. 10.  [DIRECT OR INDIRECT PROFIT.] "Direct or indirect 
profit" means a payment of money, the provision of a service or 
an item of other than nominal value, an extension of credit, a 
loan, or any other special consideration to a fiduciary or a 
direct relative of a fiduciary on behalf of the fiduciary in 
consideration for the performance of a fiduciary activity or a 
failure to perform a fiduciary activity.  
    Subd. 11.  [DIRECT RELATIVE.] "Direct relative" means any 
of the persons or spouses of persons related to one another 
within the third degree of kindred under civil law.  
    Subd. 12.  [FIDUCIARY.] "Fiduciary" means a person 
identified in section 356A.02. 
    Subd. 13.  [FIDUCIARY ACTIVITY.] "Fiduciary activity" means 
an activity described in section 356A.02, subdivision 2. 
    Subd. 14.  [FINANCIAL INSTITUTION.] "Financial institution" 
means a bank, savings institution, or credit union organized 
under federal or state law. 
    Subd. 15.  [GOVERNING BOARD OF A PENSION PLAN.] "Governing 
board of a pension plan" means the body of a pension plan that 
is assigned or that undertakes the chief policy-making powers 
and management duties of the plan. 
    Subd. 16.  [INVESTMENT ADVISORY COUNCIL.] "Investment 
advisory council" means the investment advisory council 
established by section 11A.08. 
    Subd. 17.  [LIABILITY.] "Liability" means a secured or 
unsecured debt or an obligation for a future payment of money, 
including an actuarial accrued liability or an unfunded 
actuarial accrued liability, except where the context clearly 
indicates another meaning. 
    Subd. 18.  [OFFICE OF THE PENSION PLAN.] "Office of the 
pension plan" means an administrative facility or portion of a 
facility where the primary business or administrative affairs of 
a pension plan are conducted and the primary and permanent 
records and files of the plan are retained. 
    Subd. 19.  [PENSION FUND.] "Pension fund" means the assets 
amassed and held in a pension plan, other than the general fund, 
as reserves for present and future payment of benefits and 
administrative expenses. 
    Subd. 20.  [PENSION PLAN.] "Pension plan" means all aspects 
of an arrangement between a public employer and its employees 
concerning the pension benefit coverage provided to the 
employees. 
    Subd. 21.  [PLAN DOCUMENT.] "Plan document" means a written 
document or series of documents containing the eligibility 
requirements and entitlement provisions constituting the benefit 
coverage of a pension plan, including any articles of 
incorporation, bylaws, governing body rules and policies, 
municipal charter provisions, municipal ordinance provisions, or 
general or special state law.  
    Subd. 22.  [PLAN PARTICIPANT.] "Plan participant" means a 
person who is an active member of a pension plan by virtue of 
the person's employment or who is making a pension plan member 
contribution. 
    Subd. 23.  [STATE BOARD OF INVESTMENT.] "State board of 
investment" means the Minnesota state board of investment 
created by the Minnesota Constitution, article XI, section 8. 
    Subd. 24.  [STATEWIDE PLAN.] "Statewide plan" means any of 
the following pension plans: 
    (1) the Minnesota state retirement system or a pension plan 
administered by it; 
    (2) the public employees retirement association or a 
pension plan administered by it; and 
    (3) the teachers retirement association or a pension plan 
administered by it. 
    Sec. 2.  [356A.02] [FIDUCIARY STATUS AND ACTIVITIES.] 
    Subdivision 1.  [FIDUCIARY STATUS.] For purposes of this 
chapter, the following persons are fiduciaries: 
    (1) any member of the governing board of a covered pension 
plan; 
    (2) the chief administrative officer of a covered pension 
plan or of the state board of investment; 
    (3) any member of the state board of investment; and 
    (4) any member of the investment advisory council. 
    Subd. 2.  [FIDUCIARY ACTIVITY.] The activities of a 
fiduciary identified in subdivision 1 that must be carried out 
in accordance with the requirements of section 356A.04 include, 
but are not limited to: 
    (1) the investment of plan assets; 
    (2) the determination of benefits; 
    (3) the determination of eligibility for membership or 
benefits; 
    (4) the determination of the amount or duration of 
benefits; 
    (5) the determination of funding requirements or the 
amounts of contributions; 
    (6) the maintenance of membership or financial records; and 
    (7) the expenditure of plan assets. 
    Sec. 3.  [356A.03] [PROHIBITION OF CERTAIN PERSONS FROM 
FIDUCIARY STATUS.] 
    Subdivision 1.  [INDIVIDUAL PROHIBITION.] For the 
prohibition period established by subdivision 2, a person, other 
than a constitutional officer of the state, who has been 
convicted of a violation listed in subdivision 3, may not serve 
in a fiduciary capacity identified in section 356A.02. 
    Subd. 2.  [PROHIBITION PERIOD.] A prohibition under 
subdivision 1 is for a period of five years, beginning on the 
day following conviction for a violation listed in subdivision 3 
or, if the person convicted is incarcerated, the day following 
unconditional release from incarceration. 
    Subd. 3.  [APPLICABLE VIOLATIONS.] A prohibition under 
subdivision 1 is imposed as a result of any of the following 
violations of law: 
    (1) a violation of federal law specified in United States 
Code, title 29, section 1111, as amended; 
    (2) a violation of Minnesota law that is a felony under 
Minnesota law; or 
    (3) a violation of the law of another state, United States 
territory or possession, or federally recognized Indian tribal 
government, or of the Uniform Code of Military Justice, that 
would be a felony under the offense definitions and sentences in 
Minnesota law. 
    Subd. 4.  [DOCUMENTATION.] In determining the applicability 
of this section, the appropriate appointing authority, the state 
board of investment, or the covered pension plan, as the case 
may be, may rely on a disclosure form meeting the requirements 
of the federal Investment Adviser Act of 1940, as amended 
through the effective date of this section, and filed with the 
state board of investment or the pension plan. 
    Sec. 4.  [356A.04] [GENERAL STANDARD OF FIDUCIARY CONDUCT.] 
    Subdivision 1.  [DUTY.] A fiduciary of a covered pension 
plan owes a fiduciary duty to: 
    (1) the active, deferred, and retired members of the plan, 
who are its beneficiaries; 
    (2) the taxpayers of the state or political subdivision, 
who help to finance the plan; and 
    (3) the state of Minnesota, which established the plan. 
    Subd. 2.  [PRUDENT PERSON STANDARD.] A fiduciary identified 
in section 356A.02 shall act in good faith and shall exercise 
that degree of judgment and care, under the circumstances then 
prevailing, that persons of prudence, discretion, and 
intelligence would exercise in the management of their own 
affairs, not for speculation, considering the probable safety of 
the plan capital as well as the probable investment return to be 
derived from the assets. 
    Sec. 5.  [356A.05] [DUTIES APPLICABLE TO ALL ACTIVITIES.] 
    (a) The activities of a fiduciary of a covered pension plan 
must be carried out solely for the following purposes: 
    (1) to provide authorized benefits to plan participants and 
beneficiaries; 
    (2) to incur and pay reasonable and necessary 
administrative expenses; or 
    (3) to manage a covered pension plan in accordance with the 
purposes and intent of the plan document. 
    (b) The activities of fiduciaries identified in section 
356A.02 must be carried out faithfully, without prejudice, and 
in a manner consistent with law and the plan document. 
    Sec. 6.  [356A.06] [INVESTMENTS; ADDITIONAL DUTIES.] 
    Subdivision 1.  [TITLE TO ASSETS.] Assets of a covered 
pension plan may be held only by the plan treasurer, the state 
board of investment, the depository agent of the plan, or of the 
state board of investment.  Legal title to plan assets must be 
vested in the plan, the state board of investment, the 
governmental entity that sponsors the plan, the nominee of the 
plan, or the depository agent.  The holder of legal title shall 
function as a trustee for a person or entity with a beneficial 
interest in the assets of the plan. 
    Subd. 2.  [DIVERSIFICATION.] The investment of plan assets 
must be diversified to minimize the risk of substantial 
investment losses unless the circumstances at the time an 
investment is made clearly indicate that diversification would 
not be prudent. 
    Subd. 3.  [ABSENCE OF PERSONAL PROFIT.] No fiduciary may 
personally profit, directly or indirectly, as a result of the 
investment or management of plan assets.  This subdivision, 
however, does not preclude the receipt by a fiduciary of 
reasonable compensation, including membership in or the receipt 
of benefits from a pension plan, for the fiduciary's position 
with respect to the plan.  
    Subd. 4.  [ECONOMIC INTEREST STATEMENT.] Each member of the 
governing board of a covered pension plan and the chief 
administrative officer of the plan shall file with the plan a 
statement of economic interest.  The statement must contain the 
information required by section 10A.09, subdivision 5, and any 
other information that the fiduciary or the governing board of 
the plan determines is necessary to disclose a reasonably 
foreseeable potential or actual conflict of interest.  The 
statement must be filed annually with the chief administrative 
officer of the plan and be available for public inspection 
during regular office hours at the office of the pension plan.  
A disclosure form meeting the requirements of the federal 
Investment Advisers Act of 1940, United States Code, title 15, 
sections 80b-1 to 80b-21 as amended, and filed with the state 
board of investment or the pension plan meets the requirements 
of this subdivision. 
    Subd. 5.  [INVESTMENT BUSINESS RECIPIENT DISCLOSURE.] The 
chief administrative officer of a covered pension plan, with 
respect to investments made by the plan, and the executive 
director of the state board of investment, with respect to 
investments of plan assets made by the board, shall annually 
disclose in writing the recipients of investment business placed 
with or investment commissions allocated among commercial banks, 
investment bankers, brokerage organizations, or other investment 
managers.  The disclosure document must be prepared within 60 
days after the close of the fiscal year of the plan and must be 
available for public inspection during regular office hours at 
the office of the plan.  The disclosure document must also be 
filed with the executive director of the legislative commission 
on pensions and retirement within 90 days after the close of the 
fiscal year of the plan.  For the state board of investment, a 
disclosure document included as part of a regular annual report 
of the board is considered to have been filed on a timely basis. 
     Subd. 6.  [LIMITED LIST OF AUTHORIZED INVESTMENT 
SECURITIES.] (a) Except to the extent otherwise authorized by 
law, a covered pension plan may invest its assets only in 
investment securities authorized by this subdivision if the plan 
does not: 
    (1) have assets with a book value in excess of $1,000,000; 
    (2) use the services of an investment advisor registered 
with the Securities and Exchange Commission in accordance with 
the Investment Advisors Act of 1940, or licensed as an 
investment advisor in accordance with sections 80A.04, 
subdivision 4, and 80A.14, subdivision 9, for the investment of 
at least 60 percent of its assets, calculated on book value; 
    (3) use the services of the state board of investment for 
the investment of at least 60 percent of its assets, calculated 
on book value; or 
    (4) use a combination of the services of an investment 
advisor meeting the requirements of clause (2) and the services 
of the state board of investment for the investment of at least 
75 percent of its assets, calculated on book value. 
    (b) Investment securities authorized for a pension plan 
covered by this subdivision are: 
    (1) certificates of deposit issued, to the extent of 
available insurance or collateralization, by a financial 
institution that is a member of the Federal Deposit Insurance 
Corporation or the Federal Savings and Loan Insurance 
Corporation, is insured by the National Credit Union 
Administration, or is authorized to do business in this state 
and has deposited with the chief administrative officer of the 
plan a sufficient amount of marketable securities as collateral 
in accordance with section 118.01; 
    (2) savings accounts, to the extent of available insurance, 
with a financial institution that is a member of the Federal 
Deposit Insurance Corporation or the Federal Savings and Loan 
Insurance Corporation; 
    (3) governmental obligations, including bonds, notes, 
bills, or other fixed obligations, issued by the United States, 
an agency or instrumentality of the United States, an 
organization established and regulated by an act of Congress or 
by a state, state agency or instrumentality, municipality, or 
other governmental or political subdivision that: 
    (i) for the obligation in question, issues an obligation 
that equals or exceeds the stated investment yield of debt 
securities not exempt from federal income taxation and of 
comparable quality; 
    (ii) for an obligation that is a revenue bond, has been 
completely self-supporting for the last five years; and 
    (iii) for an obligation other than a revenue bond, has 
issued an obligation backed by the full faith and credit of the 
applicable taxing jurisdiction and has not been in default on 
the payment of principal or interest on the obligation in 
question or any other nonrevenue bond obligation during the 
preceding ten years; 
    (4) corporate obligations, including bonds, notes, 
debentures, or other regularly issued and readily marketable 
evidences of indebtedness issued by a corporation organized 
under the laws of any state that during the preceding five years 
has had on average annual net pretax earnings at least 50 
percent greater than the annual interest charges and principal 
payments on the total issued debt of the corporation during that 
period and that, for the obligation in question, has issued an 
obligation rated in one of the top three quality categories by 
Moody's Investors Service, Incorporated, or Standard and Poor's 
Corporation; and 
    (5) shares in an open-end investment company registered 
under the federal Investment Company Act of 1940, if the 
portfolio investments of the company are limited to investments 
that meet the requirements of clauses (1) to (4). 
    Subd. 7.  [EXPANDED LIST OF AUTHORIZED INVESTMENT 
SECURITIES.] Except to the extent otherwise authorized by law or 
bylaws, a covered pension plan not described by subdivision 6, 
paragraph (a), may invest its assets only in accordance with 
section 11A.24. 
    Subd. 8.  [MINIMUM LIQUIDITY REQUIREMENTS.] A covered 
pension plan described by subdivision 6, paragraph (a), in order 
to pay benefits as they come due, shall invest a portion of its 
assets in authorized short-term debt obligations that can be 
immediately liquidated without accrual of a substantial 
determinable penalty or loss and that have an average maturity 
of no more than 90 days.  The chief administrative officer of 
the plan shall determine the minimum liquidity requirement of 
the plan and shall retain appropriate documentation of that 
determination for three years from the date of determination. 
    Subd. 9.  [PROHIBITED TRANSACTIONS.] (a) No fiduciary of a 
covered pension plan may engage in a prohibited transaction or 
allow the plan to engage in a transaction that the fiduciary 
knows or should know is a prohibited transaction. 
    (b) A prohibited transaction is any of the following 
transactions, whether direct or indirect: 
    (1) the sale, exchange, or lease of real estate between the 
pension plan and a fiduciary of the plan; 
    (2) the lending of money or other extension of credit 
between the plan and a fiduciary of the plan; 
    (3) the furnishing to a plan by a fiduciary for 
compensation or remuneration, of goods, services other than 
those performed in the capacity of fiduciary, or facilities; 
    (4) the furnishing to a fiduciary by a plan of goods, 
services, or facilities other than office and related space, 
equipment and office supplies, and administrative services 
appropriate to the recipient's fiduciary position; 
    (5) the transfer of plan assets to a plan fiduciary for use 
by or the benefit of the fiduciary, other than the payment of 
retirement plan benefits to which a fiduciary is entitled or the 
payment to a fiduciary of a reasonable salary and of necessary 
and reasonable expenses incurred by the fiduciary in the 
performance of the fiduciary's duties; and 
    (6) the sale, exchange, loan, or lease of any item of value 
between a plan and a fiduciary of the plan other than for a fair 
market value and as a result of an arms-length transaction. 
    Sec. 7.  [356A.07] [BENEFIT SUMMARY; ANNUAL REPORTS; 
ADDITIONAL DUTIES.] 
    Subdivision 1.  [BENEFIT PROVISIONS SUMMARY.] The chief 
administrative officer of a covered pension plan shall prepare 
and provide each active plan participant with a summary of the 
benefit provisions of the plan document.  The summary must be 
provided within 30 days of the start or resumption of a 
participant's membership in the plan, or within 30 days of the 
date on which the start or resumption of membership was reported 
to a covered pension plan by a covered governmental entity, 
whichever is later.  The summary must contain a notice that it 
is a summary of the plan document but is not itself the plan 
document, and that in the event of a discrepancy between the 
summary and the plan document as amended, the plan document 
governs.  A copy of the plan document as amended must be 
furnished to a plan participant or benefit recipient upon 
request.  The chief administrative officer may utilize the 
services of the covered governmental entity in providing the 
summary.  The summary must be in a form reasonably calculated to 
be understood by an average plan participant. 
    Subd. 2.  [ANNUAL FINANCIAL REPORT.] A covered pension plan 
shall provide each active plan participant and benefit recipient 
with a copy of the most recent annual financial report required 
by section 356.20 and a copy of the most recent actuarial 
evaluation, if any, required by section 69.77, 69.773, 356.215, 
or 356.216, or a summary of those reports. 
    Subd. 3.  [DISTRIBUTION.] A covered pension plan may 
distribute the summaries required by this section through 
covered governmental entities so long as the plan has made 
arrangements with the entities to assure, with reasonable 
certainty, that the summaries will be distributed, or made 
easily available, to active plan participants. 
    Subd. 4.  [REVIEW PROCEDURE.] If a review procedure is not 
specified by law for a covered pension plan, the chief 
administrative officer of the plan shall propose, and the 
governing board of the plan shall adopt and implement, a 
procedure for reviewing a determination of eligibility, 
benefits, or other rights under the plan that is adverse to a 
plan participant or benefit recipient.  The review procedure 
must include provisions for timely notice to the plan 
participant or benefit recipient and reasonable opportunity to 
be heard in any review proceeding conducted and may, but need 
not be, a contested case under chapter 14. 
    Sec. 8.  [356A.08] [PLAN ADMINISTRATION; ADDITIONAL 
DUTIES.] 
    Subdivision 1.  [PUBLIC MEETINGS.] A meeting of the 
governing board of a covered statewide pension plan or of a 
committee of the governing board of the statewide plan is 
governed by section 471.705. 
    Subd. 2.  [LIMIT ON COMPENSATION.] No fiduciary of a 
covered pension plan or a direct relative of a fiduciary may 
receive any direct or indirect compensation, fee, or other item 
of more than nominal value from a third party in consideration 
for a pension plan disbursement. 
    Sec. 9.  [356A.09] [FIDUCIARY BREACH; REMEDIES.] 
    Subdivision 1.  [OCCURRENCE OF BREACH.] A fiduciary breach 
occurs if a fiduciary violates the general standard of fiduciary 
conduct as specified in section 356A.04 in carrying out the 
activities of a fiduciary.  A fiduciary breach also occurs if a 
fiduciary of a covered pension plan violates the provisions of 
section 356A.06, subdivision 9. 
    Subd. 2.  [REMEDIES.] Remedies available for a fiduciary 
breach by a fiduciary are those specified by statute or 
available at common law. 
    Sec. 10.  [356A.10] [COFIDUCIARY RESPONSIBILITY AND 
LIABILITY.] 
    Subdivision 1.  [COFIDUCIARY RESPONSIBILITY IN GENERAL.] A 
cofiduciary has a general responsibility to oversee the 
fiduciary activities of all other fiduciaries unless the 
activity has been allocated or delegated in accordance with 
subdivision 3.  A cofiduciary also has a general responsibility 
to correct or alleviate a fiduciary breach of which the 
cofiduciary had or ought to have had knowledge. 
    Subd. 2.  [COFIDUCIARY LIABILITY.] A cofiduciary is liable 
for a fiduciary breach committed by another fiduciary when the 
cofiduciary has a responsibility to oversee the fiduciary 
activities of the other fiduciary or to correct or alleviate a 
breach by that fiduciary. 
    Subd. 3.  [LIMITATION ON COFIDUCIARY RESPONSIBILITY.] A 
cofiduciary may limit cofiduciary responsibility and liability 
through the allocation or delegation of fiduciary activities if 
the allocation or delegation: 
    (1) follows appropriate procedures; 
    (2) is made to an appropriate person or persons; and 
    (3) is subject to continued monitoring of performance. 
    Subd. 4.  [BAR TO LIABILITY IN CERTAIN INSTANCES.] A 
properly made delegation or allocation of a fiduciary activity 
is a bar to liability on the part of a fiduciary making the 
delegation or allocation unless the fiduciary has or ought to 
have knowledge of the breach and takes part in the breach, 
conceals it, or fails to take reasonable steps to remedy it.  
    Subd. 5.  [EXTENT OF COFIDUCIARY LIABILITY.] Unless 
liability is barred under subdivision 4, cofiduciary liability 
is joint and several, but a cofiduciary has the right to recover 
from the responsible fiduciary for any damages paid by the 
cofiduciary. 
     Sec. 11.  [356A.11] [FIDUCIARY INDEMNIFICATION.] 
    Subdivision 1.  [INDEMNIFIED FIDUCIARIES.] A fiduciary who 
is a member of the governing board of a pension plan, the state 
board of investment or the investment advisory council, or who 
is an employee of a covered pension plan or of the state board 
of investment may be indemnified from liability for fiduciary 
breach.  Indemnification is at the discretion of the governing 
board of the plan or of the state board of investment in the 
case of members of the state board or of the investment advisory 
council.  A decision to indemnify a fiduciary must apply to all 
eligible fiduciaries of similar rank. 
    Subd. 2.  [ALLOWABLE INDEMNIFICATION.] An indemnified 
fiduciary must be held harmless from reasonable costs or 
expenses incurred as a result of any actual or threatened 
litigation or other proceedings. 
    Sec. 12.  [356A.12] [JURISDICTION; SERVICE OF PROCESS; AND 
STATUTE OF LIMITATIONS.] 
    Subdivision 1.  [JURISDICTION.] The district court has 
jurisdiction over a challenge of a fiduciary action or inaction. 
    Subd. 2.  [SERVICE OF PROCESS.] For a fiduciary or 
cofiduciary alleged in the complaint to be responsible for an 
alleged breach, personal service of process must be obtained. 
     Subd. 3.  [LIMITATIONS ON LEGAL ACTIONS.] A legal action 
challenging a fiduciary action or inaction must be timely.  
Notwithstanding any limitation in chapter 541, an action is 
timely if it is brought within the earlier of the following 
periods: 
    (1) the period ending three years after the date of the 
last demonstrable act representing the alleged fiduciary breach 
or after the final date for performance of the act the failure 
to perform which constitutes the alleged breach; or 
    (2) the period ending one year after the date of the 
discovery of the alleged fiduciary breach. 
    Sec. 13.  [356A.13] [CONTINUING FIDUCIARY EDUCATION.] 
    Subdivision 1.  [OBLIGATION OF FIDUCIARIES.] A fiduciary of 
a covered pension plan shall make reasonable effort to obtain 
knowledge and skills sufficient to enable the fiduciary to 
perform fiduciary activities adequately.  At a minimum, a 
fiduciary of a covered pension plan shall comply with the 
program established in accordance with subdivision 2. 
    Subd. 2.  [CONTINUING FIDUCIARY EDUCATION PROGRAM.] The 
governing boards of covered pension plans shall each develop and 
periodically revise a program for the continuing education of 
any of their board members and any of their chief administrative 
officers who are not reasonably considered to be experts with 
respect to their activities as fiduciaries.  The program must be 
designed to provide those persons with knowledge and skills 
sufficient to enable them to perform their fiduciary activities 
adequately. 
    Sec. 14.  [EFFECTIVE DATE.] 
    Sections 1 to 13 are effective the day following final 
enactment. 

                                ARTICLE 8
 CONFORMING AMENDMENTS TO FIDUCIARY PROVISIONS.
    Section 1.  [3A.011] [ADMINISTRATION OF PLAN.] 
    The Minnesota state retirement system shall administer the 
legislators retirement plan in accordance with article 7. 
    Sec. 2.  Minnesota Statutes 1988, section 11A.01, is 
amended to read: 
    11A.01 [STATEMENT OF PURPOSE.] 
    The purpose of sections 11A.01 to 11A.25 this chapter is to 
establish standards which will, in addition to the applicable 
standards of article 7, to insure that state and pension assets 
subject to this legislation will be responsibly invested to 
maximize the total rate of return without incurring undue risk.  
    Sec. 3.  Minnesota Statutes 1988, section 11A.04, is 
amended to read: 
     11A.04 [DUTIES AND POWERS.] 
     The state board shall: 
     (1) Act as trustees for each fund for which it invests or 
manages money in accordance with the standard of care set forth 
in section 11A.09 if state assets are involved and in accordance 
with article 7 if pension assets are involved. 
    (2) Formulate policies and procedures deemed necessary and 
appropriate to carry out its functions.  Procedures adopted by 
the board shall must allow fund beneficiaries and members of the 
public to become informed of proposed board actions.  Procedures 
and policies of the board shall are not be subject to the 
administrative procedure act. 
    (3) Employ an executive director as provided in section 
11A.07. 
    (4) Employ investment advisors and consultants as it deems 
necessary. 
    (5) Prescribe policies concerning personal investments of 
all employees of the board to prevent conflicts of interest. 
    (6) Maintain a record of its proceedings. 
    (7) As it deems necessary, establish advisory committees 
subject to the provisions of section 15.059 to assist the board 
in carrying out its duties. 
    (8) Not permit state funds to be used for the underwriting 
or direct purchase of municipal securities from the issuer or 
the issuer's agent. 
    (9) Direct the state treasurer to sell property other than 
money which that has escheated to the state when the board 
determines that sale of the property is in the best interest of 
the state.  Escheated property shall must be sold to the highest 
bidder in the manner and upon terms and conditions prescribed by 
the board. 
    (10) Undertake any other activities necessary to implement 
the duties and powers set forth in this section. 
    (11) Establish a formula or formulas to measure management 
performance and return on investment.  All Public pension funds 
in the state shall utilize the formula or formulas developed by 
the state board. 
    (12) Except as otherwise provided in article XI, section 8, 
of the constitution of the state of Minnesota, employ, at its 
discretion, qualified private firms to invest and manage the 
assets of funds over which the state board has investment 
management responsibility.  There is annually appropriated to 
the state board, from the assets of the funds for which the 
state board utilizes a private investment manager, sums 
sufficient to pay the costs therefor of employing private firms. 
Each year, by January 15, the board shall report to the governor 
and legislature on the cost and the investment performance of 
each investment manager employed by the board.  
    (13) Adopt an investment policy statement that includes 
investment objectives, asset allocation, and the investment 
management structure for the retirement fund assets under its 
control.  The statement may be revised at the discretion of the 
state board.  The state board shall seek the advice of the 
council regarding its investment policy statement.  Adoption of 
the statement is not subject to chapter 14. 
    Sec. 4.  Minnesota Statutes 1988, section 11A.07, 
subdivision 4, is amended to read: 
    Subd. 4.  [DUTIES AND POWERS.] The director, at the 
direction of the state board, shall: 
    (1) Plan, direct, coordinate and execute administrative and 
investment functions in conformity with the policies and 
directives of the state board and the requirements of this 
chapter and of article 7. 
    (2) Employ such professional and clerical staff as is 
necessary within the complement limits established by the 
legislature.  Employees whose primary responsibility is to 
invest or manage money or employees who hold positions 
designated as unclassified pursuant to under section 43A.08, 
subdivision 1a shall be, are in the unclassified service of the 
state.  Other employees shall be are in the classified service.  
    (3) Report to the state board on all operations under the 
director's control and supervision. 
    (4) Maintain accurate and complete records of securities 
transactions and official activities. 
    (5) Establish a policy relating to the purchase and sale of 
all securities on the basis of competitive offerings or bids.  
The policy is subject to board approval.  
    (6) Cause all securities acquired to be kept in the custody 
of the state treasurer or such other depositories consistent 
with article 7, as the state board deems appropriate. 
    (7) Prepare and file with the director of the legislative 
reference library on or before, by December 31 of each year, a 
report summarizing the activities of the state board, the 
council, and the director during the preceding fiscal year.  The 
report shall must be prepared so as to provide the legislature 
and the people of the state with a clear, comprehensive summary 
of the portfolio composition, the transactions, the total annual 
rate of return, and the yield to the state treasury and to each 
of the funds whose assets are invested by the state board, and 
the recipients of business placed or commissions allocated among 
the various commercial banks, investment bankers, and brokerage 
organizations.  This The report shall must contain financial 
statements for funds managed by the board prepared in accordance 
with generally accepted accounting principles. 
    (8) Require state officials from any department or agency 
to produce and provide access to any financial documents the 
state board deems necessary in the conduct of their its 
investment activities. 
    (9) Receive and expend legislative appropriations. 
    (10) Undertake any other activities necessary to implement 
the duties and powers set forth in this subdivision consistent 
with article 7. 
    Sec. 5.  Minnesota Statutes 1988, section 11A.09, is 
amended to read: 
    11A.09 [STANDARD OF CARE.] 
    In the discharge of their respective duties, the members of 
the state board, director, board staff, and members of the 
council and any other person charged with the responsibility of 
investing money pursuant to the standards set forth in sections 
11A.01 to 11A.25 shall act in good faith and shall exercise that 
degree of judgment and care, under circumstances then 
prevailing, which persons of prudence, discretion and 
intelligence exercise in the management of their own affairs, 
not for speculation, but for investment, considering the 
probable safety of their capital as well as the probable income 
to be derived therefrom.  In addition, for the investment of 
pension fund assets, the members and director of the state 
board, and members of the investment advisory council shall act 
in accordance with article 7. 
    Sec. 6.  Minnesota Statutes 1988, section 11A.13, 
subdivision 1, is amended to read: 
    Subdivision 1.  [LEGAL TITLE TO FUND ASSETS.] Legal title 
to the assets of state funds to be invested by the state 
board shall must be in the state of Minnesota, or its nominees.  
Legal title to pension funds to be invested by the state board 
shall must be in the state board, or its nominees, as trustees 
for any person having a beneficial interest in the applicable 
fund subject to the rights of the particular funds maintaining 
shares, investment participation or units in the accounts to 
their credit as specified in article 7, section 6.  
    Sec. 7.  Minnesota Statutes 1988, section 69.77, 
subdivision 2g, is amended to read: 
    Subd. 2g.  The funds of the association shall must be 
invested in securities which that are proper authorized 
investments pursuant to under article 7, section 11A.24 6, 
subdivision 6 or 7.  Notwithstanding the foregoing, up to 75 
percent of the market value of the assets of the fund may be 
invested in open-end investment companies registered under the 
federal Investment Company Act of 1940, if the portfolio 
investments of the investment companies comply with the type of 
securities authorized for investment by section 11A.24, 
subdivisions 2 to 5. Securities held by the association 
before March 20, 1986, which the effective date of this section 
that do not meet the requirements of this paragraph subdivision 
may be retained after that date if they were proper investments 
for the association on that date.  
    The governing board of the association may select and 
appoint investment agencies to act for and in its behalf or may 
certify funds for investment by the state board of investment 
under the provisions of section 11A.17.  The governing board of 
the association may select and appoint a qualified private firm 
to measure management performance and return on investment, and 
the firm shall use the formula or formulas developed by the 
state board pursuant to under section 11A.04, clause (11). 
    Sec. 8.  Minnesota Statutes 1988, section 69.775, is 
amended to read: 
    69.775 [INVESTMENTS.] 
    The special fund assets of the relief associations governed 
by sections 69.771 to 69.776 shall must be invested in 
securities which that are proper authorized investments 
pursuant to under article 7, section 11A.24 6, subdivision 6 or 
7.  Notwithstanding the foregoing, up to 75 percent of the 
market value of the assets of the fund may be invested in 
open-end investment companies registered under the federal 
Investment Company Act of 1940, if the portfolio investments of 
the investment companies comply with the type of securities 
authorized for investment by section 11A.24, subdivisions 2 to 
5.  Securities held by the associations before March 20, 1986, 
which the effective date of this section that do not meet the 
requirements of this section may be retained after that date if 
they were proper investments for the association on that date.  
The governing board of the association may select and appoint 
investment agencies to act for and in its behalf or may certify 
funds for investment by the state board of investment under the 
provisions of section 11A.17.  The governing board of the 
association may select and appoint a qualified private firm to 
measure management performance and return on investment, and the 
firm shall use the formula or formulas developed by the state 
board under section 11A.04, clause (11). 
    Sec. 9.  Minnesota Statutes 1988, section 136.84, is 
amended to read: 
    136.84 [TITLE TO ASSETS, PERSONAL RIGHTS.] 
    The right of a person who has shares to the credit of the 
person's employee's share account record to redeem the shares or 
any portion thereof of the shares is a personal right only 
and shall is not be assignable.  Legal title to the assets of 
the supplemental retirement investment fund shall be in the 
state of Minnesota or the state board of investment or the 
nominee of either is as specified in article 7, section 6, 
subdivision 1, subject to the rights of the teachers retirement 
fund.  Any An assignment or attempted assignment of shares to 
the credit of an employee's share account record by any person 
is null and void.  Such Shares are exempt from garnishment or 
levy under attachment or execution and from all taxation by the 
state of Minnesota, except that none shall be but are not exempt 
from taxation under chapter 291, unless transferred to a 
surviving spouse or minor or dependent child of the decedent or 
a trust for their benefit.  
    Sec. 10.  Minnesota Statutes 1988, section 352.03, 
subdivision 7, is amended to read: 
    Subd. 7.  [DIRECTORS' FIDUCIARY OBLIGATION.] The board and 
the director shall administer the law faithfully without 
prejudice and undertake their activities consistent with the 
expressed intent of the legislature.  They shall act in their 
respective capacities with a fiduciary obligation to the state 
of Minnesota which created the fund, the taxpayers who aid in 
financing it, and the state employees who are its 
beneficiaries article 7. 
    Sec. 11.  Minnesota Statutes 1988, section 352.92, is 
amended by adding a subdivision to read:  
    Subd. 3.  [PLAN ADMINISTRATION.] The Minnesota state 
retirement system shall administer the correctional employees 
retirement plan established by sections 352.90 to 352.951 in 
accordance with this chapter, chapter 356, and article 7. 
    Sec. 12.  Minnesota Statutes 1988, section 352.96, 
subdivision 3, is amended to read: 
    Subd. 3.  [EXECUTIVE DIRECTOR TO ADMINISTER SECTION.] This 
section shall must be administered by the executive director of 
the system under subdivision 4.  Fiduciary activities of the 
deferred compensation plan must be undertaken in a manner 
consistent with article 7.  If the state board of investment so 
elects, it may solicit bids for options under subdivision 2, 
clauses (2) and (3).  All contracts must be approved before 
execution by the state board of investment.  Contracts must 
provide that all options in subdivision 2 must:  be presented in 
an unbiased manner, be presented and in a manner conforming that 
conforms to applicable rules adopted by the executive director, 
be reported on a periodic basis to all employees participating 
in the deferred compensation program, and not be the subject of 
unreasonable solicitation of state employees to participate in 
the program.  The contract may not call for any person to 
jeopardize the tax-deferred status of money invested by state 
employees under this section.  All costs or fees in relation to 
the options provided under subdivision 2, clause (3), must be 
paid by the underwriting companies ultimately selected by the 
state board of investment. 
    Sec. 13.  Minnesota Statutes 1988, section 352B.03, 
subdivision 1, is amended to read: 
    Subdivision 1.  [OFFICERS.] The policy-making, management, 
and administrative functions governing the operation of the 
state patrol retirement fund are vested in the board of 
directors and executive director of the Minnesota state 
retirement system with duties, authority, and responsibility as 
provided in chapter 352.  Fiduciary activities of the fund must 
be undertaken in a manner consistent with article 7. 
    Sec. 14.  Minnesota Statutes 1988, section 352C.091, 
subdivision 1, is amended to read: 
    Subdivision 1.  [ADMINISTRATIVE AGENCY AND STANDARDS.] The 
provisions of This chapter shall must be administered by the 
Minnesota state retirement system.  The elected state officers 
retirement plan must be administered consistent with this 
chapter, chapter 356, and article 7. 
    Sec. 15.  Minnesota Statutes 1988, section 352D.09, 
subdivision 1, is amended to read: 
    Subdivision 1.  [ADMINISTRATIVE AGENCY AND STANDARDS.] The 
unclassified employees retirement plan and the provisions of 
this chapter shall must be administered by the Minnesota state 
retirement system.  The provisions of chapter 352 shall govern 
in all instances where not inconsistent with the provisions of 
this chapter.  Fiduciary activities of the unclassified 
employees retirement plan must be undertaken in a manner 
consistent with article 7. 
    Sec. 16.  Minnesota Statutes 1988, section 353.03, 
subdivision 1, is amended to read: 
    Subdivision 1.  [MANAGEMENT; COMPOSITION; ELECTION.] The 
management of the public employees retirement fund is vested in 
a board of trustees consisting of the state auditor and eight 
members.  The governor shall appoint five trustees to four-year 
terms, one of whom shall be designated to represent school 
boards, one to represent cities, one to represent counties, one 
who shall be is a retired annuitant, and one who is a public 
member knowledgeable in pension matters.  The membership of the 
association shall elect three trustees for terms of four years.  
Trustees elected by the membership of the association must be 
public employees and members of the association.  For seven days 
beginning October 1 of each year preceding a year in which an 
election is held, the association shall accept at its office 
filings in person or by mail of candidates for the board of 
trustees.  A candidate shall submit at the time of filing a 
nominating petition signed by 25 or more members of the fund.  
No name may be withdrawn from nomination by the nominee after 
October 15.  At the request of a candidate for an elected 
position on the board of trustees, the board shall mail a 
statement of up to 300 words prepared by the candidate to all 
persons eligible to vote in the election of the candidate.  The 
board may adopt policies to govern form and length of these 
statements, timing of mailings, and deadlines for submitting 
materials to be mailed.  These policies must be approved by the 
secretary of state.  The secretary of state shall resolve 
disputes between the board and a candidate concerning 
application of these policies to a particular statement.  A 
candidate who: 
    (1) receives contributions or makes expenditures in excess 
of $100; or 
    (2) has given implicit or explicit consent for any other 
person to receive contributions or make expenditures in excess 
of $100 for the purpose of bringing about the candidate's 
election, must shall file a report with the ethical practices 
board disclosing the source and amount of all contributions to 
the candidate's campaign.  The ethical practices board shall 
prescribe forms governing these disclosures.  Expenditures and 
contributions have the meaning defined in section 10A.01.  These 
terms do not include the mailing made by the association board 
on behalf of the candidate.  A candidate must shall file a 
report within 30 days from the day that the results of the 
election are announced.  The ethical practices board shall 
maintain these reports and make them available for public 
inspection in the same manner as the board maintains and makes 
available other reports filed with it.  By January 10 of each 
year in which elections are to be held the board shall 
distribute by mail to the members ballots listing the 
candidates.  No member may vote for more than one candidate for 
each board position to be filled.  A ballot indicating a vote 
for more than one person for any position is void.  No special 
marking may be used on the ballot to indicate incumbents.  The 
last day for mailing ballots to the fund is January 31.  Terms 
expire on January 31 of the fourth year, and positions are 
vacant until newly elected members are qualified.  The ballot 
envelopes must be so designed and the ballots counted in a 
manner that ensures that each vote is secret.  
    The secretary of state shall supervise the elections.  The 
board of trustees and the executive director shall faithfully 
administer the law without prejudice and undertake their 
activities consistent with the expressed intent of the 
legislature.  Board members shall act as trustees with a 
fiduciary obligation to the state of Minnesota, which created 
the fund, the taxpayers of the governmental subdivisions that 
aid in financing it, and the public employees who are its 
beneficiaries.  They shall act in good faith and shall exercise 
that degree of judgment and care, under circumstances then 
prevailing, that persons of prudence, discretion, and 
intelligence exercise in the management of their own 
affairs article 7.  
    Sec. 17.  Minnesota Statutes 1988, section 354.06, 
subdivision 1, is amended to read: 
    Subdivision 1.  The management of the fund shall be is 
vested in a board of eight trustees which shall be known as the 
board of trustees of the teachers retirement fund.  It shall be 
is composed of the following persons:  the commissioner of 
education, the commissioner of finance, the commissioner of 
commerce, four members of the fund who shall be elected by the 
members of the fund, and one retiree who shall be elected by the 
retirees of the fund.  The five elected members of the board of 
trustees shall must be chosen by mail ballot in a manner which 
shall be fixed by the board of trustees of the fund.  In every 
odd-numbered year there shall be elected two members of the fund 
to the board of trustees for terms of four years commencing on 
the first of July next succeeding their election.  In every 
odd-numbered year there shall be elected one retiree of the fund 
must be elected to the board of trustees for a term of two years 
commencing on the first of July next succeeding the election.  
The filing of candidacy for a retiree election must include a 
petition of endorsement signed by at least ten retirees of the 
fund.  Each election shall must be completed by June first of 
each succeeding odd-numbered year.  In the case of elective 
members, any vacancy shall must be filled by appointment by the 
remainder of the board, and the appointee shall serve until the 
members or retirees of the fund at the next regular election 
have elected a trustee to serve for the unexpired term caused by 
the vacancy.  No member or retiree shall may be appointed by the 
board, or elected by the members of the fund as a trustee, if 
the person is not a member or retiree of the fund in good 
standing at the time of the appointment or election.  
    Subd. 1a.  [FIDUCIARY DUTY.] It shall be is the duty of the 
board of trustees and the executive director to faithfully 
administer the law without prejudice and undertake their 
activities consistent with the expressed intent of the 
legislature.  They shall act as trustees with a fiduciary 
obligation to the state of Minnesota which created the fund, the 
taxpayers which aid in financing it and the teachers who are its 
beneficiaries article 7. 
    Sec. 18.  Minnesota Statutes 1988, section 354A.021, 
subdivision 6, is amended to read: 
    Subd. 6.  [TRUSTEES' FIDUCIARY OBLIGATION.] It is the duty 
of The trustees or directors of each teachers retirement fund 
association to shall administer each fund in accordance with the 
applicable portions of this chapter, of the articles of 
incorporation, and of the bylaws, and of article 7.  They shall 
act as trustees with a fiduciary obligation to the state of 
Minnesota which created the fund, the taxpayers which aid in 
financing it, and the teachers who are its beneficiaries.  The 
purpose of this subdivision is to establish each teachers 
retirement fund association as a trust under the laws of the 
state of Minnesota for all purposes related to section 401(a) of 
the Internal Revenue Code of the United States, including all 
amendments.  
    Sec. 19.  Minnesota Statutes 1988, section 422A.05, 
subdivision 2a, is amended to read: 
    Subd. 2a.  [FIDUCIARY DUTY.] In the discharge of their 
respective duties, the members of the board, the executive 
director, the board staff, and any other person charged with the 
responsibility of investing money pursuant to the standards set 
forth in this chapter shall act in good faith and shall exercise 
that degree of judgment and care, under circumstances then 
prevailing, which persons of prudence, discretion and 
intelligence exercise in the management of their own affairs, 
not for speculation, but for investment, considering the 
probable safety of their capital as well as the probable income 
to be derived therefrom.  In addition, the members of the board 
and the chief administrative officer shall act in a manner 
consistent with article 1.  
    Sec. 20.  Minnesota Statutes 1988, section 422A.05, 
subdivision 2d, is amended to read: 
    Subd. 2d.  [ACCOUNT TRANSFERS.] Notwithstanding any law to 
the contrary, the retirement board, subject to the standards of 
subdivision 2a of this section and article 7, may transfer 
assets between accounts established by section 422A.06.  
    Sec. 21.  Minnesota Statutes 1988, section 423.374, is 
amended to read: 
    423.374 [OFFICERS OF ASSOCIATION.] 
    The officers of the relief association shall be a 
president, one or more vice-presidents, a secretary and a 
treasurer. The offices of assistant secretary and assistant 
treasurer may be created by the bylaws of any such 
associations.  The affairs of each association shall must be 
managed in accordance with article 7 by a board of directors 
elected in the manner prescribed by the articles of 
incorporation of the association.  
    The secretary and treasurer of each relief association 
shall each furnish a corporate bond to the association for the 
faithful performance of their duties, in such amounts as the 
association from time to time may determine.  Each relief 
association shall and is hereby authorized to pay the premiums 
on such bonds from its special fund.  
    Sec. 22.  Minnesota Statutes 1988, section 423.45, is 
amended to read: 
    423.45 [OFFICERS; DIRECTORS; BOND.] 
    The officers of the relief association shall be a 
president, one or more vice-presidents, a secretary and a 
treasurer. The offices of assistant secretary and assistant 
treasurer may be created by the bylaws of any such 
associations.  The affairs of each association shall must be 
managed in accordance with article 7 by a board of directors 
elected in the manner prescribed by the articles of 
incorporation of the association.  
    The secretary and treasurer of each relief association 
shall each furnish a corporate bond to the association for the 
faithful performance of their duties, in such amounts as the 
association from time to time may determine.  Each relief 
association shall and is hereby authorized to pay the premiums 
on such bonds from its special fund.  
    Sec. 23.  Minnesota Statutes 1988, section 423.805, is 
amended to read: 
    423.805 [POLICE PENSION FUND.] 
    The association shall establish a police pension fund or 
continue to maintain the police pension fund now existing in the 
city and shall have the management manage and control of the 
fund.  Fiduciary activities of the fund must be undertaken in a 
manner consistent with article 7. 
    Sec. 24.  Minnesota Statutes 1988, section 423A.21, 
subdivision 4, is amended to read: 
    Subd. 4.  [FIDUCIARY RESPONSIBILITY.] In the discharge of 
their respective duties, the officers and trustees shall be held 
to the standard of care enumerated in section 11A.09.  In 
addition, the trustees must act in accordance with article 7. 
    Each member of the board is a fiduciary and shall undertake 
all fiduciary activities in accordance with the standard of care 
of section 11A.09, and in a manner consistent with article 7.  
No fiduciary of a relief association shall cause a relief 
association to engage in a transaction if the fiduciary knows or 
should know that a transaction constitutes one of the following 
direct or indirect transactions: 
    (1) sale or exchange or leasing of any real property 
between the relief association and a board member; 
    (2) lending of money or other extension of credit between 
the relief association and a board member or member of the 
relief association; 
    (3) furnishing of goods, services, or facilities between 
the relief association and a board member; or 
    (4) transfer to a board member, or use by or for the 
benefit of a board member, of any assets of the relief 
association.  Transfer of assets does not mean the payment of 
relief association benefits or administrative expenses permitted 
by law.  
    Sec. 25.  Minnesota Statutes 1988, section 424.06, is 
amended to read: 
    424.06 [OFFICERS; TRUSTEES.] 
    The officers of the relief association shall be a 
president, one or more vice-presidents, a secretary, and a 
treasurer. The offices of assistant secretary and assistant 
treasurer may be created by the bylaws of any such 
associations.  The affairs of each association shall must be 
managed in accordance with article 7 by a board of trustees 
elected in the manner prescribed by the articles of 
incorporation of the association.  
    The secretary and treasurer of each relief association 
shall each furnish a corporate bond to the association for the 
faithful performance of their duties, in amounts as the 
association from time to time may determine.  Each relief 
association shall be and is hereby authorized to pay the 
premiums on such bonds from its general fund.  
    Sec. 26.  Minnesota Statutes 1988, section 424A.001, 
subdivision 7, is amended to read: 
    Subd. 7.  [FIDUCIARY RESPONSIBILITY.] In the discharge of 
their respective duties, the officers and trustees shall be held 
to the standard of care enumerated in section 11A.09.  In 
addition, the trustees must act in accordance with article 7. 
    Each member of the board is a fiduciary and shall undertake 
all fiduciary activities in accordance with the standard of care 
of section 11A.09, and in a manner consistent with article 7.  
No fiduciary of a relief association shall cause a relief 
association to engage in a transaction if the fiduciary knows or 
should know that a transaction constitutes one of the following 
direct or indirect transactions: 
    (1) sale or exchange or leasing of any real property 
between the relief association and a board member; 
    (2) lending of money or other extension of credit between 
the relief association and a board member or member of the 
relief association; 
    (3) furnishing of goods, services, or facilities between 
the relief association and a board member; or 
    (4) transfer to a board member, or use by or for the 
benefit of a board member, of any assets of the relief 
association.  Transfer of assets does not mean the payment of 
relief association benefits or administrative expenses permitted 
by law. 
    Sec. 27.  Minnesota Statutes 1988, section 424A.04, 
subdivision 2, is amended to read: 
    Subd. 2.  [FIDUCIARY DUTY.] It shall be the duty of The 
board of trustees to faithfully administer any provisions of 
statute or special law applicable to the relief association 
without prejudice and shall undertake their activities 
consistent with the expressed intent of the legislature.  The 
members of the board shall act as trustees with a fiduciary 
obligation to the state of Minnesota which authorized the 
creation of the relief association, to the taxpayers who aid in 
its financing, and to the firefighters who are its beneficiaries 
article 7.  
    Sec. 28.  [490.021] [ADMINISTRATION OF VARIOUS JUDGES 
RETIREMENT PLANS.] 
    The Minnesota state retirement system shall administer the 
judges retirement plans established by sections 490.025 to 
490.12 in accordance with article 7. 
    Sec. 29.  Minnesota Statutes 1988, section 490.122, is 
amended to read: 
    490.122 [ADMINISTRATION OF JUDGES' RETIREMENT.] 
    The policy-making, management, and administrative functions 
governing the operation of the judges' retirement fund and the 
administration of sections 490.025 490.121 to 490.132 shall be 
are vested in the board of directors and executive director of 
the Minnesota state retirement system with such duties, 
authority, and responsibility as are provided in chapter 352.  
Except as otherwise specified, no provision of chapter 352 shall 
apply applies to the judges' retirement fund or any 
judge.  Fiduciary activities of the uniform retirement and 
survivors' annuities for judges must be undertaken in a manner 
consistent with article 7. 
    Sec. 30.  [EFFECTIVE DATE.] 
    Sections 1 to 29 are effective the day following final 
enactment. 

                               ARTICLE 9

          OTHER TEACHERS' RETIREMENT ASSOCIATIONS PROVISIONS 
    Section 1.  Minnesota Statutes 1988, section 11A.19, is 
amended by adding a subdivision to read: 
    Subd. 9.  Effective June 30, 1989, all assets of the 
variable annuity investment fund must be transferred to the 
Minnesota combined investment funds to the credit of the 
teachers retirement fund established under chapter 354. 
    Sec. 2.  Minnesota Statutes 1988, section 354.50, is 
amended by adding a subdivision to read: 
    Subd. 5.  Notwithstanding section 354.62, subdivision 5, 
clause (4), a member who received a refund of variable account 
accumulations may repay this refund to the member's formula 
account under this section. 
    Sec. 3.  Minnesota Statutes 1988, section 354.62, 
subdivision 2, is amended to read: 
    Subd. 2.  [INDIVIDUAL ELECTION.] Each member of the 
teachers retirement association may elect to participate in the 
variable annuity division by filing a written notice with the 
board of trustees on forms provided by the board. 
    (1) Employee variable annuity contributions to the variable 
annuity division shall be pursuant to the option available in 
section 354.44, subdivision 7, the employee variable annuity 
contributions shall be an amount equal to one-half of the 
employee rates specified in section 354.42, subdivision 2. 
    (2) Employer variable annuity contributions shall be an 
amount equal to the employee variable annuity contributions 
provided in clause (1).  The deficiency in equal employer 
variable annuity contributions which shall exist prior to July 
1, 1975 shall be recovered from the additional employer 
contributions made prior to July 1, 1975 pursuant to section 
354.42, subdivision 5. 
     (3) There shall be provided for members participating in 
the variable annuity division a separate account for each member 
which will show the member's variable account accumulations as 
defined in section 354.05, subdivision 23.  The board shall 
establish such other accounts in the variable annuity division 
as it deems necessary for the operation of this provision. 
     (4) After June 30, 1974 there shall be no new participants 
in this program. 
     (5) Any active member currently participating in the 
variable annuity division may elect to cease participation in 
the variable annuity division effective the July 1 following the 
filing of a written notice with the board of trustees on forms 
provided by the board.  If this election is made, all future 
contributions will go to the formula program. 
     (6) Effective May 16, 1989, all active and inactive members 
with variable account accumulations must have their formula 
service credit covered by the full formula program percentages 
specified in section 354.44, subdivision 6.  Each active and 
inactive member's variable account accumulations must be 
transferred to the member's formula account and this amount must 
become part of the member's accumulated deductions.  An equal 
employer contribution amount must be transferred to the regular 
fund of the association.  These transfers must include any 
employee and employer contributions made after June 30, 1988. 
    Sec. 4.  Minnesota Statutes 1988, section 354.62, is 
amended by adding a subdivision to read: 
    Subd. 7.  [TRANSFER.] Effective June 30, 1989, all persons 
receiving benefits from the variable annuity reserve account 
must have the full amount of their required reserves transferred 
to the Minnesota postretirement investment fund.  Benefit 
payments from the Minnesota postretirement investment fund must 
be in the same amount as benefit payments from the variable 
annuity reserve account but any future increases on these 
amounts must be based on the increases applicable to the 
Minnesota postretirement investment fund as determined under 
section 11A.18.  The first increase must be paid January 1, 
1990.  The additional required reserves, including the required 
reserves for the first increase, that must be transferred from 
the variable annuity fund to the Minnesota postretirement 
investment fund must be transferred from the turnover account of 
the variable annuity fund.  After this transfer of additional 
required reserves, any remaining balance in the turnover account 
of the variable annuity fund must be transferred to the regular 
fund of the association. 
    Sec. 5.  [ENTITLEMENT TO ANNUITY.] 
    Notwithstanding any requirement of prior law that a member 
or former member have 20 years of service credit in order for a 
surviving spouse to receive a joint and survivor annuity under 
the teachers' retirement association formula program established 
in Minnesota Statutes, section 354.46, a surviving spouse of a 
person who met the following qualifications is entitled to 
receive the second portion of a 100 percent joint and survivor 
annuity under the formula program: 
    (1) the person was age 55 or older at the time of death; 
    (2) the person had at least 19 years of service credit in 
the teachers' retirement association; and 
    (3) the sum of the person's service credit in the teachers' 
retirement association plus the person's employment at the 
University of Minnesota exceeds 20 years. 
    The payments due under this section do not include 
postretirement adjustments that would have been granted between 
the time of the member or former member's death and the 
effective date of this section. 
    The teachers' retirement association shall transfer to the 
state board of investment, for deposit in the postretirement 
investment fund, money equal to the reserves required to fund 
the benefits payable under this section. 
    Sec. 6.  [EFFECTIVE DATE.] 
    Sections 1 to 5 are effective the day following final 
enactment.  Section 5 applies retroactively to the surviving 
spouses of persons who died after January 1, 1977.  Annuity 
payments due under section 5 must begin after the date of final 
enactment.  No payments are due for the period of time before 
the effective date of section 5. 

                               ARTICLE 10 

                         VOLUNTEER FIREFIGHTERS
    Section 1.  Minnesota Statutes 1988, section 423A.01, 
subdivision 2, is amended to read: 
    Subd. 2.  [OPERATION OF LOCAL RELIEF ASSOCIATION UPON 
MODIFICATION OF RETIREMENT COVERAGE FOR NEWLY HIRED POLICE 
OFFICERS AND FIREFIGHTERS.] The following provisions shall 
govern the operation of a local relief association upon the 
modification of retirement coverage for newly hired police 
officers or firefighters:  
    (1) The minimum obligation of a municipality in which the 
retirement coverage for newly hired police officers or salaried 
firefighters has been modified pursuant to subdivision 1 with 
respect to the local relief association shall be determined and 
governed in accordance with the provisions of sections 69.77, 
356.215 and 356.216, except that the normal cost calculation for 
the relief association shall be computed as a percentage of the 
compensation paid to the active members of the relief 
association.  The compensation paid to persons with retirement 
coverage modified pursuant to subdivision 1 shall not be 
included in any of the computations made in determining the 
obligation of the municipality with respect to the local relief 
association. 
    (2) The contribution rate of members of the local relief 
association shall be governed by section 69.77, unless a special 
law establishing a greater member contribution rate is 
applicable whereupon it shall continue to govern.  The member 
contribution rate of persons with retirement coverage modified 
pursuant to subdivision 1 shall be governed by section 353.65. 
     (3) Unless otherwise provided for by law, when every active 
member of the local relief association retires or terminates 
from active duty, the local relief association shall cease to 
exist as a legal entity and the assets of the special fund of 
the relief association shall be transferred to a trust fund to 
be established by the appropriate municipality for the purpose 
of paying service pensions and retirement benefits to recipient 
beneficiaries.  Recipient beneficiaries who are competent to act 
on their own behalf shall be entitled to select the prescribed 
number of trustees of the trust fund as provided in this clause, 
subject to the approval of the governing body of the 
municipality.  If there are at least five recipient 
beneficiaries, the trust fund shall be managed by a board of 
trustees composed of five persons selected by the recipient 
beneficiaries of the fund.  When there are fewer than five 
recipient beneficiaries, the number of trustees selected by the 
recipient beneficiaries shall be equal to the number of the 
remaining recipient beneficiaries.  The governing body of the 
municipality shall select the additional trustees.  The term of 
the elected members of the board of trustees shall be indefinite 
and shall continue until a vacancy occurs in one of the board of 
trustee member positions.  Board of trustee members shall not be 
compensated for their services, but shall be reimbursed for any 
expenses actually and necessarily incurred as a result of the 
performance of their duties in their capacity as board of 
trustee members.  The municipality shall perform whatever 
services are necessary to administer the trust fund.  When all 
obligations of the trust fund are paid, the balance of the 
assets remaining in the trust fund shall revert to the 
municipality for expenditure for law enforcement or firefighting 
purposes, whichever is applicable. 
     (4) The financial requirements of the trust fund and the 
minimum obligation of the municipality with respect to the trust 
fund shall be determined in accordance with sections 69.77, 
356.215 and 356.216 until the unfunded accrued liability of the 
trust fund is fully amortized in accordance with section 69.77, 
subdivision 2b.  The municipality shall provide in its annual 
budget for at least the aggregate amount of service pensions, 
disability benefits, survivorship benefits and refunds which are 
projected as payable for the following calendar year, as 
determined by the board of trustees of the trust fund, less the 
amount of assets in the trust fund as of the end of the most 
current calendar year for which figures are available, valued 
pursuant to section 356.20, subdivision 4, clause (1)(a), if the 
difference between those two figures is a positive number. 
      (5) In calculating the amount of service pensions and other 
retirement benefits payable from the local relief association 
and in calculating the amount of any automatic post retirement 
increases in those service pensions and retirement benefits 
based on the salary paid or payable to active members or 
escalated in any fashion, the salary for use as the base for the 
service pension or retirement benefit calculation and the post 
retirement increase calculation for the local relief association 
shall be the salary for the applicable position as specified in 
the articles of incorporation or bylaws of the relief 
association as of the date immediately prior to the effective 
date of the modification of retirement coverage for newly hired 
personnel pursuant to subdivision 1, as the applicable salary is 
reset by the municipality periodically, irrespective of whether 
retirement coverage for persons holding the applicable position 
used in calculations is provided by the relief association or by 
the public employees police and fire fund.  If for a local 
salaried firefighters relief association, the specified position 
no longer exists because of a reorganization of the fire 
department as a volunteer fire department, the percentage 
increase in the salary of the position of a top grade patrol 
officer in the police department of the municipality must be the 
basis for service pension and retirement benefit postretirement 
increase calculations. 
    (6) If the modification of retirement coverage implemented 
pursuant to subdivision 1 is applicable to a local police relief 
association, the police state aid received by the municipality 
shall be disbursed pursuant to section 69.031, subdivision 5, 
clause (2)(c).  If the modification of retirement coverage 
implemented pursuant to subdivision 1 is applicable to a local 
firefighters' relief association, the fire state aid received by 
the applicable municipality shall be disbursed as the 
municipality at its option may elect.  The municipality may 
elect:  (a) to transmit the total fire state aid to the 
treasurer of the local relief association for immediate deposit 
in the special fund of the relief association; or (b) to apply 
the total fire state aid toward the employer contribution of the 
municipality to the public employees police and fire fund 
pursuant to section 353.65, subdivision 3; or (c) to allocate 
the total fire state aid proportionately between the special 
fund of the local relief association and employer contribution 
of the municipality to the public employees police and fire fund 
on the basis of the respective number of active full time 
salaried firefighters receiving retirement coverage from each. 
    Sec. 2.  Minnesota Statutes 1988, section 424A.01, 
subdivision 2, is amended to read: 
    Subd. 2.  [STATUS OF SUBSTITUTE OR PROBATIONARY VOLUNTEER 
FIREFIGHTERS.] No person who is serving as a substitute or a 
probationary volunteer firefighter shall be deemed to be a 
firefighter for purposes of chapter 69 or this chapter nor shall 
be authorized to be a member of any volunteer firefighters' 
relief association governed by chapter 69 or this chapter.  
    Sec. 3.  Minnesota Statutes 1988, section 424A.02, 
subdivision 1, is amended to read: 
    Subdivision 1.  [AUTHORIZATION.] Any A relief association, 
when its articles of incorporation or bylaws so provide, may pay 
out of the assets of its special fund a service pension to each 
of its members who:  (1) separates from active service with the 
fire department; (2) reaches the age of 50 years; (3) completes 
at least ten five years of active service as an active member of 
the municipal fire department to which the relief association is 
associated; (4) completes at least ten five years of active 
membership with the relief association prior to before 
separation from active service; and (5) complies with any 
additional conditions as to age, service, and membership which 
that are prescribed by the bylaws of the relief association.  
The service pension may be paid whether or not the municipality 
or nonprofit firefighting corporation to which the relief 
association is associated qualifies for fire state aid under 
chapter 69.  In the case of a member who has completed at least 
ten five years of active service as an active member of the fire 
department to which the relief association is associated on the 
date that the relief association is established and 
incorporated, the requirement that the member complete at least 
ten five years of active membership with the relief 
association prior to before separation from active service may 
be waived by the board of trustees of the relief association if 
the member completes at least ten five years of inactive 
membership with the relief association prior to before the 
payment of the service pension.  During the period of inactive 
membership, the member shall is not be entitled to receive any 
disability benefit coverage, shall is not be entitled to receive 
any additional service credit towards computation of a service 
pension, and shall be deemed is considered to have the status of 
a person entitled to a deferred service pension pursuant 
to under subdivision 7. 
    No municipality or nonprofit firefighting corporation is 
authorized to may delegate the power to take final action in 
setting a service pension or ancillary benefit amount or level 
to the board of trustees of the relief association or to approve 
in advance a service pension or ancillary benefit amount or 
level equal to the maximum amount or level which that this 
chapter would allow rather than a specific dollar amount or 
level.  
    No relief association as defined in section 424A.001, 
subdivision 4, shall may pay a service pension or disability 
benefit to any a former member of the relief association if that 
person has not separated from active service with the fire 
department to which the relief association is directly 
associated.  
    For the purposes of this chapter, "to separate from active 
service" means to cease to perform fire suppression duties and 
to cease to supervise fire suppression duties. 
    Sec. 4.  Minnesota Statutes 1988, section 424A.02, 
subdivision 2, is amended to read: 
    Subd. 2.  [NONFORFEITABLE PORTION OF SERVICE PENSION.] If 
the articles of incorporation or bylaws of a relief association 
so provide, a relief association may pay a reduced service 
pension to a retiring member who has completed fewer than 20 
years of service.  The reduced service pension may be paid when 
the retiring member meets the minimum age and service 
requirements of subdivision 1.  
    The amount of the reduced service pension shall may not 
exceed the amount calculated by multiplying the service pension 
appropriate for the completed years of service as specified in 
the bylaws times the applicable nonforfeitable percentage of 
pension.  The applicable nonforfeitable percentage of pension 
amounts are as follows:  
  Completed Years of Service   Nonforfeitable Percentage
                                   of Pension Amount
             5                          40 percent 
             6                          44 percent 
             7                          48 percent 
             8                          52 percent 
             9                          56 percent 
            10                          60 percent 
            11                          64 percent 
            12                          68 percent 
            13                          72 percent 
            14                          76 percent 
            15                          80 percent 
            16                          84 percent 
            17                          88 percent 
            18                          92 percent 
            19                          96 percent 
            20 and thereafter          100 percent 
    Sec. 5.  Minnesota Statutes 1988, section 424A.02, 
subdivision 7, is amended to read: 
    Subd. 7.  [DEFERRED SERVICE PENSIONS.] A member of a relief 
association to which this section applies is entitled to a 
deferred service pension if the member:  
    (1) has completed the lesser of the minimum period of 
active service with the fire department specified in the bylaws 
or 20 years of active service with the fire department; 
    (2) has completed at least ten five years of active 
membership in the relief association; and 
    (3) separates from active service and membership prior 
to before reaching the age of 50 years or the minimum age for 
retirement and commencement of a service pension specified in 
the bylaws governing the relief association if that age is 
greater than the age of 50 years.  The deferred service 
pension shall commence starts when the former member reaches the 
age of 50 years or the minimum age specified in the bylaws 
governing the relief association if that age is greater than the 
age of 50 years and when the former member makes a valid written 
application.  Any A relief association which that provides a 
lump sum service pension may, when its governing bylaws so 
provide, pay interest on the deferred lump sum service pension 
during the period of deferral.  If provided for, interest shall 
must be paid at the rate actually earned by the relief 
association, but not to exceed the interest rate specified in 
section 356.215, subdivision 4d, and shall must be compounded 
annually based on calendar year balances.  The deferred service 
pension shall be is governed by and shall must be 
calculated pursuant to any under the general statute, special 
law, relief association articles of incorporation, or relief 
association bylaw provisions applicable as of on the date on 
which the member separated from active service with the fire 
department and active membership in the relief association.  
    Sec. 6.  Minnesota Statutes 1988, section 424A.02, 
subdivision 13, is amended to read: 
    Subd. 13.  [COMBINED SERVICE PENSIONS.] If the articles of 
incorporation or bylaws of the associations so provide, a 
volunteer firefighter with total service credit of ten years or 
more, if every affected relief association does not require only 
a five-year service vesting requirement, or five years or more, 
if every affected relief association requires only a five-year 
service vesting requirement, as a member of two or more relief 
associations is entitled, when otherwise qualified, to a 
prorated service pension from each association in which the 
member has two years one year or more of service credit.  The 
prorated service pension must be based on the service pension 
amount in effect for the relief association on the date 
volunteer firefighting services covered by that relief 
association terminate.  To receive a service pension under this 
subdivision, the firefighter must become a member of the second 
or succeeding association and give notice of membership to the 
prior association within two years of termination of active 
service with the prior association.  The notice must be attested 
to by the association secretary. 
    Sec. 7.  Minnesota Statutes 1988, section 424A.10, is 
amended to read: 
    424A.10 [STATE SUPPLEMENTAL BENEFIT; VOLUNTEER 
FIREFIGHTERS.] 
    Subdivision 1.  [DEFINITION.] For purposes of this section, 
"qualified recipient" means an individual who receives an 
involuntary a lump sum distribution of pension or retirement 
benefits from a firefighters' relief association for service 
performed as a volunteer firefighter. 
    Subd. 2.  [PAYMENT OF SUPPLEMENTAL BENEFIT.] Upon the 
payment by a firefighters' relief association of an involuntary 
a lump sum distribution to a qualified recipient, the 
association must pay a supplemental benefit to the qualified 
recipient.  Notwithstanding any law to the contrary, the relief 
association may pay the supplemental benefit out of its special 
fund.  The amount of this benefit equals ten percent of the 
regular involuntary lump sum distribution that is paid on the 
basis of service as a volunteer firefighter.  In no case may the 
amount of the supplemental benefit exceed $1,000. 
    Subd. 3.  [STATE REIMBURSEMENT.] By February 15 of each 
year, the relief association shall apply to the commissioner of 
revenue for state reimbursement of the amount of supplemental 
benefits paid under subdivision 2 during the preceding calendar 
year.  By March 15 the commissioner shall reimburse the relief 
association for the amount of the supplemental benefits paid to 
qualified recipients.  The commissioner of revenue shall 
prescribe the form of and supporting information that must be 
supplied as part of the application for state reimbursement.  
The reimbursement payment must be deposited in the special fund 
of the relief association. 
    Subd. 4.  [IN LIEU OF INCOME TAX EXCLUSION.] The 
supplemental benefit provided by this section is in lieu of the 
state income tax exclusion for involuntary lump sum 
distributions of retirement benefits paid to volunteer 
firefighters.  If the law is modified to exclude or exempt 
volunteer firefighters' lump sum distributions from state income 
taxation, the supplemental benefits under this section may no 
longer be paid beginning with the first calendar year in which 
the exclusion or exemption is effective.  This subdivision does 
not apply to exemption of all or part of a lump sum distribution 
under section 290.032 or 290.0802. 
    Sec. 8.  [REPEALER.] 
    Minnesota Statutes 1988, section 424A.01, subdivision 3a, 
is repealed. 

                               ARTICLE 11

                     LOCAL POLICE AND FIREFIGHTERS
    Section 1.  Minnesota Statutes 1988, section 353.64, is 
amended by adding a subdivision to read: 
    Subd. 9.  [PENSION COVERAGE FOR CERTAIN SHERIFFS' 
ASSOCIATION EMPLOYEES.] A former member of the association who 
is an employee of the Minnesota sheriffs' association may elect 
to be a police and fire fund member with respect to service with 
the sheriffs' association, if written election to be covered is 
delivered to the board within 60 days after the effective date 
of this section or within 60 days after commencement of 
employment, whichever is later.  
    Employee and employer contributions for past service are 
the obligation of the employee, except that the Minnesota 
sheriffs' association may pay the employer contributions.  The 
employer shall, in any event, deduct necessary future 
contributions from the employee's salary and remit all 
contributions to the association as required by this chapter.  
    Persons who become association members under this section 
shall not be eligible for election to the board of trustees.  
    Sec. 2.  Laws 1955, chapter 151, section 13, as amended by 
Laws 1963, chapter 271, section 7; Laws 1971, chapter 549, 
section 2; Laws 1980, chapter 600, section 14; and Laws 1983, 
chapter 47, section 1, is amended to read: 
    Sec. 13.  The association shall pay a pension to the 
surviving spouse or any child under 18 years of age of any 
pensioned and retired member, or to the surviving spouse or any 
child under 18 years of age of any member who dies while in the 
service of the city police department, or to the surviving 
spouse or any child under 18 years of age of any member who, 
after being a member of the city police department for not less 
than 20 years, severs his or her connection with the department, 
and dies before attaining the age of 50 years.  The association 
shall pay to any such surviving spouse a pension of 20 not less 
than 22-1/2 units nor more than 27-1/2 units per month, as the 
bylaws of the association provide, subject to Minnesota 
Statutes, section 69.77, subdivision 2i.  The association shall 
pay to any such child under 18 years of age a pension of five 
units per month until the child attains the age of 18 years, 
provided, however, that if such child is married at the time of 
the death of the member or marries or becomes legally adopted 
after the death of the member, the child shall not be entitled 
to such benefits.  If the surviving spouse and children reside 
together, the pension payable to the children shall be paid to 
the surviving spouse and shall be used for the support of the 
children.  If a surviving spouse remarries, the pension 
immediately ceases and the association shall not make any 
further pension payments; provided further that if the 
remarriage terminates for any reason, the surviving spouse, 
whose benefit terminated solely because of remarriage, shall be 
entitled upon reapplication to a surviving spouse's benefit; 
provided, however, that such person shall not be entitled to 
retroactive payments for any period of time, prior to the 
effective date of this act or reapplication, whichever is 
later.  For the purposes of this section, all provisions 
governing a child under 18 shall be extended to include a full 
time student under the age of 23. 
    Sec. 3.  [AMENDMENT AUTHORIZED.] 
    Subdivision 1.  [AUTHORIZATION.] Subject to Minnesota 
Statutes, section 69.77, subdivision 2i, the Mankato fire 
department relief association may amend its constitution and 
bylaws to provide for payment of disability benefits to active 
regular salaried firefighters who, because of medically 
determinable sickness or injury, are unable to perform their 
duties as firefighters, regardless of whether the sickness was 
caused in the performance of duty or the injury occurred while 
on duty. 
    Subd. 2.  [REGULAR SALARIED FIREFIGHTER NONDUTY DISABILITY 
BENEFIT AMOUNT.] The nonduty disability benefit for regular 
salaried firefighters must not exceed the amount of the duty 
disability benefit. 
    Sec. 4.  Laws 1982, chapter 574, section 5, as amended by 
Laws 1985, chapter 261, section 16, is amended to read: 
    Sec. 5.  [VIRGINIA POLICE; BENEFIT CHANGES FOR 
PARTICIPANTS.] 
    If the bylaws so authorize, the following changes shall be 
effective: 
    (a) The service pension payable to persons who retired from 
the police department on or before January 12, 1966, shall be 
supplemented by $100 $200 per month. 
    (b) For any participant who terminated employment after 
20 or more years of service, the amount of the monthly service 
pension payable after the participant has attained the age of at 
least 50 years shall be equal to one-half 50 percent of the 
prevailing pay of a police officer of the rank and position held 
by the participant for a period of at least six months prior to 
termination of service, or to the rank and position most 
analogous thereto, plus an additional one percent for each full 
year of service in excess of 20 years to a maximum of 60 
percent, payable by the police department in each month during 
which the retired participant receives a service pension. 
    (c) The amount of a monthly disability pension shall be 
equal to one-half of the prevailing pay of a police officer of 
the rank and position held by the participant for a period of at 
least six months prior to his or her disability or the rank and 
position most analogous thereto, payable by the police 
department in each month during the period of the participant's 
disability, subject to any integration of benefits.  Disability 
pensions payable for disabilities incurred on or before January 
11, 1967, are increased by $100 per month. 
    (d) The benefit paid to the surviving spouse of a 
participant who died on or before January 11, 1967, shall be 
increased by $50 $100 per month, with benefits payable until the 
surviving spouse's death or remarriage. 
    (e) The benefit paid to a surviving child shall be 
increased to $50 per child per month, subject to any limitation 
placed on the total amount of survivor's benefits. 
    Sec. 5.  [MINNETONKA VOLUNTEER FIREFIGHTERS RELIEF 
ASSOCIATION; INCREASED NONFORFEITABLE SERVICE PENSION 
PERCENTAGE.] 
    Notwithstanding any provision of Minnesota Statutes, 
section 424A.02, subdivision 2, to the contrary, if the articles 
of incorporation or the bylaws of the relief association so 
provide, subject to Minnesota Statutes, section 424A.02, 
subdivision 10, the Minnetonka volunteer firefighters relief 
association may pay a service pension to a retiring member who 
meets the minimum age, service, and other requirements of 
Minnesota Statutes, section 424A.02, subdivision 1.  The amount 
of the service pension is that portion of a service pension 
payable with 20 years of service that full years of service 
credited by the relief association bear to 20 years of service. 
    Sec. 6.  [EVELETH POLICE AND FIREFIGHTERS; BENEFIT 
INCREASE.] 
    Notwithstanding any general or special law to the contrary, 
in addition to other benefits payable, retirement benefits 
payable to retired police officers and firefighters and their 
surviving spouses by the Eveleth police and fire trust fund may 
be increased by $100 a month.  Increases may be made retroactive 
to January 1, 1989. 
    Sec. 7.  [BLOOMINGTON VOLUNTEER FIREFIGHTERS RELIEF 
ASSOCIATION; DUTY DISABILITY BENEFIT.] 
    Notwithstanding any provision of Minnesota Statutes, 
section 424A.02, subdivision 9, or any other law to the 
contrary, the Bloomington firefighters relief association may 
provide a duty disability benefit to a volunteer firefighter who:
     (1) becomes disabled from a medically determinable injury 
or illness arising out of or occurring in the course of the line 
of duty; 
     (2) is not entitled to the immediate receipt of a service 
pension equal to the amount of a service pension payable to a 
retiring firefighter with 20 years of service; and 
     (3) complies with any other requirement specified in the 
bylaws of the association. 
     The duty disability benefit must be equal to the amount of 
the service pension payable to a retiring firefighter with 20 
years of service. 
    A Bloomington volunteer firefighter who has received a 
duty-related disability benefit and who returns to active 
firefighting duties with the Bloomington fire department must 
accrue service credit towards a service pension for the period 
of the receipt of the duty-related disability benefit.  
    Sec. 8.  [NONDUTY DISABILITY BENEFIT.] 
    The Bloomington firefighters relief association may provide 
a volunteer firefighter who becomes disabled from an injury or 
illness not arising out of or not occurring in the course of the 
line of duty with a disability benefit as the bylaws of the 
relief association specify, subject to the provisions of 
Minnesota Statutes, section 424A.02, subdivision 9.  
    Sec. 9.  Laws 1965, chapter 446, section 2, is amended to 
read:  
    Sec. 2.  [DUTY-RELATED DEATH SURVIVOR BENEFITS.] 
    Notwithstanding Minnesota Statutes, section 424A.02, 
subdivision 9, or any other provision of law to the contrary and 
in lieu of the widows pension surviving spouse benefit provided 
in Minnesota Statutes, Section 424.24, the firemen's 
firefighters relief association in the city of Bloomington may 
provide a pension surviving spouse benefit to the widow 
surviving spouse of a volunteer fireman firefighter who dies as 
the result of an injury or illness arising out of or in the 
course of the line of duty, if the surviving spouse qualifies 
under the terms of Minnesota Statutes, Section 424.24, of not 
more than a sum.  The surviving spouse benefit must not exceed 
an amount equal to one fourth of the salary as payable from time 
to time during the period of pension payment to policemen of the 
highest grade, not including officers of the police department, 
in the employ of the city, such pension to three-quarters of the 
amount of the service pension payable to a retiring firefighter 
with 20 years of service.  The surviving spouse benefit must be 
paid as the bylaws of the association provide for her natural 
life; provided that if she remarry, such pension shall upon 
remarriage, the surviving spouse benefit must cease to accrue 
and terminate as of the date of her remarriage.  
    In event If there is a surviving child or there are 
surviving children of a deceased firefighter who suffered a 
duty-related death as provided in Minnesota Statutes, Section 
424.24, the firemen's relief association of the city of 
Bloomington may provide for a pension of not more than four 
percent of the monthly salary as payable from time to time 
during the period of pension payment to policemen of the highest 
grade, not including officers of the department, in the employ 
of the city, surviving child benefit.  The surviving child 
benefit must not exceed an amount equal to 12 percent of the 
amount of the service pension payable to a retiring firefighter 
with 20 years of service for each child up to the time each 
child reaches the age of not less than 16 years or more than 18 
years as the bylaws of the association provide; provided,.  The 
total pension hereunder survivor benefits for the widow 
surviving spouse and children of the deceased member shall not 
exceed one third of the monthly salary of a policeman of the 
highest grade, not including officers of the police department, 
in the employ of the municipality the amount of the service 
pension payable to a retiring firefighter with 20 years of 
service during the period of the pension payment. 
    Sec. 10.  Laws 1965, chapter 446, section 3, is amended to 
read:  
    Sec. 3.  [DUTY-RELATED DEATH SURVIVING CHILD BENEFITS IN 
CERTAIN INSTANCES.] The firemen's Bloomington firefighters 
relief association of the city of Bloomington may provide 
a pension surviving child benefit for the child or the children 
of a deceased members member with a duty-related death after the 
death of their mothers the surviving spouse, of such the amount 
as the board of trustees of the association shall deem considers 
necessary to properly support such the child or the children 
until they reach an the age of not more than 18, as the bylaws 
of the association provide; provided.  The total pension 
hereunder surviving child benefit for the child or the children 
of the deceased member shall not exceed a sum an amount equal to 
one third of the monthly salary of a policeman of the highest 
grade, not including officers of the police department, in the 
employ of the municipality the amount of the service pension 
payable to a retiring firefighter with 20 years of service 
during the period of the pension survivor benefit payment. 
    Sec. 11.  [NONDUTY-RELATED DEATH SURVIVOR BENEFITS.] 
    The Bloomington firefighters relief association may provide 
the surviving spouse, surviving child or surviving children of a 
volunteer firefighter who dies from an injury or illness not 
arising out of or not occurring in the course of the line of 
duty with a survivor benefit as the bylaws of the relief 
association specify, subject to the provisions of Minnesota 
Statutes, section 424A.02, subdivision 9. 
    Sec. 12.  [BYLAW AMENDMENT.] 
    The St. Paul police relief association and the St. Paul 
fire department relief association shall amend their articles of 
incorporation and bylaws to ensure that retired members of the 
police department and fire department are represented on the 
board of directors of the St. Paul police relief association and 
the board of trustees of the St. Paul fire department relief 
association in the same proportion that the number of retired 
members in each relief association bears to the total membership 
of each relief association.  However, retired members of the St. 
Paul police relief association and the St. Paul fire department 
relief association are never entitled under the articles of 
incorporation or bylaws to more seats on the board of directors 
than the active members of the respective associations. 
    Sec. 13.  [REPEALER.] 
    Laws 1967, chapter 815; Laws 1978, chapter 683; and Laws 
1981, chapter 224, sections 2 and 5, are repealed.  
    Sec. 14.  [EFFECTIVE DATES.] 
    Subdivision 1.  Section 2 is effective upon approval by the 
St. Paul city council and compliance with Minnesota Statutes, 
section 645.021, subdivision 3. 
    Subd. 2.  Section 3 is effective upon approval by the 
Mankato city council and compliance with Minnesota Statutes, 
section 645.021, subdivision 3. 
    Subd. 3.  Section 4 is effective upon approval by the 
Virginia city council and compliance with Minnesota Statutes, 
section 645.021, subdivision 3. 
    Subd. 4.  Section 5 is effective upon approval by the 
governing body of the city of Minnetonka and compliance with 
Minnesota Statutes, section 645.021, subdivision 3. 
    Subd. 5.  Section 6 is effective upon approval by the 
Eveleth city council and compliance with Minnesota Statutes, 
section 645.021, subdivision 3. 
    Subd. 6.  Sections 7 to 11 are effective upon approval by 
the governing body of the city of Bloomington and compliance 
with Minnesota Statutes, section 645.021, subdivision 3. 
    Subd. 7.  Sections 12 and 13 are effective the day 
following final enactment. 
    Subd. 8.  Section 1 is effective July 1, 1989. 

                               ARTICLE 12

                   HIGHER EDUCATION SUPPLEMENTAL PLAN
    Section 1.  Minnesota Statutes 1988, section 136.80, 
subdivision 1, is amended to read: 
    Subdivision 1.  A The supplemental retirement plan for 
personnel employed by the state university board and the state 
board for community colleges who are in the unclassified service 
of the state commencing July 1 following the completion of the 
second year of their full time contract is hereby established 
and shall be governed pursuant to sections 136.81 to 136.85.  
Any An unclassified employee who is employed by the state 
university board or the state board for community colleges in 
subsidized on-the-job training, work experience, or public 
service employment as an enrollee under the federal 
comprehensive employment and training act shall may not be 
included in the supplemental retirement plan provided for in 
sections 136.81 to 136.85 from and after March 30, 1978, unless 
the unclassified employee has as of the later of March 30, 1978, 
or the date of employment sufficient service credit in the 
retirement fund providing primary retirement coverage to meet 
the minimum vesting requirements for a deferred retirement 
annuity, or the board agrees in writing to make the employer 
contribution required by section 136.81 on account of that 
unclassified employee from revenue sources other than funds 
provided under the federal comprehensive employment and training 
act, or the unclassified employee agrees in writing to make the 
employer contribution required by section 136.81 in addition to 
the member contribution. 
    Sec. 2.  Minnesota Statutes 1988, section 136.81, 
subdivision 1, is amended to read: 
    Subdivision 1.  [DEDUCTIONS.] There shall be deducted The 
state university board and the state board for community 
colleges shall deduct from the salary of each person described 
in section 136.80, subdivision 1, a sum equal to five percent of 
the portion of the person's annual salary paid between $6,000 
and $15,000.  The deduction is to must be made in the same 
manner as other retirement deductions are made from the salary 
of the person only after the first $6,000 has been paid in a 
fiscal year.  The state employer shall make a contribution to 
the plan on behalf of every covered person in an amount equal to 
the deductions made from the salary of the person.  If an 
agreement is made under section 356.24 for additional employer 
contributions, an amount equal to the additional employer 
contribution must be deducted from the person's annual salary 
above $15,000 as specified in this subdivision.  The moneys so 
money deducted and the state contribution shall must be 
deposited to the credit of the state university and community 
college supplemental retirement plan account of the teachers 
retirement fund.  The account is hereby established and 
shall must be separate and distinct from other funds, accounts, 
or assets of the teachers retirement fund.  The money required 
to meet the obligation of the state employer as provided in this 
subdivision shall must be contributed to the executive director 
of the teachers retirement association by the state employer. 
    Any Deductions which are taken from the salary of a person 
for the supplemental retirement plan in error shall must, upon 
discovery and verification, be refunded to the person.  The 
retirement board shall establish a reserve which shall 
reflect reflecting any gains or losses realized due to the 
purchase and redemption of shares representing salary deductions 
and state employer contributions which were made in error.  The 
balance of the reserve shall must be credited annually to the 
cancellation reserve established pursuant to under section 
136.82, subdivision 1, clause (5). 
    If any payroll deductions which are required pursuant 
to under this section are omitted, the deductions shall must be 
remitted to the supplemental retirement plan investment account 
of the teachers retirement association within one year from the 
end of the fiscal year in which the deductions were due, and, at 
the time of the receipt of the omitted deductions, the required 
state contribution shall then must be made. 
    Sec. 3.  Minnesota Statutes 1988, section 356.24, is 
amended to read: 
    356.24 [SUPPLEMENTAL PENSION OR DEFERRED COMPENSATION 
PLANS, RESTRICTIONS UPON GOVERNMENT UNITS.] 
    (a) It is unlawful for a school district or other 
governmental subdivision or state agency to levy taxes for, or 
contribute public funds to a supplemental pension or deferred 
compensation plan that is established, maintained, and operated 
in addition to a primary pension program for the benefit of the 
governmental subdivision employees other than: 
    (1) to a supplemental pension plan that was established, 
maintained, and operated before May 6, 1971; 
    (2) to a plan that provides solely for group health, 
hospital, disability, or death benefits, to the individual 
retirement account plan established by sections 354B.01 to 
354B.04; 
    (3) to a plan that provides solely for severance pay under 
section 465.72 to a retiring or terminating employee; or 
    (4) for employees other than personnel employed by the 
state university board or the community college board and 
covered by section 136.80, subdivision 1, to the state of 
Minnesota deferred compensation plan under section 352.96, if 
provided for in a personnel policy or in the collective 
bargaining agreement of the public employer with the exclusive 
representative of public employees in an appropriate unit, in an 
amount matching employee contributions on a dollar for dollar 
basis, but not to exceed an employer contribution of $2,000 a 
year per employee; or 
    (5) for personnel employed by the state university board or 
the community college board and covered by section 136.80, 
subdivision 1, to the supplemental retirement plan under 
sections 136.80 to 136.85, if provided for in a personnel policy 
or in the collective bargaining agreement of the public employer 
with the exclusive representative of the covered employees in an 
appropriate unit, in an amount matching employee contributions 
on a dollar for dollar basis, but not to exceed an employer 
contribution of $2,000 a year for each employee.  
    (b) No change in benefits or employer contributions in a 
supplemental pension plan to which this section applies after 
May 6, 1971, is effective without prior legislative 
authorization. 

                               ARTICLE 13

                            BENEFIT CHANGES
    Section 1.  Minnesota Statutes 1988, section 352.01, 
subdivision 19, is amended to read: 
    Subd. 19.  [RETIREMENT.] "Retirement" means the time after 
a state employee is entitled to an accrued annuity, as defined 
in subdivision 21, payable under an application for annuity 
filed in the office of the system as provided in section 
352.115, subdivision 8 or, in the case of an employee who has 
received a disability benefit, when that employee reaches normal 
retirement age 65. 
    Sec. 2.  Minnesota Statutes 1988, section 352.01, is 
amended by adding a subdivision to read: 
    Subd. 25.  [NORMAL RETIREMENT AGE.] "Normal retirement age" 
means age 65 for a person who first became a covered employee 
before July 1, 1989.  For a person who first becomes a covered 
employee after June 30, 1989, normal retirement age means the 
higher of age 65 or "retirement age," as defined in United 
States Code, title 42, section 416(l), as amended. 
    Sec. 3.  Minnesota Statutes 1988, section 352.04, 
subdivision 2, is amended to read: 
    Subd. 2.  [EMPLOYEE CONTRIBUTIONS.] The employee 
contribution to the fund must be equal to 3.73 4.34 percent of 
salary, beginning with the first full pay period after June 30, 
1984 1989.  These contributions must be made by deduction from 
salary as provided in subdivision 4. 
    Sec. 4.  Minnesota Statutes 1988, section 352.04, 
subdivision 3, is amended to read: 
    Subd. 3.  [EMPLOYER CONTRIBUTIONS.] The employer 
contribution to the fund must be equal to 3.90 4.51 percent of 
salary beginning with the first full pay period after June 30, 
1984 1989.  
    Sec. 5.  Minnesota Statutes 1988, section 352.113, 
subdivision 1, is amended to read: 
    Subdivision 1.  [AGE AND SERVICE REQUIREMENTS.] Any 
employee covered by the system who is less than 65 years old 
normal retirement age who becomes totally and permanently 
disabled after five three or more years of allowable service is 
entitled to a disability benefit in an amount provided in 
subdivision 3.  If the disabled employee's state service has 
terminated at any time, the employee must have at least three 
two years of allowable service after last becoming a state 
employee covered by the system. 
    Sec. 6.  Minnesota Statutes 1988, section 352.113, 
subdivision 12, is amended to read: 
    Subd. 12.  [RETIREMENT STATUS AT NORMAL RETIREMENT AGE 65.] 
The disability benefit paid to a disabled employee under this 
section ends when the employee reaches normal retirement age 
65.  If the disabled employee is still totally and permanently 
disabled when the employee reaches normal retirement age 65, the 
employee shall be considered to be a retired employee.  If the 
employee had chosen an optional annuity under subdivision 3, the 
employee shall receive an annuity in accordance with the terms 
of the optional annuity previously chosen.  If the employee had 
not chosen an optional annuity pursuant to subdivision 3, the 
employee may then choose to receive either a normal retirement 
annuity equal in amount to the disability benefit paid before 
the employee reached normal retirement age 65 or an optional 
annuity as provided in section 352.116, subdivision 3.  The 
choice of an optional annuity must be made before 
reaching normal retirement age 65.  If an optional annuity is 
chosen, the choice is effective on the date the employee becomes 
65 years old attains normal retirement age and the optional 
annuity shall begin to accrue the first of the month following 
the month in which the employee attains 65 this age.  
    Sec. 7.  Minnesota Statutes 1988, section 352.115, 
subdivision 1, is amended to read: 
    Subdivision 1.  [AGE AND SERVICE REQUIREMENTS.] After 
separation from state service, any employee (1) who has attained 
the age of at least 55 years and who is entitled to credit for 
at least five three years allowable service, or (2) who has 
received credit for at least 30 years allowable service 
regardless of age, is entitled upon application to a retirement 
annuity. 
    Sec. 8.  Minnesota Statutes 1988, section 352.115, 
subdivision 2, is amended to read: 
    Subd. 2.  [AVERAGE SALARY.] The retirement annuity 
hereunder payable at normal retirement age 65 or thereafter must 
be computed in accordance with the applicable provisions of the 
formula stated in subdivision 3, on the basis of the employee's 
average salary for the period of allowable service.  This 
retirement annuity is known as the "normal" retirement annuity.  
    For each year of allowable service, "average salary" of an 
employee in determining a retirement annuity means the average 
of the highest five successive years of salary upon which the 
employee has made contributions to the retirement fund by 
payroll deductions.  Average salary must be based upon all 
allowable service if this service is less than five years. 
    "Average salary" does not include the payment of accrued 
unused annual leave or overtime paid at time of final separation 
from state service if paid in a lump sum nor does it include the 
reduced salary, if any, paid during the period the employee is 
entitled to workers' compensation benefit payments for temporary 
disability. 
    Sec. 9.  Minnesota Statutes 1988, section 352.115, 
subdivision 3, is amended to read: 
    Subd. 3.  [RETIREMENT ANNUITY FORMULA.] (a) This paragraph, 
in conjunction with section 352.116, subdivision 1, applies to a 
person who became a covered employee before July 1, 1989, unless 
paragraph (b), in conjunction with section 352.116, subdivision 
1a, produces a higher annuity amount, in which case paragraph 
(b) will apply.  The employee's average salary, as defined in 
subdivision 2, multiplied by one percent per year of allowable 
service for the first ten years and 1.5 percent for each later 
year of allowable service and pro rata for completed months less 
than a full year shall determine the amount of the retirement 
annuity to which the employee is entitled. 
    (b) This paragraph applies to a person who first became a 
covered employee after June 30, 1989, and to any other employee 
whose annuity amount, when calculated under this paragraph and 
in conjunction with section 352.116, subdivision 1a, is higher 
than it is when calculated under paragraph (a), in conjunction 
with section 352.116, subdivision 1.  The employee's average 
salary, as defined in subdivision 2, multiplied by 1.5 percent 
for each year of allowable service and pro rata for months less 
than a full year shall determine the amount of the retirement 
annuity to which the employee is entitled. 
    Sec. 10.  Minnesota Statutes 1988, section 352.116, is 
amended to read: 
    352.116 [ANNUITIES UPON RETIREMENT.] 
    Subdivision 1.  [REDUCED ANNUITY BEFORE NORMAL RETIREMENT 
AGE 65.] This subdivision applies only to a person who first 
became a covered employee before July 1, 1989, and whose annuity 
is higher when calculated under section 352.115, subdivision 3, 
paragraph (a), in conjunction with this subdivision than when 
calculated under section 352.115, subdivision 3, paragraph (b), 
in conjunction with subdivision 1a. 
    (a) Any employee who is eligible for a retirement annuity 
under section 352.115, subdivision 1, and who retires before 
normal retirement age 65 with credit for less than at least 
three but less than 30 years of allowable service shall be paid 
the normal retirement annuity provided in section 352.115, 
subdivisions 2 and 3, paragraph (a), reduced so that the reduced 
annuity is the actuarial equivalent of the annuity that would be 
payable to by one-quarter of one percent for each month that the 
employee if the employee deferred receipt of the annuity from 
the day the annuity begins to accrue to is under normal 
retirement age 65 at the time of retirement.  Any An employee 
who is eligible for a retirement annuity under section 352.115, 
subdivision 1, and who retires prior to age 62 with credit for 
at least 30 years of allowable service shall be paid the normal 
retirement annuity provided in section 352.115, subdivisions 2 
and 3, paragraph (a), 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 from 
the day the annuity begins to accrue to by one-quarter of one 
percent for each month that the employee is under age 62 at the 
time of retirement. 
    (b) Any person 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 section 352.115, subdivisions 2 and 3, paragraph 
(a), without any reduction by reason of early retirement. 
    Subd. 1a.  [ACTUARIAL REDUCTION FOR EARLY RETIREMENT.] This 
subdivision applies to a person who first became a covered 
employee after June 30, 1989, and to any other employee whose 
annuity is higher when calculated under section 352.115, 
subdivision 3, paragraph (b), in conjunction with this 
subdivision than when calculated under section 352.115, 
subdivision 3, paragraph (a), in conjunction with subdivision 1. 
An employee who retires before the normal retirement age shall 
be paid the normal retirement annuity provided in section 
352.115, subdivisions 2 and 3, paragraph (b), 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. 
    Subd. 2.  [NORMAL ANNUITY AT NORMAL RETIREMENT AGE 65.] Any 
employee who retires after reaching normal retirement age 65 
shall be paid the annuity provided in section 352.115. 
    Subd. 3.  [OPTIONAL ANNUITIES.] The board shall establish 
an optional retirement annuity in the form of a joint and 
survivor annuity.  The board may also establish an optional 
annuity in the form of an annuity payable for a period certain 
and for life thereafter or establish an optional annuity which 
takes the form of a joint and survivor annuity providing that, 
if after the joint and survivor annuity becomes payable, the 
person with the designated remainder interest in the annuity 
dies before the former member, the annuity amount must be 
reinstated to a normal single life annuity amount as of the 
first day of the month after the day the person dies.  In 
addition, the board may also establish an optional annuity that 
takes the form of an annuity calculated on the basis of the age 
of the retired employee at retirement and payable for the period 
before the retired employee becomes eligible for social security 
old age retirement benefits in a greater amount than the amount 
of the annuity calculated under subdivision 2 on the basis of 
the age of the retired employee at retirement but equal so far 
as possible to the social security old age retirement benefit 
and the adjusted retirement annuity amount payable immediately 
after the retired employee becomes eligible for social security 
old age retirement benefits and payable for the period after the 
retired employee becomes eligible for social security old age 
retirement benefits in an amount less than the amount of the 
annuity calculated under subdivisions 2 and 3.  The social 
security leveling option may be calculated based on broad 
average social security old age retirement benefits.  Except as 
provided in subdivision 3a, the optional forms must be 
actuarially equivalent to the normal single life annuity forms 
provided in sections 352.115 and 352.116, whichever applies.  
    Subd. 3a.  [BOUNCE-BACK ANNUITY.] (a) If a retired employee 
or disabilitant selects a joint and survivor annuity option 
under subdivision 3, the retired employee or disabilitant must 
receive a normal single-life annuity if the designated optional 
annuity beneficiary dies before the retired employee or 
disabilitant.  Under this option, no reduction may be made in 
the annuity to provide for restoration of the normal single-life 
annuity in the event of the death of the designated optional 
annuity beneficiary. 
    (b) A retired employee or disabilitant who selected an 
optional joint and survivor annuity before July 1, 1989, but did 
not choose an option that provides that the normal single-life 
annuity is payable to the retired employee or the disabilitant 
if the designated optional annuity beneficiary dies first, is 
eligible for restoration of the normal single-life annuity if 
the designated optional annuity beneficiary dies first, without 
further actuarial reduction of the person's annuity.  A retired 
employee or disabilitant who selected an optional joint and 
survivor annuity, but whose designated optional annuity 
beneficiary died before July 1, 1989, shall receive a normal 
single-life annuity after that date, but shall not receive 
retroactive payments for periods before that date. 
    (c) A retired employee or disabilitant who took a further 
actuarial reduction to elect an optional joint and survivor 
annuity that provides that the normal annuity is payable to the 
retired employee or disabilitant if the designated optional 
beneficiary died before July 1, 1989, shall have the annuity 
increased as of July 1, 1989, to the amount the person would 
have received if, at the time of retirement or disability, the 
person had selected only optional survivor coverage that would 
not have provided for restoration of the normal annuity upon the 
death of the designated optional annuity beneficiary.  Any 
annuity or benefit increase under this paragraph is effective 
only for payments made after June 30, 1989, and is not 
retroactive for payments made before July 1, 1989. 
    Subd. 4.  [DETERMINING ACTUARIAL EQUIVALENCY.] In 
establishing the procedure for determining the actuarial 
equivalency of early retirement annuities as required under 
subdivision 1 1a or in establishing actuarial equivalent 
optional retirement annuity forms as required under subdivision 
3, the board shall obtain the written recommendation of the 
commission-retained actuary.  The recommendations shall be a 
part of the permanent records of the board. 
    Sec. 11.  Minnesota Statutes 1988, section 352.12, 
subdivision 1, is amended to read: 
    Subdivision 1.  [DEATH BEFORE TERMINATION OF SERVICE.] If 
an employee dies before state service has terminated and neither 
a survivor annuity nor a reversionary annuity is payable, or if 
a former employee who has sufficient service credit to be 
entitled to an annuity dies before the benefit has become 
payable, the director shall make a refund to the last designated 
beneficiary or, if there is none, to the surviving spouse or, if 
none, to the employee's surviving children in equal shares or, 
if none, to the employee's surviving parents in equal shares or, 
if none, to the representative of the estate in an amount equal 
to the accumulated employee contributions plus interest thereon 
to the date of death at the rate of five six percent per annum 
compounded annually.  Upon the death of an employee who has 
received a refund that was later repaid in full, interest must 
be paid on the repaid refund only from the date of repayment.  
If the repayment was made in installments, interest must be paid 
only from the date installment payments began.  The designated 
beneficiary, surviving spouse, or representative of the estate 
of an employee who had received a disability benefit is not 
entitled to interest upon any balance remaining to the 
decedent's credit in the fund at the time of death.  
    Sec. 12.  Minnesota Statutes 1988, section 352.12, 
subdivision 2, is amended to read: 
    Subd. 2.  [SURVIVING SPOUSE BENEFIT.] If an employee or 
former employee is at least 50 years old and has credit for at 
least five three years allowable service or who has credit for 
at least 30 years of allowable service, regardless of age, dies 
before an annuity or disability benefit has become payable, 
notwithstanding any designation of beneficiary to the contrary, 
the surviving spouse of the employee may elect to receive, in 
lieu of the refund with interest provided in subdivision 1, an 
annuity equal to the joint and 100 percent survivor annuity 
which the employee could have qualified for had the employee 
terminated service on the date of death.  The surviving spouse 
may apply for the annuity at any time after the date on which 
the deceased employee would have attained the required age for 
retirement based on the employee's allowable service.  The 
annuity must be computed as provided in sections 352.115, 
subdivisions 1, 2, and 3, and 352.116, subdivisions 1, 1a, and 3.
Sections 352.22, subdivision 3, and 352.72, subdivision 2, apply 
to a deferred annuity payable under this subdivision.  The 
annuity must cease with the last payment received by the 
surviving spouse in the lifetime of the surviving spouse.  An 
amount equal to the excess, if any, of the accumulated 
contributions credited to the account of the deceased employee 
in excess of the total of the benefits paid and payable to the 
surviving spouse must be paid to the deceased employee's last 
designated beneficiary or, if none, to the surviving children of 
the deceased spouse in equal shares or, if none, to the 
surviving parents of the deceased spouse or, if none, to the 
representative of the estate of the deceased spouse.  Any 
employee may request in writing that this subdivision not apply 
and that payment be made only to a designated beneficiary as 
otherwise provided by this chapter. 
    Sec. 13.  Minnesota Statutes 1988, section 352.12, 
subdivision 6, is amended to read: 
    Subd. 6.  [DEATH AFTER SERVICE TERMINATION.] Except as 
provided in subdivision 1, if a former employee covered by the 
system dies and has not received an annuity, a retirement 
allowance, or a disability benefit, a refund must be made to the 
last designated beneficiary or, if there is none, to the 
surviving spouse or, if none, to the employee's surviving 
children in equal shares or, if none, to the employee's 
surviving parents in equal shares or, if none, to the 
representative of the estate in an amount equal to accumulated 
employee contributions.  The refund must include interest at the 
rate of five six percent per year compounded annually.  The 
interest must be computed to the first day of the month in which 
the refund is processed and be based on fiscal year balances. 
    Sec. 14.  Minnesota Statutes 1988, section 352.22, 
subdivision 2, is amended to read: 
    Subd. 2.  [AMOUNT OF REFUND.] Except as provided in 
subdivision 3, any person who ceased to be a state employee 
after June 30, 1973, by reason of termination of state service 
shall receive a refund in an amount equal to employee 
accumulated contributions plus interest at the rate of five six 
percent per year compounded annually.  Interest must be computed 
to the first day of the month in which the refund is processed 
and must be based on fiscal year balances.  
    Sec. 15.  Minnesota Statutes 1988, section 352.22, 
subdivision 3, is amended to read: 
    Subd. 3.  [DEFERRED ANNUITY.] (a) Any employee with at 
least five three years of allowable service when termination 
occurs may elect to leave the accumulated contributions in the 
fund and thereby be entitled to a deferred retirement annuity.  
This annuity must be computed as provided by the law in effect 
when state service terminated, on the basis of allowable service 
before termination of service. 
    (b) An employee on layoff or on leave of absence without 
pay, except a leave of absence for health reasons, who does not 
return to state service shall have any annuity, deferred 
annuity, or other benefit to which the employee may become 
entitled computed under the law in effect on the last working 
day. 
    (c) No application for a deferred annuity shall be made 
more than 60 days before the time the former employee reaches 
the required age for entitlement to the payment of the annuity.  
The deferred annuity shall begin to accrue no earlier than 60 
days before the date the application is filed in the office of 
the system, but not (1) before the date the employee reaches the 
required age for entitlement to the annuity nor (2) before the 
day following the termination of state service in a position not 
covered by the retirement system nor (3) before the day 
following the termination of employment in a position that 
requires the employee to be a member of either the public 
employees retirement association or the teachers retirement 
association. 
     (d) Application for the accumulated contributions left on 
deposit with the fund may be made at any time after 30 days 
following the date of termination of service. 
    Sec. 16.  Minnesota Statutes 1988, section 352.72, 
subdivision 1, is amended to read: 
    Subdivision 1.  [ENTITLEMENT TO ANNUITY.] (a) Any person 
who has been an employee covered by a retirement system listed 
in paragraph (b) is entitled when qualified to an annuity from 
each fund if total allowable service in all funds or in any two 
of these funds totals five three or more years.  
    (b) This section applies to the Minnesota state retirement 
system, the public employees retirement association including 
the public employees retirement association police and 
firefighters fund, the teachers retirement association, the 
state patrol retirement association, or any other public 
employee retirement system in the state with a similar 
provision, except as noted in paragraph (c).  
    (c) This section does not apply to other funds providing 
benefits for police officers or firefighters.  
    (d) No portion of the allowable service upon which the 
retirement annuity from one fund is based shall be again used in 
the computation for benefits from another fund.  No refund may 
have been taken from any one of these funds since service 
entitling the employee to coverage under the system or the 
employee's membership in any of the associations last 
terminated.  The annuity from each fund must be determined by 
the appropriate provisions of the law except that the 
requirement that a person must have at least five three years 
allowable service in the respective system or association does 
not apply for the purposes of this section if the combined 
service in two or more of these funds equals five three or more 
years. 
    Sec. 17.  Minnesota Statutes 1988, section 352.72, 
subdivision 2, is amended to read: 
    Subd. 2.  [COMPUTATION OF DEFERRED ANNUITY.] The deferred 
annuity, if any, accruing under subdivision 1, or section 
352.22, subdivision 3, must be computed as provided in section 
352.22, subdivision 3, on the basis of allowable service before 
termination of state service and augmented as provided herein.  
The required reserves applicable to a deferred annuity or to an 
annuity for which a former employee was eligible but had not 
applied or to any deferred segment of an annuity must be 
determined as of the date the benefit begins to accrue and 
augmented by interest compounded annually from the first day of 
the month following the month in which the employee ceased to be 
a state employee, or July 1, 1971, whichever is later, to the 
first day of the month in which the annuity begins to accrue.  
The rates of interest used for this purpose must be five percent 
compounded annually until January 1, 1981, and after that date 
three percent compounded annually thereafter until January 1 of 
the year following the year in which the former employee attains 
age 55.  From that date to the effective date of retirement, the 
rate is five percent compounded annually.  If a person has more 
than one period of uninterrupted service, the required reserves 
related to each period must be augmented by interest under this 
subdivision.  The sum of the augmented required reserves so 
determined is the present value of the annuity.  "Uninterrupted 
service" for the purpose of this subdivision means periods of 
covered employment during which the employee has not been 
separated from state service for more than two years.  If a 
person repays a refund, the service restored by the repayment 
must be considered continuous with the next period of service 
for which the employee has credit with this system.  The formula 
percentages used for each period of uninterrupted service must 
be those applicable to a new employee.  The mortality table and 
interest assumption used to compute the annuity must be those in 
effect when the employee files application for annuity.  This 
section shall not reduce the annuity otherwise payable under 
this chapter. 
    Sec. 18.  Minnesota Statutes 1988, section 352.72, 
subdivision 5, is amended to read: 
    Subd. 5.  [EARLY RETIREMENT.] The requirements and 
provisions for retirement before normal retirement age 65 in 
sections 352.115, subdivision 1, and 352.116 also apply to an 
employee fulfilling the requirements with a combination of 
service as provided in subdivision 1. 
    Sec. 19.  Minnesota Statutes 1988, section 352.85, 
subdivision 1, is amended to read: 
    Subdivision 1.  [ELIGIBILITY; RETIREMENT ANNUITY.] Any 
person who is employed by the department of military affairs 
other than as a full-time firefighter, who is covered by the 
general employee retirement plan of the system as provided in 
section 352.01, subdivision 23, who is ordered to active duty 
under section 190.08, subdivision 3, who elects this special 
retirement coverage under subdivision 4, who is required to 
retire from federal military status at an age earlier 
than normal retirement age 65 by applicable federal laws or 
regulations and who terminates employment as a state employee 
upon attaining that mandatory retirement age is entitled, upon 
application, to a retirement annuity computed in accordance with 
section 352.115, subdivisions 2 and 3, without any reduction for 
early retirement under section 352.116, subdivision 1 or la. 
    Sec. 20.  Minnesota Statutes 1988, section 352.93, 
subdivision 1, is amended to read: 
    Subdivision 1.  [BASIS OF ANNUITY; WHEN TO APPLY.] After 
separation from state service an employee covered under section 
352.91 who has reached age 55 years and has credit for at 
least five three years of covered correctional service and 
regular Minnesota state retirement system service is entitled 
upon application to a retirement annuity under this section 
based only on covered correctional employees' service.  
Application may be made no earlier than 60 days before the date 
the employee is eligible to retire by reason of both age and 
service requirements.  
    In this section, "average salary" means the average of the 
monthly salary during the employees' highest five successive 
years of salary as an employee covered by the Minnesota state 
retirement system.  Average salary must be based upon all 
allowable service if this service is less than five years. 
    Sec. 21.  Minnesota Statutes 1988, section 352.93, 
subdivision 3, is amended to read: 
    Subd. 3.  [PAYMENTS; DURATION AND AMOUNT.] The annuity 
under this section shall begin to accrue as provided in section 
352.115, subdivision 8, and must be paid for an additional 84 
full calendar months or to the first of the month following the 
month in which the employee becomes attains normal retirement 
age 65, whichever occurs first, except that payment must not 
cease before the first of the month following the month in which 
the employee becomes 62.  It must then be reduced to the amount 
as calculated under section 352.115, except that if this amount, 
when added to the social security benefit based on state service 
the employee is eligible to receive at the time, is less than 
the benefit payable under subdivision 2, the retired employee 
shall receive an amount that when added to the social security 
benefit will equal the amount payable under subdivision 2.  
    When an annuity is reduced under this subdivision, the 
percentage adjustments, if any, that have been applied to the 
original annuity under section 11A.18, before the reduction, 
must be compounded and applied to the reduced annuity.  A former 
correctional employee employed by the state in a position 
covered by the regular plan between the ages age of 58 and 65 
normal retirement age shall receive a partial return of 
correctional contributions at retirement with five six percent 
interest based on the following formula: 
 
 Employee contributions             Years and complete    
 contributed as a                   months of regular     
 correctional employee              service between ages
 in excess of the                   age 58 and 65 the    
 contributions the                  normal retirement age 
 employee would have       X        ..................
 contributed as a                            7
 regular employee                   number of years between 
                                    age 58 and normal 
                                    retirement age 
    Sec. 22.  Minnesota Statutes 1988, section 352.95, 
subdivision 2, is amended to read: 
    Subd. 2.  [NONJOB-RELATED DISABILITY.] Any covered 
correctional employee who, after at least five three years of 
covered correctional service, before reaching the age of 55 
becomes disabled and physically unfit to perform the duties of 
the position because of sickness or injury occurring while not 
engaged in covered employment, is entitled to a disability 
benefit based on covered correctional service only.  The 
disability benefit must be computed as provided in section 
352.93, subdivisions 1 and 2, and computed as though the 
employee had at least ten years of covered correctional service. 
    Sec. 23.  Minnesota Statutes 1988, section 352.95, 
subdivision 5, is amended to read: 
    Subd. 5.  [RETIREMENT STATUS AT NORMAL RETIREMENT AGE 65.] 
The disability benefit paid to a disabled correctional employee 
under this section shall terminate at the end of the month in 
which the employee reaches age 62.  If the disabled correctional 
employee is still disabled when the employee reaches age 62, the 
employee shall be deemed to be a retired employee.  If the 
employee had elected an optional annuity under subdivision 1a, 
the employee shall receive an annuity in accordance with the 
terms of the optional annuity previously elected.  If the 
employee had not elected an optional annuity under subdivision 
1a, the employee may then either elect to receive a normal 
retirement annuity computed in the manner provided in section 
352.115 or elect to receive an optional annuity as provided in 
section 352.116, subdivision 3, based on the same length of 
service as used in the calculation of the disability benefit.  
Election of an optional annuity must be made before reaching age 
62.  The reduction for retirement before normal retirement age 
65 as provided in section 352.116, subdivision 1 or 1a, does not 
apply.  The savings clause provision of section 352.93, 
subdivision 3, applies.  If an optional annuity is elected, the 
optional annuity shall begin to accrue on the first of the month 
following the month in which the employee reaches age 62.  
    Sec. 24.  Minnesota Statutes 1988, section 352B.01, 
subdivision 11, is amended to read: 
    Subd. 11.  [AVERAGE SALARY.] "Average monthly salary" means 
the average of the highest monthly salaries for five years of 
service as a member.  Average monthly salary must be based upon 
all allowable service if this service is less than five years.  
It does not include any amounts of severance pay or any reduced 
salary paid during the period the person is entitled to workers' 
compensation benefit payments for temporary disability.  
    Sec. 25.  Minnesota Statutes 1988, section 352B.08, 
subdivision 1, is amended to read: 
    Subdivision 1.  [WHO IS ELIGIBLE; WHEN TO APPLY; ACCRUAL.] 
Every member who is credited with five three or more years of 
allowable service is entitled to separate from state service and 
upon becoming 55 years old, is entitled to receive a life 
annuity, upon separation from state service.  Members shall 
apply for an annuity in a form and manner prescribed by the 
executive director.  No application may be made more than 60 
days before the date the member is eligible to retire by reason 
of both age and service requirements.  An annuity begins to 
accrue no earlier than 90 days before the date the application 
is filed with the executive director.  
    Sec. 26.  Minnesota Statutes 1988, section 352B.11, 
subdivision 1, is amended to read: 
    Subdivision 1.  [REFUND OF PAYMENTS.] A member who has not 
received other benefits under this chapter is entitled to a 
refund of payments made by salary deduction, plus interest, if 
the member is separated, either voluntarily or involuntarily, 
from state service that entitled the member to membership.  In 
the event of the member's death, the member's estate is entitled 
to the refund.  Interest must be computed at the rate of five 
six percent a year, compounded annually.  To receive a refund, 
the member must apply on a form prescribed by the executive 
director. 
    Sec. 27.  Minnesota Statutes 1988, section 352B.11, 
subdivision 2, is amended to read: 
    Subd. 2.  [DEATH; PAYMENT TO SPOUSE AND CHILDREN.] If a 
member serving actively as a member, a member receiving the 
disability benefit provided by section 352B.10, subdivision 1, 
or a former member receiving a disability benefit as provided by 
section 352B.10, subdivision 3 2, dies from any cause, the 
surviving spouse and dependent children are entitled to benefit 
payments as follows: 
    (a) A member with at least five three years of allowable 
service or a former member with at least 20 years of allowable 
service is deemed to have elected a 100 percent joint and 
survivor annuity payable to a surviving spouse only on or after 
the date the member or former member became or would have become 
55. 
    (b) The surviving spouse of a member who had credit for 
less than five three years of service shall receive, for life, a 
monthly annuity equal to 20 percent of that part of the average 
monthly salary of the member from which deductions were made for 
retirement.  If the surviving spouse remarries, the annuity 
shall cease as of the date of the remarriage. 
    (c) The surviving spouse of a member who had credit for at 
least five three years service and who died after attaining 55 
years of age, may elect to receive a 100 percent joint and 
survivor annuity, for life, notwithstanding a subsequent 
remarriage, in lieu of the annuity prescribed in paragraph (b). 
    (d) The surviving spouse of any member who had credit for 
five three years or more and who was not 55 years of age at 
death, shall receive the benefit equal to 20 percent of the 
average monthly salary as described in clause (b) until the 
deceased member would have reached the age of 55 years, and 
beginning the first of the month following that date, may elect 
to receive the 100 percent joint and survivor annuity.  If the 
surviving spouse remarries before the deceased member's 55th 
birthdate, benefits or annuities shall cease as of the date of 
remarriage.  Remarriage after the deceased member's 55th 
birthday shall not affect the payment of the benefit. 
     (e) Each dependent child shall receive a monthly annuity 
equal to ten percent of that part of the average monthly salary 
of the former member from which deductions were made for 
retirement.  A dependent child over 18 and under 22 years of age 
also may receive the monthly benefit provided in this section, 
if the child is continuously attending an accredited school as a 
full-time student during the normal school year as determined by 
the director.  If the child does not continuously attend school 
but separates from full-time attendance during any part of a 
school year, the annuity shall cease at the end of the month of 
separation.  In addition, a payment of $20 per month shall be 
prorated equally to surviving dependent children when the former 
member is survived by one or more dependent children.  Payments 
for the benefit of any qualified dependent child must be made to 
the surviving spouse, or if there is none, to the legal guardian 
of the child.  The maximum monthly benefit must not exceed 40 
percent of the average monthly salary for any number of children.
    (f) If the member dies under circumstances that entitle the 
surviving spouse and dependent children to receive benefits 
under the workers' compensation law, the workers' compensation 
benefits received by them must not be deducted from the benefits 
payable under this section. 
    (g) The surviving spouse of a deceased former member who 
had credit for five three or more years of allowable service, 
but not the spouse of a former member receiving a disability 
benefit under section 352B.10, subdivision 3, is entitled to 
receive the 100 percent joint and survivor annuity at the time 
the deceased member would have reached the age of 55 years, if 
the surviving spouse has not remarried before that date.  If a 
former member dies who does not qualify for other benefits under 
this chapter, the surviving spouse or, if none, the children or 
heirs are entitled to a refund of the accumulated deductions 
left in the fund plus interest at the rate of five six percent 
per year compounded annually.  
    Sec. 28.  Minnesota Statutes 1988, section 352B.30, 
subdivision 1, is amended to read: 
    Subdivision 1.  [ENTITLEMENT TO ANNUITY.] Any person who 
has been an employee covered by the Minnesota state retirement 
system, or a member of the public employees retirement 
association including the public employees retirement 
association police and firefighters' fund, or the teachers 
retirement association, or the state patrol retirement fund, or 
any other public employee retirement system in Minnesota having 
a like provision but excluding all other funds providing 
benefits for police or firefighters is entitled when qualified 
to an annuity from each fund if total allowable service in all 
funds or in any two of these funds totals five three or more 
years.  No part of the allowable service upon which the 
retirement annuity from one fund is based may again be used in 
the computation for benefits from another fund.  The member must 
not have taken a refund from any one of these funds since 
service entitling the member to coverage under the system or 
membership in any of the associations last terminated.  The 
annuity from each fund must be determined by the appropriate law 
except that the requirement that a person must have at 
least five three years allowable service in the respective 
system or association does not apply for the purposes of this 
section if the combined service in two or more of these funds 
equals five three or more years. 
    Sec. 29.  Minnesota Statutes 1988, section 353.01, is 
amended by adding a subdivision to read: 
    Subd. 37.  [NORMAL RETIREMENT AGE.] "Normal retirement age" 
means age 65 for a person who first became a public employee 
before July 1, 1989.  For a person who first becomes a public 
employee after June 30, 1989, "normal retirement age" means the 
higher of age 65 or "retirement age," as defined in United 
States Code, title 42, section 416(l), as amended. 
    Sec. 30.  Minnesota Statutes 1988, section 353.27, 
subdivision 2, is amended to read: 
    Subd. 2.  [EMPLOYEE CONTRIBUTION.] The employee 
contribution shall be an amount (a) for a "basic member" equal 
to eight 8.23 percent of total salary; and (b) for a 
"coordinated member" equal to four 4.23 percent of total 
salary.  These contributions shall be made by deduction from 
salary in the manner provided in subdivision 4.  Where any 
portion of a member's salary is paid from other than public 
funds, such member's employee contribution shall be based on the 
total salary received from all sources. 
    Sec. 31.  Minnesota Statutes 1988, section 353.29, 
subdivision 1, is amended to read: 
    Subdivision 1.  [AGE AND ALLOWABLE SERVICE REQUIREMENTS.] 
Upon separation from public service any person who has 
attained the normal retirement age of at least 65 years and who 
received credit for not less than five three years of allowable 
service is entitled upon application to a retirement annuity.  
Such retirement annuity is known as the "normal" retirement 
annuity. 
    Sec. 32.  Minnesota Statutes 1988, section 353.29, 
subdivision 2, is amended to read: 
    Subd. 2.  [AVERAGE SALARY.] In calculating the annuity 
under subdivision 3, "average salary" means an amount equivalent 
to the average of a member's highest salary upon which employee 
contributions were paid for any five successive years of 
allowable service, based on dates of salary periods as listed on 
salary deduction reports.  Average salary must be based upon all 
allowable service if this service is less than five years.  The 
five successive years average salary may not include any reduced 
salary paid during a period in which the employee is entitled to 
benefit payments from workers' compensation for temporary 
disability, unless the average salary is higher, including this 
period.  
    Sec. 33.  Minnesota Statutes 1988, section 353.29, 
subdivision 3, is amended to read: 
    Subd. 3.  [RETIREMENT ANNUITY FORMULA.] (a) This paragraph, 
in conjunction with section 353.30, subdivisions 1, 1a, 1b, and 
1c, applies to any member who first became a public employee 
before July 1, 1989, unless paragraph (b), in conjunction with 
section 353.30, subdivision 5, produces a higher annuity amount, 
in which case paragraph (b) will apply.  The average salary as 
defined in subdivision 2, multiplied by two percent for each 
year of allowable service for the first ten years and thereafter 
by 2.5 percent per year of allowable service and completed 
months less than a full year for the "basic member", and one 
percent for each year of allowable service for the first ten 
years and thereafter by 1.5 percent per year of allowable 
service and completed months less than a full year for the 
"coordinated member," shall determine the amount of the "normal" 
retirement annuity. 
    (b) This paragraph applies to a member who first became a 
public employee after June 30, 1989, and to any other member 
whose annuity amount, when calculated under this paragraph and 
in conjunction with section 353.30, subdivision 5, is higher 
than it is when calculated under paragraph (a), in conjunction 
with section 353.30, subdivisions 1, 1a, 1b, and 1c.  The 
average salary, as defined in subdivision 2, multiplied by 2.5 
percent for each year of allowable service and completed months 
less than a full year for a basic member and 1.5 percent per 
year of allowable service and completed months less than a full 
year for a coordinated member, shall determine the amount of the 
normal retirement annuity. 
    Sec. 34.  Minnesota Statutes 1988, section 353.30, is 
amended to read: 
    353.30 [ANNUITIES UPON RETIREMENT.] 
    Subdivision 1.  Upon separation from public service any 
person who first became a public employee before July 1, 1989, 
and who has attained the age of at least 58 years but not more 
than 65 years normal retirement age and who received credit for 
not less than 20 years of allowable service is entitled upon 
application to a retirement annuity in an amount equal to the 
normal annuity provided in section 353.29, subdivisions 2 and 3, 
paragraph (a), reduced by one-quarter of one percent for each 
month that the member is under normal retirement age 65 at the 
time of retirement. 
    Subd. 1a.  Any person who first became a public employee 
before July 1, 1989, and 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 section 353.29, subdivisions 2 and 3, paragraph (a), 
without any reduction in annuity by reason of such early 
retirement. 
    Subd. 1b.  Any person who first became a public employee 
before July 1, 1989, with 30 years or more of allowable service 
credit, who elects early retirement under subdivision 1, shall 
receive an annuity in an amount equal to the normal annuity 
provided under section 353.29, subdivisions 2 and 3, paragraph 
(a), reduced by one-quarter of one percent for each month that 
the member is under age 62 at the time of retirement.  
    Subd. 1c.  Any person who first became a public employee 
before July 1, 1989, and who has received credit for at least 30 
years of allowable service or any person who has attained the 
age of at least 55 years but not more than 65 years normal 
retirement age, and who has received credit for at least five 
three years of allowable service is entitled upon application to 
a retirement annuity in an amount equal to the normal annuity 
provided in section 353.29, subdivisions 2 and 3, paragraph (a), 
reduced by one-quarter of one percent for each month that the 
member is under normal retirement age 65 at the time of 
retirement, except that for any member who has 30 or more years 
of allowable service the reduction shall be applied only for 
each month that the member is under age 62 at the time of 
retirement. 
    Subd. 3.  [OPTIONAL RETIREMENT ANNUITY FORMS.] The board of 
trustees shall establish optional annuities which shall take the 
form of a joint and survivor annuity.  Except as provided in 
subdivision 3a, the optional annuity forms shall be actuarially 
equivalent to the forms provided in section 353.29 and 
subdivisions 1, 1a, 1b, and 1c of this section, and 5.  In 
establishing those optional forms, the board shall obtain the 
written recommendation of the commission-retained actuary.  The 
recommendations shall be a part of the permanent records of 
board.  A member or former member may select an optional form of 
annuity in lieu of accepting any other form of annuity which 
might otherwise be available. 
    Subd. 3a.  [BOUNCE-BACK ANNUITY.] (a) If a former member or 
disabilitant selects a joint and survivor annuity option under 
subdivision 3, the former member or disabilitant must receive a 
normal single-life annuity if the designated optional annuity 
beneficiary dies before the former member or disabilitant.  
Under this option, no reduction may be made in the person's 
annuity to provide for restoration of the normal single-life 
annuity in the event of the death of the designated optional 
annuity beneficiary. 
    (b) A former member or disabilitant who selected an 
optional joint and survivor annuity before July 1, 1989, but did 
not choose an option that provides that the normal single-life 
annuity is payable to the former member or the disabilitant if 
the designated optional annuity beneficiary dies first, is 
eligible for restoration of the normal single-life annuity if 
the designated optional annuity beneficiary dies first, without 
further actuarial reduction of the person's annuity.  A former 
member or disabilitant who selected an optional joint and 
survivor annuity, but whose designated optional annuity 
beneficiary died before July 1, 1989, shall receive a normal 
single-life annuity after that date, but shall not receive 
retroactive payments for periods before that date. 
    (c) A former member or disabilitant who took a further 
actuarial reduction to elect an optional joint and survivor 
annuity that provides that the normal annuity is payable to the 
former member or disabilitant if the designated optional 
beneficiary died before July 1, 1989, shall have their annuity 
increased as of July 1, 1989, to the amount the person would 
have received if, at the time of retirement or disability, the 
person had selected only optional survivor coverage that would 
not have provided for restoration of the normal annuity upon the 
death of the designated optional annuity beneficiary.  Any 
annuity or benefit increase under this paragraph is effective 
only for payments made after June 30, 1989, and is not 
retroactive for payments made before July 1, 1989. 
    Subd. 4.  Any monthly payments to which any person may be 
entitled under this chapter may be reduced in amount upon 
application of the person entitled thereto to the association, 
provided that such the person shall first relinquish in writing 
all claim to that part of the full monthly payment which is the 
difference between the monthly payment which that person would 
be otherwise entitled to receive and the monthly payment which 
that person will receive.  The reduced monthly payment shall be 
payment in full of all amounts due under this chapter for the 
month for which the payment is made and acceptance of the 
reduced monthly payment releases the retirement association from 
all obligation to pay to such the person the difference between 
the amount of the reduced monthly payment and the full amount of 
the monthly payment which such the person would otherwise have 
received.  Upon application of the person who is entitled to 
such monthly payment, it may be increased prospectively to not 
more than the amount to which such the person would have been 
entitled had no portion thereof been waived.  
    Subd. 5.  [ACTUARIAL REDUCTION FOR EARLY RETIREMENT.] This 
subdivision applies to a member who first became a public 
employee after June 30, 1989, and to any other member whose 
annuity is higher when calculated under section 353.29, 
subdivision 3, paragraph (b), in conjunction with this 
subdivision than when calculated under section 353.29, 
subdivision 3, paragraph (a), in conjunction with subdivision 1, 
1a, 1b, or 1c.  An employee who retires before normal retirement 
age shall be paid the retirement annuity provided in section 
353.29, subdivision 3, paragraph (b), 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. 
    Sec. 35.  Minnesota Statutes 1988, section 353.32, 
subdivision 1, is amended to read: 
    Subdivision 1.  [BEFORE RETIREMENT.] If a member or former 
member who terminated public service dies before retirement or 
before receiving any retirement annuity and no other payment of 
any kind is or may become payable to any person, a refund shall 
be paid to the designated beneficiary or, if there be none, to 
the surviving spouse, or, if none, to the legal representative 
of the decedent's estate.  Such refund shall be in an amount 
equal to accumulated deductions plus interest thereon at the 
rate of five six percent per annum compounded annually less the 
sum of any disability or survivor benefits, if any, that may 
have been paid by the fund; provided that a survivor who has a 
right to benefits pursuant to section 353.31 may waive such 
benefits in writing, except such benefits for a dependent child 
under the age of 18 years may only be waived pursuant to an 
order of the district court. 
    Sec. 36.  Minnesota Statutes 1988, section 353.32, 
subdivision 1a, is amended to read: 
    Subd. 1a.  [SURVIVING SPOUSE OPTIONAL ANNUITY.] If a member 
or former member who has attained at least age 50 and has credit 
for not less than five three years of allowable service or who 
has credit for not less than 30 years of allowable service, 
regardless of age attained, dies before the annuity or 
disability benefit begins to accrue in accordance with section 
353.29, subdivision 7, or 353.33, subdivision 2, notwithstanding 
any designation of beneficiary to the contrary, the surviving 
spouse may elect to receive, instead of a refund with interest 
provided in subdivision 1, or survivor benefits otherwise 
payable under section 353.31, an annuity equal to the 100 
percent joint and survivor annuity that the member could have 
qualified for had the member terminated service on the date of 
death.  The surviving spouse may apply for the annuity at any 
time after the date on which the deceased employee would have 
attained the required age for retirement based on the employee's 
allowable service.  The annuity must be computed as provided in 
sections 353.29, subdivisions 2 and 3; and 353.30, subdivisions 
1, 1a, 1b, and 1c, and 5.  Sections 353.34, subdivision 3, and 
353.71, subdivision 2, apply to a deferred annuity payable under 
this subdivision.  No payment may accrue beyond the end of the 
month in which entitlement to the annuity has terminated.  An 
amount equal to any excess of the accumulated contributions that 
were credited to the account of the deceased employee over and 
above the total of the annuities paid and payable to the 
surviving spouse must be paid to the deceased member's last 
designated beneficiary or, if none, to the legal representative 
of the estate of the deceased member.  A member may specify in 
writing that this subdivision does not apply and that payment 
may be made only to the designated beneficiary as otherwise 
provided by this chapter. 
    Sec. 37.  Minnesota Statutes 1988, section 353.33, 
subdivision 1, is amended to read: 
    Subdivision 1.  [AGE, SERVICE AND SALARY REQUIREMENTS.] Any 
member who becomes totally and permanently disabled before 
normal retirement age 65 and after five three years of allowable 
service shall be entitled to a disability benefit in an amount 
provided in subdivision 3.  If such disabled person's public 
service has terminated at any time, at least three two of the 
required five three years of allowable service must have been 
rendered after last becoming a member.  Any member whose average 
salary is less than $75 per month shall not be entitled to a 
disability benefit.  No repayment of a refund otherwise 
authorized pursuant to section 353.34 and no purchase of prior 
service or payment made in lieu of salary deductions otherwise 
authorized pursuant to section 353.01, subdivision 16, 353.017, 
subdivision 4, or 353.36, subdivision 2, may be made after the 
occurrence of the disability for which an application pursuant 
to this section is filed.  
    Sec. 38.  Minnesota Statutes 1988, section 353.33, 
subdivision 3, is amended to read: 
    Subd. 3.  [COMPUTATION OF BENEFITS.] This disability 
benefit is an amount equal to the normal annuity payable to a 
member who has reached 65 normal retirement age with the same 
number of years of allowable service and the same average 
salary, as provided in section 353.29, subdivisions 2 and 3.  A 
"basic member" shall receive in addition a supplementary monthly 
benefit computed in accordance with the following table: 
 
               Age when           Supplementary        
               Disabled              benefit           
            Under 56                   $50             
                  56                    45             
                  57                    40             
                  58                    35             
                  59                    30             
                  60                    25             
                  61                    20             
                  62                    15             
                  63                    10             
                  64                     5             
    If the disability benefits provided in this subdivision 
exceed the average salary as defined in section 353.29, 
subdivision 2, the disability benefits shall be reduced to an 
amount equal to said average salary. 
    Sec. 39.  Minnesota Statutes 1988, section 353.33, 
subdivision 11, is amended to read: 
    Subd. 11.  [RETIREMENT STATUS AT NORMAL RETIREMENT AGE 65.] 
No person shall be entitled to receive disability benefits and a 
retirement annuity at the same time.  The disability benefits 
paid to a person hereunder shall terminate when the person 
reaches normal retirement age 65.  If the person is still 
totally and permanently disabled when the person attains 
the normal retirement age of 65 years, the person shall be 
deemed to be on retirement status and, if the person had elected 
an optional annuity pursuant to subdivision 3a, shall receive an 
annuity in accordance with the terms of the optional annuity 
previously elected, or, if the person had not elected an 
optional annuity pursuant to subdivision 3a, may at the option 
of the person either elect to receive either a normal retirement 
annuity as provided in section 353.29 or normal retirement 
annuity equal to the disability benefit paid before the person 
reached normal retirement age 65, whichever amount is greater, 
or elect to receive an optional annuity as provided in section 
353.30, subdivision 3.  Any disabled person who becomes age 65 
attains normal retirement age shall have the annuity computed in 
accordance with the law in effect upon attainment of that age 
65.  Election of an optional annuity shall be made prior to the 
person attaining the normal retirement age of 65 years.  If an 
optional annuity is elected, the election shall be effective on 
the date on which the person attains the age of 65 years normal 
retirement age and the optional annuity shall begin to accrue on 
the first day of the month next following the month in which the 
person attains the that age of 65 years.  
    Sec. 40.  Minnesota Statutes 1988, section 353.34, 
subdivision 2, is amended to read: 
    Subd. 2.  [REFUND WITH INTEREST.] Except as provided in 
subdivision 1, any person who ceases to be a public employee 
shall receive a refund in an amount equal to accumulated 
deductions with interest to the first day of the month in which 
the refund is processed at the rate of five six percent per 
annum compounded annually based on fiscal year balances. 
    Sec. 41.  Minnesota Statutes 1988, section 353.34, 
subdivision 3, is amended to read: 
    Subd. 3.  [DEFERRED ANNUITY; ELIGIBILITY; COMPUTATION.] A 
member with at least five three years of allowable service when 
termination of public service occurs has the option of leaving 
the accumulated deductions in the fund and being entitled to a 
deferred retirement annuity commencing at normal retirement age 
65 or to a deferred early retirement annuity under section 
353.30, subdivision 1, 1a, 1b, or 1c, or 5.  The deferred 
annuity must be computed under section 353.29, subdivisions 2 
and 3, on the basis of the law in effect on the date of 
termination of public service and must be augmented as provided 
in section 353.71, subdivision 2.  A former member qualified to 
apply for a deferred retirement annuity may revoke this option 
at any time before the commencement of deferred annuity payments 
by making application for a refund.  The person is entitled to a 
refund of accumulated member contributions within 30 days 
following date of receipt of the application by the executive 
director. 
    Sec. 42.  Minnesota Statutes 1988, section 353.34, 
subdivision 3a, is amended to read: 
    Subd. 3a.  [DEFERRED ANNUITY; CERTAIN HOSPITAL EMPLOYEES.] 
Any member employed by a public hospital, as defined in section 
355.71, subdivision 3, who has at least five three years of 
allowable service credit on the date the public hospital is 
taken over by a private corporation or organization, may elect 
to receive a deferred annuity pursuant to subdivision 3 
notwithstanding the length of service requirement contained 
therein.  
    Sec. 43.  Minnesota Statutes 1988, section 353.651, 
subdivision 1, is amended to read: 
    Subdivision 1.  [AGE AND ALLOWABLE SERVICE REQUIREMENTS.] 
Upon separation from public service, any police officer or 
firefighter member who has attained the age of at least 55 years 
and who received credit for not less than five three years of 
allowable service is entitled upon application to a retirement 
annuity.  Such retirement annuity is known as the "normal" 
retirement annuity. 
    Sec. 44.  Minnesota Statutes 1988, section 353.651, 
subdivision 2, is amended to read: 
    Subd. 2.  [AVERAGE SALARY.] In calculating the annuity 
under subdivision 3, "average salary" means an amount equivalent 
to the average of the highest salary earned as a police officer 
or firefighter upon which employee contributions were paid for 
any five successive years of allowable service.  Average salary 
must be based upon all allowable service if this service is less 
than five years. 
    The five successive years average salary may not include 
any reduced salary paid during a period in which the employee is 
entitled to benefit payments from workers' compensation for 
temporary disability unless the average salary is higher, 
including this period. 
    Sec. 45.  Minnesota Statutes 1988, section 353.657, 
subdivision 2a, is amended to read: 
    Subd. 2a.  [DEATH WHILE ELIGIBLE SURVIVOR BENEFIT.] If a 
member or former member who has attained the age of at least 50 
years and has credit for not less than five three years 
allowable service or who has credit for at least 30 years of 
allowable service, regardless of age attained, dies before 
public service has terminated, or if an employee who has filed a 
valid application for an annuity or disability benefit prior to 
termination of public service dies before the annuity or benefit 
has become payable, notwithstanding any designation of 
beneficiary to the contrary, the surviving spouse may elect to 
receive a death while eligible survivor benefit.  The benefit 
shall be in lieu of a refund with interest provided in section 
353.32, subdivision 1, or survivor benefits otherwise payable 
pursuant to subdivisions 1 and 2.  The benefit must be an 
annuity equal to the 100 percent joint and survivor annuity 
which the member could have qualified for on the date of death, 
computed as provided in sections 353.651, subdivisions 2 and 3, 
and 353.30, subdivision 3.  The surviving spouse may apply for 
the annuity at any time after the date on which the deceased 
employee would have attained the required age for retirement 
based on the employee's allowable service.  Sections 353.34, 
subdivision 3, and 353.71, subdivision 2, apply to a deferred 
annuity payable under this subdivision.  No payment shall accrue 
beyond the end of the month in which entitlement to such annuity 
has terminated.  An amount equal to the excess, if any, of the 
accumulated contributions which were credited to the account of 
the deceased employee over and above the total of the annuities 
paid and payable to the surviving spouse shall be paid to the 
deceased member's last designated beneficiary or, if none, to 
the legal representative of the estate of such deceased member.  
Any member may request in writing that this subdivision not 
apply and that payment be made only to the designated 
beneficiary, as otherwise provided by this chapter.  For a 
member who is employed as a full-time firefighter by the 
department of military affairs of the state of Minnesota, 
allowable service as a full-time state military affairs 
department firefighter credited by the Minnesota state 
retirement system may be used in meeting the minimum allowable 
service requirement of this subdivision. 
    Sec. 46.  Minnesota Statutes 1988, section 353.71, 
subdivision 1, is amended to read: 
    Subdivision 1.  [ELIGIBILITY.] Any person who has been a 
member of the public employees retirement association, or 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, shall be 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 five 
three or more years, 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 shall be determined by the appropriate provisions of the 
law except that the requirement that a person must have at least 
five three years of allowable service in the respective 
association or system shall not apply for the purposes of this 
section provided the combined service in two or more of these 
funds equals five three or more years. 
    Sec. 47.  Minnesota Statutes 1988, section 353.71, 
subdivision 2, is amended to read: 
    Subd. 2.  [DEFERRED ANNUITY COMPUTATION; AUGMENTATION.] The 
deferred annuity, if any, accruing under subdivision 1, or 
sections 353.34, subdivision 3, and 353.68, subdivision 4, shall 
be computed in the manner provided in said sections, on the 
basis of allowable service prior to termination of public 
service and augmented as provided herein.  The required reserves 
applicable to a deferred annuity, or to an annuity for which a 
former member was eligible but had not applied, or to any 
deferred segment of an annuity shall be determined as of the 
date the annuity begins to accrue and shall be augmented from 
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, to the first day of the month in which the 
annuity begins to accrue, at the rate of five percent per annum 
compounded annually until January 1, 1981, and thereafter at the 
rate of three percent thereafter until January 1 of the year 
following the year in which the former member attains age 55.  
From that date to the effective date of retirement, the rate is 
five percent per annum compounded annually.  If a person has 
more than one period of uninterrupted service, the required 
reserves related to each period shall be augmented by interest 
pursuant to this subdivision.  The sum of the augmented required 
reserves so determined shall be the present value of the 
annuity.  Uninterrupted service for the purpose of this 
subdivision shall mean 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 
service restored thereby shall be considered as continuous with 
the next period of service for which the employee has credit 
with this association. The formula percentages used for each 
period of uninterrupted service shall be those as would be 
applicable to a new employee.  This section shall not reduce the 
annuity otherwise payable under this chapter.  This subdivision 
shall apply to deferred annuitants of record on July 1, 1971 and 
to employees who thereafter become deferred annuitants; it shall 
also apply from July 1, 1971 to former members who make 
application for an annuity after July 1, 1973. 
    Sec. 48.  Minnesota Statutes 1988, section 353.71, 
subdivision 5, is amended to read: 
    Subd. 5.  [EARLY RETIREMENT.] The requirements and 
provisions for retirement prior to normal retirement age 65 
contained in section 353.30, shall also apply to a person 
fulfilling such requirements with a combination of service as 
provided in subdivision 1. 
    Sec. 49.  Minnesota Statutes 1988, section 353C.06, 
subdivision 1, is amended to read: 
    Subdivision 1.  [ELIGIBILITY REQUIREMENTS.] After 
separation from public employment, an employee covered under 
section 353C.02 who has attained the age of at least 55 years 
and has credit for not less than five three years of coverage in 
the local government correctional service plan is entitled, upon 
application, to a normal retirement annuity.  Instead of a 
normal retirement annuity, a retiring employee may elect to 
receive the optional annuity provided in section 353.30, 
subdivision 3. 
    Sec. 50.  Minnesota Statutes 1988, section 353C.06, 
subdivision 2, is amended to read: 
    Subd. 2.  [AVERAGE SALARY BASE.] In calculating the annuity 
under subdivision 3, "average salary" means an amount equivalent 
to the average of the highest salary earned as a local 
government correctional employee upon which employee 
contributions were paid for any five successive years of 
allowable service.  Average salary must be based on all 
allowable service if this service is less than five years. 
    Sec. 51.  Minnesota Statutes 1988, section 353C.06, 
subdivision 4, is amended to read: 
    Subd. 4.  [ACCRUAL AND DURATION.] The annuity under this 
section begins to accrue as provided in section 353.29, 
subdivision 7.  The annuity is payable for the life of the 
recipient, or in accordance with the terms of any optional 
annuity form selected, and is payable for 84 full calendar 
months or to the first of the month following the month in which 
the employee becomes attains the normal retirement age 65, 
whichever occurs first.  After a recipient has received the 
annuity calculated under this formula for 84 full calendar 
months or to the first of the month following the month in which 
the employee becomes attains the normal retirement age 65, 
whichever occurs first, the benefit must be recomputed in 
accordance with the coordinated formula in sections 353.29 and 
353.30, except that if this amount, when added to the social 
security benefit based on public service the employee is 
eligible to receive at that time, is less than the benefit 
payable under subdivision 3, the retired employee is entitled to 
receive an amount payable under subdivision 3, less any amount 
payable from social security based on public service used in the 
benefit calculation.  When an annuity is reduced under this 
subdivision, any percentage of adjustments that have been 
applied to the original annuity under section 11A.18, before the 
reduction, must be compounded and applied to the reduced annuity.
    Sec. 52.  Minnesota Statutes 1988, section 353C.08, 
subdivision 5, is amended to read: 
    Subd. 5.  [DISABILITY BENEFIT TERMINATION.] The disability 
benefit paid to a disabled local government correctional 
employee terminates at the end of the month in which the 
employee reaches age 62.  If the disabled local government 
correctional employee is still disabled when the employee 
reaches age 62, the employee is deemed to be a retired employee 
and, if the employee had elected an optional annuity under 
subdivision 3, must receive an annuity in accordance with the 
terms of the optional annuity previously elected.  If the 
employee had not elected an optional annuity under subdivision 
3, the employee may elect either to receive a normal retirement 
annuity computed on the coordinated formula in the manner 
provided in section 353.29 or to receive an optional annuity as 
provided in section 353.30, subdivision 3, based on the same 
length of service as used in the calculation of the disability 
benefit.  Election of an optional annuity must be made before 
attaining the age of 62 years.  The reduction for retirement 
prior to normal retirement age 65 as provided in section 353.30, 
subdivisions 1 and, 1c, and 5, is not applicable.  The savings 
clause provision of section 353C.06, subdivision 4, is 
applicable. 
    Sec. 53.  Minnesota Statutes 1988, section 354.05, is 
amended by adding a subdivision to read: 
    Subd. 38.  [NORMAL RETIREMENT AGE.] "Normal retirement age" 
means age 65 for a person who first became a member of the fund 
before July 1, 1989.  For a person who first becomes a member of 
the fund after June 30, 1989, normal retirement age means the 
higher of age 65 or "retirement age," as defined in United 
States Code, title 42, section 416(l), as amended. 
    Sec. 54.  Minnesota Statutes 1988, section 354.35, is 
amended to read: 
    354.35 [RETIREMENT BEFORE BECOMING ELIGIBLE FOR SOCIAL 
SECURITY.] 
    Any coordinated member who retires before becoming eligible 
for social security retirement benefits, may elect to receive an 
optional retirement annuity from the association which provides 
for different annuity amounts over different periods of 
retirement.  The election of this optional retirement annuity 
shall be exercised by making an application to the board on a 
form provided by the board.  The optional annuity shall take the 
form of an annuity payable for the period before the member 
attains the normal retirement age of 65 years in a greater 
amount than the amount of the annuity calculated under section 
354.44 on the basis of the age of the member at retirement but 
equal insofar as possible to the social security old age 
retirement benefit and the adjusted retirement annuity amount 
payable immediately after the annuitant becomes eligible for 
social security old age retirement benefits in an amount less 
than the amount of the annuity calculated under section 354.44 
on the basis of the age of the member at retirement.  The social 
security leveling option may be calculated based on broad 
average social security old age retirement benefits.  The 
optional annuity shall be the actuarial equivalent of the 
member's annuity computed on the basis of the member's age at 
retirement.  The greater amount shall be paid until the member 
reaches the normal retirement age of 65 at which time the 
payment from the association shall be reduced.  The method of 
computing the optional retirement annuity provided in this 
section shall be established by the board of trustees.  In 
establishing the method of computing the optional retirement 
annuity, the board of trustees shall obtain the written 
recommendation of the commission-retained actuary.  The 
recommendations shall be a part of the permanent records of the 
board of trustees.  
    Sec. 55.  Minnesota Statutes 1988, section 354.41, 
subdivision 3, is amended to read: 
    Subd. 3.  (1) Each annuitant, age 60 or over, who is 
drawing an annuity pursuant to Minnesota Statutes 1953, section 
135.10 and Minnesota Statutes 1965, sections 354.44 and 354.33 
shall have the right to have membership in the fund restored 
upon resumption of teaching service, for the purpose of having 
deductions made in accordance with sections 354.42 and 355.48.  
Upon completion of five three years of allowable service, under 
this subdivision the member shall be entitled to a coordinated 
annuity provided in section 354.44, subdivision 6.  This annuity 
is in addition to any annuity previously granted under this 
chapter. 
    (2) Any annuitant qualifying for membership in the fund 
under clause (1) may file a written notice with the executive 
director of the teachers retirement association requesting that 
deductions provided for in section 354.42 be made from 
compensation paid for subsequent teaching services.  Such notice 
shall remain in effect until the annuitant requests in writing 
that this membership be revoked.  After July 1, 1967, deductions 
pursuant to section 355.48 are required for any annuitant 
eligible for membership in the fund under clause (1).  Teaching 
service rendered by an annuitant for which no deductions were 
made pursuant to section 354.42, shall not be included in any 
additional annuity granted pursuant to clause (1) of this 
subdivision. 
    (3) Teachers retirement deductions made prior to July 1, 
1973 from the salary of any annuitant who was qualified for 
membership in the fund under clause (1) of this subdivision at 
the time such deductions were made, shall be applicable to the 
computation of an annuity as provided under clause (1) of this 
subdivision even if the written notice required in clause (2) of 
this subdivision has not been filed.  The teaching service 
related to such retirement deductions shall be deemed to be 
allowable service credit which is applicable to the completion 
of the five three years of allowable service required in clause 
(2) of this subdivision. 
    Sec. 56.  Minnesota Statutes 1988, section 354.44, 
subdivision 1, is amended to read: 
    Subdivision 1.  [REQUIREMENTS AS TO AGE AND SERVICE.] Any 
member or former member who ceases or has ceased to render 
teaching services in any school or institution covered by the 
provisions of this chapter, and who has attained the age of at 
least 55 years with not less than five three years allowable 
service, or who has received credit for not less than 30 years 
allowable service regardless of age, is entitled upon written 
application to a retirement annuity. 
    Sec. 57.  Minnesota Statutes 1988, section 354.44, 
subdivision 1a, is amended to read: 
    Subd. 1a.  [MANDATORY RETIREMENT.] Notwithstanding the 
provisions of sections 43A.11 or 197.455 to 197.48, a member who 
is serving as a faculty member or administrator under a contract 
of unlimited tenure or similar arrangement providing for 
unlimited tenure at an institution of higher education, as 
defined in section 1201(a) of the federal Higher Education Act 
of 1965, as amended through January 1, 1987, shall terminate 
employment at the end of the academic year in which the member 
reaches the age of 70.  For purposes of this subdivision, an 
academic year shall be deemed to end August 31.  No other member 
shall be subject to a mandatory retirement age provision.  A 
member who terminates employment at any time during the academic 
year at the end of which the person is at the normal retirement 
age 65 or older shall, for the purpose of determining 
eligibility for a proportionate retirement annuity, be 
considered to have been required to terminate employment 
at normal retirement age 65 or older pursuant to section 
356.32.  Nothing contained in this subdivision shall preclude an 
employing unit covered by this chapter from employing a retired 
teacher as a substitute or part time teacher.  Any person who 
has attained the normal retirement age of at least 65 years, who 
is employed as a substitute or part-time teacher and who earns 
an amount equal to the annual maximum earnings allowable for 
that age for the continued receipt of full benefit amounts 
monthly under the federal old age, survivors and disability 
insurance program as set by the secretary of health and human 
services pursuant to the provisions of United States Code, title 
42, section 403, in any academic year from employment as a 
substitute or part-time teacher, shall terminate employment for 
the remainder of that academic year.  No person who has attained 
the normal retirement age of at least 65 years and who has 
retired under this chapter may resume membership in the 
retirement association as a result of subsequent employment as a 
substitute or part-time teacher.  
    Sec. 58.  Minnesota Statutes 1988, section 354.44, 
subdivision 6, is amended to read: 
    Subd. 6.  [COMPUTATION OF FORMULA PROGRAM RETIREMENT 
ANNUITY.] (1) The formula retirement annuity hereunder shall be 
computed in accordance with the applicable provisions of the 
formula formulas stated in clause (2) hereof or (4) on the basis 
of each member's average salary for the period of the member's 
formula service credit.  For the purposes of computing the 
formula benefits under the formula and variable program, if a 
combination of these formulas is used, the formula percentages 
used will be those percentages in each formula as continued for 
the respective years of service from one formula to the next. 
    For all years of formula service credit "average salary" 
for the purpose of determining the member's retirement annuity 
means the average salary upon which contributions were made and 
upon which payments were made to increase the salary limitation 
provided in Minnesota Statutes 1971, section 354.511 for the 
highest five successive years of formula service credit provided 
however that such "average salary" shall not include any more 
than the equivalent of 60 monthly salary payments.  Average 
salary must be based upon all years of formula service credit if 
this service credit is less than five years. 
    (2) This clause, in conjunction with clause (3), applies to 
a person who first became a member of the fund before July 1, 
1989, unless clause (4), in conjunction with clause (5), 
produces a higher annuity amount, in which case clause (4) 
applies.  The average salary as defined in clause (1), 
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: 
                         Coordinated Member   Basic Member
 Each year of service      1.0 percent        2.0 percent
  during first ten         per year           per year
 Each year of service      1.5 percent        2.5 percent
  thereafter               per year           per year
    (3) (i) This clause applies only to a person who first 
became a member of the fund before July 1, 1989, and whose 
annuity is higher when calculated under clause (2), in 
conjunction with this clause than when calculated under clause 
(4), in conjunction with clause (5). 
    (ii) Where any member retires prior to normal retirement 
age 65 under a formula annuity, the member shall be paid a 
retirement annuity in an amount equal to the normal annuity 
provided in this subdivision clause (2) and subdivision 7, 
paragraph (a), reduced by one-half one-quarter of one percent 
for each month that the member is under normal retirement age 65 
to and including age 60 and reduced by one-fourth of one percent 
for each month under age 60 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 which that the member is under age 62. 
    (iii) 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 clause (2), without any reduction by reason of early 
retirement. 
    (4) This clause applies to a member who first became a 
member of the fund after June 30, 1989, and to any other member 
whose annuity amount when calculated under this clause and in 
conjunction with clause (5), is higher than it is when 
calculated under clause (2), in conjunction with clause (3).  
The average salary, as defined in clause (1) multiplied by 2.5 
percent for each year of service for a basic member and by 1.5 
percent for each year of service for a coordinated member shall 
determine the amount of the retirement annuity to which the 
member is entitled. 
    (5) This clause applies to a person who first becomes a 
member of the fund after June 30, 1989, and to any other member 
whose annuity is higher when calculated under clause (4) in 
conjunction with this clause than when calculated under clause 
(2), in conjunction with clause (3).  An employee who retires 
under the formula annuity before the normal retirement age shall 
be paid the normal annuity provided in clause (4) and 
subdivision 7, paragraph (b), 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. 
    Sec. 59.  Minnesota Statutes 1988, section 354.44, 
subdivision 7, is amended to read: 
    Subd. 7.  [COMPUTATION OF FORMULA AND VARIABLE PROGRAM 
RETIREMENT ANNUITY.] (a) This paragraph applies to a person who 
first became a member of the fund before July 1, 1989, unless 
paragraph (b) produces a higher annuity amount, in which case 
paragraph (b) applies.  The benefits provided in 
this subdivision paragraph are the sum of the benefits provided 
by the following: 
    (1) The benefits provided in subdivision 6, clause (2) for 
formula service credit prior to the effective date of the 
original election of this subdivision and subsequent to June 30, 
1978 unless the member elects continued participation in the 
variable program pursuant to Minnesota Statutes 1984, section 
354.621, and 
    (2) The benefits for service credit subsequent to the 
effective date of the formula and variable program but prior to 
July 1, 1978 and the benefits for service credit subsequent to 
June 30, 1978 if the member elects continued participation in 
the variable program pursuant to Minnesota Statutes 1984, 
section 354.621, shall be the average salary as defined in 
subdivision 6, clause (1) of any member multiplied by the 
following percentages per year of formula service credit, 
                       Coordinated Member   Basic Member
 Each year of service    .5 percent         1.0 percent
  during first ten       per year           per year
 Each year of service    .75 percent        1.25 percent
  thereafter             per year           per year, and
    (3) The benefits provided in section 354.62, subdivision 5. 
    (b) This paragraph applies to a person who first became a 
member of the fund before July 1, 1989, but whose annuity 
amount, when calculated under this paragraph, is higher than it 
is when calculated under paragraph (a).  The benefits provided 
in this paragraph are the sum of the benefits provided by the 
following:  
    (1) the benefits provided in subdivision 6, clause (4), for 
formula service credit before the effective date of the original 
election of this subdivision and subsequent to June 30, 1978, 
unless the member elects continued participation in the variable 
program pursuant to Minnesota Statutes 1984, section 354.621; 
    (2) the benefits for service credit subsequent to the 
effective date of the formula and variable program but before 
July 1, 1978, and the benefits for service credit subsequent to 
June 30, 1978, if the member elects continued participation in 
the variable program pursuant to Minnesota Statutes 1984, 
section 354.621, shall be the average salary as defined in 
subdivision 6, clause (1), of any member multiplied by 1.25 
percent for each year of service for a basic member and by 0.75 
percent for each year of service for a coordinated member; and 
    (3) the benefits provided in section 354.62, subdivision 5. 
    Sec. 60.  Minnesota Statutes 1988, section 354.45, 
subdivision 1, is amended to read: 
    Subdivision 1.  [OPTIONAL ANNUITY FORMS.] The retirement 
board shall establish optional annuities at retirement which 
shall take the form of an annuity payable for a period certain 
and for life thereafter or the form of a joint and survivor 
annuity.  The board shall also establish an optional annuity 
which shall take the form of a guaranteed refund annuity paying 
the annuitant a fixed amount for life with the guarantee that in 
the event of death the balance of the accumulated deductions and 
interest accrued to the date of retirement will be paid to the 
designated beneficiary.  Except as provided in subdivision 1a, 
any optional annuity forms shall be actuarially equivalent to 
the normal forms provided in section 354.44.  In establishing 
these optional annuity forms, the board shall obtain the written 
recommendation of the commission-retained actuary.  The 
recommendations shall be a part of the permanent records of the 
board.  
    Sec. 61.  Minnesota Statutes 1988, section 354.45, is 
amended by adding a subdivision to read: 
    Subd. 1a.  [BOUNCE-BACK ANNUITY.] (a) If a former member or 
disabilitant selects a joint and survivor annuity option under 
subdivision 1, the former member or disabilitant must receive a 
normal single-life annuity if the designated optional annuity 
beneficiary dies before the former member or disabilitant.  
Under this option, no reduction may be made in the person's 
annuity to provide for restoration of the normal single-life 
annuity in the event of the death of the designated optional 
annuity beneficiary. 
    (b) A former member or disabilitant who selected an 
optional joint and survivor annuity before July 1, 1989, but did 
not choose an option that provides that the normal single-life 
annuity is payable to the former member or the disabilitant if 
the designated optional annuity beneficiary dies first, is 
eligible for restoration of the normal single-life annuity if 
the designated optional annuity beneficiary dies first, without 
further actuarial reduction of the person's annuity.  A former 
member or disabilitant who selected an optional joint and 
survivor annuity, but whose designated optional annuity 
beneficiary died before July 1, 1989, shall receive a normal 
single-life annuity after that date, but shall not receive 
retroactive payments for periods before that date. 
    Sec. 62.  Minnesota Statutes 1988, section 354.46, 
subdivision 2, is amended to read: 
    Subd. 2.  [DEATH WHILE ELIGIBLE DESIGNATED BENEFICIARY 
BENEFIT.] The surviving spouse of any member or former member 
who has attained the age of at least 50 years and has credit for 
at least five three years of allowable service or who has credit 
for at least 30 years of allowable service irrespective of age 
shall be entitled to joint and survivor annuity coverage in the 
event of death of the member prior to retirement.  If the 
surviving spouse does not elect to receive a surviving spouse 
benefit provided pursuant to subdivision 1, if applicable, or 
does not elect to receive a refund of accumulated member 
contributions provided pursuant to section 354.47, subdivision 
1, or 354.62, subdivision 5, clause (3), whichever is 
applicable, the surviving spouse shall be entitled to receive, 
upon written application on a form prescribed by the executive 
director, a benefit equal to the second portion of a 100 percent 
joint and survivor annuity as provided pursuant to section 
354.45 and computed pursuant to section 354.44, subdivision 2, 6 
or 7, whichever is applicable.  The surviving spouse may apply 
for the annuity at any time after the date on which the deceased 
employee would have attained the required age for retirement 
based on the employee's allowable service.  Sections 354.44, 
subdivisions 6 and 7, and 354.60 apply to a deferred annuity 
payable under this section.  If the member was a participant in 
the variable annuity division, the applicable portion of the 
benefit shall be computed pursuant to section 354.62, 
subdivision 5, clause (1).  The benefit shall be payable for 
life. 
    Sec. 63.  Minnesota Statutes 1988, section 354.47, 
subdivision 1, is amended to read: 
    Subdivision 1.  [DEATH BEFORE RETIREMENT.] (1) If a member 
dies before retirement and is covered pursuant to the provisions 
of section 354.44, subdivision 2, and neither an optional 
annuity, nor a reversionary annuity, nor a benefit pursuant to 
section 354.46, subdivision 1 is payable to the survivors if the 
member was a basic member, the surviving spouse, or if there is 
no surviving spouse, the designated beneficiary shall be 
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. 
    (2) If a member dies before retirement and is covered 
pursuant to the provisions of section 354.44, subdivisions 6 and 
7, 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, the 
surviving spouse, or if there is no surviving spouse, the 
designated beneficiary shall be 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 the member's accumulated deductions plus interest at 
the rate of five six percent per annum compounded annually. 
    (3) The amounts payable in clause (1) or (2) are in 
addition to the amount payable in section 354.62, subdivision 5, 
for the member's variable annuity account.  
    Sec. 64.  Minnesota Statutes 1988, section 354.48, 
subdivision 1, is amended to read: 
    Subdivision 1.  [AGE, SERVICE AND SALARY REQUIREMENTS.] Any 
member who became totally and permanently disabled after at 
least five three years of allowable service shall be entitled to 
a disability benefit in an amount provided in subdivision 3.  If 
such disabled person's teaching service has terminated at any 
time, at least three two of the required five three years of 
allowable service must have been rendered after last becoming a 
member.  Any member whose average salary is less than $75 per 
month shall not be entitled to disability benefits. 
    Sec. 65.  Minnesota Statutes 1988, section 354.48, 
subdivision 3, is amended to read: 
    Subd. 3.  [COMPUTATION OF BENEFITS.] (1) The amount of the 
disability benefit granted to members covered under section 
354.44, subdivision 2, clauses (1) and (2), is an amount equal 
to double the annuity which could be purchased by the member's 
accumulated deductions plus interest on the amount computed as 
though the teacher were at normal retirement age 65 at the time 
the benefit begins to accrue and in accordance with the law in 
effect when the disability application is received.  Any member 
who applies for a disability benefit after June 30, 1974, and 
who failed to make an election pursuant to Minnesota Statutes 
1971, section 354.145, shall have the disability benefit 
computed under this clause or clause (2), whichever is larger. 
    The benefit granted shall be determined by the following: 
    (a) the amount of the accumulated deductions; 
    (b) interest actually earned on these accumulated 
deductions to the date the benefit begins to accrue; 
    (c) interest for the years from the date the benefit begins 
to accrue to the date the member attains normal retirement age 
65 at the rate of three percent; 
    (d) annuity purchase rates based on an appropriate annuity 
table of mortality established by the board as provided in 
section 354.07, subdivision 1, and using the applicable 
postretirement interest rate assumption specified in section 
356.215, subdivision 4d. 
    In addition, a supplementary monthly benefit shall be paid 
to basic members only in accordance with the following table: 
 
        Age When Benefit                Supplementary     
        Begins to Accrue                  Benefit         
        Under Age 56                         $50          
                  56                          45          
                  57                          40          
                  58                          35          
                  59                          30          
                  60                          25          
                  61                          20          
                  62                          15          
                  63                          10          
                  64                           5          
    (2) The disability benefit granted to members covered under 
section 354.44, subdivision 6 or 7 shall be computed in the same 
manner as the annuity provided in section 354.44, subdivision 6 
or 7 of that section, whichever is applicable.  The disability 
benefit shall be the formula annuity without the reduction for 
each month the member is under normal retirement age 65 when the 
benefit begins to accrue. 
    (3) For the purposes of computing a retirement annuity when 
the member becomes eligible, the amounts paid for disability 
benefits shall not be deducted from the individual member's 
accumulated deductions.  If the disability benefits provided in 
this subdivision exceed the monthly average salary of the 
disabled member, the disability benefits shall be reduced to an 
amount equal to the disabled member's average salary. 
    Sec. 66.  Minnesota Statutes 1988, section 354.48, 
subdivision 10, is amended to read: 
    Subd. 10.  [RETIREMENT STATUS AT NORMAL RETIREMENT AGE 65.] 
No person shall be entitled to receive both a disability benefit 
and a retirement annuity provided by this chapter.  The 
disability benefit paid to a person hereunder shall terminate at 
the end of the month in which the person attains the normal 
retirement age of 65 years.  If the person is still totally and 
permanently disabled at the beginning of the month next 
following the month in which the person attains the normal 
retirement age of 65 years, the person shall be deemed to be on 
retirement status and, if the person had elected an optional 
annuity pursuant to subdivision 3a, shall receive an annuity in 
accordance with the terms of the optional annuity previously 
elected, or, if the person had not elected an optional annuity 
pursuant to subdivision 3a, may at the option of the person 
elect to receive either a straight life retirement annuity 
computed pursuant to section 354.44 or a straight life 
retirement annuity equal to the disability benefit paid prior to 
the date on which the person attained the age of 65 years, 
whichever amount is greater, or elect to receive an optional 
annuity as provided in section 354.45, subdivision 1.  Election 
of an optional annuity shall be made prior to the person 
attaining the normal retirement age of 65 years.  If an optional 
annuity is elected, the election shall be effective on the date 
on which the person attains the normal retirement age of 65 
years and the optional annuity shall begin to accrue on the 
first day of the month next following the month in which the 
person attains the that age of 65 years.  
    Sec. 67.  Minnesota Statutes 1988, section 354.49, 
subdivision 2, is amended to read: 
    Subd. 2.  Except as provided in section 354.44, subdivision 
1, any person who ceases to be a member by reason of termination 
of teaching service, shall 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 five six percent per annum 
compounded annually plus any variable annuity account 
accumulations payable pursuant to section 354.62, subdivision 5, 
clause (4).  For the purpose of this subdivision, interest shall 
be computed on fiscal year end balances to the first day of the 
month in which the refund is issued. 
    Sec. 68.  Minnesota Statutes 1988, section 354.49, 
subdivision 3, is amended to read: 
    Subd. 3.  Any person who has attained the normal retirement 
age of at least 65 with less than five three years of credited 
allowable service shall be entitled to receive a refund in an 
amount equal to the person's accumulated deductions plus 
interest in lieu of a proportionate annuity pursuant to section 
356.32 except those covered under the provisions of section 
354.44, subdivision 6 or 7 in which case the refund shall be an 
amount equal to the accumulated deductions credited to the 
person's account as of June 30, 1957, and after July 1, 1957, 
the accumulated deductions plus interest at the rate of five six 
percent compounded annually.  
    Sec. 69.  Minnesota Statutes 1988, section 354.55, 
subdivision 11, is amended to read: 
    Subd. 11.  [DEFERRED ANNUITY; AUGMENTATION.] Any person 
covered under section 354.44, subdivisions 6 and 7, 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.  Eligibility for an annuity under this 
subdivision shall be governed pursuant to section 354.44, 
subdivision 1, or 354.60. 
    The amount of the deferred retirement annuity shall be 
determined by section 354.44, subdivisions 6 and 7, and 
augmented as provided in this subdivision.  The required 
reserves related to that portion of the annuity which had 
accrued when the member ceased to render teaching service shall 
be augmented by interest 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.  
There shall be no augmentation if this period is less than three 
months or if this period commences prior to July 1, 1971.  The 
rates of interest used for this purpose shall be five percent 
compounded annually commencing July 1, 1971, until January 1, 
1981, and three percent compounded annually thereafter until 
January 1 of the year following the year in which the former 
member attains age 55.  From that date to the effective date of 
retirement, the rate is five percent compounded annually.  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 shall be augmented by interest 
pursuant to this subdivision.  The sum of the augmented required 
reserves so determined shall be the basis for purchasing the 
deferred annuity.  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 credit with 
this fund.  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 shall be those 
applicable to new members.  The mortality table and interest 
assumption used to compute the annuity shall be the applicable 
mortality table established by the board under section 354.07, 
subdivision 1, and the interest rate assumption under section 
356.215 in effect when the member retires.  A period of 
uninterrupted service for the purposes of this subdivision means 
a period of covered teaching service during which the member has 
not been separated from active service for more than one fiscal 
year. 
    The provisions of this subdivision shall not apply to 
variable account accumulations as defined in section 354.05, 
subdivision 23. 
    In no case shall the annuity payable under this subdivision 
be less than the amount of annuity payable pursuant to section 
354.44, subdivisions 6 and 7. 
    The requirements and provisions for retirement before 
normal retirement age 65 contained in section 354.44, 
subdivision 6, clause (2) (3) or (5), shall also apply to an 
employee fulfilling the requirements with a combination of 
service as provided in section 354.60. 
     The augmentation provided by this subdivision applies to 
the benefit provided in section 354.46, subdivision 2. 
     The augmentation provided by this subdivision shall 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.  
    Sec. 70.  Minnesota Statutes 1988, section 354.60, is 
amended to read: 
    354.60 [SERVICE IN OTHER PUBLIC RETIREMENT FUNDS; ANNUITY.] 
    Any person who has been a member of the Minnesota state 
retirement system or the public employees retirement association 
including the public employees retirement association police and 
fire fund or the teachers retirement association or the 
Minnesota state patrol retirement association, or any other 
public employee retirement system in the state of Minnesota 
having a like provision but excluding all other funds providing 
benefits for police officers or firefighters shall be entitled 
when qualified to an annuity from each fund if the person's 
total allowable service in all three funds or in any two of 
these funds totals five three or more years, 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 three funds since the 
person's membership in that association has terminated.  The 
annuity from each fund shall be determined by the appropriate 
provisions of the law except that the requirement that an 
annuitant have at least five three years' membership service or 
five three years of allowable service in the respective 
association shall not apply for the purposes of this section 
provided the combined service in two or more of these funds 
equals five three or more years. 
    Sec. 71.  Minnesota Statutes 1988, section 354A.011, is 
amended by adding a subdivision to read: 
    Subd. 15a.  [NORMAL RETIREMENT AGE.] "Normal retirement age"
means age 65 for a person who first became a member of the 
coordinated program of the Minneapolis or St. Paul teachers 
retirement fund association or the new law coordinated program 
of the Duluth teachers retirement fund association before July 
1, 1989.  For a person who first became a member of the 
coordinated program of the Minneapolis or St. Paul teachers 
retirement fund association or the new law coordinated program 
of the Duluth teachers retirement fund association after June 
30, 1989, normal retirement age means the higher of age 65 or 
retirement age, as defined in United States Code, title 42, 
section 416(l), as amended.  For a person who is a member of the 
basic program of the Minneapolis or St. Paul teachers retirement 
fund association or the old law coordinated program of the 
Duluth teachers retirement fund association, normal retirement 
age means the age at which a teacher becomes eligible for a 
normal retirement annuity computed upon meeting the age and 
service requirements specified in the applicable provisions of 
the articles of incorporation or bylaws of the respective 
teachers retirement fund association. 
    Sec. 72.  Minnesota Statutes 1988, section 354A.011, 
subdivision 20, is amended to read: 
    Subd. 20.  [REDUCED RETIREMENT ANNUITY.] "Reduced 
retirement annuity" means for a coordinated member the 
retirement annuity computed pursuant to section 354A.31, 
subdivision 4, reduced pursuant to section 354A.31, subdivision 
6 or 7, and paid or payable to a member upon meeting the minimum 
age and service requirements specified in section 354A.31, 
subdivision 1, but prior to meeting the age and service 
requirements specified in section 354A.31, subdivision 5, and 
for a basic member the retirement annuity computed pursuant to 
and paid or payable to a member upon meeting the minimum age and 
service requirements specified in but prior to meeting the age 
and service requirements for a normal retirement annuity 
specified in the applicable provisions of the articles of 
incorporation or bylaws of the respective teachers retirement 
fund association.  
    Sec. 73.  Minnesota Statutes 1988, section 354A.21, is 
amended to read: 
    354A.21 [PROPORTIONATE ANNUITY.] 
    A teacher who terminates employment at any time during the 
academic year at the end of which the teacher is required to 
terminate employment pursuant to this section shall be entitled 
upon application to a proportionate retirement annuity pursuant 
to section 356.32.  Nothing contained in this section shall 
preclude a district from employing a retired teacher as a 
substitute teacher but upon having earned an amount equal to the 
annual maximum earnings allowable for that age for the continued 
receipt of full benefit amounts monthly under the federal old 
age, survivors and disability insurance program as set by the 
secretary of health and human services pursuant to the 
provisions of United States Code, title 42, section 403, in any 
academic year from employment as a substitute teacher, any 
person over the age of 70 years shall terminate employment for 
the remainder of that academic year.  No person employed as a 
substitute teacher after reaching the normal retirement age of 
at least 65 years and who has retired under this chapter shall 
resume membership in the teachers retirement fund association by 
virtue of the employment as a substitute teacher. 
    Sec. 74.  Minnesota Statutes 1988, section 354A.31, 
subdivision 1, is amended to read: 
    Subdivision 1.  [AGE AND SERVICE REQUIREMENTS.] Any 
coordinated member or former coordinated member who has ceased 
to render teaching service for the school district in which the 
teachers retirement fund association exists and who has either 
attained the age of at least 55 years with not less than five 
three years of allowable service credit or received credit for 
not less than 30 years of allowable service regardless of age, 
shall be entitled upon written application to a retirement 
annuity.  
    Sec. 75.  Minnesota Statutes 1988, section 354A.31, 
subdivision 4, is amended to read: 
    Subd. 4.  [COMPUTATION OF THE NORMAL COORDINATED RETIREMENT 
ANNUITY.] (a) The normal coordinated retirement annuity shall be 
an amount equal to a retiring coordinated member's average 
salary multiplied by the retirement annuity formula percentage.  
Average salary for purposes of this section shall mean an amount 
equal to the average salary upon which contributions were made 
for the highest five successive years of service credit, but 
which shall not in any event include any more than the 
equivalent of 60 monthly salary payments.  Average salary must 
be based upon all years of service credit if this service credit 
is less than five years. 
    (b) This paragraph, in conjunction with subdivision 6, 
applies to a person who first became a member before July 1, 
1989, unless paragraph (c), in conjunction with subdivision 7, 
produces a higher annuity amount, in which case paragraph (c) 
will apply.  The retirement annuity formula percentage for 
purposes of this section shall mean paragraph is one percent per 
year for each year of coordinated service for the first ten 
years and 1-1/2 percent for each year of coordinated service 
thereafter.  
    (c) This paragraph applies to a person who first becomes a 
member after June 30, 1989, and to any other member whose 
annuity amount, when calculated under this paragraph and in 
conjunction with subdivision 7 is higher than it is when 
calculated under paragraph (b), in conjunction with the 
provisions of subdivision 6.  The retirement annuity formula 
percentage for purposes of this paragraph is 1-1/2 percent for 
each year of coordinated service.  
    Sec. 76.  Minnesota Statutes 1988, section 354A.31, 
subdivision 5, is amended to read: 
    Subd. 5.  [UNREDUCED NORMAL RETIREMENT ANNUITY.] Upon 
retirement at normal retirement age 65 with at least five three 
years of service credit or at age 62 with at least 30 years of 
service credit, a coordinated member shall be entitled to a 
normal retirement annuity calculated pursuant to subdivision 4.  
    Sec. 77.  Minnesota Statutes 1988, section 354A.31, 
subdivision 6, is amended to read: 
    Subd. 6.  [REDUCED RETIREMENT ANNUITY.] This subdivision 
applies only to a person who first became a coordinated member 
before July 1, 1989, and whose annuity is higher when calculated 
using the retirement annuity formula percentage in subdivision 
(4), paragraph (b), in conjunction with this subdivision than 
when calculated under subdivision 4, paragraph (c), in 
conjunction with subdivision 7. 
    (a) Upon retirement at an age prior to normal retirement 
age 65 with five three years of service credit or prior to age 
62 with at least 30 years of service credit, a coordinated 
member shall be entitled to a retirement annuity in an amount 
equal to the normal retirement annuity calculated using the 
retirement annuity formula percentage in subdivision (4), 
paragraph (b), reduced by one-half one-quarter of one percent 
for each month that the coordinated member is under the normal 
retirement age of 65 if the coordinated member has less than 30 
years of service credit or is under the age of 62 if the 
coordinated member has at least 30 years of service credit but 
is over the age of 59, and reduced by one-fourth of one percent 
for each month that the coordinated member is under the age of 
60.  
    (b) Any coordinated 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 
retirement annuity calculated using the retirement annuity 
formula percentage in subdivision (4), paragraph (b), without 
any reduction by reason of early retirement. 
    Sec. 78.  Minnesota Statutes 1988, section 354A.31, is 
amended by adding a subdivision to read:  
    Subd. 7.  [ACTUARIAL REDUCTION FOR EARLY RETIREMENT.] This 
subdivision applies to a person who first becomes a coordinated 
member after June 30, 1989, and to any other coordinated member 
whose annuity is higher when calculated using the retirement 
annuity formula percentage in subdivision 4, paragraph (c), in 
conjunction with this subdivision than when calculated under 
subdivision 4, paragraph (b), in conjunction with subdivision 
6.  A coordinated member who retires before the full benefit age 
shall be paid the retirement annuity calculated using the 
retirement annuity formula percentage in subdivision 4, 
paragraph (c), reduced so that the reduced annuity is the 
actuarial equivalent of the annuity that would be payable to the 
member if the member 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. 
    Sec. 79.  Minnesota Statutes 1988, section 354A.32, 
subdivision 1, is amended to read: 
    Subdivision 1.  [OPTIONAL FORMS GENERALLY.] The boards of 
the Minneapolis and the St. Paul teachers retirement fund 
associations shall each establish for the coordinated program 
and the board of the Duluth teachers retirement fund association 
shall establish for the new law coordinated program an optional 
retirement annuity which shall take the form of a joint and 
survivor annuity.  Each board may also in its discretion 
establish an optional annuity which shall take the form of an 
annuity payable for a period certain and for life thereafter.  
Each board shall also establish an optional retirement annuity 
which shall take the form of a guarantee that in the event of 
death the balance of the accumulated deductions shall be paid to 
a designated beneficiary.  Except as provided in subdivision 1a, 
optional annuity forms shall be the actuarial equivalent of the 
normal forms provided in section 354A.31.  In establishing these 
optional annuity forms, the board shall obtain the written 
recommendation of the commission-retained actuary.  The 
recommendation shall be a part of the permanent records of the 
board. 
    Sec. 80.  Minnesota Statutes 1988, section 354A.32, is 
amended by adding a subdivision to read: 
    Subd. 1a.  [BOUNCE-BACK ANNUITY.] (a) If a former 
coordinated member or disabilitant has selected a joint and 
survivor annuity option under subdivision 1, the former member 
or disabilitant must receive a normal single-life annuity if the 
designated optional annuity beneficiary dies before the former 
member or disabilitant.  Under this option, no reduction may be 
made in the person's annuity to provide for restoration of the 
normal single-life annuity in the event of the death of the 
designated optional annuity beneficiary. 
    (b) A former coordinated member or disabilitant who 
selected an optional joint and survivor annuity before July 1, 
1989, but did not choose an option that provides that the normal 
single-life annuity is payable to the former member or the 
disabilitant if the designated optional annuity beneficiary dies 
first, is eligible for restoration of the normal single-life 
annuity if the designated optional annuity beneficiary dies 
first, without further actuarial reduction of the person's 
annuity.  A former member or disabilitant who selected an 
optional joint and survivor annuity, but whose designated 
optional annuity beneficiary died before July 1, 1989, shall 
receive a normal single-life annuity after that date, but shall 
not receive retroactive payments for periods before that date. 
    (c) A former coordinated member or disabilitant who took a 
further actuarial reduction to elect an optional joint and 
survivor annuity that provides that the normal annuity is 
payable to the former member or disabilitant if the designated 
optional beneficiary died before July 1, 1989, shall have the 
annuity increased as of July 1, 1989, to the amount the person 
would have received if, at the time of retirement or disability, 
the person had selected only optional survivor coverage that 
would not have provided for restoration of the normal annuity 
upon the death of the designated optional annuity beneficiary.  
Any annuity or benefit increase under this paragraph is 
effective only for payments made after June 30, 1989, and is not 
retroactive for payments made before July 1, 1989. 
    Sec. 81.  Minnesota Statutes 1988, section 354A.35, 
subdivision 1, is amended to read: 
    Subdivision 1.  [DEATH BEFORE RETIREMENT; REFUND.] If a 
coordinated member or former coordinated member dies prior to 
retirement or prior to the receipt of any retirement annuity or 
other benefit payment which is or may be payable and a surviving 
spouse optional annuity is not payable pursuant to subdivision 
2, a refund shall be paid to the person's surviving spouse, or 
if there is none, to the person's designated beneficiary, or if 
there is none, to the legal representative of the person's 
estate.  The refund shall be in an amount equal to the person's 
accumulated contributions plus interest at the rate of five six 
percent per annum compounded annually.  
    Sec. 82.  Minnesota Statutes 1988, section 354A.35, 
subdivision 2, is amended to read: 
    Subd. 2.  [DEATH WHILE ELIGIBLE TO RETIRE; SURVIVING SPOUSE 
OPTIONAL ANNUITY.] The surviving spouse of any coordinated 
member who has attained the age of at least 50 years and has 
credit for at least five three years of service or has credit 
for at least 30 years of service regardless of age shall be 
entitled to joint and survivor annuity coverage in the event of 
death of the member prior to retirement.  The surviving spouse 
may apply for the annuity at any time after the date on which 
the deceased employee would have attained the required age for 
retirement based on the employee's allowable service.  The 
member's surviving spouse shall be paid a joint and survivor 
annuity as provided in section 354A.32 and computed pursuant to 
section 354A.31.  Sections 354A.37, subdivision 2, and 354A.39 
apply to a deferred annuity payable under this section.  The 
benefits shall be payable for life.  
    Sec. 83.  Minnesota Statutes 1988, section 354A.36, 
subdivision 1, is amended to read: 
    Subdivision 1.  [MINIMUM AGE, SERVICE AND SALARY 
REQUIREMENTS.] Any coordinated member who has at least five 
three years of allowable service credit, has an average salary 
of at least $75 per month and has become totally and permanently 
disabled shall be entitled to a disability benefit.  If the 
disabled coordinated member's allowable service credit has not 
been continuous, at least three two years of the required 
allowable service shall be required to have been rendered 
subsequent to the last interruption in service.  
    Sec. 84.  Minnesota Statutes 1988, section 354A.36, 
subdivision 3, is amended to read: 
    Subd. 3.  [COMPUTATION OF DISABILITY BENEFIT.] The 
coordinated permanent disability benefit shall be an amount 
equal to the normal coordinated retirement annuity computed 
pursuant to section 354A.31, subdivision 4, based on allowable 
service credited to the date of disability but without any 
reduction for the commencement of the benefit prior to the 
attainment of normal retirement age 65 or age 62 with at least 
30 years of service credit as specified in section 354A.31, 
subdivision 6.  The disabled coordinated member shall not be 
entitled to elect an optional annuity form pursuant to section 
354A.32 prior to attaining normal retirement age 65 as provided 
in subdivision 10.  
    Sec. 85.  Minnesota Statutes 1988, section 354A.36, 
subdivision 10, is amended to read: 
    Subd. 10.  [RETIREMENT STATUS UPON ATTAINING NORMAL 
RETIREMENT AGE 65.] No person shall be entitled to receive both 
a disability benefit under this section and a retirement annuity 
under section 354A.31.  If a disability benefit recipient 
remains totally and permanently disabled upon attaining normal 
retirement age 65, the disability benefit shall terminate and 
the former disability benefit recipient shall be deemed to be on 
retirement status.  If the former disability benefit recipient 
had elected an optional annuity pursuant to subdivision 3a, the 
recipient shall receive an annuity in accordance with the terms 
of the optional annuity previously elected, or if the recipient 
had not elected an optional annuity pursuant to subdivision 3a, 
the recipient shall be entitled either to receive a retirement 
annuity in an amount equal to the greater of either a single 
life retirement annuity calculated pursuant to section 354A.31 
or the disability benefit paid to the recipient immediately 
prior to the recipient's attaining normal retirement age 65 or 
elect either a single life retirement annuity as provided in 
this section or an actuarial equivalent optional form retirement 
annuity as provided in section 354A.32.  Election of an optional 
annuity shall be made prior to the person attaining the normal 
retirement age of 65 years.  If an optional annuity is elected, 
the election shall be effective on the date on which the person 
attains the normal retirement age of 65 years and the optional 
annuity shall begin to accrue on the first day of the month next 
following the month in which the person attains the normal 
retirement age of 65 years.  
    Sec. 86.  Minnesota Statutes 1988, section 354A.37, 
subdivision 2, is amended to read: 
    Subd. 2.  [ELIGIBILITY FOR DEFERRED RETIREMENT ANNUITY.] 
Any coordinated member who ceases to render teaching services 
for the school district in which the teachers retirement fund 
association is located, with sufficient allowable service credit 
to meet the minimum service requirements specified in section 
354A.31, subdivision 1, shall be entitled to a deferred 
retirement annuity in lieu of a refund pursuant to subdivision 
1.  The deferred retirement annuity shall be computed pursuant 
to section 354A.31 and it shall be augmented as provided in this 
subdivision.  The deferred annuity shall commence upon 
application after the person on deferred status attains at least 
the minimum age specified in section 354A.31, subdivision 1.  
    The monthly annuity amount that had accrued when the member 
ceased to render teaching service must be augmented 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.  There is no augmentation if this period is less 
than three months.  The rate of augmentation is three percent 
compounded annually until January 1 of the year following the 
year in which the former member attains age 55, and five percent 
compounded annually after that date to the effective date of 
retirement.  If a person has more than one period of 
uninterrupted service, a separate average salary determined 
under section 354A.31 must be used for each period, and the 
monthly annuity amount related to each period must be augmented 
as provided in this subdivision.  The sum of the augmented 
monthly annuity amounts determines the total deferred annuity 
payable.  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 credit with the 
fund.  If a person does not render teaching services in any one 
fiscal year or more consecutive fiscal years and then resumes 
teaching service, the formula percentages used from the date of 
resumption of teaching service are those applicable to new 
members.  The mortality table and interest assumption used to 
compute the annuity are the table established by the fund to 
compute other annuities, and the interest assumption under 
section 356.215 in effect when the member retires.  A period of 
uninterrupted service for the purpose of this subdivision means 
a period of covered teaching service during which the member has 
not been separated from active service for more than one fiscal 
year.  
    The augmentation provided by this subdivision applies to 
the benefit provided in section 354A.35, subdivision 2.  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. 
    Sec. 87.  Minnesota Statutes 1988, section 354A.37, 
subdivision 3, is amended to read: 
    Subd. 3.  [COMPUTATION OF REFUND AMOUNT.] A former 
coordinated member who qualifies for a refund pursuant to 
subdivision 1 shall receive a refund equal to the amount of the 
former coordinated member's accumulated contributions with 
interest at the rate of five six percent per annum compounded 
annually.  
    Sec. 88.  Minnesota Statutes 1988, section 354A.37, 
subdivision 4, is amended to read: 
    Subd. 4.  [CERTAIN REFUNDS AT NORMAL RETIREMENT AGE 65.] 
Any coordinated member who has attained the normal retirement 
age of at least 65 with less than ten years of allowable service 
credit and has terminated active teaching service shall be 
entitled to a refund in lieu of a proportionate annuity pursuant 
to section 356.32.  The refund shall be equal to the coordinated 
member's accumulated employee contributions plus interest at the 
rate of five six percent compounded annually.  
    Sec. 89.  Minnesota Statutes 1988, section 354A.39, is 
amended to read: 
    354A.39 [SERVICE IN OTHER PUBLIC RETIREMENT FUNDS; 
ANNUITY.] 
    Any person who has been a member of the Minnesota state 
retirement system, the public employees retirement association 
including the public employees retirement association police and 
fire fund, the teachers retirement association, the Minnesota 
state patrol retirement association, the legislators retirement 
plan, the constitutional officers retirement plan, the 
Minneapolis employees retirement fund, the Duluth teachers 
retirement fund association new law coordinated program, the 
Minneapolis teachers retirement fund association coordinated 
program, the St. Paul teachers retirement fund association 
coordinated program, or any other public employee retirement 
system in the state of Minnesota having a like provision but 
excluding all other funds providing retirement benefits for 
police officers or firefighters shall be entitled when qualified 
to an annuity from each fund if the person's total allowable 
service in all of the funds or in any two or more of the funds 
totals five three or more years, provided that no portion of the 
allowable service upon which the retirement annuity from one 
fund is based is used again in the computation for a retirement 
annuity from another fund and provided further that the person 
has not taken a refund from any of funds or associations since 
the person's membership in the fund or association has 
terminated.  The annuity from each fund or association shall be 
determined by the appropriate provisions of the law governing 
each fund or association, except that the requirement that a 
person must have at least five three years of allowable service 
in the respective fund or association shall not apply for the 
purposes of this section, provided that the aggregate service in 
two or more of these funds equals five three or more years. 
    Sec. 90.  Minnesota Statutes 1988, section 356.215, 
subdivision 4d, is amended to read: 
    Subd. 4d.  [INTEREST AND SALARY ASSUMPTIONS.] For funds 
governed by chapters 3A, 352, 352B, 352C, 353, 353C, 354 other 
than the variable annuity fund governed by section 354.62, and 
490, the actuarial valuation shall use a preretirement interest 
assumption of eight 8.5 percent, a postretirement interest 
assumption of five percent, and an assumption that in each 
future year the salary on which a retirement or other benefit is 
based is 1.065 multiplied by the salary for the preceding year.  
For funds governed by chapter 354A, the actuarial valuation 
shall use preretirement and postretirement assumptions of 
eight 8.5 percent and an assumption that in each future year the 
salary on which a retirement or other benefit is based is 1.065 
multiplied by the salary for the preceding year, but the 
actuarial valuation shall reflect the payment of postretirement 
adjustments to retirees shall be based on the methods specified 
in the bylaws of the fund as approved by the legislature.  For 
all other funds, the actuarial valuation shall use a 
preretirement interest assumption of five percent, a 
postretirement interest assumption of five percent, and an 
assumption that in each future year the salary on which a 
retirement or other benefit is based is 1.035 multiplied by the 
salary for the preceding year. 
    For funds governed by chapters 3A, 352C, and 490, the 
actuarial valuation shall use a preretirement interest 
assumption of eight 8.5 percent, a postretirement interest 
assumption of five percent, and an assumption that in each 
future year in which the salary amount payable is not 
determinable from section 3.099, 15A.081, subdivision 6, or 
15A.083, subdivision 1, whichever is applicable, or from 
applicable compensation council recommendations under section 
15A.082, the salary on which a retirement or other benefit is 
based is 1.065 multiplied by the known or computed salary for 
the preceding year, whichever is applicable. 
    Sec. 91.  Minnesota Statutes 1988, section 356.215, 
subdivision 4g, is amended to read: 
    Subd. 4g.  [AMORTIZATION CONTRIBUTIONS.] In addition to the 
exhibit indicating the level normal cost, the actuarial 
valuation shall contain an exhibit indicating the additional 
annual contribution which would be required to amortize the 
unfunded actuarial accrued liability.  For funds governed by 
chapters 3A, 352, 352B, 352C, 353, 353C, 354, 354A, and 490, the 
additional contribution shall be calculated on a level 
percentage of covered payroll basis by the established date for 
full funding which is in effect when the valuation is prepared.  
The level percent additional contribution shall be calculated 
assuming annual payroll growth of 6.5 percent.  For all other 
funds, the additional annual contribution shall be calculated on 
a level annual dollar amount basis. 
    If, for any fund other than the Minneapolis employees 
retirement fund, after the first actuarial valuation date 
occurring after June 1, 1979 1989, there has not been a change 
in the actuarial assumptions used for calculating the actuarial 
accrued liability of the fund, a change in the benefit plan 
governing annuities and benefits payable from the fund, a change 
in the actuarial cost method used in calculating the actuarial 
accrued liability of all or a portion of the fund, or a 
combination of the three, which change or changes by themselves 
without inclusion of any other items of increase or decrease 
produce a net increase in the unfunded actuarial accrued 
liability of the fund, the established date for full funding for 
the first actuarial valuation made after June 1, 1979 1989, and 
each successive actuarial valuation shall be the first actuarial 
valuation date which occurs after June 1, 2009 2020.  
    If, for any fund or plan other than the Minneapolis 
employees retirement fund, after the first actuarial valuation 
date occurring after June 1, 1979 1989, there has been a change 
in any or all of the actuarial assumptions used for calculating 
the actuarial accrued liability of the fund, a change in the 
benefit plan governing annuities and benefits payable from the 
fund, a change in the actuarial cost method used in calculating 
the actuarial accrued liability of all or a portion of the fund, 
or a combination of the three, and the change or changes, by 
themselves and without inclusion of any other items of increase 
or decrease, produce a net increase in the unfunded actuarial 
accrued liability in the fund, the established date for full 
funding shall be determined using the following procedure:  
    (i) the unfunded actuarial accrued liability of the fund 
shall be determined in accordance with the plan provisions 
governing annuities and retirement benefits and the actuarial 
assumptions in effect before an applicable change; 
    (ii) the level annual dollar contribution or level 
percentage, whichever is applicable, which is needed to amortize 
the unfunded actuarial accrued liability amount determined 
pursuant to subclause (i) by the established date for full 
funding in effect prior to the change shall be calculated using 
the interest assumption specified in subdivision 4d in effect 
before the change; 
     (iii) the unfunded actuarial accrued liability of the fund 
shall be determined in accordance with any new plan provisions 
governing annuities and benefits payable from the fund and any 
new actuarial assumptions and the remaining plan provisions 
governing annuities and benefits payable from the fund and 
actuarial assumptions in effect before the change; 
     (iv) the level annual dollar contribution or level 
percentage, whichever is applicable, which is needed to amortize 
the difference between the unfunded actuarial accrued liability 
amount calculated pursuant to subclause (i) and the unfunded 
actuarial accrued liability amount calculated pursuant to 
subclause (iii) over a period of 30 years from the end of the 
plan year in which the applicable change is effective shall be 
calculated using the applicable interest assumption specified in 
subdivision 4d in effect after any applicable change; 
     (v) the level annual dollar or level percentage 
amortization contribution pursuant to subclause (iv) shall be 
added to the level annual dollar amortization contribution or 
level percentage calculated pursuant to subclause (ii); 
     (vi) the period in which the unfunded actuarial accrued 
liability amount determined in subclause (iii) will be amortized 
by the total level annual dollar or level percentage 
amortization contribution computed pursuant to subclause (v) 
shall be calculated using the interest assumption specified in 
subdivision 4d in effect after any applicable change, rounded to 
the nearest integral number of years, but which shall not exceed 
a period of 30 years from the end of the plan year in which the 
determination of the established date for full funding using the 
procedure set forth in this clause is made and which shall not 
be less than the period of years beginning in the plan year in 
which the determination of the established date for full funding 
using the procedure set forth in this clause is made and ending 
by the date for full funding in effect before the change; and 
     (vii) the period determined pursuant to subclause (vi) 
shall be added to the date as of which the actuarial valuation 
was prepared and the date obtained shall be the new established 
date for full funding.  
     For the Minneapolis employees retirement fund, the 
established date for full funding shall be June 30, 2017. 
    Sec. 92.  Minnesota Statutes 1988, section 356.30, 
subdivision 1, is amended to read: 
    Subdivision 1.  [ELIGIBILITY; COMPUTATION OF ANNUITY.] (1) 
Notwithstanding any provisions to the contrary of the laws 
governing the funds enumerated in subdivision 3, a person who 
has met the qualifications of clause (2) may elect to receive a 
retirement annuity from each fund in which the person has at 
least six months allowable service, based on the allowable 
service in each fund, subject to the provisions of clause (3).  
    (2) A person may receive upon retirement, in lieu of any 
augmentation of deferred annuities provided by laws governing 
the funds enumerated in subdivision 3, a retirement annuity from 
each fund in which the person has at least six months allowable 
service if 
    (a) the person has allowable service totaling five or more 
years an amount that allows the person to receive an annuity in 
any two or more of the enumerated funds; 
    (b) the person has at least six months of allowable service 
with the last such fund earned during the last period of 
employment; and 
    (c) the person has not begun to receive an annuity from any 
enumerated fund or the person has made application for benefits 
from all funds within a six-month period.  
    (3) The retirement annuity from each fund shall be based 
upon the allowable service in each fund, except that:  
    (a) The laws governing annuities shall be the law in effect 
on the date of final termination from the last public service 
under a covered fund.  
     (b) The "average salary" on which the annuity from each 
covered fund in which the employee has credit in a formula plan 
shall be based on the employee's highest five successive years 
of covered salary during the entire service in covered funds.  
     (c) The formula percentages to be used by each fund shall 
be those percentages prescribed by each fund's formula as 
continued for the respective years of allowable service from one 
fund to the next, recognizing all previous allowable service 
with the other covered funds.  
     (d) Allowable service in all the funds shall be combined in 
determining eligibility for and the application of each fund's 
provisions in respect to actuarial reduction in the benefit 
amount for retirement prior to normal retirement.  
     (e) The benefit amount payable for any allowable service 
under a nonformula plan of a covered fund shall not be affected 
but such service and covered salary shall be used in the above 
calculation.  
     (f) This section shall not apply to any person whose final 
termination from the last public service under a covered fund is 
prior to May 1, 1975.  
     (g) For the purpose of computing benefits under this 
section the formula percentages used by any covered fund shall 
in no event exceed 2-1/2 percent per year of service for any 
year of service or fraction thereof.  
     (h) Any period of time for which a person has credit in 
more than one of the covered funds shall be used only once for 
the purpose of determining total allowable service.  
     (i) If the period of duplicated service credit is more than 
six months, or the person has credit for more than six months 
with each of the funds, each fund shall 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 funds for the period.  
     (j) If the period of duplicated service credit is less than 
six months, or when added to other service credit with that fund 
is less than six months, the service credit shall be ignored and 
a refund of contributions made to the person in accord with that 
fund's refund provisions.  
    Sec. 93.  Minnesota Statutes 1988, section 356.32, 
subdivision 1, is amended to read: 
    Subdivision 1.  [PROPORTIONATE RETIREMENT ANNUITY.] 
Notwithstanding any provision to the contrary of the laws 
governing any of the retirement funds referred to in subdivision 
2, any person who is an active member of any applicable fund, 
who has credit for at least one year but less than ten years of 
allowable service in one or more of the applicable funds, and 
who terminates active service pursuant to a mandatory retirement 
law or policy or at age 65 or older, or the normal retirement 
age if this age is not age 65, for any reason shall be entitled 
upon making written application on the form prescribed by 
executive director or executive secretary of the fund to a 
proportionate retirement annuity from each applicable fund in 
which the person has allowable service credit.  The 
proportionate annuity shall be calculated under the applicable 
laws governing annuities based upon allowable service credit at 
the time of retirement and the person's average salary for the 
highest five successive years of allowable service or the 
average salary for the entire period of allowable service if 
less than five years.  Nothing in this section shall prevent the 
imposition of the appropriate early retirement reduction of an 
annuity which commences prior to normal retirement age. 
    Sec. 94.  [FIRST CLASS CITY TEACHER FUNDS.] 
    In accordance with Minnesota Statutes, section 354A.12, 
subdivision 4, approval is granted for the teachers retirement 
fund associations in each of the cities of the first class to 
amend their articles of incorporation or bylaws in the manner 
specified in this section.  The amendments apply only to basic 
members in the Minneapolis teachers retirement fund association 
and the St. Paul teachers retirement fund association, and to 
old law coordinated program members in the Duluth teachers 
retirement fund association. 
    (a) For purposes of this paragraph, the retirement formula 
percentages are: 
    (1) for Minneapolis teachers retirement fund:  2.25 percent 
for each year of service; 
    (2) for St. Paul teachers retirement fund:  2.0 percent for 
each year of service; and 
    (3) for Duluth teachers retirement fund old coordinated 
plan:  1.25 percent for each year of service. 
    A member whose age plus credited allowable service totals 
90 years, is entitled upon termination of active service and 
application, to a normal retirement annuity provided in the 
articles and bylaws without any reduction in the amount of the 
annuity by reason of early retirement unless the benefit in 
paragraph (b) in conjunction with paragraph (c) produces a 
higher annuity in which case, paragraph (b) applies.  A member 
who retires before the normal retirement age shall be provided a 
normal retirement annuity provided in the articles and bylaws, 
reduced by one-fourth of one percent for each month that the 
employee is under normal retirement age at the time of 
retirement unless the benefit in paragraph (b) in conjunction 
with paragraph (c) produces a higher annuity, in which case 
paragraph (b) applies.  For the Minneapolis teachers retirement 
association, this paragraph applies only to basic members with 
less than 30 years of service who have attained age 55.  For 
Minneapolis teachers retirement fund basic members who were 
first hired after July 1, 1977, and who have 30 or more years of 
service, the early retirement penalty contained in the articles 
and bylaws is repealed.  
    (b) This paragraph applies only to a member whose annuity, 
when calculated under this paragraph in conjunction with 
paragraph (c), is higher than when calculated under paragraph 
(a).  The average salary, as specified in the bylaws of St. Paul 
teachers retirement fund association, the bylaws of Duluth 
teachers retirement fund association, and the bylaws of 
Minneapolis teachers retirement fund association, multiplied by 
2.5 percent for each year of service for basic members and 1.5 
percent for each year of service for old coordinated members of 
Duluth teachers retirement fund association, shall determine the 
amount of the retirement annuity to which a member is entitled. 
    (c) This paragraph applies only to a member whose annuity 
under paragraph (b) in conjunction with this paragraph is higher 
than when calculated under paragraph (a).  A member who retires 
under the formula annuity specified in paragraph (b) before the 
normal retirement age defined in section 354A.011, shall be paid 
the normal annuity provided in paragraph (b) 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. 
    (d) The interest rate to be paid on refunds is six percent 
per annum compounded annually. 
    (e) Any joint and survivor annuity option is subject to an 
automatic bounce-back annuity as provided in section 354A.32, 
subdivision 1a. 
    (f) A member who is eligible for a deferred retirement 
annuity shall have the annuity augmented as provided in section 
354A.37, subdivision 2. 
    (g)  The first class city teachers retirement funds, may 
provide optional annuity forms to its retirement program which 
are the actuarial equivalent of its normal retirement annuity.  
For all optional forms, the board shall obtain the written 
recommendation of an approved actuary and the recommendation 
shall be a part of the permanent records of the board.  
    Sec. 95.  [356.82] [SAVINGS CLAUSE.] 
    The intent of the legislature in sections 352.01, 
subdivision 25; 353.01, subdivision 35; 354.05, subdivision 38; 
and 354A.011, subdivision 15a is to create a normal retirement 
age for persons first covered by those sections after the 
effective date of those sections that is the same as the 
retirement age in the federal Social Security law, including 
future amendments to that law.  If a court determines that the 
legislature may not incorporate by reference the future changes 
in federal Social Security law, the legislature reserves the 
right to amend the appropriate sections to make the normal 
retirement conform to the retirement age in the federal Social 
Security law.  No person first covered by any of those sections 
after the effective date of those sections has a right to a 
normal retirement age that is less than the retirement age in 
the federal Social Security law. 
    Sec. 96.  [356.85] [REVIEW OF RULE OF 90.] 
    By September 1, 1993, the executive directors of the 
teachers retirement association, the state retirement system, 
and each teachers retirement fund association in a city of the 
first class must calculate the number of employees who were 
eligible to retire without any reduction in their annuity due to 
early retirement because their attained age plus credited 
allowable service totaled 90 years between the effective date of 
sections 352.116; 354.44, subdivision 6; 354A.31, subdivision 6, 
and 98 and June 30, 1993.  The executive directors must also 
calculate the number of these employees who did retire early and 
who received an unreduced annuity because their attained age 
plus credited allowable service totaled 90 years.  The executive 
directors must report the results of their calculation to the 
executive director of the legislative commission on pensions and 
retirement.  If the calculation shows that number of employees 
from all of the systems combined who did retire under the rule 
of 90 is more than 45 percent of the number from all the systems 
who were eligible to retire under the rule of 90, sections 
352.116, subdivision 1, paragraph (b), section 354.44, 
subdivision 6, clause (3)(iii), section 354A.31, subdivision 6, 
paragraph (b), and any provision in the bylaws or articles of 
incorporation of a teachers retirement fund association in the 
city of the first class that permits unreduced retirement under 
the rule of 90 are not effective after June 30, 1994.  The 
executive directors must make a similar combined calculation 
before September 1, 1998 and September 1 every five years after 
that, based on use of the rule of 90 during the four year period 
ending on the most recent June 30.  If any calculation shows 
that the number of employees who retired under the rule of 90 is 
more than 45 percent of the number eligible to retire under the 
rule of 90, sections 352.116, subdivision 1, paragraph (b), 
section 354.44, subdivision 6, clause (3)(iii), section 354A.31, 
subdivision 6, paragraph (b), and any provision in the bylaws or 
articles of incorporation of a teachers retirement fund 
association in the city of the first class that permits 
unreduced retirement under the rule of 90 are not effective 
after the following June 30.  The legislature reserves the right 
to amend or repeal sections 352.116, subdivision 1, paragraph 
(b), section 354.44, subdivision 6, clause (3)(iii), section 
354A.31, subdivision 6, paragraph (b), and any provision in the 
bylaws or articles of incorporation of a teachers retirement 
fund association in the city of the first class that permits 
unreduced retirement under the rule of 90, effective July 1, 
1994 and July 1 every fifth year after 1994. 
     Sec. 97.  [APPROPRIATION.] 
    Subdivision 1.  [GENERAL FUND.] There is appropriated from 
the general fund to the commissioner of finance $3,916,000 in 
fiscal year 1990 and $4,123,000 in fiscal year 1991 for 
allocation among state agencies and the University of Minnesota 
to offset the costs of increases in the employer contribution 
rate for the general plan of the Minnesota state retirement 
system.  Of these amounts, $800,000 in fiscal year 1990 and 
$850,000 in fiscal year 1991 is for allocation among state 
supported accounts at the University of Minnesota in proportion 
to estimated salaries paid to members of the general plan of the 
Minnesota state retirement system; $3,001,000 in fiscal year 
1990 and $3,152,000 in fiscal year 1991 is for allocation among 
state agencies in proportion to estimated salaries paid from the 
state general fund to members of the general plan of the 
Minnesota state retirement system; and $115,000 in fiscal year 
1990 and $121,000 in fiscal year 1991 is for allocation to state 
agencies in proportion to the estimated fiscal year 1989 salary 
part of the cost of services purchased by the agencies with 
state general fund monies from the following internal service 
funds:  computer services, plant management, printing, motor 
pool, central stores, micrographics, telecommunications, general 
services, and office equipment. 
    Subd. 2.  [OTHER FUNDS.] Except as limited by the direct 
appropriations from the state general fund made in this section, 
the amounts necessary to pay the cost of increases in the 
employer contribution rate for the general plan of the Minnesota 
state retirement system, are appropriated from the various funds 
in the state treasury from which salaries are paid, to the 
commissioner of finance, for the fiscal years ending June 30, 
1990 and June 30, 1991. 
    Sec. 98.  [REPEALER.] 
    Minnesota Statutes 1988, section 354A.32, subdivision 2, is 
repealed. 
    Sec. 99.  [EFFECTIVE DATE.] 
    Sections 1 to 96 and 98 are effective May 16, 1989.  
Sections 86 and 94, paragraph (f), are effective May 16, 1989, 
and apply retroactively to a person who is eligible for a 
deferred retirement annuity on that date, and whose retirement 
annuity has not begun to accrue.  The increased employee or 
member and employer contribution rates are effective on the 
first day of the first pay period occurring after July 1, 1989. 

                               ARTICLE 14

                   PARTIAL POSTRETIREMENT ADJUSTMENTS
    Section 1.  Minnesota Statutes 1988, section 11A.18, 
subdivision 9, is amended to read: 
    Subd. 9.  [CALCULATION OF POSTRETIREMENT ADJUSTMENT.] 
Annually, following June 30, the state board shall determine 
whether a postretirement adjustment shall be is payable and 
shall determine the amount of any postretirement 
adjustment which shall be that is payable. 
    (1) The state board shall determine whether a 
postretirement adjustment shall be is payable using the 
following procedure: 
    (a) The state board shall determine the amount of 
dividends, interest, accruals and realized capital gains or 
losses applicable to the most recent fiscal year ending June 30; 
    (b) The amount of reserves required for the annuity or 
benefit payable to an annuitant and benefit recipient of the 
participating public pension plans or funds shall be determined 
by the commission-retained actuary as of the current June 30.  
An annuitant or benefit recipient who has been receiving an 
annuity or benefit for at least one year 12 full months as of 
the current June 30 shall be is eligible to receive a full 
postretirement adjustment.  An annuitant or benefit recipient 
who has been receiving an annuity or benefit for at least one 
full month, but less than 12 full months as of the current June 
30, is eligible to receive a partial postretirement adjustment.  
Each fund shall report separately the amount of the reserves for 
those annuitants and benefit recipients who are eligible to 
receive a full postretirement benefit adjustment and.  This 
amount is known as "eligible reserves."  Each fund shall also 
report separately the amount of the reserves for those 
annuitants and benefit recipients who are not eligible to 
receive a postretirement adjustment shall be reported 
separately.  This amount is known as "noneligible reserves."  
For an annuitant or benefit recipient who is eligible to receive 
a partial postretirement adjustment, each fund shall report 
separately as additional "eligible reserves" an amount that 
bears the same ratio to the total reserves required for the 
annuitant or benefit recipient as the number of full months of 
annuity or benefit receipt as of the current June 30 bears to 12 
full months.  The remainder of the annuitant's or benefit 
recipient's reserves shall be separately reported as additional 
"noneligible reserves."  The amount of the "eligible" and 
"noneligible" required reserves shall be certified to the board 
by the commission-retained actuary as soon as is practical 
following the current June 30; 
    (c) The state board shall determine the amount of 
investment income required to equal five percent of the total 
amount of the required reserves as of the preceding June 30 
adjusted by five percent of each transfer in or transfer out 
multiplied by the fraction of a year from the date of transfer 
to the current June 30.  This amount of required investment 
income shall be subtracted from the actual amount of investment 
income determined according to clause (1)(a), to determine the 
amount of excess investment income.  If this amount is positive, 
then a postretirement adjustment may be paid. 
    (2) The state board shall determine the amount of any 
postretirement adjustment which is payable using the following 
procedure: 
    (a) The state board shall determine the amount of excess 
investment income by the method indicated in clause (1); 
    (b) The total "eligible" required reserves as of the first 
of January next following the end of the fiscal year for the 
annuitants and benefit recipients eligible to receive the a full 
or partial postretirement adjustment as determined by clause 
(1)(b) shall be certified to the state board by the 
commission-retained actuary.  The total "eligible" required 
reserves shall be determined by the commission-retained actuary 
on the assumption that all annuitants and benefit recipients 
eligible to receive the a full or partial postretirement 
adjustment will be alive on the January 1 in question; 
    (c) If the state board determines that the book value of 
the assets of the fund is less than an amount equal to the total 
amount of the current June 30 required reserves, with the book 
value and required reserves to be determined after the 
adjustments provided for in subdivision 11, then the state board 
shall allocate five percent of the excess investment income as 
an asset of the fund.  The excess investment income allocated as 
an asset of the fund shall not exceed the difference between 
book value and required reserves.  The remaining amount shall be 
termed available for distribution.  The book value of assets on 
any given date shall be the net assets at cost less the excess 
investment income determined pursuant to clause (1)(c); 
    (d) The resulting total amount available for distribution 
shall be increased by 2-1/2 percent, and the result shall be 
stated as a percentage of the total amount of the required 
reserves pursuant to clause (2)(b), and if the percentage is 
equal to or greater than one percent, the amount shall be 
certified to each participating public pension fund or plan as 
the amount of the full postretirement adjustment amount.  If the 
percentage is less than one percent, no postretirement 
adjustment shall be payable in that year and the amount 
otherwise available for distribution shall be credited to a 
separate reserve established for this purpose.  The reserve 
shall be invested in the same manner as all other assets of the 
fund and shall be credited with any investment income as 
specified in clause (1)(a).  Amounts credited to the reserve 
shall be utilized in determining a postretirement adjustment in 
the subsequent year.  The amount of any full postretirement 
adjustment certified by the state board as payable to the 
participating public pension plans or funds shall be carried to 
five decimal places and stated as a percentage. 
    (e) A retirement annuity payable in the event of retirement 
before becoming eligible for social security benefits as 
provided in section 352.116, subdivision 3; 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 shall be the 
annuity amount payable until age 62 or 65, whichever applies.  A 
postretirement adjustment granted on the period certain 
retirement annuity must terminate when the period certain 
retirement annuity terminates. 
    Sec. 2.  Minnesota Statutes 1988, section 11A.18, 
subdivision 10, is amended to read: 
    Subd. 10.  [PAYMENT OF POSTRETIREMENT ADJUSTMENT.] Upon 
receiving the certification of the amount of the full 
postretirement adjustment from the state board, each 
participating public pension fund or plan shall determine the 
amount of the postretirement adjustment payable to each eligible 
annuitant and benefit recipient.  The dollar amount of the 
postretirement adjustment payable to each annuitant or benefit 
recipient shall be calculated by applying the certified 
postretirement adjustment percentage to the amount of the 
monthly annuity or benefit payable to each eligible annuitant or 
benefit recipient eligible for a full adjustment.  
    The dollar amount of the partial postretirement adjustment 
payable to each annuitant or benefit recipient eligible for a 
partial adjustment shall be calculated by first determining a 
partial percentage amount that bears the same ratio to the 
certified full adjustment percentage amount as the number of 
full months of annuity or benefit receipt as of the current June 
30 bears to 12 full months.  The partial percentage amount 
determined shall then be applied to the amount of the monthly 
annuity or benefit payable to each annuitant or benefit 
recipient eligible to receive a partial postretirement 
adjustment.  The postretirement adjustment adjustments shall 
commence to be paid on January 1 following the calculations 
required pursuant to this section and shall thereafter be 
included in the monthly annuity or benefit paid to the 
recipient. Notwithstanding section 356.18, any adjustment 
adjustments pursuant to this section shall be paid automatically 
unless the intended recipient files a written notice with the 
applicable participating public pension fund or plan requesting 
that the adjustment not be paid. 
    Sec. 3.  [EFFECTIVE DATES.] 
    Sections 1 and 2 are effective the day following final 
enactment. 

                               ARTICLE 15

                           PRE 1973 RETIREES
    Section 1.  [356.86] [POSTRETIREMENT ADJUSTMENT; LUMP SUM 
PAYMENTS.] 
    Subdivision 1.  [ENTITLEMENT.] A person who is receiving a 
retirement annuity, a disability benefit or a surviving spouse's 
annuity or benefit from a retirement fund specified in 
subdivision 3, clauses (1) to (8) is entitled to receive a 
postretirement adjustment from the applicable retirement fund in 
the amount specified in subdivision 2, if the annuity or benefit 
was computed under: 
    (1) the laws in effect before June 1, 1973, if the person 
is receiving an annuity or benefit from the retirement fund 
specified in subdivision 3, clause (4); or 
    (2) the laws in effect before July 1, 1973, if the person 
is receiving an annuity or benefit from a retirement fund 
specified in subdivision 3, clause (1), (2), (3), or (5); or 
    (3) the metropolitan transit commission-transit operating 
division employees retirement fund plan document in effect on or 
before December 31, 1977, if the person is receiving a 
retirement annuity, a disability benefit or a surviving spouse's 
annuity or benefit from the retirement fund specified in 
subdivision 3, clause (5); or 
    (4) the laws in effect before May 1, 1974 and before any 
adjustment under Laws 1987, chapter 372, article 3, if the 
person is receiving an annuity or benefit from the retirement 
fund specified in subdivision 3, clause (6); or 
     (5) the laws in effect before January 1, 1970, if the 
person is receiving an annuity or benefit from the retirement 
fund specified in subdivision 3, clause (7); or 
    (6) the laws in effect before June 30, 1971, if the person 
is receiving an annuity or benefit from the retirement fund 
specified in subdivision 3, clause (8). 
    Subd. 2.  [AMOUNT OF POSTRETIREMENT ADJUSTMENT; 
PAYMENT.] (a) For any person receiving an annuity or benefit on 
November 30, 1989, and entitled to receive a postretirement 
adjustment under subdivision 1, the postretirement adjustment is 
a lump sum payment calculated under paragraph (b) or (c). 
    (b) For coordinated plan members the postretirement 
adjustment in 1989 is $25 for each full year of allowable 
service credited to the person by the respective retirement 
fund.  In 1990 and each following year the postretirement 
adjustment is the amount payable in the preceding year increased 
by the same percentage applied to regular annuities paid from 
the postretirement fund or, for the retirement funds specified 
in subdivision 3, clauses (6), (7), and (8), by the same 
percentage applied under the articles of incorporation and 
bylaws of these funds. 
    (c) For basic plan members the postretirement adjustment, 
in 1989 is the greater of: 
    (1) $25 for each full year of allowable service credited to 
the person by the respective retirement fund; or 
    (2) the difference between: 
    (i) the product of $400 times the number of full years of 
allowable service credited to the person by the respective 
retirement fund; and 
    (ii) the sum of the benefits payable to the person from any 
Minnesota public employee pension plan, and cash benefits 
payable to the person from the social security administration. 
    In 1990 and each following year each basic plan member 
shall receive the amount received in the preceding year 
increased by the same percentage applied to regular annuities 
paid from the postretirement fund or, for the retirement funds 
specified in subdivision 3, clauses (6), (7), and (8), by the 
same percentage applied under the articles of incorporation and 
bylaws of these funds. 
    (d) The postretirement adjustment provided for in this 
section is payable for those persons receiving an annuity or 
benefit on November 30, 1989, on December 1, 1989.  In 
subsequent years the adjustment must be paid on December 1, 
unless the beneficiary is entitled to participate in an optional 
benefit receipt schedule under subdivision 4.  This section does 
not authorize the payment of a postretirement adjustment to an 
estate.  Notwithstanding section 356.18, the postretirement 
adjustment provided for in this section must be paid 
automatically unless the intended recipient files a written 
notice with the retirement fund requesting that the 
postretirement adjustment not be paid. 
    Subd. 3.  [COVERED RETIREMENT FUNDS.] The postretirement 
adjustment provided in this section applies to the following 
retirement funds: 
     (1)  public employees retirement fund; 
     (2) public employees police and fire fund; 
     (3) teachers retirement fund; 
    (4) state patrol retirement fund; 
    (5)  state employees retirement fund of the Minnesota state 
retirement system; 
     (6) Minneapolis teachers retirement fund association 
established under chapter 354A; 
    (7) St. Paul teachers retirement fund association, 
established under chapter 354A; and 
    (8) Duluth teachers retirement fund association established 
under chapter 354A. 
    Subd. 4.  [OPTIONAL BENEFIT PAYMENT SCHEDULE.] Basic plan 
benefit recipients receiving adjustments under subdivision (2), 
clause (2)(c) and whose adjustment exceeds 20 percent of their 
Minnesota plan benefit may elect to have the amount of the 
benefit adjustment paid in equal monthly amounts instead of 
receiving a benefit adjustment on December 1 of each year.  
Selection of this option must be made by the recipient in 
writing on forms prepared by the retirement association. 
    Subd. 5.  [SOCIAL SECURITY INFORMATION.] To be eligible for 
a benefit adjustment calculated under subdivision 2, clause 
(2)(c), a person must authorize the social security 
administration to release to the retirement association 
information on the person's social security cash benefits. 
    Subd. 6.  [REPORT.] By September 30, 1990, the retirement 
funds listed in subdivision 3 shall report to the legislature 
and the commissioner of finance on the number of benefit 
recipients eligible for each type of adjustment established in 
subdivision 2, the annual cost of each type of adjustment, and 
the estimated actuarial liability associated with each. 
    Sec. 2.  [POSTRETIREMENT ADJUSTMENT; LUMP SUM PAYMENTS; 
MINNEAPOLIS EMPLOYEES RETIREMENT FUND.] 
    Subdivision 1.  [ENTITLEMENT.] Any person who is receiving 
either an annuity that was computed under the laws in effect 
before March 5, 1974, or a "$2 bill and annuity" annuity from 
the Minneapolis employees retirement fund is entitled to receive 
a postretirement adjustment from the applicable retirement fund 
in the amount specified in subdivision 2.  
    Subd. 2.  [AMOUNT OF POSTRETIREMENT ADJUSTMENT; 
PAYMENT.] For any person receiving an annuity or benefit on 
November 30, 1989, or on November 30, 1990, and entitled to 
receive a postretirement adjustment under subdivision 1, the 
postretirement adjustment under subdivision 1, the 
postretirement adjustment is a lump sum payment in an amount 
equal to $25 during 1989 and $25 during 1990 for each full year 
of allowable service credited to the person by the respective 
retirement fund. 
    The postretirement adjustment provided in this section is 
payable for those persons receiving an annuity or benefit on 
November 30, 1989, on December 1, 1989, and for those persons 
receiving an annuity or benefit on November 30, 1990, on 
December 1, 1990.  This section does not authorize the payment 
of a postretirement adjustment to an estate.  Notwithstanding 
Minnesota Statutes, section 356.18, the postretirement 
adjustment provided for in this section must be paid 
automatically unless the intended recipient files a written 
notice with the retirement fund requesting that the 
postretirement adjustment not be paid. 
    Subd. 3.  [APPROPRIATION AND TERMINAL AUDIT.] To fund the 
postretirement benefits provided in this section for eligible 
persons in the Minneapolis employees retirement fund, there is 
appropriated from the general fund the amount of $916,745 for 
fiscal year 1990 and $916,745 for fiscal year 1991.  The 
Minneapolis employees retirement fund shall, as soon as 
practical following the payment of the postretirement 
adjustment, calculate the amount of any appropriation 
apportioned to it that is in excess of the amounts required to 
pay the postretirement adjustments provided in this section.  
The calculations required by this subdivision must be reported 
to and verified by the commissioner of finance.  Amounts equal 
to reported excess appropriations must be returned to the 
general fund. 

                               ARTICLE 16

                              LEGISLATORS
    Section 1.  Minnesota Statutes 1988, section 3A.01, is 
amended by adding a subdivision to read: 
    Subd. 6a.  [SALARY.] "Salary" means the regular 
compensation payable under law to legislators and paid to the 
person for service as a legislator.  The term includes the 
monthly compensation paid to the legislator, and the per diem 
payments paid during a regular or special session to the 
legislator.  The term does not include per diem payments paid 
other than during the regular or special session, additional 
compensation attributable to a leadership position under section 
3.099, subdivision 3, living expense payments under section 
3.101, and special session living expense payments under section 
3.103. 
    Sec. 2.  Minnesota Statutes 1988, section 3A.01, 
subdivision 7, is amended to read: 
    Subd. 7.  [AVERAGE MONTHLY SALARY.] With regard to any 
member of the legislature whose service terminates prior to the 
beginning of the 1981 legislative session, "average monthly 
salary" means final monthly salary during the member's final 
term of office as a member of the legislature; and with regard 
to any member of the legislature whose service terminates after 
the beginning of the 1981 legislative session, "Average monthly 
salary" means the average of the member's highest five 
successive years of salary received as a member of the 
legislature after the beginning of the 1981 legislative session, 
or all the years and months salary after the beginning of the 
1981 legislative session if the member's service after the 
beginning of the 1981 legislative session is less than five 
years.  Any additional payments provided by law for legislative 
leadership positions shall not be included in any calculation of 
the average monthly salary of a legislator or former 
legislator and upon which the member has made contributions 
under section 3A.03, subdivision 1, payments for past service 
under section 3A.02, subdivision 2, or payments in lieu of 
contributions under section 3A.031. 
    Sec. 3.  Minnesota Statutes 1988, section 3A.02, 
subdivision 1, is amended to read: 
    Subdivision 1.  [QUALIFICATIONS.] Any (a) A former 
legislator is entitled, upon written application to the 
director, to receive a retirement allowance monthly, if the 
person: 
    (1) Who has served at least six full years, without regard 
to the application of section 3A.10, subdivision 2, or who has 
served during all or part of four regular sessions as a member 
of the legislature, which service need not be continuous, but 
must have been after January 1, 1965 except as hereinafter 
provided; and 
    (2) who attains has attained the normal retirement age; and 
    (3) Who has retired as a member of the legislature; and 
    (4) Who has made all contributions provided for in section 
3A.03, or who has made payments in lieu of all contributions 
provided for in section 3A.03 as provided for in for past 
service under subdivision 2, or has made payments in lieu of 
contributions under section 3A.031; shall be entitled upon 
written application to the director to receive a retirement 
allowance monthly. 
    (b) For service rendered prior to before the beginning of 
the 1979 legislative session, but not to exceed eight years of 
service, the retirement allowance shall be is an amount equal to 
five percent per year of service of that member's average 
monthly salary.  For service in excess of eight years 
rendered prior to before the beginning of the 1979 legislative 
session, and for service rendered after the beginning of the 
1979 legislative session, the retirement allowance shall be is 
an amount equal to 2-1/2 percent per year of service of that 
member's average monthly salary. 
    (c) The retirement allowance shall accrue accrues beginning 
with the first day of the month of receipt of the application 
and for the remainder of the former legislator's life, provided 
if the former legislator is not serving as a member of the 
legislature or as a constitutional officer or commissioner as 
defined in section 352C.021, subdivisions 2 and 3. 
    (d) Any member who has served during all or part of four 
regular sessions shall be deemed is considered to have served 
eight years as a member of the legislature. 
    (e) The retirement allowance shall cease ceases with the 
last payment which had that accrued to the retired legislator 
during the retired legislator's lifetime, except that the 
surviving spouse, if any, shall be is entitled to the retirement 
allowance for the calendar month in which the retired legislator 
died. 
    Effective for service rendered after the beginning of the 
1981 legislative session, no member may accrue credit for more 
than 20 years service, nor shall member contributions thereafter 
be required for more than 20 years service. 
     Sec. 4.  Minnesota Statutes 1988, section 3A.02, 
subdivision 1b, is amended to read: 
    Subd. 1b.  [REDUCED RETIREMENT ALLOWANCE.] Upon separation 
from service after the beginning of the 1981 legislative 
session, a former member of the legislature who has attained the 
age of at least 60 years and who is otherwise qualified in 
accordance with subdivision 1 is entitled upon making written 
application on forms supplied by the director to a retirement 
allowance in an amount equal to the retirement allowance 
specified in subdivision 1 reduced by one-half of one percent 
for each month that the former member of the legislature is 
under so that the reduced annuity is the actuarial equivalent of 
the annuity that would be payable if the former member of the 
legislature deferred receipt of the annuity and the annuity 
amount were augmented at an annual rate of three percent 
compounded annually from the date the annuity begins to accrue 
until age 62. 
     Sec. 5.  Minnesota Statutes 1988, section 3A.02, 
subdivision 4, is amended to read: 
    Subd. 4.  [DEFERRED ANNUITIES AUGMENTATION.] The deferred 
annuity of any former legislator shall be augmented as provided 
herein.  The required reserves applicable to the deferred 
annuity, determined as of the date the benefit begins to accrue 
using an appropriate mortality table and an interest assumption 
of five percent, shall be augmented from the first of the month 
following termination of service, or July 1, 1973, whichever is 
later, to the first day of the month in which the annuity begins 
to accrue, at the rate of five percent per annum compounded 
annually until January 1, 1981, and thereafter at the rate of 
three percent per annum compounded annually until January 1 of 
the year in which the former legislator attains age 55.  From 
that date to the effective date of retirement, the rate is five 
percent compounded annually. 
    Sec. 6.  [3A.031] [PAYMENTS IN LIEU OF MEMBER CONTRIBUTIONS 
IN CERTAIN INSTANCES.] 
    A member may make a payment in lieu of member contributions 
on all or a portion of the member's per diem payments that were 
paid during the regular and special sessions after December 31, 
1988, and before July 1, 1989.  The amount of the payment is 
nine percent of the regular or special session per diem payments 
paid during the applicable period, plus interest at the annual 
rate of six percent, compounded annually, from the date the per 
diem payment was made to the date on which the payment in lieu 
of member contributions is made. 
    Sec. 7.  [TRANSITIONAL PROVISION.] 
    A member of the legislature on the effective date of this 
section to whom the service limit in Minnesota Statutes 1988, 
section 3A.02, subdivision 1, applies is entitled to again 
accrue service credit in and have member contributions deducted 
for crediting to the legislators retirement plan, effective with 
the start of the 1989 legislative session. 
    Sec. 8.  [REPEALER.] 
    Section 6 is repealed, effective July 1, 1994. 
    Sec. 9.  [EFFECTIVE DATE.] 
    Sections 1 to 8 are effective the day following final 
enactment.  Section 7 applies retroactively to January 1, 1989. 

                               ARTICLE 17

                            POLICE AND FIRE
    Section 1.  Minnesota Statutes 1988, section 352.116, is 
amended by adding a subdivision to read: 
    Subd. 3a.  [BOUNCE BACK ANNUITY.] (a) The board of trustees 
must provide a joint and survivor annuity option to members of 
the correctional employees and state patrol retirement funds.  
Under this option, a former member or disabilitant must receive 
a normal single life annuity if the designated optional annuity 
beneficiary dies before the former member or disabilitant.  
Under this option, no reduction may be made in the person's 
annuity to provide for restoration of the normal single life 
annuity in the event of the death of the designated optional 
annuity beneficiary. 
    (b) A former member or disabilitant of the correctional or 
state patrol fund who selected an optional joint and survivor 
annuity before July 1, 1989, but did not choose an option that 
provides that the normal single life annuity is payable to the 
former member or the disabilitant if the designated optional 
annuity beneficiary dies first, is eligible for restoration of 
the normal single life annuity if the designated optional 
annuity beneficiary dies first, without further actuarial 
reduction of the person's annuity.  A former member or 
disabilitant who selected an optional joint and survivor 
annuity, but whose designated optional annuity beneficiary died 
before July 1, 1989, shall receive a normal single life annuity 
after that date, but shall not receive retroactive payments for 
periods before that date. 
    (c) A former member or disabilitant who took a further 
actuarial reduction to elect an optional joint and survivor 
annuity that provides that the normal annuity is payable to the 
former member or disabilitant if the designated optional 
beneficiary died before July 1, 1989, shall have their annuity 
increased as of July 1, 1989, to the amount the person would 
have received if, at the time of retirement or disability, the 
person had selected only optional survivor coverage that would 
not have provided for restoration of the normal annuity upon the 
death of the designated optional annuity beneficiary.  Any 
annuity or benefit increase under this paragraph is effective 
only for payments made after June 30, 1989, and is not 
retroactive for payments made before July 1, 1989. 
    Sec. 2.  Minnesota Statutes 1988, section 352.93, 
subdivision 2, is amended to read: 
    Subd. 2.  [CALCULATING MONTHLY ANNUITY.] The monthly 
annuity under this section must be determined by multiplying the 
average monthly salary by the number of years, or completed 
months, of covered correctional service by 2.5 percent for the 
first 25 years of correctional service and two percent for each 
year after that.  However, the monthly annuity must not exceed 
75 percent of the average monthly salary.  
    Sec. 3.  Minnesota Statutes 1988, section 352.93, is 
amended by adding a subdivision to read: 
    Subd. 2a.  [EARLY RETIREMENT.] Any covered correctional 
employee who has attained the age of at least 50 and who has at 
least five years of allowable service is entitled upon 
application to a retirement annuity equal to the normal annuity 
calculated under subdivision 2, reduced so that the reduced 
annuity is the actuarial equivalent of the annuity that would be 
payable if the employee deferred receipt of the annuity from the 
day the annuity begins to accrue to age 55. 
    Sec. 4.  Minnesota Statutes 1988, section 352.95, 
subdivision 1, is amended to read: 
    Subdivision 1.  [JOB-RELATED DISABILITY.] A covered 
correctional employee less than 55 years old who becomes 
disabled and physically unfit to perform the duties of the 
position as a direct result of an injury, sickness, or other 
disability incurred in or arising out of any act of duty that 
makes the employee physically or mentally unable to perform the 
duties, is entitled to a disability benefit based on covered 
correctional service only.  The benefit amount must equal 50 
percent of the average salary defined in section 352.93, plus an 
additional 2-1/2 percent for each year of covered correctional 
service in excess of 20 years but not in excess of 25 years, and 
two percent for each year of covered correctional service in 
excess of 25 years, prorated for completed months, to a maximum 
monthly benefit of 75 percent of the average monthly salary. 
    Sec. 5.  Minnesota Statutes 1988, section 352.95, 
subdivision 2, is amended to read: 
    Subd. 2.  [NON-JOB-RELATED DISABILITY.] Any covered 
correctional employee who, after at least five years one year of 
covered correctional service, before reaching the age of 55 
becomes disabled and physically unfit to perform the duties of 
the position because of sickness or injury occurring while not 
engaged in covered employment, is entitled to a disability 
benefit based on covered correctional service only.  The 
disability benefit must be computed as provided in section 
352.93, subdivisions 1 and 2, and computed as though the 
employee had at least ten 15 years of covered correctional 
service. 
    Sec. 6.  Minnesota Statutes 1988, section 352B.08, 
subdivision 2, is amended to read: 
    Subd. 2.  [NORMAL RETIREMENT ANNUITY.] The annuity must be 
paid in monthly installments.  The annuity shall be equal to the 
amount determined by multiplying the average monthly salary of 
the member by 2-1/2 percent for each year and pro rata for 
completed months of service not exceeding 25 years and two 
percent for each year and pro rata for completed months of 
service in excess of 25 years.  
    Sec. 7.  Minnesota Statutes 1988, section 352B.08, is 
amended by adding a subdivision to read: 
    Subd. 2a.  [EARLY RETIREMENT.] Any member who has attained 
the age of at least 50 and who has at least five years of 
allowable service is entitled upon application to a retirement 
annuity equal to the normal annuity calculated under subdivision 
2, reduced so that the reduced annuity is the actuarial 
equivalent of the annuity that would be payable if the member 
deferred receipt of the annuity from the day the annuity begins 
to accrue to age 55. 
    Sec. 8.  Minnesota Statutes 1988, section 352B.10, 
subdivision 1, is amended to read: 
    Subdivision 1.  [INJURIES, PAYMENT AMOUNTS.] Any member 
less than 55 years old, who becomes disabled and physically or 
mentally unfit to perform duties as a direct result of an 
injury, sickness, or other disability incurred in or arising out 
of any act of duty, shall receive disability benefits while 
disabled.  The benefits must be paid in monthly installments 
equal to the member's average monthly salary multiplied (1) by 
50 percent and, (2) by plus an additional 2-1/2 percent for each 
year and pro rata for completed months of service in excess of 
20 years, but not exceeding 25 years and two percent for each 
year and pro rata for completed months of service in excess of 
25 years if any. 
    Sec. 9.  Minnesota Statutes 1988, section 352B.10, 
subdivision 2, is amended to read: 
    Subd. 2.  [UNDER 55; DISABLED WHILE NOT ON DUTY.] If a 
member terminates employment after at least five years one year 
of service, before reaching the age of 55, because of sickness 
or injury occurring while not on duty and not engaged in state 
work entitling the member to membership, and the termination is 
necessary because the member cannot perform duties, the member 
is entitled to receive a disability benefit.  The benefit must 
be in the same amount and computed in the same way as if the 
member were 55 years old at the date of disability and the 
annuity were paid under section 352B.08.  If disability under 
this clause occurs after five one but before ten 15 years 
service, the disability benefit must be computed as though the 
member had ten 15 years service. 
    Sec. 10.  Minnesota Statutes 1988, section 352B.11, 
subdivision 2, is amended to read: 
    Subd. 2.  [DEATH; PAYMENT TO SPOUSE AND CHILDREN.] If a 
member serving actively as a member, a member receiving the 
disability benefit provided by section 352B.10, subdivision 1, 
or a former member receiving a disability benefit as provided by 
section 352B.10, subdivision 3, dies from any cause, the 
surviving spouse and dependent children are entitled to benefit 
payments as follows: 
    (a) A member with at least five years of allowable service 
or a former member with at least 20 years of allowable service 
is deemed to have elected a 100 percent joint and survivor 
annuity payable to a surviving spouse only on or after the date 
the member or former member became or would have become 55. 
    (b) The surviving spouse of a member who had credit for 
less than five years of service shall receive, for life, a 
monthly annuity equal to 20 50 percent of that part of the 
average monthly salary of the member from which deductions were 
made for retirement.  If the surviving spouse remarries, the 
annuity shall cease as of the date of the remarriage. 
    (c) The surviving spouse of a member who had credit for at 
least five years service and who died after attaining 55 years 
of age, may elect to receive a 100 percent joint and survivor 
annuity, for life, notwithstanding a subsequent remarriage, in 
lieu of the annuity prescribed in paragraph (b). 
    (d) The surviving spouse of any member who had credit for 
five years or more and who was not 55 years of age at death, 
shall receive the benefit equal to 20 50 percent of the average 
monthly salary as described in clause (b) until the deceased 
member would have reached the age of 55 years, and beginning the 
first of the month following that date, may elect to receive the 
100 percent joint and survivor annuity.  If the surviving spouse 
remarries before the deceased member's 55th birthdate, benefits 
or annuities shall cease as of the date of remarriage.  
Remarriage after the deceased member's 55th birthday shall not 
affect the payment of the benefit. 
    (e) Each dependent child shall receive a monthly annuity 
equal to ten percent of that part of the average monthly salary 
of the former member from which deductions were made for 
retirement.  A dependent child over 18 and under 22 23 years of 
age also may receive the monthly benefit provided in this 
section, if the child is continuously attending an accredited 
school as a full-time student during the normal school year as 
determined by the director.  If the child does not continuously 
attend school but separates from full-time attendance during any 
part of a school year, the annuity shall cease at the end of the 
month of separation.  In addition, a payment of $20 per month 
shall be prorated equally to surviving dependent children when 
the former member is survived by one or more dependent 
children.  Payments for the benefit of any qualified dependent 
child must be made to the surviving spouse, or if there is none, 
to the legal guardian of the child.  The maximum monthly benefit 
must not be less than 50 nor exceed 40 70 percent of the average 
monthly salary for any number of children. 
    (f) If the member dies under circumstances that entitle the 
surviving spouse and dependent children to receive benefits 
under the workers' compensation law, the workers' compensation 
benefits received by them must not be deducted from the benefits 
payable under this section. 
    (g) The surviving spouse of a deceased former member who 
had credit for five or more years of allowable service, but not 
the spouse of a former member receiving a disability benefit 
under section 352B.10, subdivision 3, is entitled to receive the 
100 percent joint and survivor annuity at the time the deceased 
member would have reached the age of 55 years, if the surviving 
spouse has not remarried before that date.  If a former member 
dies who does not qualify for other benefits under this chapter, 
the surviving spouse or, if none, the children or heirs are 
entitled to a refund of the accumulated deductions left in the 
fund plus interest at the rate of five percent per year 
compounded annually. 
    Sec. 11.  Minnesota Statutes 1988, section 353.30, is 
amended by adding a subdivision to read: 
    Subd. 3b.  [BOUNCE BACK ANNUITY.] (a) The board of trustees 
must provide a joint and survivor annuity option to members of 
the police and fire fund.  Under this option, a former member or 
disabilitant must receive a normal single life annuity if the 
designated optional annuity beneficiary dies before the former 
member or disabilitant.  Under this option, no reduction may be 
made in the person's annuity to provide for restoration of the 
normal single life annuity in the event of the death of the 
designated optional annuity beneficiary. 
    (b) A former member or disabilitant of the police and fire 
fund who selected an optional joint and survivor annuity before 
July 1, 1989, but did not choose an option that provides that 
the normal single life annuity is payable to the former member 
or the disabilitant if the designated optional annuity 
beneficiary dies first, is eligible for restoration of the 
normal single life annuity if the designated optional annuity 
beneficiary dies first, without further actuarial reduction of 
the person's annuity.  A former member or disabilitant who 
selected an optional joint and survivor annuity, but whose 
designated optional annuity beneficiary died before July 1, 
1989, shall receive a normal single life annuity after that 
date, but shall not receive retroactive payments for periods 
before that date. 
    (c) A former member or disabilitant who took a further 
actuarial reduction to elect an optional joint and survivor 
annuity that provides that the normal annuity is payable to the 
former member or disabilitant if the designated optional 
beneficiary died before July 1, 1989, shall have their annuity 
increased as of July 1, 1989, to the amount the person would 
have received if, at the time of retirement or disability, the 
person had selected only optional survivor coverage that would 
not have provided for restoration of the normal annuity upon the 
death of the designated optional annuity beneficiary.  Any 
annuity or benefit increase under this paragraph is effective 
only for payments made after June 30, 1989, and is not 
retroactive for payments made before July 1, 1989. 
    Sec. 12.  Minnesota Statutes 1988, section 353.651, 
subdivision 3, is amended to read: 
    Subd. 3.  [RETIREMENT ANNUITY FORMULA.] The average salary 
as defined in subdivision 2, multiplied by 2-1/2 percent per 
year of allowable service for the first 25 years and two percent 
per year of allowable service thereafter, shall determine the 
amount of the normal retirement annuity.  If the member has 
earned allowable service for performing services other than 
those of a police officer or firefighter, the annuity 
representing such service shall be computed in accordance with 
sections 353.29 and 353.30. 
    Sec. 13.  Minnesota Statutes 1988, section 353.651, is 
amended by adding a subdivision to read: 
    Subd. 4.  [EARLY RETIREMENT.] Any police officer or 
firefighter member who has attained the age of at least 50 and 
who has at least five years of allowable service is entitled 
upon application to a retirement annuity equal to the normal 
annuity calculated under subdivision 3, reduced so that the 
reduced annuity is the actuarial equivalent of the annuity that 
would be payable to the member if the member deferred receipt of 
the annuity from the day the annuity begins to accrue until the 
member attains age 55. 
    Sec. 14.  Minnesota Statutes 1988, section 353.656, 
subdivision 1, is amended to read: 
    Subdivision 1.  [IN LINE OF DUTY; COMPUTATION OF BENEFITS.] 
Any member of the police and fire fund less than 55 years of 
age, who shall become disabled and physically unfit to perform 
duties as a police officer or firefighter subsequent to June 30, 
1973, as a direct result of an injury, sickness, or other 
disability incurred in or arising out of any act of duty, which 
shall render the member physically or mentally unable to perform 
duties as a police officer or firefighter, shall receive 
disability benefits during the period of such disability.  The 
benefits shall be in an amount equal to 50 percent of the 
"average salary" pursuant to subdivision 3 plus an additional 
2-1/2 percent of said average salary for each year of service in 
excess of 20 years but not exceeding 25 years and two percent 
for each year thereafter.  Should disability under this 
subdivision occur before the member has at least five years of 
allowable service credit in the police and fire fund, the 
disability benefit shall be computed on the "average salary" 
from which deductions were made for contribution to the police 
and fire fund. 
    Sec. 15.  Minnesota Statutes 1988, section 353.656, 
subdivision 3, is amended to read: 
    Subd. 3.  [NONDUTY DISABILITY BENEFIT.] Any member who 
becomes disabled after not less than five years one year of 
allowable service, before reaching the age of 55, because of 
sickness or injury occurring while not on duty as a police 
officer or firefighter, and by reason of that sickness or injury 
the member is unable to perform duties as a police officer or 
firefighter, shall be entitled to receive a disability benefit.  
The benefit shall be in the same amount and paid in the same 
manner as if the member were 55 years of age at the date of 
disability and the benefit were paid pursuant to section 
353.651.  If a disability under this subdivision occurs 
after five one but in less than ten 15 years of allowable 
service, the disability benefit shall be the same as though the 
member had at least ten 15 years service.  For any member who is 
employed as a full-time firefighter by the department of 
military affairs of the state of Minnesota, allowable service as 
a full-time state military affairs department firefighter 
credited by the Minnesota state retirement system may be used in 
meeting the minimum allowable service requirement of this 
subdivision. 
    Sec. 16.  Minnesota Statutes 1988, section 353.657, 
subdivision 2, is amended to read: 
    Subd. 2.  The spouse, for life or until remarriage, shall 
receive a monthly benefit equal to 30 50 percent of the member's 
average full-time monthly salary rate as a police officer or 
firefighter in effect over the last six months of allowable 
service preceding the month in which death occurred. 
    Sec. 17.  Minnesota Statutes 1988, section 353.657, 
subdivision 3, is amended to read: 
    Subd. 3.  Each dependent child, until the child reaches the 
age of 18 years, shall receive a monthly benefit equal to ten 
percent of the member's average full-time monthly salary rate as 
a police officer or firefighter in effect over the last six 
months of allowable service preceding the month in which death 
occurred.  A dependent child shall receive this benefit until 
age 23, so long as the child submits evidence of full-time 
enrollment in an accredited post-secondary educational 
institution for at least five of the 12 months immediately 
preceding the month for which benefits are sought.  Payments for 
the benefit of any qualified dependent child under the age of 18 
years shall be made to the surviving parent, or if there be 
none, to the legal guardian of the child or to any adult person 
with whom the child may at the time be living, provided only 
that the parent or other person to whom any amount is to be paid 
shall have advised the board in writing that the amount will be 
held or used in trust for the benefit of the child.  The maximum 
monthly benefit for any one family shall not exceed an amount 
equal to 50 70 percent of the member's specified average monthly 
salary, and the minimum benefit per family shall not be less 
than 30 50 percent of the member's specified average monthly 
salary. 
    Sec. 18.  [EFFECTIVE DATE.] 
    Sections 1 to 17 are effective July 1, 1989. 

                              ARTICLE 18 

                STATE UNIVERSITY AND COMMUNITY COLLEGE 

                  INDIVIDUAL RETIREMENT ACCOUNT PLAN 
    Section 1.  Minnesota Statutes 1988, section 354.05, 
subdivision 2a, is amended to read: 
    Subd. 2a.  [EXCEPTIONS.] Notwithstanding subdivision 2, a 
person who is first employed as a teacher in the state 
university system or the state community college system after 
June 30, 1988 1989, is not a member of the fund except for 
purposes of social security coverage unless the person is 
covered by section 354B.02, subdivision 2, and has exercised an 
option under that subdivision to remain remains a member of the 
fund for all purposes. 
    Sec. 2.  Minnesota Statutes 1988, section 354.05, 
subdivision 5, is amended to read: 
    Subd. 5.  [MEMBER OF FUND.] The term "member of fund" means 
every teacher who joins and contributes to the teachers 
retirement fund as provided in this chapter who has not 
retired., except a teacher covered by section 354B.02, 
subdivision 2 or 3, who elects to participate in the individual 
retirement account plan under chapter 354B. 
    Sec. 3.  Minnesota Statutes 1988, section 354.66, 
subdivision 2, is amended to read: 
    Subd. 2.  A teacher in the public elementary schools, 
secondary schools, or technical institutes, or in the community 
college system or the state university system of the state who 
has 20 years or more of allowable service in the fund or 20 
years or more of full time teaching service in Minnesota public 
elementary schools, secondary schools, or technical 
institutes, or in the community college system or the state 
university system, or a teacher in the community college system 
or state university system who has attained at least age 55 and 
has ten years or more of full-time teaching service, may, by 
agreement with the board of the employing district, be assigned 
to teaching service within the district in a part-time teaching 
position. 
    Sec. 4.  [354B.015] [SOCIAL SECURITY COVERAGE.] 
    Plan participants under section 354B.02, subdivision 1, and 
persons electing participation under section 354B.02, 
subdivision 2 or 3, remain members of the teachers retirement 
association for purposes of social security coverage only and 
remain covered by the applicable agreement entered into under 
section 355.02, but are not members of the association for any 
other purpose while employed in covered employment. 
    Sec. 5.  Minnesota Statutes 1988, section 354B.02, is 
amended to read: 
    354B.02 [COVERED PERSONS.] 
    Subdivision 1.  [PLAN PARTICIPANTS.] Except as provided in 
subdivision 2, a person who was first employed in covered 
employment after June 30, 1988 1989, shall participate in the 
plan. 
    Subd. 2.  [PERSONS WITH CERTAIN PRIOR SERVICE.] A person 
with less than three years of prior allowable service as a 
member of the teachers retirement association other than in 
covered employment under section 354B.01, subdivision 2 or 
3, who is entitled to a deferred annuity under section 354.55, 
subdivision 11, and who is first employed in covered employment 
after June 30, 1988 1989, may, at the person's option, remain a 
member of the teacher's retirement association for all purposes 
or elect to participate in the plan.  This election must be made 
within 60 days of the start of covered employment. 
    Subd. 3.  [OPTIONAL PARTICIPATION.] A person with less than 
three years of allowable service who was first employed in 
covered employment before July 1, 1989, and who is a coordinated 
member of the teachers retirement association, may elect to 
transfer retirement coverage to the plan under section 6.  The 
election must be made on a form provided by the executive 
director.  An election to transfer retirement coverage to the 
plan must be made before July 1, 1992, and is irrevocable.  When 
a member transfers coverage to the plan, all existing service 
credits with the association to which the person was entitled 
before the transfer terminate and may not be restored. 
    Sec. 6.  [354B.03] [COVERAGE TRANSFER.] 
    Subdivision 1.  [PROCEDURE.] If a person with less than 
three years of allowable service elects a transfer to the plan 
under section 5, subdivision 2 or 3, the executive director of 
the teachers retirement association shall transfer from the 
teachers retirement fund to the plan the person's member 
contributions plus interest compounded annually at five percent 
a year.  The transfer must be made within 90 days from the date 
the executive director receives notification of the election.  
The transfer may not include any amount representing an employer 
contribution nor any amount representing the repayment of a 
refund received by the association after the date of enactment 
of this act. 
    Subd. 2.  [LIMITATIONS.] A transfer to the plan under this 
section is a transfer to the financial institution selected by a 
plan administrator to provide annuity contracts or custodial 
accounts and must be made through the governing board of the 
system in which the person electing the transfer is employed in 
covered employment.  No amount may be distributed to the person 
electing the transfer. 
    Subd. 3.  [ELECTION.] A person with more than three years 
of allowable service credit who was first employed in covered 
employment before July 1, 1989, or after June 30, 1989 as 
provided in section 354B.02, subdivision 2, may elect coverage 
by the plan.  If coverage is elected, accumulated employer and 
employee contributions and allowable service credit shall remain 
with the teachers retirement fund and that person shall remain 
eligible for a deferred annuity from that fund augmented with 
interest at the rate of five percent computed as specified in 
section 354.55, subdivision 11.  Future contributions only shall 
be made to the plan. 
    Sec. 7.  Minnesota Statutes 1988, section 354B.04, 
subdivision 2, is amended to read: 
    Subd. 2.  [EMPLOYER CONTRIBUTIONS.] The employer of persons 
in covered employment who participate in the plan shall make an 
employer contribution to the plan in an amount equal to the 
amount prescribed by section 354.42, subdivision 3, and shall 
continue to make an additional employer contribution to the 
teachers retirement association in an amount equal to the amount 
prescribed by section 354.42, subdivision 5. 
    Sec. 8.  Minnesota Statutes 1988, section 354B.05, 
subdivision 3, is amended to read: 
    Subd. 3.  [SELECTION OF FINANCIAL INSTITUTIONS.] The state 
university board and the community college board shall select no 
more than three financial institutions to provide annuity 
contracts or custodial accounts.  Each board may at its 
discretion change a selection of an institution.  Investment 
programs offered by the institutions must meet the requirements 
of section 401(a) or 403(b) of the Internal Revenue Code of 
1986, as amended.  In making their selections, the boards shall 
consider these criteria: 
    (1) the experience and ability of the financial institution 
to provide retirement and death benefits suited to the needs of 
the covered employees; 
    (2) the relationship of the benefits to their cost; and 
    (3) the financial strength and stability of the institution.
    Sec. 9.  Minnesota Statutes 1988, section 354B.05, 
subdivision 4, is amended to read: 
    Subd. 4.  [BENEFITS OWNED BY MEMBERS.] The retirement and 
death benefits provided by the annuity contracts or custodial 
accounts are owned by the members of the plan trust and must be 
paid in accordance with the provisions of the annuity contracts 
or custodial accounts plan document. 
    Sec. 10.  [355.61] [SOCIAL SECURITY COVERAGE FOR CERTAIN 
STATE UNIVERSITY OR COMMUNITY COLLEGE FACULTY.] 
    Plan participants under section 354B.02, subdivision 1, and 
persons electing participation under section 354B.02, 
subdivision 2 or 3, remain members of the teachers retirement 
association for purposes of social security coverage only, and 
remain covered by the applicable agreement entered into under 
section 355.02, but are not members of the teachers retirement 
association for any other purpose while employed in covered 
employment. 
    Sec. 11.  [EFFECTIVE DATE OF COVERAGE.] 
    Notwithstanding Laws 1988, chapter 709, article 11, 
sections 1, 3, and 7, persons first employed in covered 
employment between June 30, 1988, and July 1, 1989, are members 
of the teachers retirement association for all purposes but are 
eligible to elect to participate in the plan under section 6. 
    Sec. 12.  [REPEALER.) 
    Section 6 is repealed October 1, 1992. 
    Sec. 13.  [EFFECTIVE DATE.] 
    Sections 1 to 12 are effective July 1, 1989. 

                               ARTICLE 19
    Section 1.  [CITATION.] 
    Sections 1 to 7 may be cited as the "pension refinancing 
and incentive to retirement investment earnings act of 1989." 
    Sec. 2.  Minnesota Statutes 1988, section 69.031, 
subdivision 5, is amended to read: 
    Subd. 5.  [DEPOSIT OF STATE AID.] (1) The municipal 
treasurer, on receiving the fire state aid, shall within 30 days 
after receipt transmit it to the treasurer of the duly 
incorporated firefighters' relief association if there is one 
organized and the association has filed a financial report with 
the municipality; but if there is no relief association 
organized, or if any association dissolve, be removed, or has 
heretofore dissolved, or has been removed as trustees of state 
aid, then the treasurer of the municipality shall keep the money 
in the municipal treasury as provided for in section 424A.08 and 
shall be disbursed only for the purposes and in the manner set 
forth in that section. 
    (2) The municipal treasurer, upon receipt of the police 
state aid, shall disburse the police state aid in the following 
manner: 
    (a) For a municipality in which a local police relief 
association exists and all peace officers are members of the 
association, the total state aid shall be transmitted to the 
treasurer of the relief association within 30 days of the date 
of receipt, and the treasurer of the relief association shall 
immediately deposit the total state aid in the special fund of 
the relief association; 
    (b) For a municipality in which police retirement coverage 
is provided by the public employees police and fire fund and all 
peace officers are members of the fund, the total state aid 
shall be applied toward the municipality's employer contribution 
to the public employees police and fire fund pursuant to section 
353.65, subdivision 3, and any state aid in excess of the amount 
required to meet the employer's contribution pursuant to section 
353.65, subdivision 3, shall also be contributed to the public 
employees police and fire fund and credited in the manner to be 
specified by the board of trustees of the public employees 
retirement association; or 
    (c) For a municipality other than a city of the first class 
with a population of more than 300,000 in which both a police 
relief association exists and police retirement coverage is 
provided in part by the public employees police and fire fund, 
the municipality may elect at its option to transmit the total 
state aid to the treasurer of the relief association as provided 
in clause (a), to use the total state aid to apply toward the 
municipality's employer contribution to the public employees 
police and fire fund subject to all the provisions set forth in 
clause (b), or to allot the total state aid proportionately to 
be transmitted to the police relief association as provided in 
this subdivision and to apply toward the municipality's employer 
contribution to the public employees police and fire fund 
subject to the provisions of clause (b) on the basis of the 
respective number of active full-time peace officers, as defined 
in section 69.011, subdivision 1, clause (g). 
     For a city of the first class with a population of more 
than 300,000, in addition, the city may elect to allot the 
appropriate portion of the total police state aid to apply 
toward the employer contribution of the city to the public 
employees police and fire fund based on the covered salary of 
police officers covered by the fund each payroll period and to 
transmit the balance to the police relief association. 
     (3) The county treasurer, upon receipt of the police state 
aid for the county, shall apply the total state aid toward the 
county's employer contribution to the public employees police 
and fire fund pursuant to section 353.65, subdivision 3, and any 
state aid in excess of the amount required to meet the 
employer's contribution pursuant to section 353.65, subdivision 
3, shall also be contributed to the public employees police and 
fire fund and credited in the manner to be specified by the 
board of trustees of the public employees retirement association.
    Sec. 3.  Minnesota Statutes 1988, section 69.77, 
subdivision 2b, is amended to read: 
    Subd. 2b.  [RELIEF ASSOCIATION FINANCIAL REQUIREMENTS; 
MINIMUM MUNICIPAL OBLIGATION.] The officers of the relief 
association shall determine the financial requirements of the 
relief association and minimum obligation of the municipality 
for the following calendar year in accordance with the 
requirements of this subdivision.  The financial requirements of 
the relief association and the minimum obligation of the 
municipality shall be determined on or before the submission 
date established by the municipality pursuant to subdivision 2c. 
     The financial requirements of the relief association for 
the following calendar year shall be based on the most recent 
actuarial valuation or survey of the special fund of the 
association if more than one fund is maintained by the 
association, or of the association, if only one fund is 
maintained, prepared in accordance with sections 356.215, 
subdivisions 4 to 4k and 356.216, as required pursuant to 
subdivision 2h.  If an actuarial estimate is prepared by the 
actuary of the relief association as part of obtaining a 
modification of the benefit plan of the relief association and 
the modification is implemented, the actuarial estimate shall be 
used in calculating the financial requirements of the relief 
association. 
     If the relief association has an unfunded actuarial accrued 
liability as reported in the most recent actuarial valuation or 
survey, the total of the amounts calculated pursuant to clauses 
(a), (b), and (c) shall constitute the financial requirements of 
the relief association for the following year.  If the relief 
association does not have an unfunded actuarial accrued 
liability as reported in the most recent actuarial valuation or 
survey the amount calculated pursuant to clauses (a) and (b) 
shall constitute the financial requirements of the relief 
association for the following year. 
    (a) The normal level cost requirement for the following 
year, expressed as a dollar amount, which shall be determined by 
applying the normal level cost of the relief association as 
reported in the actuarial valuation or survey and expressed as a 
percentage of covered payroll to the estimated covered payroll 
of the active membership of the relief association, including 
any projected increase in the active membership, for the 
following year. 
    (b) To the dollar amount of normal cost thus determined 
shall be added an amount equal to the dollar amount of the 
administrative expenses of the special fund of the association 
if more than one fund is maintained by the association, or of 
the association if only one fund is maintained, for the most 
recent year, multiplied by the factor of 1.035.  For a relief 
association in a municipality, the administrative expenses are 
those authorized under section 69.80.  No amount of 
administrative expenses under this clause shall be included in 
the financial requirements of a relief association in a city of 
the first class with a population of more than 300,000. 
    (c) To the dollar amount of normal cost and expenses 
determined under clauses (a) and (b) shall be added an amount 
equal to the level annual dollar amount which is sufficient to 
amortize the unfunded actuarial accrued liability by December 
31, 2010, as determined from the actuarial valuation or survey 
of the fund, using an interest assumption set at the rate 
specified in section 356.215, subdivision 4d.  The amortization 
date specified in this clause shall apply to all local police or 
salaried firefighters' relief associations and shall supersede 
any amortization date specified in any applicable special law. 
     The minimum obligation of the municipality shall be an 
amount equal to the financial requirements of the relief 
association reduced by the estimated amount of member 
contributions from covered salary anticipated for the following 
calendar year and the estimated amounts anticipated for the 
following calendar year from the applicable state aid program 
established pursuant to sections 69.011 to 69.051 receivable by 
the relief association after any allocation made pursuant to 
section 69.031, subdivision 5, clause (2), subclause (c) or 
423A.01, subdivision 2, clause (6), from the local police and 
salaried firefighters' relief association amortization aid 
program established pursuant to section 423A.02 and from the 
supplementary amortization state-aid program established under 
Laws 1984, chapter 564, section 48, and Laws 1985, chapter 261, 
section 17. 
    Sec. 4.  Minnesota Statutes 1988, section 356.216, is 
amended to read: 
    356.216 [CONTENTS OF ACTUARIAL VALUATIONS FOR LOCAL POLICE 
AND FIRE FUNDS.] 
    (a) The provisions of section 356.215 governing the 
contents of actuarial valuations shall apply to any local police 
or fire pension fund or relief association required to make an 
actuarial report under this section except as follows: 
    (1) in calculating normal cost and other requirements, if 
required to be expressed as a level percentage of covered 
payroll, the salaries used in computing covered payroll shall be 
the maximum rate of salary from which retirement and 
survivorship credits and amounts of benefits are determined and 
from which any member contributions are calculated and deducted; 
    (2) in lieu of the amortization date specified in section 
356.215, subdivision 4g, the appropriate amortization target 
date specified in section 69.77, subdivision 2b, or 69.773, 
subdivision 4, clause (b), shall be used in calculating any 
required amortization contribution; 
    (3) in addition to the tabulation of active members and 
annuitants provided for in section 356.215, subdivision 4i, the 
member contributions for active members for the calendar year 
and the prospective annual retirement annuities under the 
benefit plan for active members shall be reported; 
    (4) actuarial valuations required pursuant to section 
69.773, subdivision 2, shall be made at least every four years 
and actuarial valuations required pursuant to section 69.77 
shall be made annually; and 
    (5) the actuarial balance sheet showing accrued assets 
valued at market value if the actuarial valuation is required to 
be prepared at least every four years or valued as current 
assets under section 356.215, subdivision 1, clause (5) (6), or 
paragraph (b), whichever applies, if the actuarial valuation is 
required to be prepared annually, actuarial accrued liabilities, 
and the unfunded actuarial accrued liability shall include the 
following required reserves: 
    (a) For active members 
      1.  Retirement benefits 
      2.  Disability benefits 
      3.  Refund liability due to death or withdrawal 
      4.  Survivors' benefits 
     (b) For deferred annuitants' benefits 
     (c) For former members without vested rights 
     (d) For annuitants 
      1.  Retirement annuities 
      2.  Disability annuities 
      3.  Surviving spouses' annuities 
      4.  Surviving children's annuities 
    In addition to those required reserves, separate items 
shall be shown for additional benefits, if any, which may not be 
appropriately included in the reserves listed above.  
    (6) actuarial valuations shall be due by the first day of 
the seventh month after the end of the fiscal year which the 
actuarial valuation covers. 
     (b) For a relief association in a city of the first class 
with a population of more than 300,000, the following provisions 
additionally apply: 
     (1) in calculating the actuarial balance sheet, unfunded 
actuarial accrued liability, and amortization contribution of 
the relief association, "current assets" means the value of all 
assets at cost, including realized capital gains and losses, 
plus or minus, whichever applies, the average value of total 
unrealized capital gains or losses for the most recent 
three-year period ending with the end of the plan year 
immediately preceding the actuarial valuation report 
transmission date; and 
    (2) in calculating the applicable portions of the actuarial 
valuation, an annual preretirement interest assumption of six 
percent, an annual postretirement interest assumption of six 
percent, and an annual salary increase assumption of four 
percent must be used. 
    Sec. 5.  Minnesota Statutes 1988, section 423A.01, 
subdivision 2, is amended to read: 
    Subd. 2.  [OPERATION OF LOCAL RELIEF ASSOCIATION UPON 
MODIFICATION OF RETIREMENT COVERAGE FOR NEWLY HIRED POLICE 
OFFICERS AND FIREFIGHTERS.] The following provisions shall 
govern the operation of a local relief association upon the 
modification of retirement coverage for newly hired police 
officers or firefighters:  
     (1) The minimum obligation of a municipality in which the 
retirement coverage for newly hired police officers or salaried 
firefighters has been modified pursuant to subdivision 1 with 
respect to the local relief association shall be determined and 
governed in accordance with the provisions of sections 69.77, 
356.215 and 356.216, except that the normal cost calculation for 
the relief association shall be computed as a percentage of the 
compensation paid to the active members of the relief 
association.  The compensation paid to persons with retirement 
coverage modified pursuant to subdivision 1 shall not be 
included in any of the computations made in determining the 
obligation of the municipality with respect to the local relief 
association. 
      (2) The contribution rate of members of the local relief 
association shall be governed by section 69.77, unless a special 
law establishing a greater member contribution rate is 
applicable whereupon it shall continue to govern.  The member 
contribution rate of persons with retirement coverage modified 
pursuant to subdivision 1 shall be governed by section 353.65. 
     (3) Unless otherwise provided for by law, when every active 
member of the local relief association retires or terminates 
from active duty, the local relief association shall cease to 
exist as a legal entity and the assets of the special fund of 
the relief association shall be transferred to a trust fund to 
be established by the appropriate municipality for the purpose 
of paying service pensions and retirement benefits to recipient 
beneficiaries.  Recipient beneficiaries who are competent to act 
on their own behalf shall be entitled to select the prescribed 
number of trustees of the trust fund as provided in this clause, 
subject to the approval of the governing body of the 
municipality.  If there are at least five recipient 
beneficiaries, the trust fund shall be managed by a board of 
trustees composed of five persons selected by the recipient 
beneficiaries of the fund.  When there are fewer than five 
recipient beneficiaries, the number of trustees selected by the 
recipient beneficiaries shall be equal to the number of the 
remaining recipient beneficiaries.  The governing body of the 
municipality shall select the additional trustees.  The term of 
the elected members of the board of trustees shall be indefinite 
and shall continue until a vacancy occurs in one of the board of 
trustee member positions.  Board of trustee members shall not be 
compensated for their services, but shall be reimbursed for any 
expenses actually and necessarily incurred as a result of the 
performance of their duties in their capacity as board of 
trustee members.  The municipality shall perform whatever 
services are necessary to administer the trust fund.  When all 
obligations of the trust fund are paid, the balance of the 
assets remaining in the trust fund shall revert to the 
municipality for expenditure for law enforcement or firefighting 
purposes, whichever is applicable. 
     (4) The financial requirements of the trust fund and the 
minimum obligation of the municipality with respect to the trust 
fund shall be determined in accordance with sections 69.77, 
356.215 and 356.216 until the unfunded accrued liability of the 
trust fund is fully amortized in accordance with section 69.77, 
subdivision 2b.  The municipality shall provide in its annual 
budget for at least the aggregate amount of service pensions, 
disability benefits, survivorship benefits and refunds which are 
projected as payable for the following calendar year, as 
determined by the board of trustees of the trust fund, less the 
amount of assets in the trust fund as of the end of the most 
current calendar year for which figures are available, valued 
pursuant to section 356.20, subdivision 4, clause (1)(a), if the 
difference between those two figures is a positive number. 
      (5) In calculating the amount of service pensions and other 
retirement benefits payable from the local relief association 
and in calculating the amount of any automatic post retirement 
increases in those service pensions and retirement benefits 
based on the salary paid or payable to active members or 
escalated in any fashion, the salary for use as the base for the 
service pension or retirement benefit calculation and the post 
retirement increase calculation for the local relief association 
shall be the salary for the applicable position as specified in 
the articles of incorporation or bylaws of the relief 
association as of the date immediately prior to the effective 
date of the modification of retirement coverage for newly hired 
personnel pursuant to subdivision 1, as the applicable salary is 
reset by the municipality periodically, irrespective of whether 
retirement coverage for persons holding the applicable position 
used in calculations is provided by the relief association or by 
the public employees police and fire fund. 
    (6) If the modification of retirement coverage implemented 
pursuant to subdivision 1 is applicable to a local police relief 
association, the police state aid received by the municipality 
shall be disbursed pursuant to section 69.031, subdivision 5, 
clause (2)(c).  If the modification of retirement coverage 
implemented pursuant to subdivision 1 is applicable to a local 
firefighters' relief association, the fire state aid received by 
the applicable municipality other than a city of the first class 
with a population of more than 300,000 shall be disbursed as the 
municipality at its option may elect.  The municipality may 
elect:  (a) to transmit the total fire state aid to the 
treasurer of the local relief association for immediate deposit 
in the special fund of the relief association; or (b) to apply 
the total fire state aid toward the employer contribution of the 
municipality to the public employees police and fire fund 
pursuant to section 353.65, subdivision 3; or (c) to allocate 
the total fire state aid proportionately between the special 
fund of the local relief association and employer contribution 
of the municipality to the public employees police and fire fund 
on the basis of the respective number of active full time 
salaried firefighters receiving retirement coverage from each. 
    For a city of the first class with a population of more 
than 300,000, in addition, the city may elect to allot the 
appropriate portion of the total fire state aid to apply toward 
the employer contribution of the city to the public employees 
police and fire fund based on the covered salary of firefighters 
covered by the fund each payroll period and to transmit the 
balance to the firefighters relief association. 
     Sec. 6.  [DISPOSITION OF ASSETS UPON CONCLUSION OF BENEFIT 
PAYMENTS.] 
     Upon the death of the last benefit recipient and the 
certification by the chief administrative officer of a city of 
the first class with a population of more than 300,000 to the 
state auditor of the absence of any remaining person with a 
benefit entitlement, the assets of the relief association or 
trust fund, whichever applies, must revert to the city and may 
be used by the city only for law enforcement or firefighting 
expenditure purposes, whichever applies. 
    Sec. 7.  [INVESTMENT RELATED POSTRETIREMENT ADJUSTMENTS.] 
    Subdivision 1.  [DEFINITIONS.] For the purposes of this 
section, each of the terms in this subdivision have the meanings 
given them in paragraphs (a) to (h).  
    (a) "Annual postretirement payment" means the payment of a 
lump sum postretirement benefit to an eligible member on June 1 
following the determination date in any year. 
    (b) "City" means a city of the first class with a 
population of more than 300,000. 
    (c) "Determination date" means December 31 of each year. 
    (d) "Eligible member" means a person, including a service 
pensioner, a disability pensioner, a survivor, or dependent of a 
deceased active member, service pensioner, or disability 
pensioner, who received a pension or benefit during the 12 
months before the determination date.  A person who received a 
pension or benefit for the entire 12 months before the 
determination date are eligible for a full annual postretirement 
payment.  A person who received a pension or benefit for less 
than 12 months before the determination date is eligible for a 
prorated annual postretirement payment. 
    (e) "Excess investment income" means the amount by which 
the time weighted total rate of return earned by the fund in the 
most recent fiscal year has exceeded the actual percentage 
increase in the current monthly salary of a top grade patrol 
officer or top grade firefighter, whichever applies, in the most 
recent fiscal year plus two percent.  The excess investment 
income must be expressed as a dollar amount and may not exceed 
one percent of the total assets of the fund and does not exist 
unless the yearly average percentage increase of the time 
weighted total rate of return of the fund for the previous five 
years exceeds by two percent the yearly average percentage 
increase in monthly salary of a top grade patrol officer or top 
grade firefighter, whichever applies, during the previous five 
calendar years.  
     (f) "Fund" means a police relief association or 
firefighters relief association, whichever applies, located in 
the city and governed by Minnesota Statutes, section 69.77. 
    (g) "Relief association" means the police relief 
association or the firefighters relief association, whichever 
applies, located in the city. 
     (h) "Time weighted total rate of return" means the 
percentage amount determined by using the formula or formulas 
established by the state board of investment under Minnesota 
Statutes, section 11A.04, clause (11), and in effect on January 
1, 1987. 
    Subd. 2.  [ANNUAL POSTRETIREMENT PAYMENT AUTHORIZED.] 
Notwithstanding the provisions of Minnesota Statutes, chapter 
69, or any other law to the contrary, the relief association may 
provide annual postretirement payments to eligible members under 
this section. 
     Subd. 3.  [DETERMINATION OF EXCESS INVESTMENT INCOME.] The 
board of trustees of the relief association shall determine by 
May 1 of each year whether or not the relief association has 
excess investment income.  The amount of excess investment 
income, if any, must be stated as a dollar amount and reported 
by the chief administrative officer of the relief association to 
the mayor and governing body of the city, the state auditor, the 
commissioner of finance, and the executive director of the 
legislative commission on pensions and retirement.  The dollar 
amount of excess investment income up to one percent of the 
assets of the fund must be applied for the purpose specified in 
subdivision 4.  Excess investment income must not be considered 
as income to or assets of the fund for actuarial valuations of 
the fund for that year under sections 69.77, 356.215, and 
356.216 and the provisions of this section except to offset the 
annual postretirement payment.  Additional investment income is 
any realized or unrealized investment income other than the 
excess investment income and must be included in the actuarial 
valuations performed under sections 69.77, 356.215, and 356.216 
and the provisions of this section. 
    Subd. 4.  [AMOUNT OF ANNUAL POSTRETIREMENT PAYMENT.] The 
amount determined under subdivision 3 must be applied in 
accordance with this subdivision.  The relief association shall 
apply the first one-half of one percent of excess investment 
income to the payment of an annual postretirement payment as 
specified in this subdivision.  The second one-half of one 
percent of excess investment income shall be applied to reduce 
the state amortization state aid or supplementary amortization 
state aid payments otherwise due to the relief association under 
section 423A.02 for the current calendar year.  The relief 
association shall pay an annual postretirement payment to all 
eligible members in an amount not to exceed one-half of one 
percent of the assets of the fund.  Payment of the annual 
postretirement payment must be in a lump sum amount on June 1 
following the determination date in any year.  Payment of the 
annual postretirement payment may be made only if the time 
weighted total rate of return exceeds by two percent the actual 
percentage increase in the current monthly salary of a top grade 
patrol officer or a top grade firefighter, whichever applies, in 
the most recent fiscal year and the yearly average percentage 
increase of the time weighted total rate of return of the fund 
for the previous five years exceeds by two percent the yearly 
average percentage increase in monthly salary of a top grade 
patrol officer or a top grade firefighter, whichever applies, of 
the previous five years.  The total amount of all payments to 
members may not exceed the amount determined under subdivision 
3.  Payment to each eligible member must be calculated by 
dividing the total number of pension units to which eligible 
members are entitled into the excess investment income available 
for distribution to members, and then multiplying that result by 
the number of units to which each eligible member is entitled to 
determine each eligible member's annual postretirement payment.  
Payment to each eligible member may not exceed an amount equal 
to the total monthly benefit that the eligible member was 
entitled to in the prior year under the terms of the benefit 
plan of the relief association or each eligible member's 
proportionate share of the excess investment income, whichever 
is less.  
    Subd. 5.  [ANNUAL POSTRETIREMENT PAYMENT IN THE EVENT OF 
DEATH.] In the event an eligible member dies after the 
determination date and before the payment of the annual 
postretirement payment, the chief administrative officer of the 
relief association shall pay that eligible member's estate the 
amount to which the eligible member was entitled. 
    Subd. 6.  [REPORT ON ANNUAL POSTRETIREMENT PAYMENT.] The 
chief administrative officer of the relief association shall 
submit a report on the amount of all postretirement payments 
made under this section and the manner in which those payments 
were determined to the state auditor, the executive director of 
the legislative commission on pensions and retirement, and the 
city clerk of the city. 
    Subd. 7.  [NO GUARANTEE OF ANNUAL POSTRETIREMENT PAYMENT.] 
No provision of or payment made under this section may be 
interpreted or relied upon by any member of the relief 
association to guarantee or entitle a member to annual 
postretirement payments for a period when no excess investment 
income is earned by the fund. 
    Sec. 8.  [EFFECTIVE DATE.] 
    Sections 1 to 7 are effective on the day following final 
enactment and apply to 1988 investment performance, actuarial 
valuations covering the calendar year ending December 31, 1988, 
and the annual financial requirements and minimum municipal 
obligation based on the 1988 actuarial valuations. 
    Presented to the governor May 30, 1989 
    Signed by the governor June 1, 1989, 10:19 p.m.