Office of the Revisor of Statutes
Minnesota Session Laws - 1994, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 572-S.F.No. 2498
An act relating to retirement; offering options of
coverage for employees of the higher education board
upon merger of the state university system, community
college board, and technical college board; directing
a study of tax aspects of tax sheltered annuities;
amending Minnesota Statutes 1992, sections 136E.04, by
adding a subdivision; 354.66, subdivision 2; 354B.07,
subdivision 1; and 354B.08; Minnesota Statutes 1993
Supplement, sections 352.01, subdivision 2b; 353.01,
subdivision 2a; 354B.02, subdivision 3c; and 354B.05,
subdivision 1; proposing coding for new law in
Minnesota Statutes, chapters 136C; and 136E.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. [136C.75] [TRANSFER OF RETIREMENT FUND
MEMBERSHIP FOR TECHNICAL COLLEGE EMPLOYEES; ELECTION TO RETAIN
RETIREMENT FUND MEMBERSHIP.]
A person who is employed by a technical college or by the
technical college system on June 30, 1995, and who is
transferred to state employment shall remain a member of the
public employees retirement association or the Minneapolis
employees retirement fund, whichever applies, unless the person
affirmatively elects, in writing, retirement coverage by the
general state employees retirement plan of the Minnesota state
retirement system. The following provisions govern the election
of a transfer or the retention of retirement benefit coverage:
(1) For a person who desires to transfer benefit coverage,
the affirmative written election must be made within 120 days of
the transfer of the employee to state employment.
(2) On behalf of transferred employees who retain
retirement benefit coverage with the pre-transfer retirement
plan, the higher education board shall make the applicable
employer contributions to the public employees retirement
association under section 353.27, subdivisions 3 and 3a, or the
same percentage of covered payroll employer contribution to the
Minneapolis employees retirement fund that special school
district no. 1 is required to make for that school year under
section 422A.101, subdivision 2.
(3) An employee who makes a retirement benefit coverage
transfer election under this section may revoke that election at
any time within the first six months after the person becomes a
state employee. Once an employee revokes the retirement benefit
coverage transfer election, the employee may not make another
election. If the initial retirement benefit coverage transfer
election is revoked, all retirement contributions made by or on
behalf of the employee revoking a prior election must be
transferred to the applicable retirement plan as though they
were erroneous deductions or contributions, plus monthly
interest at an annual rate of 8.5 percent, compounded monthly,
and the balance remaining between any contribution amount
transferred and the amount of contributions that otherwise would
have been due are payable in the applicable proportions by the
revoking employee and the higher education board, plus monthly
interest at an annual rate of 8.5 percent, compounded monthly.
(4) The executive directors of the Minnesota state
retirement system, the public employees retirement association,
and the Minneapolis employees retirement fund, and the
chancellor of the higher education system, shall confer and
jointly adopt appropriate procedures for making the retirement
benefit coverage transfer elections under this section.
(5) The executive directors of the public employees
retirement association, the Minnesota state retirement system,
and the Minneapolis employees retirement fund, whichever
applies, shall, upon request, provide appropriate benefit
counseling to applicable affected employees on the effect of
electing retirement benefit coverage by the general state
employees retirement plan of the Minnesota state retirement
system.
Sec. 2. Minnesota Statutes 1992, section 136E.04, is
amended by adding a subdivision to read:
Subd. 8. [PENSION PLAN.] Effective July 1, 1995, the board
shall assume the administrative responsibility for the
individual retirement account plans in chapter 354B formerly
administered separately by the state university board and the
community college board. The separate plans and the former plan
administration must be merged into a single individual
retirement account plan and plan administration covering
eligible employees of the board, eligible employees of system
institutions, and other eligible employee groups who are covered
by the plan under section 354B.01.
Sec. 3. [136E.395] [EARLY SEPARATION INCENTIVES.]
Subdivision 1. [EMPLOYER PARTICIPATION; HIGHER EDUCATION
AGENCIES.] (a) In order to minimize the disruptive effects of
layoffs or reorganization attributable to the merger of the
state universities, community colleges, and technical colleges,
and the restructuring of the higher education coordinating
board, employees of the higher education coordinating board, the
state university, community college, and technical college
systems, and employees of local school districts, joint
technical districts, and intermediate districts assigned to a
technical college position, who are employed in positions that
are to be eliminated in the merger and restructuring, as
certified by the chancellor of the higher education board or the
executive director of the higher education coordinating board,
are entitled to elect an early separation incentive set forth in
subdivision 3.
(b) The higher education board and the higher education
coordinating board must determine those specific positions to be
permanently eliminated as part of the merger or restructuring
and identify the employees who may elect one of the early
separation incentives established by this section.
Subd. 2. [ELIGIBILITY.] A person employed by the employing
units identified in subdivision 1 is eligible to elect the
incentive if the person:
(1) is an employee of the higher education coordinating
board, a state university, community college, or technical
college, or an administrative employee of a local school
district, joint technical district and intermediate district
assigned to a technical college position whose position is to be
eliminated;
(2) is at least age 55 but is not yet age 65;
(3) is employed in a permanent position and in active work
status at the time the incentive is elected;
(4) upon retirement, termination, or separation is
immediately eligible for a retirement annuity from a defined
benefit Minnesota public employee pension plan or a distribution
from a defined contribution Minnesota public employee pension
plan;
(5) retires, separates, or is terminated from an eligible
position after June 30, 1994, but before July 1, 1996; and
(6) has been certified by the chancellor of the higher
education board or the executive director of the higher
education coordinating board as eligible to elect an early
separation incentive.
Subd. 3. [INCENTIVES.] (a) Eligible employees may elect
one of the following incentives but may not elect both.
(b) Retirement under this section means permanent
separation or termination from employment with or under the
control of the higher education board, the higher education
coordinating board, or the higher education systems to be merged.
(c) Employees who separate, terminate, or retire with the
early retirement incentive under paragraph (e) may not be
rehired by the state in any employment position under the
control of the higher education board or the higher education
coordinating board.
(d) An eligible employee who receives a termination notice
after the effective date of this section may elect to take a
six-month retraining leave in order to complete a course of
study that is approved by the higher education board or the
higher education coordinating board and which is designed to
prepare the employee to assume a faculty position at a state
university, community college, or technical college. The
retraining leave must be at the full salary level that the
person received immediately before the termination notice,
including fringe benefits. The leave must be completed no later
than June 30, 1996. Employees who seek to return to teaching
must satisfy the qualifications established by applicable
collective bargaining agreements. Any subsequent faculty
appointments must be in accordance with collective bargaining
agreements and policies of the higher education board. The
individual's pre-termination notice employment ceases at the
conclusion of the retraining leave. Individual employee
eligibility for severance payments must be made in accordance
with the policies of the employing unit in effect at the time
the incentive was elected. Notice of election of this incentive
must be made before April 1, 1996, on forms prescribed by the
higher education board.
(e) An eligible employee may elect the following instead of
the incentive in paragraph (d):
(1) state-paid hospital, medical, and dental insurance to
age 65. An employee who retires, is terminated, or is separated
is eligible for single or dependent insurance coverages,
whichever applies, and any employer payments to which the person
was entitled immediately before retirement, termination, or
separation subject to any changes in coverage and employer and
employee payments through collective bargaining or personnel
plans in positions equivalent to the position from which the
employee retired, terminated, or separated. The employee is not
eligible for employer-paid life insurance. If the employee is
not yet age 65 at the time of retirement or separation, the
employee is eligible for employer-paid insurance under the
provisions of a personnel plan and has at least as many months
service with the current employer and the number of months the
individual is under age 65 at the time of retirement; and
(2) if the eligible employee has at least 15 years of
combined service credit in a Minnesota public pension plan, a
one-time opportunity to purchase up to two years of service
credit in or to make not more than two years of additional
member contributions to the public pension plan that the
employee is a member of at the time of retirement of separation
as follows:
(i) Eligible employees may have the additional payment made
on the basis of the employee's base salary in the year of
separation as denoted in the salary schedule in the applicable
employer personnel policy and at the rate and in the manner
specified in section 352.04, 353.27, 354.42, or 354A.12,
whichever applies. The employee payment must include interest
at the rate of 8.5 percent. The employer shall make the
required employer contribution and employer additional
contribution to the retirement fund as specified in section
352.04, 353.27, 354.42, or 354A.12, whichever applies for an
employee who elects this option. Both the required employee and
employer payments must be made to the fund before the employee's
date of retirement or separation, whichever is earlier.
(ii) Defined contribution plan members in plans established
by chapter 352D or 354B must have additional employee and
employer contributions made on the basis of the employee's base
salary in the year of retirement as denoted in the salary
schedule in the applicable employer personnel policy and at the
rate and in the manner specified in section 352D.04, subdivision
2, or 354B.04, as applicable. The additional contributions must
be made before the employee's date of retirement or separation,
whichever is earlier.
Sec. 4. Minnesota Statutes 1993 Supplement, section
352.01, subdivision 2b, is amended to read:
Subd. 2b. [EXCLUDED EMPLOYEES.] "State employee" does not
include:
(1) elective state officers;
(2) students employed by the University of Minnesota, the
state universities, and community colleges unless approved for
coverage by the board of regents, the state university board, or
the state board for community colleges, as the case may be;
(3) employees who are eligible for membership in the state
teachers retirement association except employees of the
department of education who have chosen or may choose to be
covered by the Minnesota state retirement system instead of the
teachers retirement association;
(4) employees of the University of Minnesota who are
excluded from coverage by action of the board of regents;
(5) officers and enlisted personnel in the national guard
and the naval militia who are assigned to permanent peacetime
duty and who under federal law are or are required to be members
of a federal retirement system;
(6) election officers;
(7) persons engaged in public work for the state but
employed by contractors when the performance of the contract is
authorized by the legislature or other competent authority;
(8) officers and employees of the senate and house of
representatives or a legislative committee or commission who are
temporarily employed;
(9) receivers, jurors, notaries public, and court employees
who are not in the judicial branch as defined in section 43A.02,
subdivision 25, except referees and adjusters employed by the
department of labor and industry;
(10) patient and inmate help in state charitable, penal,
and correctional institutions including the Minnesota veterans
home;
(11) persons employed for professional services where the
service is incidental to regular professional duties and whose
compensation is paid on a per diem basis;
(12) employees of the Sibley House Association;
(13) the members of any state board or commission who serve
the state intermittently and are paid on a per diem basis; the
secretary, secretary-treasurer, and treasurer of those boards if
their compensation is $5,000 or less per year, or, if they are
legally prohibited from serving more than three years; and the
board of managers of the state agricultural society and its
treasurer unless the treasurer is also its full-time secretary;
(14) state troopers;
(15) temporary employees of the Minnesota state fair
employed on or after July 1 for a period not to extend beyond
October 15 of that year; and persons employed at any time by the
state fair administration for special events held on the
fairgrounds;
(16) emergency employees in the classified service; except
that if an emergency employee, within the same pay period,
becomes a provisional or probationary employee on other than a
temporary basis, the employee shall be considered a "state
employee" retroactively to the beginning of the pay period;
(17) persons described in section 352B.01, subdivision 2,
clauses (2) to (5);
(18) temporary employees in the classified service,
temporary employees in the unclassified service appointed for a
definite period of not more than six months and employed less
than six months in any one-year period and seasonal help in the
classified service employed by the department of revenue;
(19) trainee employees, except those listed in subdivision
2a, clause (10);
(20) persons whose compensation is paid on a fee basis;
(21) state employees who in any year have credit for 12
months service as teachers in the public schools of the state
and as teachers are members of the teachers retirement
association or a retirement system in St. Paul, Minneapolis, or
Duluth;
(22) employees of the adjutant general employed on an
unlimited intermittent or temporary basis in the classified and
unclassified service for the support of army and air national
guard training facilities;
(23) chaplains and nuns 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,
if no irrevocable election of coverage has been made under
section 3121(r) of the Internal Revenue Code of 1954, as
amended;
(24) examination monitors employed by departments,
agencies, commissions, and boards to conduct examinations
required by law;
(25) members of appeal tribunals, exclusive of the chair,
to which reference is made in section 268.10, subdivision 4;
(26) persons appointed to serve as members of fact-finding
commissions or adjustment panels, arbitrators, or labor referees
under chapter 179;
(27) temporary employees employed for limited periods under
any state or federal program for training or rehabilitation
including persons employed for limited periods from areas of
economic distress except skilled and supervisory personnel and
persons having civil service status covered by the system;
(28) full-time students employed by the Minnesota
historical society intermittently during part of the year and
full-time during the summer months;
(29) temporary employees, appointed for not more than six
months, of the metropolitan council and of any of its statutory
boards, if the board members are appointed by the metropolitan
council;
(30) persons employed in positions designated by the
department of employee relations as student workers;
(31) members of trades employed by the metropolitan waste
control commission with trade union pension plan coverage under
a collective bargaining agreement first employed after June 1,
1977;
(32) persons employed in subsidized on-the-job training,
work experience, or public service employment as enrollees under
the federal Comprehensive Employment and Training Act after
March 30, 1978, unless the person has as of the later of March
30, 1978, or the date of employment sufficient service credit in
the retirement system to meet the minimum vesting requirements
for a deferred annuity, or the employer agrees in writing on
forms prescribed by the director to make the required employer
contributions, including any employer additional contributions,
on account of that person from revenue sources other than funds
provided under the federal Comprehensive Employment and Training
Act, or the person agrees in writing on forms prescribed by the
director to make the required employer contribution in addition
to the required employee contribution;
(33) off-duty peace officers while employed by the
metropolitan transit commission under section 629.40,
subdivision 5, or comparable statutory authority;
(34) persons who are employed as full-time police officers
by the metropolitan transit commission and as police officers
are members of the public employees police and fire fund;
(35) persons who are employed as full-time firefighters by
the department of military affairs and as firefighters are
members of the public employees police and fire fund; and
(36) foreign citizens with a work permit of less than three
years, or an H-1b/JV visa valid for less than three years of
employment, unless notice of extension is supplied which allows
them to work for three or more years as of the date the
extension is granted, in which case they are eligible for
coverage from the date extended; and
(37) persons who are employed by the higher education board
and who elect to remain members of the public employees
retirement association or the Minneapolis employees retirement
fund, whichever applies, under section 136C.75.
Sec. 5. Minnesota Statutes 1993 Supplement, section
353.01, subdivision 2a, is amended to read:
Subd. 2a. [INCLUDED EMPLOYEES.] Public employees whose
salary from one governmental subdivision exceeds $425 in any
month shall participate as members of the association. If the
salary of an employee is less than $425 in a subsequent month,
the employee retains membership eligibility. The following
persons are considered public employees:
(1) employees whose annual salary from one governmental
subdivision exceeds a stipulation prepared 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 expected to be of less than a full
year's duration. If compensation from one governmental
subdivision to an employee under this clause 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 under
section 353.27, subdivision 12, from the month in which the
employee's salary first exceeded $425;
(2) employees whose total salary from concurrent
nontemporary positions in one governmental subdivision exceeds
$425 in any month;
(3) elected officers for service to which they were elected
by the public-at-large, or persons appointed to fill a vacancy
in an elective office, who elect to participate by filing an
application for membership, but not for service on a joint or
regional board that is a governmental subdivision under
subdivision 6, paragraph (a), unless the salary earned for that
service exceeds $425 in any month. The option to become a
member, once exercised, may not be withdrawn during the
incumbency of the person in office;
(4) members who are appointed by the governor to be a state
department head and elect not to be covered by the Minnesota
state retirement system under section 352.021;
(5) employees of elected officers;
(6) persons who elect to remain members under
section 136C.75, or 480.181, subdivision 2;
(7) employees of a school district who receive separate
salaries for driving their own buses;
(8) 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;
(9) employees of a county historical society who are county
employees;
(10) 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; and
(11) employees who became members before July 1, 1988,
based on the total salary of positions held in more than one
governmental subdivision.
Sec. 6. Minnesota Statutes 1992, section 354.66,
subdivision 2, is amended to read:
Subd. 2. A teacher in the public elementary schools,
secondary schools, or technical colleges 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 colleges or
in the community college system or the state university system,
or a teacher in the technical college system, community college
system, or state university system who has attained at least age
55 and has ten years or more of allowable service in the fund or
ten years or more of full-time teaching service as described in
this subdivision, 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. 7. Minnesota Statutes 1993 Supplement, section
354B.02, subdivision 3c, is amended to read:
Subd. 3c. [HIGHER EDUCATION BOARD EMPLOYEES.] Employees in
covered employment under section 354B.01, subdivision 6, may
elect coverage under the plan. Election to participate in the
plan must be made by December 31, 1993, or within 120 days of
the start of covered employment, whichever is later, and is
irrevocable during any period of covered employment in a
position listed in section 352D.02, subdivision 1, paragraph
(b), clause (14), which is established by the higher education
board or the higher education facilities authority. These
employees are not also eligible for the supplemental retirement
plan specified in sections 354B.07 to 354B.09.
Sec. 8. Minnesota Statutes 1993 Supplement, section
354B.05, subdivision 1, is amended to read:
Subdivision 1. [GOVERNING BOARDS.] The state university
board or any successor board shall administer the plan for
persons in covered employment under section 354B.01,
subdivisions 2, 4, and 5. The community college board or any
successor board shall administer the plan for persons in covered
employment under section 354B.01, subdivision 3.
Sec. 9. Minnesota Statutes 1992, section 354B.07,
subdivision 1, is amended to read:
Subdivision 1. [ESTABLISHMENT AND ELIGIBILITY.] (a)
[REGULAR UNCLASSIFIED EMPLOYEES.] The supplemental retirement
plan for personnel employed by the state university board and,
the state board for community colleges, the higher education
board, and effective July 1, 1995, the technical 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 governed by this section.
(b) [CETA UNCLASSIFIED EMPLOYEES.] An unclassified employee
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 is not
included in the supplemental retirement plan provided for in
this section 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 this section 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 this section in addition to the member
contribution.
Sec. 10. Minnesota Statutes 1992, section 354B.08, is
amended to read:
354B.08 [SALARY DEDUCTIONS, MATCHING FUNDS.]
Subdivision 1. [DEDUCTIONS AND CONTRIBUTIONS.] (a) [BASIC
DEDUCTIONS AND CONTRIBUTIONS FOR STATE UNIVERSITIES AND
COMMUNITY COLLEGES.] The state university board and the state
board for community colleges shall deduct from the salary of
each eligible person described in section 354B.07 a sum equal to
five percent of the person's annual salary paid between $6,000
and $15,000. The deduction must be made in the same manner as
other retirement deductions are made from the salary of the
person. The 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.
(b) [BASIC DEDUCTIONS AND CONTRIBUTIONS FOR TECHNICAL
COLLEGES.] Effective July 1, 1995, unclassified employees of the
technical colleges are eligible for participation in the
supplemental retirement plan on the same basis as employees in
paragraph (a) for the basic deductions and contributions.
(c) [ADDITIONAL DEDUCTIONS AND CONTRIBUTIONS.] 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. Two percent of
the amount of the salary deductions and employer contributions
may be used by the state university board and the state board
for community colleges boards for payment of necessary and
reasonable administrative expenses.
Subd. 2. [ADMINISTRATION.] (a) The chancellor of the state
university system and the chancellor of the state community
college system shall administer the supplemental retirement plan
for their employees. The chancellors shall invest contributions
made under this section, less amounts used for administrative
expenses, as authorized by law. The retirement contributions
and death benefits provided by annuity contracts or custodial
accounts purchased by the chancellors are owned by the plan and
must be paid in accordance with the annuity contracts or
custodial accounts.
(b) Effective July 1, 1995, administration of the plan must
transfer to the higher education board.
Sec. 11. [EXISTING PENSION; RETIREMENT; OR SEPARATION
OBLIGATIONS.]
(a) Obligations incurred by a school board, a joint
vocational district under Minnesota Statutes, section 136C.60,
or an intermediate school district under Minnesota Statutes,
chapter 136D, before July 1, 1995, for retired employees who
were primarily employed in a technical college at the time of
retirement transfer to the higher education board on July 1,
1995. Obligations incurred on or after June 30, 1994, for
retired employees who were primarily employed in a technical
college at the time of retirement and are not covered by a
collective bargaining agreement negotiated under Minnesota
Statutes, chapter 179A, transfer only if approved by the higher
education board.
(b) Pension, retirement, or separation obligations incurred
by a school board, a joint vocational district under Minnesota
Statutes, section 136C.60, or an intermediate school district
under Minnesota Statutes, chapter 136D, which are not satisfied
on or before June 30, 1995, on behalf of a technical college
must transfer to the higher education board, subject to limits
identified in state law or in plans or policies subject to
legislative approval.
Sec. 12. [STUDY OF IMPLICATIONS OF EMPLOYER MATCHING
CONTRIBUTIONS TO SECTION 403(b) PLANS.]
The legislative commission on pensions and retirement shall
study whether pension provisions of federal tax laws apply to
employer matching contributions to tax sheltered annuity
contracts qualified under section 403(b) of the federal Internal
Revenue Code, as permitted under Minnesota Statutes 1993
Supplement, section 356.24. The commission shall report the
results of the study and any proposed legislation to the chairs
of the committee on government operations and gaming and the
committee on ways and means of the house of representatives and
the committee on government operations and reform and the
committee on finance of the senate by January 15, 1995.
Sec. 13. [EFFECTIVE DATE.]
Sections 1, 2, 4 to 6 and 8 to 11 are effective July 1,
1995.
Sections 3 and 7 are effective July 1, 1994.
Presented to the governor May 3, 1994
Signed by the governor May 5, 1994, 3:30 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes