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Minnesota Legislature

Office of the Revisor of Statutes

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

                            CHAPTER 267-S.F.No. 676 
                  An act relating to retirement; statewide and major 
                  local public pension plans; making various changes of 
                  an administrative nature; setting various limitations 
                  and requirements for public employees police and fire 
                  retirement plan disability benefit applications; 
                  modifying permanent disability benefits provisions; 
                  resolving one person and small group pension problems; 
                  reducing the early retirement age for the judges 
                  retirement plan; authorizing a shorter vesting 
                  schedule for the Marine on St. Croix Volunteer 
                  Firefighters Relief Association; revising the salary 
                  maximum for the executive secretary of the Minneapolis 
                  Firefighters Relief Association; permitting single 
                  Teachers Retirement Association members to make 
                  survivor benefit designations; authorizing retirement 
                  coverage discontinuation by an elected county 
                  official; continuing retirement coverage by the 
                  general employees retirement plan of the Public 
                  Employees Retirement Association for Anoka County 
                  Achieve Program and the Government Training Services; 
                  including in privatized public employee retirement 
                  coverage employees of the Fair Oaks Lodge, Wadena, and 
                  RenVilla Nursing Home; extending the expiration date 
                  on certain prior military service credit purchases; 
                  temporarily exempting Metropolitan Airports Commission 
                  police from reemployed annuitant earnings limitation; 
                  ratifying certain Bellingham volunteer firefighter 
                  relief association annuity purchases; including the 
                  Lake Johanna fire department employees in Public 
                  Employees Retirement Association coverage; expanding 
                  the health care savings plan; modifying the department 
                  of transportation pilots retirement plan; authorizing 
                  shorter vesting periods for defined contribution 
                  volunteer firefighter relief associations; modifying 
                  Minneapolis Police Relief Association provisions; 
                  amending Minnesota Statutes 2002, sections 3A.03, 
                  subdivision 2; 69.77, subdivision 4; 352.01, 
                  subdivision 13; 352.113, subdivisions 4, 6, 8, by 
                  adding a subdivision; 352.12, subdivisions 1, 6; 
                  352.22, subdivisions 2, 3; 352.27; 352.275, 
                  subdivision 1; 352.86, subdivision 1; 352.91, 
                  subdivision 3g; 352.95, subdivisions 1, 2, 4; 352.98; 
                  352B.01, subdivisions 3a, 11, by adding a subdivision; 
                  352B.10, subdivisions 1, 2, 3, 4, 5; 352B.105; 
                  352B.11, subdivisions 1, 2, by adding subdivisions; 
                  352D.065, subdivision 2; 352D.075, subdivisions 2, 3, 
                  by adding a subdivision; 353.01, subdivisions 2b, 10, 
                  12a, 12b, 16, 16a; 353.33, subdivisions 4, 6, 6b, 7, 
                  by adding a subdivision; 353.37, subdivision 3, by 
                  adding a subdivision; 353.656, subdivision 5, by 
                  adding subdivisions; 354.05, subdivisions 2, 22, 35; 
                  354.07, subdivision 9; 354.091; 354.096, subdivision 
                  1; 354.42, subdivision 7; 354.44, subdivisions 4, 5, 
                  6; 354.46, subdivisions 2, 2b, 5, by adding a 
                  subdivision; 354.48, subdivisions 2, 4, 6, 6a, 10; 
                  354.51, subdivision 5; 354.52, subdivisions 4a, 6, by 
                  adding a subdivision; 354.53; 354.533, subdivision 1; 
                  354.66, subdivision 2; 354A.011, subdivision 24; 
                  354A.093; 354A.094, subdivision 3; 354A.097, 
                  subdivision 1; 354A.36, subdivisions 4, 6; 354B.20, 
                  subdivisions 4, 6; 354B.23, subdivision 1; 354B.32; 
                  354C.11, subdivision 2; 356.216; 356.302, subdivision 
                  3; 356.441; 356.611, subdivisions 1, 2, by adding 
                  subdivisions; 422A.18, subdivisions 1, 4; 423B.01, 
                  subdivision 12; 423B.09, subdivisions 1, 4, by adding 
                  a subdivision; 423B.10, subdivision 1; 423B.15, 
                  subdivision 3; 423C.05, subdivisions 4, 5, 6, by 
                  adding a subdivision; 424A.02, subdivisions 2, 7; 
                  490.121, subdivision 10, by adding a subdivision; 
                  490.124, subdivision 12; Minnesota Statutes 2003 
                  Supplement, sections 353.01, subdivision 6; 353F.02, 
                  subdivision 4; 423C.03, subdivision 3; Laws 1999, 
                  chapter 222, article 16, section 16, as amended; Laws 
                  2000, chapter 461, article 4, section 4, as amended; 
                  proposing coding for new law in Minnesota Statutes, 
                  chapters 352F; 353F; 356; 423B; repealing Minnesota 
                  Statutes 2002, sections 352D.02, subdivision 5; 
                  353.33, subdivision 5b; 354A.107; 490.11. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                                   ARTICLE 1
                               MEMBERSHIP ISSUES
           Section 1.  Minnesota Statutes 2002, section 352.91, 
        subdivision 3g, is amended to read: 
           Subd. 3g.  [ADDITIONAL CORRECTIONS DEPARTMENT PERSONNEL.] 
        (a) "Covered correctional service" means service by a state 
        employee in one of the employment positions at the designated 
        Minnesota correctional facility specified in paragraph (b), 
        provided that if at least 75 percent of the employee's working 
        time is spent in direct contact with inmates and the fact of 
        this direct contact is certified to the executive director by 
        the commissioner of corrections. 
           (b) The qualifying employment positions and the designated 
        correctional facilities are: 
           (1) corrections discipline unit supervisor, at the 
        Minnesota Correctional Facility-Faribault, the Minnesota 
        Correctional Facility-Lino Lakes, the Minnesota Correctional 
        Facility-Oak Park Heights, the Minnesota Correctional 
        Facility-Rush City, and the Minnesota Correctional Facility-St. 
        Cloud; 
           (2) dental assistant registered, at the Minnesota 
        Correctional Facility-Faribault, the Minnesota Correctional 
        Facility-Lino Lakes, the Minnesota Correctional Facility-Moose 
        Lake, the Minnesota Correctional Facility-Oak Park Heights, and 
        the Minnesota Correctional Facility-Red Wing; 
           (3) dental hygienist, at the Minnesota Correctional 
        Facility-Shakopee and the Minnesota Correctional Facility-Rush 
        City; 
           (4) psychologist 2, at the Minnesota Correctional 
        Facility-Faribault, the Minnesota Correctional Facility-Lino 
        Lakes, the Minnesota Correctional Facility-Moose Lake, the 
        Minnesota Correctional Facility-Oak Park Heights, the Minnesota 
        Correctional Facility-Red Wing, the Minnesota Correctional 
        Facility-Rush City, the Minnesota Correctional Facility-St. 
        Cloud, the Minnesota Correctional Facility-Shakopee, and the 
        Minnesota Correctional Facility-Stillwater; and or 
           (5) sentencing to service crew leader involved with the 
        inmate community work crew program, at the Minnesota 
        Correctional Facility-Faribault and the Minnesota Correctional 
        Facility-Lino Lakes. 
           Sec. 2.  Minnesota Statutes 2002, section 353.01, 
        subdivision 2b, is amended to read: 
           Subd. 2b.  [EXCLUDED EMPLOYEES.] The following public 
        employees are not eligible to participate as members of the 
        association with retirement coverage by the public employees 
        retirement plan, the local government correctional employees 
        retirement plan under chapter 353E, or the public employees 
        police and fire retirement plan: 
           (1) public officers, other than county sheriffs, who are 
        elected to a governing body, or persons who are appointed to 
        fill a vacancy in an elective office of a governing body, whose 
        term of office first commences on or after July 1, 2002, for the 
        service to be rendered in that elective position.  Elected 
        governing body officials who were active members of the 
        association's coordinated or basic retirement plans as of June 
        30, 2002, continue participation throughout incumbency in office 
        until termination of public service occurs as defined in 
        subdivision 11a; 
           (2) election officers or election judges; 
           (3) patient and inmate personnel who perform services for a 
        governmental subdivision; 
           (4) except as otherwise specified in subdivision 12a, 
        employees who are hired for a temporary position as defined 
        under subdivision 12a, and employees who resign from a 
        nontemporary position and accept a temporary position within 30 
        days in the same governmental subdivision.; An employer must not 
        apply the definition of temporary position so as to exclude 
        employees who are hired to fill positions that are permanent or 
        that are for an unspecified period but who are serving a 
        probationary period at the start of the employment.  If the 
        period of employment extends beyond six consecutive months and 
        the employee earns more than $425 from one governmental 
        subdivision in any calendar month, the department head shall 
        report the employee for membership and require employee 
        deductions be made on behalf of the employee under section 
        353.27, subdivision 4. 
           The membership eligibility of an employee who resigns or is 
        dismissed from a temporary position and within 30 days accepts 
        another temporary position in the same governmental subdivision 
        is determined on the total length of employment rather than on 
        each separate position.  Membership eligibility of an employee 
        who holds concurrent temporary and nontemporary positions in one 
        governmental subdivision is determined by the length of 
        employment and salary of each separate position; 
           (5) employees who are employed by reason of work emergency 
        caused by fire, flood, storm, or similar disaster; 
           (6) employees who by virtue of their employment 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 Minnesota State Retirement System, the Teachers Retirement 
        Association, the Duluth Teachers Retirement Fund Association, 
        the Minneapolis Teachers Retirement Fund 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 Retirement Association, or any local 
        police or firefighters consolidation account but who have not 
        elected the type of benefit coverage provided by the public 
        employees police and fire fund under sections 353A.01 to 
        353A.10, or any persons covered by section 353.665, subdivision 
        4, 5, or 6, who have not elected public employees police and 
        fire plan benefit coverage.  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 plan or 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 becomes 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; 
           (7) persons who are members of a religious order and 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, if no 
        irrevocable election of coverage has been made under section 
        3121(r) of the Internal Revenue Code of 1954, as amended; 
           (8) employees of a governmental subdivision who have not 
        reached the age of 23 and are enrolled on a full-time basis to 
        attend or are attending classes on a full-time basis at an 
        accredited school, college, or university in an undergraduate, 
        graduate, or professional-technical program, or a public or 
        charter high school; 
           (9) resident physicians, medical interns, and pharmacist 
        residents and pharmacist interns who are serving in a degree or 
        residency program in public hospitals; 
           (10) students who are serving in an internship or residency 
        program sponsored by an accredited educational institution; 
           (11) persons who hold a part-time adult supplementary 
        technical college license who render part-time teaching service 
        in a technical college; 
           (12) except for employees of Hennepin County, foreign 
        citizens working for a governmental subdivision with a work 
        permit of less than three years, or an H-1b visa valid for less 
        than three years of employment.  Upon notice to the association 
        that the work permit or visa extends beyond the three-year 
        period, the foreign citizens are to must be reported for 
        membership from the date of the extension; 
           (13) public hospital employees who elected not to 
        participate as members of the association before 1972 and who 
        did not elect to participate from July 1, 1988, to October 1, 
        1988; 
           (14) 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, whichever applies, on the 
        basis of compensation received from public employment service 
        other than service as volunteer ambulance service personnel; 
           (15) 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, whichever applies, on the 
        basis of compensation received from public employment activities 
        other than those as a volunteer firefighter; 
           (16) pipefitters and associated trades personnel employed 
        by Independent School District No. 625, St. Paul, with coverage 
        under a collective bargaining agreement by the pipefitters local 
        455 pension plan who were either first employed after May 1, 
        1997, or, if first employed before May 2, 1997, elected to be 
        excluded under Laws 1997, chapter 241, article 2, section 12; 
           (17) electrical workers, plumbers, carpenters, and 
        associated trades personnel employed by Independent School 
        District No. 625, St. Paul, or the city of St. Paul, who have 
        retirement coverage under a collective bargaining agreement by 
        the Electrical Workers Local 110 pension plan, the United 
        Association Plumbers Local 34 pension plan, or the Carpenters 
        Local 87 pension plan who were either first employed after May 
        1, 2000, or, if first employed before May 2, 2000, elected to be 
        excluded under Laws 2000, chapter 461, article 7, section 5; 
           (18) bricklayers, allied craftworkers, cement masons, 
        glaziers, glassworkers, painters, allied tradesworkers, and 
        plasterers employed by the city of St. Paul or Independent 
        School District No. 625, St. Paul, with coverage under a 
        collective bargaining agreement by the Bricklayers and Allied 
        Craftworkers Local 1 pension plan, the Cement Masons Local 633 
        pension plan, the Glaziers and Glassworkers Local L-1324 pension 
        plan, the Painters and Allied Trades Local 61 pension plan, or 
        the Twin Cities Plasterers Local 265 pension plan who were 
        either first employed after May 1, 2001, or if first employed 
        before May 2, 2001, elected to be excluded under Laws 2001, 
        First Special Session chapter 10, article 10, section 6; 
           (19) plumbers employed by the metropolitan airports 
        commission, with coverage under a collective bargaining 
        agreement by the Plumbers Local 34 pension plan, who either were 
        first employed after May 1, 2001, or if first employed before 
        May 2, 2001, elected to be excluded under Laws 2001, First 
        Special Session chapter 10, article 10, section 6; 
           (20) employees who are hired after June 30, 2002, to fill 
        seasonal positions under subdivision 12b which are limited in 
        duration by the employer to 185 consecutive calendar days or 
        less in each year of employment with the governmental 
        subdivision; 
           (21) persons who are provided supported employment or 
        work-study positions by a governmental subdivision and who 
        participate in an employment or industries program maintained 
        for the benefit of these persons where the governmental 
        subdivision limits the position's duration to three years or 
        less, including persons participating in a federal or state 
        subsidized on-the-job training, work experience, senior citizen, 
        youth, or unemployment relief program where the training or work 
        experience is not provided as a part of, or for, future 
        permanent public employment; 
           (22) independent contractors and the employees of 
        independent contractors; and 
           (23) reemployed annuitants of the association during the 
        course of that reemployment. 
           Sec. 3.  Minnesota Statutes 2002, section 353.01, 
        subdivision 12a, is amended to read: 
           Subd. 12a.  [TEMPORARY POSITION.] (1) (a) "Temporary 
        position" means an employment position predetermined by the 
        employer at the time of hiring to be a period of six months or 
        less.  Temporary position also means an employment position 
        occupied by a person hired by the employer as a temporary 
        replacement who is employed for a predetermined period of six 
        months or less. 
           (2) (b) "Temporary position" does not mean an employment 
        position for a specified or unspecified term in which a person 
        serves a probationary period as a requirement for subsequent 
        employment on a permanent or unlimited basis. 
           (c) If employment in a temporary position extends beyond 
        six consecutive months, the head of the department shall report 
        the employee for membership if salary in any month exceeds the 
        salary threshold specified in subdivision 2a.  The membership 
        eligibility of an employee who resigns or is dismissed from a 
        temporary position and accepts another temporary position in the 
        same governmental subdivision within 30 days must be determined 
        on the total length of employment rather than on each separate 
        position. 
           Sec. 4.  Minnesota Statutes 2002, section 353.01, 
        subdivision 12b, is amended to read: 
           Subd. 12b.  [SEASONAL POSITION.] "Seasonal position" means 
        a position where the nature of the work or its duration are 
        related to a specific season or seasons of the year, regardless 
        of whether or not the employing agency anticipates that the same 
        employee will return to the position each season in which it 
        becomes available.  The entire period of employment in a 
        business year must be used to determine whether or not a 
        position may be excluded as seasonal when there is less than a 
        30-day break between one seasonal position and a subsequent 
        seasonal position for employment with the same governmental 
        employer.  Seasonal positions include, but are not limited to, 
        coaching athletic activities or employment to plow snow or to 
        maintain roads or parks, or to operate skating rinks, ski 
        lodges, golf courses, or swimming pools. 
           Sec. 5.  Minnesota Statutes 2002, section 354.05, 
        subdivision 2, is amended to read: 
           Subd. 2.  [TEACHER.] (a) "Teacher" means: 
           (1) a person who renders service as a teacher, supervisor, 
        principal, superintendent, librarian, nurse, counselor, social 
        worker, therapist, or psychologist in a public school of the 
        state located outside of the corporate limits of a city of the 
        first class, or in any charter school, irrespective of the 
        location of the school, or in any charitable, penal, or 
        correctional institutions of a governmental subdivision, or who 
        is engaged in educational administration in connection with the 
        state public school system, but excluding the University of 
        Minnesota, whether the position be a public office or an 
        employment, and not including the members or officers of any 
        general governing or managing board or body; 
           (2) an employee of the Teachers Retirement Association; 
           (3) a person who renders teaching service on a part-time 
        basis and who also renders other services for a single employing 
        unit.  A person whose teaching service comprises at least 50 
        percent of the combined employment salary is a member of the 
        association for all services with the single employing unit.  If 
        the person's teaching service comprises less than 50 percent of 
        the combined employment salary, the executive director must 
        determine whether all or none of the combined service is covered 
        by the association; or 
           (4) a person who is not covered by the plans established 
        under chapter 352D, 354A, or 354B and who is employed by the 
        Board of Trustees of the Minnesota State Colleges and 
        Universities system in an unclassified position as: 
           (i) a president, vice-president, or dean; 
           (ii) a manager or a professional in an academic or an 
        academic support program other than specified in item (i); 
           (iii) an administrative or a service support faculty 
        position; or 
           (iv) a teacher or a research assistant. 
           (b) "Teacher" does not mean: 
           (1) a person who works for a school or institution as an 
        independent contractor as defined by the Internal Revenue 
        Service; 
           (2) a person employed in subsidized on-the-job training, 
        work experience or public service employment as an enrollee 
        under the federal Comprehensive Employment and Training Act from 
        and 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 association to meet the minimum vesting 
        requirements for a deferred retirement annuity, or the employer 
        agrees in writing on forms prescribed by the executive 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 Training and Employment Act, or the person agrees 
        in writing on forms prescribed by the executive director to make 
        the required employer contribution in addition to the required 
        employee contribution; 
           (3) a person holding a part-time adult supplementary 
        technical college license who renders part-time teaching service 
        or who is a customized trainer as defined by the Minnesota State 
        Colleges and Universities system in a technical college if (i) 
        the service is incidental to the regular nonteaching occupation 
        of the person; and (ii) the applicable technical college 
        employer stipulates annually in advance that the part-time 
        teaching service or customized training service will not exceed 
        300 hours in a fiscal year and retains the stipulation in its 
        records; and (iii) the part-time teaching service or customized 
        training service actually does not exceed 300 hours in a fiscal 
        year; or 
           (4) (3) a person exempt from licensure under section 
        122A.30. 
           Sec. 6.  Minnesota Statutes 2002, section 354B.20, 
        subdivision 4, is amended to read: 
           Subd. 4.  [COVERED EMPLOYMENT.] (a) "Covered employment" 
        means employment by a person eligible for coverage by this 
        retirement program under section 354B.21 in a faculty position 
        or in an eligible unclassified administrative position. 
           (b) "Covered employment" does not mean employment specified 
        in paragraph (a) by a faculty member employed in a state 
        university or a community college the Minnesota State Colleges 
        and Universities system if the person's initial appointment is 
        specified as constituting less than 25 percent of a full 
        academic year, exclusive of summer session, for the applicable 
        institution. 
           Sec. 7.  Minnesota Statutes 2002, section 354B.20, 
        subdivision 6, is amended to read: 
           Subd. 6.  [ELIGIBLE UNCLASSIFIED ADMINISTRATIVE POSITION.] 
        "Eligible unclassified administrative position" means the 
        following: 
           (1) the chancellor of the board; 
           (2) a president of a state college or university; or 
           (3) an excluded administrator employed in a state 
        university or college, by the board, or by the Higher Education 
        Services Office; or 
           (4) other managers and professionals in academic and 
        academic support programs in the unclassified service employed 
        in a state university or college, by the board, or by the Higher 
        Education Services Office. 
           Sec. 8.  Minnesota Statutes 2002, section 354C.11, 
        subdivision 2, is amended to read: 
           Subd. 2.  [ELIGIBILITY.] (a) An individual must participate 
        in the supplemental retirement plan if the individual is 
        employed by the Board of Trustees in the unclassified service of 
        the state and has completed at least two years with a full-time 
        contract of applicable unclassified employment with the board or 
        an applicable predecessor board in any of the positions 
        specified in paragraph (b). 
           (b) Eligible positions or employment classifications are: 
           (1) an unclassified administrative position as defined in 
        section 354B.20, subdivision 6; 
           (2) an employment classification included in one of the 
        following collective bargaining units under section 179A.10, 
        subdivision 2: 
           (i) the state university instructional unit; 
           (ii) the state college instructional unit; and 
           (iii) the state university administrative unit; or 
           (3) an unclassified employee of the board: 
           (i) included in the general professional unit or the 
        supervisory employees unit under section 179A.10, subdivision 2; 
        or 
           (ii) an employee who is excluded from one of those units 
        due to the employee's confidential status under section 179A.10, 
        subdivision 1, clause (8).  
           Sec. 9.  [REPEALER.] 
           Minnesota Statutes 2002, section 352D.02, subdivision 5, is 
        repealed.  
           Sec. 10.  [EFFECTIVE DATE.] 
           (a) Sections 2 to 6 and 9 are effective on July 1, 2004. 
           (b) Section 7 is effective on July 1, 2004, and applies 
        retroactively to the date of hire of the applicable person in 
        the affected position. 
           (c) Section 8 is effective retroactively to July 1, 2001. 

                                   ARTICLE 2
                           COVERED SALARY DEFINITION
           Section 1.  Minnesota Statutes 2002, section 352.01, 
        subdivision 13, is amended to read: 
           Subd. 13.  [SALARY.] (a) "Salary" means wages, or other 
        periodic compensation, paid to an employee before deductions for 
        deferred compensation, supplemental retirement plans, or other 
        voluntary salary reduction programs.  
           (b) "Salary" does not include: 
           (1) lump sum sick leave payments,; 
           (2) severance payments,; 
           (3) lump sum annual leave payments and overtime payments 
        made at the time of separation from state service,; 
           (4) payments in lieu of any employer-paid group insurance 
        coverage, including the difference between single and family 
        rates that may be paid to an employee with single coverage, and; 
           (5) payments made as an employer-paid fringe benefit,; 
           (6) workers' compensation payments,; 
           (7) employer contributions to a deferred compensation or 
        tax sheltered annuity program,; and 
           (8) amounts contributed under a benevolent vacation and 
        sick leave donation program are not salary. 
           (c) Amounts provided to an employee by the employer through 
        a grievance proceeding or a legal settlement are salary only if 
        the settlement is reviewed by the executive director and the 
        amounts are determined by the executive director to be 
        consistent with paragraph (a) and prior determinations. 
           Sec. 2.  Minnesota Statutes 2002, section 352B.01, 
        subdivision 11, is amended to read: 
           Subd. 11.  [AVERAGE MONTHLY SALARY.] (a) "Average monthly 
        salary" means the average of the highest monthly salaries for 
        five years of service as a member upon which contributions were 
        deducted from pay under section 352B.02, or upon which 
        appropriate contributions or payments were made to the fund to 
        receive allowable service and salary credit as specified under 
        the applicable law.  Average monthly salary must be based upon 
        all allowable service if this service is less than five 
        years.  It 
           (b) "Average monthly salary" means the salary of the member 
        as defined in section 352.01, subdivision 13.  "Average monthly 
        salary" does not include any lump-sum annual leave payments and 
        overtime payments made at the time of separation from state 
        service, 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.  
           (c) A member on leave of absence receiving temporary 
        workers' compensation payments and a reduced salary or no salary 
        from the employer who is entitled to allowable service credit 
        for the period of absence may make payment to the fund for the 
        difference between salary received, if any, and the salary the 
        member would normally receive if not on leave of absence during 
        the period.  The member shall pay an amount equal to the member 
        and employer contribution rate under section 352B.02, 
        subdivisions 1b and 1c, on the differential salary amount for 
        the period of the leave of absence.  The employing department, 
        at its option, may pay the employer amount on behalf of the 
        member.  Payment made under this subdivision must include 
        interest at the rate of 8.5 percent per year, and must be 
        completed within one year of the return from the leave of 
        absence. 
           Sec. 3.  Minnesota Statutes 2002, section 353.01, 
        subdivision 10, is amended to read: 
           Subd. 10.  [SALARY.] (a) "Salary" means: 
           (1) the periodic 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; and 
           (2) for a public employee who has prior service covered by 
        a local police or firefighters relief association that has 
        consolidated with the Public Employees Retirement Association or 
        to which section 353.665 applies and who has elected coverage 
        either under the public employees police and fire fund benefit 
        plan under section 353A.08 following the consolidation or under 
        section 353.665, subdivision 4, "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 periodic 
        compensation of the public employee after the effective date of 
        consolidation. 
           (b) Salary does not mean: 
           (1) the fees paid to district court reporters, unused 
        annual vacation or sick leave payments, in lump-sum or periodic 
        payments, severance payments, reimbursement of expenses, 
        lump-sum settlements not attached to a specific earnings period, 
        or workers' compensation payments; 
           (2) employer-paid amounts used by an employee toward the 
        cost of insurance coverage, employer-paid fringe benefits, 
        flexible spending accounts, cafeteria plans, health care expense 
        accounts, day care expenses, or any 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 and certain amounts determined by the 
        executive director to be ineligible; 
           (3) the amount equal to that which the employing 
        governmental subdivision would otherwise pay toward single or 
        family insurance coverage for a covered employee when, through a 
        contract or agreement with some but not all employees, the 
        employer: 
           (i) discontinues, or for new hires does not provide, 
        payment toward the cost of the employee's selected insurance 
        coverages under a group plan offered by the employer; 
           (ii) makes the employee solely responsible for all 
        contributions toward the cost of the employee's selected 
        insurance coverages under a group plan offered by the employer, 
        including any amount the employer makes toward other employees' 
        selected insurance coverages under a group plan offered by the 
        employer; and 
           (iii) provides increased salary rates for employees who do 
        not have any employer-paid group insurance coverages; and 
           (4) except as provided in section 353.86 or 353.87, 
        compensation of any kind paid to volunteer ambulance service 
        personnel or volunteer firefighters, as defined in subdivision 
        35 or 36; and 
           (5) the amount of compensation that exceeds the limitation 
        provided in section 356.611.  
           (c) Amounts provided to an employee by the employer through 
        a grievance proceeding or a legal settlement are salary only if 
        the settlement is reviewed by the executive director and the 
        amounts are determined by the executive director to be 
        consistent with paragraph (a) and prior determinations. 
           Sec. 4.  Minnesota Statutes 2002, section 354.05, 
        subdivision 35, is amended to read: 
           Subd. 35.  [SALARY.] (a) "Salary" means the periodic 
        compensation, upon which member contributions are required 
        before deductions for deferred compensation, supplemental 
        retirement plans, or other voluntary salary reduction programs. 
           (b) "Salary" does not mean: 
           (1) lump sum annual leave payments; 
           (2) lump sum wellness and sick leave payments; 
           (3) employer-paid amounts used by an employee toward the 
        cost of insurance coverage, employer-paid fringe benefits, 
        flexible spending accounts, cafeteria plans, health care expense 
        accounts, day care expenses, or any 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 and certain amounts determined by the 
        executive director to be ineligible; 
           (4) any form of payment made in lieu of any other 
        employer-paid fringe benefit or expense; 
           (5) any form of severance payments; 
           (6) workers' compensation payments; 
           (7) disability insurance payments, including self-insured 
        disability payments; 
           (8) payments to school principals and all other 
        administrators for services that are in addition to the normal 
        work year contract if these additional services are performed on 
        an extended duty day, Saturday, Sunday, holiday, annual leave 
        day, sick leave day, or any other nonduty day; 
           (9) payments under section 356.24, subdivision 1, clause 
        (4); and 
           (10) payments made under section 122A.40, subdivision 12, 
        except for payments for sick leave that are accumulated under 
        the provisions of a uniform school district policy that applies 
        equally to all similarly situated persons in the district. 
           (c) Amounts provided to an employee by the employer through 
        a grievance proceeding or a legal settlement are salary only if 
        the settlement is reviewed by the executive director and the 
        amounts are determined by the executive director to be 
        consistent with paragraph (a) and prior determinations. 
           Sec. 5.  Minnesota Statutes 2002, section 354A.011, 
        subdivision 24, is amended to read: 
           Subd. 24.  [SALARY; COVERED SALARY.] (a) "Salary" or 
        "covered salary" means the entire compensation, upon which 
        member contributions are required and made, that is paid to a 
        teacher before deductions for deferred compensation, 
        supplemental retirement plans, or other voluntary salary 
        reduction programs. 
           (b) "Salary" does not mean: 
           (1) lump sum annual leave payments; 
           (2) lump sum wellness and sick leave payments; 
           (3) employer-paid amounts used by an employee toward the 
        cost of insurance coverage, employer-paid fringe benefits, 
        flexible spending accounts, cafeteria plans, health care expense 
        accounts, day care expenses, or any 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, and certain amounts determined by the 
        executive secretary or director to be ineligible; 
           (4) any form of payment that is made in lieu of any other 
        employer-paid fringe benefit or expense; 
           (5) any form of severance payments; 
           (6) workers' compensation payments; 
           (7) disability insurance payments, including self-insured 
        disability payments; 
           (8) payments to school principals and all other 
        administrators for services that are in addition to the normal 
        work year contract if these additional services are performed on 
        an extended duty day, Saturday, Sunday, holiday, annual leave 
        day, sick leave day, or any other nonduty day; 
           (9) payments under section 356.24, subdivision 1, clause 
        (4)(ii); and 
           (10) payments made under section 122A.40, subdivision 12, 
        except for payments for sick leave that are accumulated under 
        the provisions of a uniform school district policy that applies 
        equally to all similarly situated persons in the district. 
           (c) Amounts provided to an employee by the employer through 
        a grievance proceeding or a legal settlement are salary only if 
        the settlement is reviewed by the executive director and the 
        amounts are determined by the executive director to be 
        consistent with paragraph (a) and prior determinations. 
           Sec. 6.  Minnesota Statutes 2002, section 356.611, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [STATE SALARY LIMITATIONS.] (a) 
        Notwithstanding any provision of law, bylaws, articles of 
        incorporation, retirement and disability allowance plan 
        agreements, or retirement plan contracts to the contrary, the 
        covered salary for pension purposes for a plan participant of a 
        covered retirement fund enumerated in section 356.30, 
        subdivision 3, may not exceed 95 percent of the salary 
        established for the governor under section 15A.082 at the time 
        the person received the salary. 
           (b) This section does not apply to a salary paid: 
           (1) to the governor or to a judge; 
           (2) to an employee of a political subdivision in a position 
        that is excluded from the limit as specified under section 
        43A.17, subdivision 9; or 
           (3) to a state employee in a position for which the 
        commissioner of employee relations has approved a salary rate 
        that exceeds 95 percent of the governor's salary as defined 
        under section 43A.02, subdivision 21; 
           (4) to an employee of Gillette Hospital who is covered by 
        the general state employees retirement plan of the Minnesota 
        State Retirement System; 
           (5) to an employee of the Minnesota Crop Improvement 
        Council; or 
           (6) to an employee of the Minnesota Historical Society. 
           (c) The limited covered salary determined under this 
        section must be used in determining employee and employer 
        contributions and in determining retirement annuities and other 
        benefits under the respective covered retirement fund and under 
        this chapter. 
           Sec. 7.  Minnesota Statutes 2002, section 356.611, 
        subdivision 2, is amended to read: 
           Subd. 2.  [FEDERAL COMPENSATION LIMITS.] (a) For members 
        first contributing to of a covered pension plan enumerated in 
        section 356.30, subdivision 3, on or after July 1, 1995, 
        compensation in excess of the limitation set forth specified in 
        section 401(a)(17) of the Internal Revenue Code, as amended, for 
        changes in the cost of living under section 401(a)(17)(B) of the 
        Internal Revenue Code, may not be included for contribution and 
        benefit computation purposes.  
           (b) Notwithstanding paragraph (a), for members specified in 
        paragraph (a) who first contributed to a covered plan before 
        July 1, 1995, the annual compensation limit set forth specified 
        in Internal Revenue Code 401(a)(17) on June 30, 1993, applies to 
        members first contributing before July 1, 1995 if that provides 
        a greater allowable annual compensation. 
           Sec. 8.  Minnesota Statutes 2002, section 356.611, is 
        amended by adding a subdivision to read: 
           Subd. 3.  [MAXIMUM BENEFIT LIMITATIONS.] A member's annual 
        benefit, if necessary, must be reduced to the extent required by 
        section 415(b) of the Internal Revenue Code, as adjusted by the 
        United States Secretary of the Treasury under section 415(d) of 
        the Internal Revenue Code.  For purposes of section 415 of the 
        Internal Revenue Code, the limitation year of a pension plan 
        covered by this section must be the fiscal year or calendar year 
        of that plan, whichever is applicable.  The accrued benefit 
        limitation described in section 415(e) of the Internal Revenue 
        Code must cease to be effective for limitation years beginning 
        after December 31, 1999. 
           Sec. 9.  [EFFECTIVE DATE.] 
           (a) Sections 1, 2, 3, 7, and 8 are effective on July 1, 
        2004. 
           (b) Sections 4 and 5 are effective on the day following 
        final enactment.  
           (c) Section 6 applies retroactively to April 28, 1994, and 
        retirement annuities that were based on covered salary amounts 
        that were in excess of the limit in effect after April 28, 1994, 
        but conform with section 6, are ratified. 

                                   ARTICLE 3
                            ALLOWABLE SERVICE CREDIT
           Section 1.  Minnesota Statutes 2002, section 352.27, is 
        amended to read: 
           352.27 [CREDIT FOR MILITARY BREAK IN SERVICE TO PROVIDE 
        UNIFORMED SERVICE.] 
           Any (a) An employee given a leave of absence to enter 
        military service who is absent from employment by reason of 
        service in the uniformed services, as defined in United States 
        Code, title 38, section 4303(13), and who returns to state 
        service upon discharge from military service as provided in the 
        uniformed service within the time frames required in United 
        States Code, title 38, section 192.262 4312(e), may obtain 
        service credit for the period of military the uniformed service. 
        The employee is not entitled to credit for any voluntary 
        extension of military service at the instance of the employee 
        beyond the initial period of enlistment, induction, or call to 
        active duty, nor to credit for any period of service following a 
        voluntary return to military service as further specified in 
        this section, provided that the employee did not separate from 
        uniformed service with a dishonorable or bad conduct discharge 
        or under other than honorable conditions. An 
           (b) The employee may obtain credit by paying into the fund 
        an equivalent employee contribution based upon the contribution 
        rate or rates in effect at the time that the uniformed service 
        was performed multiplied by the full and fractional years being 
        purchased and applied to the annual salary received at the date 
        of return from military service. The amount of this contribution 
        must be the applicable amounts required in section 352.04, 
        subdivision 2, plus interest at an annual rate of 8.5 percent 
        compounded annually rate.  The annual salary rate is the average 
        annual salary during the purchase period that the employee would 
        have received if the employee had continued to be employed in 
        covered employment rather than to provide uniformed service, or, 
        if the determination of that rate is not reasonably certain, the 
        annual salary rate is the employee's average salary rate during 
        the 12-month period of covered employment rendered immediately 
        preceding the period of the uniformed service.  
           (c) The matching equivalent employer contribution and, if 
        applicable, the equivalent additional employer contribution 
        provided in section 352.04 must be paid by the department 
        employing the employee upon return to state service from funds 
        available to the department at the time and in the manner 
        provided in section 352.04, using the employer and additional 
        employer contribution rate or rates in effect at the time that 
        the uniformed service was performed, applied to the same annual 
        salary rate or rates used to compute the equivalent employee 
        contribution. 
           (d) If the employee equivalent contributions provided in 
        this section are not paid in full, the employee's allowable 
        service credit must be prorated by multiplying the full and 
        fractional number of years of uniformed service eligible for 
        purchase by the ratio obtained by dividing the total employee 
        contribution received by the total employee contribution 
        otherwise required under this section.  
           (e) To receive service credit under this section, the 
        contributions specified in this section must be transmitted to 
        the Minnesota State Retirement System during the period which 
        begins with the date on which the individual returns to state 
        service and which has a duration of three times the length of 
        the uniformed service period, but not to exceed five years.  If 
        the determined payment period is less than one year, the 
        contributions required under this section to receive service 
        credit may be made within one year of the discharge date.  
           (f) The amount of service credit obtainable under this 
        section may not exceed five years unless a longer purchase 
        period is required under United States Code, title 38, section 
        4312.  
           (g) The employing unit shall pay interest on all equivalent 
        employee and employer contribution amounts payable under this 
        section.  Interest must be computed at a rate of 8.5 percent 
        compounded annually from the end of each fiscal year of the 
        leave or the break in service to the end of the month in which 
        the payment is received.  
           Sec. 2.  Minnesota Statutes 2002, section 352B.01, is 
        amended by adding a subdivision to read: 
           Subd. 3b.  [CREDIT FOR BREAK IN SERVICE TO PROVIDE 
        UNIFORMED SERVICE.] (a) A member who is absent from employment 
        by reason of service in the uniformed services, as defined in 
        United States Code, title 38, section 4303(13), and who returns 
        to state employment in a position covered by the plan upon 
        discharge from service in the uniformed service within the time 
        frame required in United States Code, title 38, section 4312(e), 
        may obtain service credit for the period of the uniformed 
        service, provided that the member did not separate from 
        uniformed service with a dishonorable or bad conduct discharge 
        or under other than honorable conditions.  
           (b) The member may obtain credit by paying into the fund an 
        equivalent member contribution based on the contribution rate or 
        rates in effect at the time that the uniformed service was 
        performed multiplied by the full and fractional years being 
        purchased and applied to the annual salary rate.  The annual 
        salary rate is the average annual salary during the purchase 
        period that the member would have received if the member had 
        continued to provide employment services to the state rather 
        than to provide uniformed service, or if the determination of 
        that rate is not reasonably certain, the annual salary rate is 
        the member's average salary rate during the 12-month period of 
        covered employment rendered immediately preceding the purchase 
        period.  
           (c) The equivalent employer contribution and, if 
        applicable, the equivalent employer additional contribution, 
        must be paid by the employing unit, using the employer and 
        employer additional contribution rate or rates in effect at the 
        time that the uniformed service was performed, applied to the 
        same annual salary rate or rates used to compute the equivalent 
        member contribution.  
           (d) If the member equivalent contributions provided for in 
        this subdivision are not paid in full, the member's allowable 
        service credit must be prorated by multiplying the full and 
        fractional number of years of uniformed service eligible for 
        purchase by the ratio obtained by dividing the total member 
        contributions received by the total member contributions 
        otherwise required under this subdivision.  
           (e) To receive allowable service credit under this 
        subdivision, the contributions specified in this section must be 
        transmitted to the fund during the period which begins with the 
        date on which the individual returns to state employment covered 
        by the plan and which has a duration of three times the length 
        of the uniformed service period, but not to exceed five years.  
        If the determined payment period is calculated to be less than 
        one year, the contributions required under this subdivision to 
        receive service credit may be within one year from the discharge 
        date.  
           (f) The amount of allowable service credit obtainable under 
        this section may not exceed five years, unless a longer purchase 
        period is required under United States Code, title 38, section 
        4312.  
           (g) The employing unit shall pay interest on all equivalent 
        member and employer contribution amounts payable under this 
        subdivision.  Interest must be computed at a rate of 8.5 percent 
        compounded annually from the end of each fiscal year of the 
        leave or break in service to the end of the month in which 
        payment is received.  
           Sec. 3.  Minnesota Statutes 2002, section 353.01, 
        subdivision 16, is amended to read: 
           Subd. 16.  [ALLOWABLE SERVICE; LIMITS AND COMPUTATION.] (a) 
        "Allowable service" means: 
           (1) service during years of actual membership in the course 
        of which employee contributions were made, periods covered by 
        payments in lieu of salary deductions under section 353.35; 
           (2) service in years during which the public employee was 
        not a member but for which the member later elected, while a 
        member, to obtain credit by making payments to the fund as 
        permitted by any law then in effect; 
           (3) a period of authorized leave of absence with pay from 
        which deductions for employee contributions are made, deposited, 
        and credited to the fund; 
           (4) a period of authorized personal, parental, or medical 
        leave of absence without pay, including a leave of absence 
        covered under the federal Family Medical Leave Act, that does 
        not exceed one year, and during or for which a member obtained 
        service credit for each month in the leave period by payments to 
        the fund made in place of salary deductions.  The payments must 
        be made in an amount or amounts based on the member's average 
        salary on which deductions were paid for the last six months of 
        public service, or for that portion of the last six months while 
        the member was in public service, to apply to the period in 
        either case that immediately precedes the commencement of the 
        leave of absence.  If the employee elects to pay the employee 
        contributions for the period of any authorized personal, 
        parental, or medical leave of absence without pay, or for any 
        portion of the leave, the employee shall also, as a condition to 
        the exercise of the election, pay to the fund an amount 
        equivalent to the required employer and the additional employer 
        contributions, if any, for the employee.  The payment must be 
        made within one year from the expiration of the leave of absence 
        or within 20 days after termination of public service under 
        subdivision 11a, whichever is earlier.  The employer, by 
        appropriate action of its governing body which is made a part of 
        its official records and which is adopted before the date of the 
        first payment of the employee contribution, may certify to the 
        association in writing its commitment to pay the employer and 
        additional employer contributions from the proceeds of a tax 
        levy made under section 353.28.  Payments under this paragraph 
        must include interest at an annual rate of 8.5 percent 
        compounded annually from the date of the termination of the 
        leave of absence to the date payment is made.  An employee shall 
        return to public service and render a minimum of three months of 
        allowable service in order to be eligible to pay employee and 
        employer contributions for a subsequent authorized leave of 
        absence without pay.  Upon payment, the employee must be granted 
        allowable service credit for the purchased period; 
           (5) a periodic, repetitive leave that is offered to all 
        employees of a governmental subdivision.  The leave program may 
        not exceed 208 hours per annual normal work cycle as certified 
        to the association by the employer.  A participating member 
        obtains service credit by making employee contributions in an 
        amount or amounts based on the member's average salary that 
        would have been paid if the leave had not been taken.  The 
        employer shall pay the employer and additional employer 
        contributions on behalf of the participating member.  The 
        employee and the employer are responsible to pay interest on 
        their respective shares at the rate of 8.5 percent a year, 
        compounded annually, from the end of the normal cycle until full 
        payment is made.  An employer shall also make the employer and 
        additional employer contributions, plus 8.5 percent interest, 
        compounded annually, on behalf of an employee who makes employee 
        contributions but terminates public service.  The employee 
        contributions must be made within one year after the end of the 
        annual normal working cycle or within 20 days after termination 
        of public service, whichever is sooner.  The association shall 
        prescribe the manner and forms to be used by a governmental 
        subdivision in administering a periodic, repetitive leave.  Upon 
        payment, the member must be granted allowable service credit for 
        the purchased period; 
           (6) an authorized temporary layoff under subdivision 12, 
        limited to three months allowable service per authorized 
        temporary layoff in one calendar year.  An employee who has 
        received the maximum service credit allowed for an authorized 
        temporary layoff must return to public service and must obtain a 
        minimum of three months of allowable service subsequent to the 
        layoff in order to receive allowable service for a subsequent 
        authorized temporary layoff; or 
           (7) a period during which a member is on an authorized 
        leave of absence to enter military absent from employment by a 
        governmental subdivision by reason of service in the armed 
        forces of the United States in the uniformed services, as 
        defined in United States Code, title 38, section 4303(13), if 
        the member returns to public service upon discharge 
        from military service in the uniformed service within the time 
        frames required under United States Code, title 38, section 
        192.262 and 4312(e), provided that the member did not separate 
        from uniformed service with a dishonorable or bad conduct 
        discharge or under other than honorable conditions.  The service 
        is credited if the member pays into the fund equivalent employee 
        contributions based upon the employee's contribution rate or 
        rates in effect at the time that the uniformed service was 
        performed multiplied by the full and fractional years being 
        purchased and applied to the annual salary at the date of return 
        from military service rate.  The annual salary rate is the 
        average annual salary during the purchase period that the member 
        would have received if the member had continued to be employed 
        in covered employment rather than to provide uniformed service, 
        or, if the determination of that rate is not reasonably certain, 
        the annual salary rate is the member's average salary rate 
        during the 12-month period of covered employment rendered 
        immediately preceding the period of the uniformed service.  
        Payment of the member equivalent contributions must be made 
        within during a period which begins with the date on which the 
        individual returns to public employment and that is three times 
        the length of the military leave period, or within five years of 
        the date of discharge from the military service, whichever is 
        less.  If the determined payment period is less than one year, 
        the contributions required under this clause to receive service 
        credit may be made within one year of the discharge date.  
        Payment may not be accepted following 20 days after termination 
        of public service under subdivision 11a.  The amount of these 
        contributions must be in accord with the contribution rates and 
        salary limitations, if any, in effect during the leave, plus 
        interest at an annual rate of 8.5 percent compounded annually 
        from the date of return to public service to the date payment is 
        made.  If the member equivalent contributions provided for in 
        this clause are not paid in full, the member's allowable service 
        credit must be prorated by multiplying the full and fractional 
        number of years of uniformed service eligible for purchase by 
        the ratio obtained by dividing the total member contributions 
        received by the total member contributions otherwise required 
        under this clause.  The corresponding equivalent employer 
        contribution, and, if applicable, the equivalent additional 
        employer contribution, if applicable, must be paid by the 
        governmental subdivision employing the member upon the person's 
        return to public service if the member makes the equivalent 
        employee contributions.  The employer payments must be made from 
        funds available to the employing unit, using the employer and 
        additional employer contribution rate or rates in effect at the 
        time that the uniformed service was performed, applied to the 
        same annual salary rate or rates used to compute the equivalent 
        member contribution.  The governmental subdivision involved may 
        appropriate money for those payments.  A member may not receive 
        credit for a voluntary extension of military service at the 
        instance of the member beyond the initial period of enlistment, 
        induction, or call to active duty.  The amount of service credit 
        obtainable under this section may not exceed five years unless a 
        longer purchase period is required under United States Code, 
        title 38, section 4312.  The employing unit shall pay interest 
        on all equivalent member and employer contribution amounts 
        payable under this clause.  Interest must be computed at a rate 
        of 8.5 percent compounded annually from the end of each fiscal 
        year of the leave or the break in service to the end of the 
        month in which the payment is received.  Upon payment, the 
        employee must be granted allowable service credit for the 
        purchased period.  
           (b) For calculating benefits under sections 353.30, 353.31, 
        353.32, and 353.33 for state officers and employees displaced by 
        the Community Corrections Act, chapter 401, and transferred into 
        county service under section 401.04, "allowable service"  means 
        the combined years of allowable service as defined in paragraph 
        (a), clauses (1) to (6), and section 352.01, subdivision 11.  
           (c) For a public employee who has prior service covered by 
        a local police or firefighters relief association that has 
        consolidated with the Public Employees Retirement Association or 
        to which section 353.665 applies, and who has elected the type 
        of benefit coverage provided by the public employees police and 
        fire fund either under section 353A.08 following the 
        consolidation or under section 353.665, subdivision 4, 
        "applicable service" is a period of service credited by the 
        local police or firefighters relief association as of the 
        effective date of the consolidation based on law and on bylaw 
        provisions governing the relief association on the date of the 
        initiation of the consolidation procedure. 
           (d) No member may receive more than 12 months of allowable 
        service credit in a year either for vesting purposes or for 
        benefit calculation purposes. 
           (e) "Allowable service" also means a period purchased under 
        section 356.555. 
           Sec. 4.  Minnesota Statutes 2002, section 354.091, is 
        amended to read: 
           354.091 [SERVICE CREDIT.] 
           (a) In computing service credit, no teacher shall receive 
        credit for more than one year of teaching service for any fiscal 
        year.  Commencing July 1, 1961: 
           (1) if a teacher teaches less than five hours in a day, 
        service credit must be given for the fractional part of the day 
        as the term of service performed bears to five hours; 
           (2) if a teacher teaches five or more hours in a day, 
        service credit must be given for only one day; 
           (3) if a teacher teaches at least 170 full days in any 
        fiscal year, service credit must be given for a full year of 
        teaching service; and 
           (4) if a teacher teaches for only a fractional part of the 
        year, service credit must be given for such fractional part of 
        the year as the period of service performed bears to 170 days. 
           (b) A teacher shall receive a full year of service credit 
        based on the number of days in the employer's full school year 
        if it is less than 170 days.  Teaching service performed before 
        July 1, 1961, must be computed under the law in effect at the 
        time it was performed. 
           (c) A teacher does must not lose or gain retirement service 
        credit as a result of the employer converting to a flexible or 
        alternate work schedule.  If the employer converts to a flexible 
        or alternate work schedule, the forms for reporting and the 
        procedures for determining service credit must be determined by 
        the executive director with the approval of the board of 
        trustees.  
           (d) For all services rendered on or after July 1, 2003, 
        service credit for all members employed by the Minnesota State 
        Colleges and Universities system must be determined: 
           (1) for full-time employees, by the definition of full time 
        employment contained in the collective bargaining agreement for 
        those units listed in section 179A.10, subdivision 2, or 
        contained in the applicable personnel or salary plan for those 
        positions designated in section 179A.10, subdivision 1; 
           (2) for part-time employees, by the appropriate proration 
        of full-time equivalency based on the provisions contained in 
        the collective bargaining agreement for those units listed in 
        section 179A.10, subdivision 2, or contained in the applicable 
        personnel or salary plan for those positions designated in 
        section 179A.10, subdivision 1, and the applicable procedures of 
        the Minnesota State Colleges and Universities system; and 
           (3) in no case may a member receive more than one year of 
        service credit for any fiscal year. 
           Sec. 5.  Minnesota Statutes 2002, section 354.096, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [CERTIFICATION.] Upon granting a family 
        leave to a member, an employing unit must certify the leave to 
        the association on a form specified by the executive director 
        before the end of the fiscal year during which the leave was 
        granted. 
           Sec. 6.  Minnesota Statutes 2002, section 354.53, is 
        amended to read: 
           354.53 [CREDIT FOR MILITARY BREAK IN SERVICE LEAVE OF 
        ABSENCE TO PROVIDE UNIFORMED SERVICE.] 
           Subdivision 1.  [ELIGIBILITY; EMPLOYEE AND EMPLOYER 
        CONTRIBUTIONS.] (a) Any employee given a leave of absence to 
        enter military service teacher who is absent from employment by 
        reason of service in the uniformed services, as defined in 
        United States Code, title 38, section 4303(13), and who returns 
        to the employer providing teaching service upon discharge from 
        military service as provided in the uniformed service within the 
        time frames required in United States Code, title 38, section 
        192.262 4312(e), may obtain service credit for the period of 
        military the uniformed service but shall not receive credit for 
        any voluntary extension of military service at the instance of 
        the member beyond the initial period of enlistment, induction or 
        call to active duty as further specified in this section, 
        provided that the teacher did not separate from uniformed 
        service with a dishonorable or bad conduct discharge or under 
        other than honorable conditions. 
           (b) The member shall may obtain credit by paying into the 
        fund an equivalent employee contribution based upon the 
        contribution rate or rates in effect at the time that 
        the military uniformed service was performed multiplied by the 
        full and fractional years being purchased and applied to the 
        annual salary rate of the member for the year beginning with the 
        date of return from military service and the number of years of 
        military service together with interest thereon at an annual 
        rate of 8.5 percent compounded annually from the time the 
        military service was rendered to the first date of payment.  The 
        annual salary rate is the average annual salary during the 
        purchase period that the teacher would have received if the 
        teacher had continued to provide teaching service to the 
        employer rather than provide uniformed service or if the 
        determination of that rate is not reasonably certain, the annual 
        salary rate is the teacher's average salary rate during the 
        12-month period immediately preceding the period, or, if the 
        preceding period is less than 12 months, the annualized rate 
        derived from the teacher's average salary rate during the period 
        of teacher employment rendered immediately preceding the period 
        of the uniformed service.  
           (c) The equivalent employer contribution and, if 
        applicable, the equivalent additional contribution provided in 
        section 354.42 must be paid by the employing unit at as provided 
        in section 354.52, subdivision 4, using the employer and 
        employer additional contribution rate or rates in effect at the 
        time that the military uniformed service was performed, applied 
        to the same annual salary rate of or rates used to compute the 
        member for the year beginning with the date of return from 
        military service, in the manner provided in section 354.52, 
        subdivision 4 equivalent employee contribution. 
           Subd. 2.  [CALCULATION OF CREDIT.] (a) For purposes of 
        computing a money purchase annuity under section 354.44, 
        subdivision 2, all payments into the fund pursuant to under this 
        section shall must be considered accumulations after July 1, 
        1957 for the purpose of computing any annuity in accordance with 
        section 354.44, subdivision 2.  
           (b) For purposes of computing a formula annuity under 
        section 354.44, subdivision 6, if the employee equivalent 
        contributions and interest thereon provided in this section are 
        not paid in full, the member's formula service credit shall must 
        be calculated prorated by multiplying the full and fractional 
        number of years of military uniformed service eligible for 
        purchase by the ratio obtained by dividing the total amount paid 
        and employee contribution received by the maximum amount payable 
        provided herein total employee contribution otherwise required 
        under this section. 
           Subd. 3.  [PAYMENTS ELIGIBLE PAYMENT PERIOD.] Payments 
        pursuant to this (a) To receive service credit under this 
        section, the contributions specified in this section shall must 
        be made within transmitted to the teachers retirement 
        association during the period which begins with the date on 
        which the individual returns to teaching service and which has a 
        duration of three times the length of the uniformed service 
        period, but not to exceed five years from the date of discharge. 
           (b) Notwithstanding paragraph (a), if the payment period 
        determined under paragraph (a) is less than one year, the 
        contributions required under this section to receive service 
        credit may be made within one year from the discharge date. 
           Subd. 4.  [LIMITS ON SERVICE CREDIT.] The amount of service 
        credit obtainable under this section may not exceed five years, 
        unless a longer purchase period is required under United States 
        Code, title 38, section 4312. 
           Subd. 5.  [INTEREST REQUIREMENTS.] The employer shall pay 
        interest on all equivalent employee and employer contribution 
        amounts payable under this section.  Interest must be computed 
        at a rate of 8.5 percent compounded annually from the end of 
        each fiscal year of the leave or the break in service to the end 
        of the month in which the payment is received. 
           Sec. 7.  Minnesota Statutes 2002, section 354A.093, is 
        amended to read: 
           354A.093 [MILITARY BREAK IN SERVICE CREDIT TO PROVIDE 
        UNIFORMED SERVICE.] 
           Subdivision 1.  [ELIGIBILITY.] Any teacher in the 
        coordinated program of either the Minneapolis Teachers 
        Retirement Fund Association or the St. Paul Teachers Retirement 
        Fund Association or any teacher in the new law coordinated 
        program of the Duluth Teachers Retirement Fund Association who 
        is granted a leave absent from employment by reason of absence 
        to enter military service in the uniformed services as defined 
        in United States Code, title 38, section 4303(13) and who 
        returns to the employer providing active teaching service upon 
        discharge from military uniformed service as provided in within 
        the time frames required under United States Code, title 38, 
        section 192.262 4312(e), shall be entitled to may receive 
        allowable service credit in the applicable association for all 
        or a portion of the period of military uniformed service but, 
        provided that the teacher did not for any voluntary extension of 
        military separate from uniformed service beyond the initial 
        period of enlistment, induction with a dishonorable or call to 
        active duty which occurred at the instance of the teacher bad 
        conduct discharge or under other than honorable conditions. 
           Subd. 2.  [CONTRIBUTIONS.] If the teacher granted the 
        military service leave of absence makes the equivalent employee 
        contribution for a period of military service leave of absence 
        pursuant to service provided to the uniformed services under 
        this section, the employing unit shall make an equivalent 
        employer contribution on behalf of the teacher to the applicable 
        association for the period of the military service leave of 
        absence being purchased in the manner described in section 
        354A.12, subdivision 2a.  The equivalent employee and employer 
        contributions shall must be in an amount equal to the employee 
        and employer contribution rates in effect for other active 
        members of the association covered by the same program applied 
        to a salary figure equal to the teacher's average annual salary 
        rate at the date of return from military service that the 
        teacher would have received if the leave or break in service had 
        not occurred, or if the determination of that average salary 
        rate is not reasonably certain, on the basis of the teacher's 
        average salary rate during the 12-month period immediately 
        preceding the period, or, if the preceding period is less than 
        12 months, the annualized rate derived from the teacher's 
        average salary rate during the period of teacher employment 
        rendered immediately preceding the period of uniformed 
        service, with the result multiplied by the number of full and 
        fractional years constituting the period of service provided to 
        the military uniformed service leave of absence which the 
        teacher seeks is authorized to purchase under this 
        section.  Payment shall include interest on the amount payable 
        pursuant to this section at the rate of six percent compounded 
        annually from the year the military service was rendered to the 
        date of payment. 
           Subd. 3.  [PRORATING.] If the payments made by a 
        teacher pursuant to under this section are less than an the full 
        amount equal to the applicable contribution rate applied to a 
        salary figure equal to the teacher's annual salary rate at the 
        date of return from military service, multiplied by the number 
        of years constituting the period of the military service leave 
        of absence determined under subdivision 2, the service credit 
        shall must be prorated.  The prorated service credit shall must 
        be determined by the ratio between the amount of the 
        actual equivalent employee payment which was made and the full 
        contribution amount payable pursuant to equivalent employee 
        payment required under this section.  In order to be entitled to 
        receive service credit under this section, payment shall be made 
        within five years from the date of discharge from military 
        service. 
           Subd. 4.  [ELIGIBLE PAYMENT PERIOD.] (a) To receive service 
        credit under this section, the contributions specified in this 
        section must be transmitted to the applicable first class city 
        teachers retirement fund association during the period which 
        begins with the date the individual returns to teaching service 
        and which has a duration of three times the length of the 
        uniformed service period, but not to exceed five years. 
           (b) Notwithstanding paragraph (a), if the payment period 
        determined under paragraph (a) is less than one year, the 
        contributions required under this section to receive service 
        credit may be made within one year from the discharge date. 
           Subd. 5.  [LIMITS ON SERVICE CREDIT.] The amount of service 
        credit obtainable under this section may not exceed five years, 
        unless a longer purchase period is required under United States 
        Code, title 38, section 4312. 
           Subd. 6.  [INTEREST REQUIREMENTS.] The employer shall pay 
        interest on all equivalent employee and employer contribution 
        amounts payable under this section.  Interest must be computed 
        at a rate of 8.5 percent compounded annually from the end of 
        each fiscal year of the leave or break in service to the end of 
        the month in which payment is received. 
           Sec. 8.  Minnesota Statutes 2002, section 490.121, is 
        amended by adding a subdivision to read: 
           Subd. 4b.  [490.1211] [CREDIT FOR BREAK IN SERVICE TO PROVIDE 
        UNIFORMED SERVICE.] (a) A judge who is absent from employment by 
        reason of service in the uniformed services, as defined in 
        United States Code, title 38, section 4303(13), and who returns 
        to state employment as a judge upon discharge from service in 
        the uniformed service within the time frame required in United 
        States Code, title 38, section 4312(e) may obtain service credit 
        for the period of the uniformed service, provided that the judge 
        did not separate from uniformed service with a dishonorable or 
        bad conduct discharge or under other than honorable conditions.  
           (b) The judge may obtain credit by paying into the fund 
        equivalent member contribution based on the contribution rate 
        rates in effect at the time that the uniformed service was 
        performed multiplied by the full and fractional years being 
        purchased and applied to the annual salary rate.  The annual 
        salary rate is the average annual salary during the purchase 
        period that the judge would have received if the judge had 
        continued to provide employment services to the state rather 
        than to provide uniformed service, or if the determination of 
        that rate is not reasonably certain, the annual salary rate is 
        the judge's average salary rate during the 12-month period of 
        judicial employment rendered immediately preceding the purchase 
        period.  
           (c) The equivalent employer contribution and, if 
        applicable, the equivalent employer additional contribution, 
        must be paid by the employing unit, using the employer and 
        employer additional contribution rate or rates in effect at the 
        time that the uniformed service was performed, applied to the 
        same annual salary rate or rates used to compute the equivalent 
        member contribution.  
           (d) If the member equivalent contributions provided for in 
        this subdivision are not paid in full, the judge's allowable 
        service credit must be prorated by multiplying the full and 
        fractional number of years of uniformed service eligible for 
        purchase by the ratio obtained by dividing the total member 
        contributions received by the total member contributions 
        otherwise required under this subdivision.  
           (e) To receive allowable service credit under this 
        subdivision, the contributions specified in this section must be 
        transmitted to the fund during the period which begins with the 
        date on which the individual returns to judicial employment and 
        which has a duration of three times the length of the uniformed 
        service period, but not to exceed five years.  If the determined 
        payment period is calculated to be less than one year, the 
        contributions required under this subdivision to receive service 
        credit may be within one year from the discharge date.  
           (f) The amount of allowable service credit obtainable under 
        this section may not exceed five years, unless a longer purchase 
        period is required under United States Code, title 38, section 
        4312.  
           (g) The state court administrator shall pay interest on all 
        equivalent member and employer contribution amounts payable 
        under this subdivision.  Interest must be computed at a rate of 
        8.5 percent compounded annually from the end of each fiscal year 
        of the leave or break in service to the end of the month in 
        which payment is received. 
           Sec. 9.  [EFFECTIVE DATE.] 
           Sections 1 to 8 are effective on July 1, 2004. 

                                   ARTICLE 4
                     QUALIFIED PART-TIME TEACHER PROVISIONS
           Section 1.  Minnesota Statutes 2002, section 354.66, 
        subdivision 2, is amended to read: 
           Subd. 2.  [QUALIFIED PART-TIME TEACHER PROGRAM 
        PARTICIPATION REQUIREMENTS.] (a) A teacher in a Minnesota public 
        elementary school, a Minnesota secondary school, or the 
        Minnesota State Colleges and Universities system who has three 
        years or more of allowable service in the association or three 
        years or more of full-time teaching service in Minnesota public 
        elementary schools, Minnesota secondary schools, or the 
        Minnesota State Colleges and Universities system, by agreement 
        with the board of the employing district or with the authorized 
        representative of the board, may be assigned to teaching service 
        in a part-time teaching position under subdivision 3.  The 
        agreement must be executed before October 1 of the school year 
        for which the teacher requests to make retirement contributions 
        under subdivision 4.  A copy of the executed agreement must be 
        filed with the executive director of the association.  If the 
        copy of the executed agreement is filed with the association 
        after October 1 of the school year for which the teacher 
        requests to make retirement contributions under subdivision 4, 
        the employing unit shall pay the fine specified in section 
        354.52, subdivision 6, for each calendar day that elapsed since 
        the October 1 due date.  The association may not accept an 
        executed agreement that is received by the association more than 
        15 months late.  The association may not waive the fine required 
        by this section. 
           (b) Notwithstanding paragraph (a), if the teacher is also a 
        legislator: 
           (1) the agreement in paragraph (a) must be executed before 
        March 1 of the school year for which the teacher requests to 
        make retirement contributions under subdivision 4; and 
           (2) the fines specified in paragraph (a) apply if the 
        employing unit does not file the executed agreement with the 
        executive director of the association by March 1. 
           Sec. 2.  Minnesota Statutes 2002, section 354A.094, 
        subdivision 3, is amended to read: 
           Subd. 3.  [QUALIFIED PART-TIME TEACHER PROGRAM 
        PARTICIPATION REQUIREMENTS.] (a) A teacher in the public schools 
        of a city of the first class who has three years or more 
        allowable service in the applicable retirement fund association 
        or three years or more of full-time teaching service in 
        Minnesota public elementary schools, Minnesota secondary 
        schools, and Minnesota State Colleges and Universities system 
        may, by agreement with the board of the employing district, be 
        assigned to teaching service within the district in a part-time 
        teaching position.  The agreement must be executed before 
        October 1 of the year for which the teacher requests to make 
        retirement contributions under subdivision 4.  A copy of the 
        executed agreement must be filed with the executive director of 
        the retirement fund association.  If the copy of the executed 
        agreement is filed with the association after October 1 of the 
        year for which the teacher requests to make retirement 
        contributions under subdivision 4, the employing school district 
        shall pay a fine of $5 for each calendar day that elapsed since 
        the October 1 due date.  The association may not accept an 
        executed agreement that is received by the association more than 
        15 months late.  The association may not waive the fine required 
        by this section. 
           (b) Notwithstanding paragraph (a), if the teacher is also a 
        legislator: 
           (1) the agreement in paragraph (a) must be executed before 
        March 1 of the school year for which the teacher requests to 
        make retirement contributions under subdivision 4; and 
           (2) the fines specified in paragraph (a) apply if the 
        employing unit does not file the executed agreement with the 
        executive director of the applicable Teachers Retirement Fund 
        Association by March 1. 
           Sec. 3.  [EFFECTIVE DATE.] 
           Sections 1 and 2 are effective on July 1, 2004. 

                                   ARTICLE 5
                  RETIREMENT PLAN CONTRIBUTIONS AND TRANSFERS
           Section 1.  Minnesota Statutes 2002, section 354.42, 
        subdivision 7, is amended to read: 
           Subd. 7.  [ERRONEOUS SALARY DEDUCTIONS OR DIRECT PAYMENTS.] 
        (a) Any deductions taken from the salary of an employee for the 
        retirement fund in error shall must be refunded to the employee 
        upon the discovery of the error and after the verification of 
        the error by the employing unit making the deduction, and. The 
        corresponding employer contribution and additional employer 
        contribution amounts attributable to the erroneous salary 
        deduction must be refunded to the employing unit. 
           (b) If salary deductions and employer contributions were 
        erroneously transmitted to the retirement fund and should have 
        been transmitted to another Minnesota public pension plan, the 
        retirement association executive director must transfer these 
        salary deductions and employer contributions to the appropriate 
        public pension fund without interest.  For purposes of this 
        paragraph, a Minnesota public pension plan means a plan 
        specified in section 356.30, subdivision 3, or the plan governed 
        by chapter 354B. 
           (c) A potential transfer under paragraph (b) that would 
        cause the plan to fail to be a qualified plan under section 
        401(a) of the Internal Revenue Code, as amended, must not be 
        made by the executive director.  Within 30 days after being 
        notified by the Teachers Retirement Association of an unmade 
        potential transfer under this paragraph, the employer of the 
        affected person must transmit an amount representing the 
        applicable salary deductions and employer contributions, without 
        interest, to the retirement fund of the appropriate Minnesota 
        public pension plan fund.  The retirement association must 
        provide a credit for the amount of the erroneous salary 
        deductions and employer contributions against future 
        contributions from the employer. 
           (d) 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 if a check has been returned to the funds of the 
        employing unit making the payment, a refund of the amount 
        deducted, or any portion of it that is required to adjust the 
        salary deductions, shall must be made to the employing unit. 
           (d) (e) Any erroneous direct payments of member-paid 
        contributions or erroneous salary deductions that were not 
        refunded in during the regular payroll cycle processing of an 
        employing unit's annual summary report shall must be refunded to 
        the member with , plus interest computed using the rate and 
        method specified in section 354.49, subdivision 2. 
           (f) Any refund under this subdivision that would cause the 
        plan to fail to be a qualified plan under section 401(a) of the 
        Internal Revenue Code, as amended, may not be refunded and 
        instead must be credited against future contributions payable by 
        the employer.  The employer is responsible for refunding to the 
        applicable employee any amount that was erroneously deducted 
        from the salary of the employee, with interest as specified in 
        paragraph (e). 
           Sec. 2.  Minnesota Statutes 2002, section 354.51, 
        subdivision 5, is amended to read: 
           Subd. 5.  [PAYMENT OF SHORTAGES.] (a) Except as provided in 
        paragraph (b), in the event that full required member 
        contributions are not deducted from the salary of a teacher, 
        payment shall must be made as follows:  
           (a) (1) Payment of shortages in member deductions on salary 
        earned after June 30, 1957, and prior to before July 1, 1981, 
        may be made any time prior to before retirement.  Payment shall 
        must include interest at an annual rate of 8.5 percent 
        compounded annually from the end of the fiscal year in which the 
        shortage occurred to the end of the month in which payment is 
        made and the interest shall must be credited to the fund.  If 
        payment of a shortage in deductions is not made, the formula 
        service credit of the member shall must be prorated pursuant to 
        under section 354.05, subdivision 25, clause (3). 
           (b) (2) Payment of shortages in member deductions on salary 
        earned after June 30, 1981, shall be are the sole obligation of 
        the employing unit and shall be are payable by the employing 
        unit upon notification by the executive director of the shortage 
        with interest at an annual rate of 8.5 percent compounded 
        annually from the end of the fiscal year in which the shortage 
        occurred to the end of the month in which payment is made and 
        the interest shall must be credited to the fund.  Effective July 
        1, 1986, the employing unit shall also pay the employer 
        contributions as specified in section 354.42, subdivisions 3 and 
        5 for such the shortages.  If the shortage payment is not paid 
        by the employing unit within 60 days of notification, the 
        executive director shall certify the amount of the shortage 
        payment to the applicable county auditor, who shall spread a 
        levy in the amount of the shortage payment over the taxable 
        property of the taxing district of the employing unit if the 
        employing unit is supported by property taxes, or to the 
        commissioner of finance, who shall deduct the amount from any 
        state aid or appropriation amount applicable to the employing 
        unit if the employing unit is not supported by property taxes.  
           (c) (3) Payment may not be made for shortages in member 
        deductions on salary earned prior to before July 1, 1957, for 
        shortages in member deductions on salary paid or payable under 
        paragraph (b), or for shortages in member deductions for persons 
        employed by the Minnesota State Colleges and Universities system 
        in a faculty position or in an eligible unclassified 
        administrative position and whose employment was less than 25 
        percent of a full academic year, exclusive of the summer 
        session, for the applicable institution that exceeds the most 
        recent 36 months. 
           (b) For a person who is employed by the Minnesota State 
        Colleges and Universities system in a faculty position or in an 
        eligible unclassified administrative position and whose 
        employment was less than 25 percent of a full academic year, 
        exclusive of the summer session, for the applicable institution, 
        upon the person's election under section 354B.21 of retirement 
        coverage under this chapter, the shortage in member deductions 
        on the salary for employment by the Minnesota State Colleges and 
        Universities system institution of less than 25 percent of a 
        full academic year, exclusive of the summer session, for the 
        applicable institution for the most recent 36 months and the 
        associated employer contributions must be paid by the Minnesota 
        State Colleges and Universities system institution, plus annual 
        compound interest at the rate of 8.5 percent from the end of the 
        fiscal year in which the shortage occurred to the end of the 
        month in which the teachers retirement association coverage 
        election is made.  If the shortage payment is not made by the 
        institution within 60 days of notification, the executive 
        director shall certify the amount of the shortage payment to the 
        commissioner of finance, who shall deduct the amount from any 
        state appropriation to the system.  An individual electing 
        coverage under this paragraph shall repay the amount of the 
        shortage in member deductions, plus interest, through deduction 
        from salary or compensation payments within the first year of 
        employment after the election under section 354B.21, subject to 
        the limitations in section 16D.16.  The Minnesota State Colleges 
        and Universities system may use any means available to recover 
        amounts which were not recovered through deductions from salary 
        or compensation payments.  No payment of the shortage in member 
        deductions under this paragraph may be made for a period longer 
        than the most recent 36 months. 
           Sec. 3.  Minnesota Statutes 2002, section 354B.23, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [MEMBER CONTRIBUTION RATE.] (a) Except as 
        provided in paragraph (b), The member contribution rate for 
        participants in the individual retirement account plan is 4.5 
        percent of salary. 
           (b) For participants in the individual retirement account 
        plan who were otherwise eligible to elect retirement coverage in 
        the state unclassified employees retirement program, the member 
        contribution rate is the rate specified in section 352D.04, 
        subdivision 2, paragraph (a). 
           Sec. 4.  Minnesota Statutes 2002, section 354B.32, is 
        amended to read: 
           354B.32 [TRANSFER OF FUNDS TO IRAP.] 
           A participant in the individual retirement account plan 
        established in this chapter who has less than ten years of 
        allowable service under the Teachers Retirement Association or 
        the a teachers retirement fund association, whichever applies, 
        may elect to transfer an amount equal to the participant's 
        accumulated member contributions to the Teachers Retirement 
        Association or the applicable teachers retirement fund 
        association, plus compound interest at the rate of six percent 
        per annum, to the individual retirement account plan.  The 
        transfers are irrevocable fund to fund fund-to-fund transfers, 
        and, in no event, may the participant receive direct payment of 
        the money transferred prior to retirement before the termination 
        of employment.  If a participant elects the contribution 
        transfer, all of the participant's allowable and formula service 
        credit in the Teachers Retirement Association or the teachers 
        retirement fund association associated with the transferred 
        amount is forfeited. 
           The executive director of the Teachers Retirement 
        Association and the chief administrative officers of the 
        teachers retirement fund associations, in cooperation with the 
        chancellor of the Minnesota State Colleges and Universities 
        system, shall notify participants who are eligible to transfer 
        of their right to transfer and the amount that they are eligible 
        to transfer, and shall, upon request, provide forms to implement 
        the transfer.  The chancellor of the Minnesota State Colleges 
        and Universities system shall assist the Teachers Retirement 
        Association and the teachers retirement fund associations in 
        developing transfer forms and in implementing the transfers.  
           Authority to elect a transfer under this section expires on 
        July 1, 2004. 
           Sec. 5.  [EFFECTIVE DATE; RETROACTIVE APPLICATION.] 
           (a) Section 2 is effective on July 1, 2004. 
           (b) Section 2 applies to shortages in member deductions 
        that occurred before the effective date of the section. 
           (c) Sections 1, 3, and 4 are effective on July 1, 2004. 

                                   ARTICLE 6
                      REPORTING AND INFORMATION PROVISION
           Section 1.  Minnesota Statutes 2002, section 354.07, 
        subdivision 9, is amended to read: 
           Subd. 9.  [INFORMATION DISTRIBUTION.] All school districts, 
        the Minnesota State Colleges and Universities, community 
        colleges and other employers of members of the association are 
        obligated to distribute to their employees ballots for the 
        election of members to the board of trustees, pamphlets, 
        brochures, documents or any other material containing 
        association information which are prepared by the executive 
        director or the board and are delivered to the employers for 
        distribution. 
           Sec. 2.  Minnesota Statutes 2002, section 354.52, 
        subdivision 4a, is amended to read: 
           Subd. 4a.  [MEMBER DATA REPORTING REQUIREMENTS.] (a) An 
        employing unit must initially provide the member data specified 
        in paragraph (b) or any of that data not previously provided to 
        the association for payroll warrants dated after June 30, 1995, 
        in a format prescribed by the executive director.  An employing 
        unit must provide the member data specified in paragraph (b) in 
        a format prescribed by the executive director.  Data changes and 
        the dates of those changes under this subdivision must be 
        reported to the association in a format prescribed by the 
        executive director on an ongoing basis within 14 calendar days 
        after the date of the end of the payroll cycle in which they 
        occur.  These data changes must be reported with the payroll 
        cycle data under subdivision 4b. 
           (b) Data on the member includes:  
           (1) legal name, address, date of birth, association member 
        number, employer-assigned employee number, and Social Security 
        number; 
           (2) association status, including, but not limited to, 
        basic, coordinated, exempt annuitant, exempt technical college 
        teacher, and exempt independent contractor or consultant; 
           (3) employment status, including, but not limited to, full 
        time, part time, intermittent, substitute, or part-time 
        mobility; 
           (4) employment position, including, but not limited to, 
        teacher, superintendent, principal, administrator, or other; 
           (5) employment activity, including, but not limited to, 
        hire, termination, resumption of employment, disability, or 
        death; 
           (6) leaves of absence; 
           (7) county district number assigned by the association for 
        the employing unit; 
           (8) data center identification number, if applicable; and 
           (9) gender; 
           (10) position code; and 
           (11) other information as may be required by the executive 
        director. 
           Sec. 3.  Minnesota Statutes 2002, section 354.52, is 
        amended by adding a subdivision to read: 
           Subd. 4c.  [MNSCU SERVICE CREDIT REPORTING.] For all 
        part-time service rendered on or after July 1, 2004, the service 
        credit reporting requirement in subdivision 4b for all part-time 
        employees of the Minnesota State Colleges and Universities 
        system must be met by the Minnesota State Colleges and 
        Universities system reporting to the association on or before 
        July 31 of each year the final calculation of each part-time 
        member's service credit for the immediately preceding fiscal 
        year based on the employee's assignments for the fiscal year. 
           Sec. 4.  Minnesota Statutes 2002, section 354.52, 
        subdivision 6, is amended to read: 
           Subd. 6.  [NONCOMPLIANCE CONSEQUENCES.] An employing unit 
        that does not comply with the reporting requirements under this 
        section shall subdivision 2a, 4a, or 4b must pay a fine of $5 
        per calendar day until the association receives the required 
        data. 
           Sec. 5.  [356.2165] [LEGISLATIVE COMMISSION ON PENSIONS AND 
        RETIREMENT; ACTUARIAL SERVICES BILLING TO THIRD PARTIES.] 
           Notwithstanding any provision of law to the contrary, the 
        Legislative Commission on Pensions and Retirement may bill third 
        parties for actuarial services performed for their benefit under 
        its contract with its consulting actuary under Minnesota 
        Statutes, section 3.85, and may deposit the actuarial services 
        reimbursements from those third parties to the credit of the 
        commission, and those deposited reimbursements are 
        reappropriated to the commission. 
           Sec. 6.  [EFFECTIVE DATE.] 
           (a) Sections 1 to 4 are effective on July 1, 2004. 
           (b) Section 5 is effective retroactively to July 1, 2003, 
        and expires when the requirement that the Legislative Commission 
        on Pensions and Retirement retain a consulting actuary to 
        perform annual actuarial valuations of retirement plans 
        terminates. 

                                   ARTICLE 7
                         RETIREMENT ANNUITY PROVISIONS
           Section 1.  Minnesota Statutes 2002, section 352.86, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ELIGIBILITY; RETIREMENT ANNUITY.] A person 
        who is employed by the Department of Transportation in the civil 
        service employment classification of aircraft pilot or chief 
        pilot who is covered by the general employee retirement plan of 
        the system under section 352.01, subdivision 23, who elects this 
        special retirement coverage under subdivision 3, who is 
        prohibited from performing the duties of aircraft pilot or chief 
        pilot after reaching age 62 65 by a rule policy adopted by the 
        commissioner of transportation, and who terminates employment as 
        a state employee on reaching that on or after age 62 but prior 
        to normal retirement age is entitled, upon application, to a 
        retirement annuity computed in accordance with under section 
        352.115, subdivisions 2 and 3, without any reduction for early 
        retirement under section 352.116, subdivision 1. 
           Sec. 2.  Minnesota Statutes 2002, section 353.37, is 
        amended by adding a subdivision to read: 
           Subd. 1b.  [RETIREMENT AGE.] For purposes of this section, 
        "retirement age" means retirement age as defined in United 
        States Code, title 42, section 416(l). 
           Sec. 3.  Minnesota Statutes 2002, section 353.37, 
        subdivision 3, is amended to read: 
           Subd. 3.  [REDUCTION OF ANNUITY.] The association shall 
        reduce the amount of the annuity as follows: 
           (a) for of a person who has not reached normal the 
        retirement age, by one-half of the amount in excess of the 
        applicable reemployment income maximum under subdivision 1;. 
           (b) for a person who has reached normal retirement age, but 
        has not reached age 70, one-third of the amount in excess of the 
        applicable reemployment income maximum under subdivision 1; 
           (c) for a person who has reached age 70, or for salary 
        earned through service in an elected office, there is no 
        reduction upon reemployment, regardless of income. 
        There is no reduction upon reemployment, regardless of income, 
        for a person who has reached the retirement age. 
           Sec. 4.  Minnesota Statutes 2002, section 354.44, 
        subdivision 4, is amended to read: 
           Subd. 4.  [RETIREMENT ANNUITY ACCRUAL DATE.] (a) An annuity 
        payment begins to accrue, providing provided that the age and 
        service requirements under subdivision 1 are satisfied, after 
        the termination of teaching service, or after the application 
        for retirement has been filed with the board, whichever is 
        later, as follows: 
           (1) on the 16th day of the month of termination or filing 
        if the termination or filing occurs on or before the 15th day of 
        the month; 
           (2) on the first day of the month following the month of 
        termination or filing if the termination or filing occurs on or 
        after the 16th day of the month; 
           (3) on July 1 for all school principals and other 
        administrators who receive a full annual contract salary during 
        the fiscal year for performance of a full year's contract 
        duties; or 
           (4) a later date to be either the first or the 16th day of 
        a month occurring within the six-month period immediately 
        following the termination of teaching service as specified under 
        paragraph (b) by the member. 
           (b) If an application for retirement is filed with the 
        board during the six-month period that occurs immediately 
        following the termination of teaching service, the annuity may 
        begin to accrue as if the application for retirement had been 
        filed with the board on the date teaching service terminated or 
        a later date under paragraph (a), clause (4).  An annuity must 
        not begin to accrue more than one month before the date of final 
        salary receipt. 
           Sec. 5.  Minnesota Statutes 2002, section 354.44, 
        subdivision 5, is amended to read: 
           Subd. 5.  [RESUMPTION OF TEACHING SERVICE AFTER 
        RETIREMENT.] (a) Any person who retired under the provisions of 
        this chapter and has thereafter resumed teaching in any employer 
        unit to which this chapter applies is eligible to continue to 
        receive payments in accordance with the annuity except that 
        annuity payments must be reduced during the calendar year 
        immediately following any 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 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.  
           (b) 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.  
           (c) After a person has reached the Social Security full 
        retirement age of 70, no reemployment income maximum is 
        applicable regardless of the amount of income. 
           (d) The amount of the retirement annuity reduction must be 
        handled or disposed of as provided in section 356.47. 
           (e) For the purpose of this subdivision, income from 
        teaching service includes, but is not limited to:  
           (1) all income for services performed as a consultant or an 
        independent contractor for an employer unit covered by the 
        provisions of this chapter; and 
           (2) 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.  
           Sec. 6.  Minnesota Statutes 2002, section 354.44, 
        subdivision 6, is amended to read: 
           Subd. 6.  [COMPUTATION OF FORMULA PROGRAM RETIREMENT 
        ANNUITY.] (1) (a) The formula retirement annuity must be 
        computed in accordance with the applicable provisions of the 
        formulas stated in clause (2) or (4) paragraph (b) or (d) on the 
        basis of each member's average salary for the period of the 
        member's formula service credit.  
           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) (b) This clause paragraph, in conjunction with clause 
        (3) paragraph (c), applies to a person who first became a member 
        of the association or a member of a pension fund listed in 
        section 356.30, subdivision 3, before July 1, 1989, 
        unless clause (4) paragraph (d), in conjunction with clause 
        (5) paragraph (e), produces a higher annuity amount, in which 
        case clause (4) paragraph (d) applies.  The average salary as 
        defined in clause (1) paragraph (a), 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     the percent        the percent
         during first ten        specified in       specified in
                                 section 356.315,   section 356.315,
                                 subdivision 1,     subdivision 3,
                                 per year           per year
        Each year of service     the percent        the percent
         thereafter              specified in       specified in
                                 section 356.315,   section 356.315,
                                 subdivision 2,     subdivision 4,
                                 per year           per year
           (3) (c)(i) This clause paragraph applies only to a person 
        who first became a member of the association or a member of a 
        pension fund listed in section 356.30, subdivision 3, before 
        July 1, 1989, and whose annuity is higher when calculated 
        under clause (2) paragraph (b), in conjunction with this clause 
        paragraph than when calculated under clause (4) paragraph (d), 
        in conjunction with clause (5) paragraph (e). 
           (ii) Where any member retires prior to normal retirement 
        age under a formula annuity, the member shall be paid a 
        retirement annuity in an amount equal to the normal annuity 
        provided in clause (2) paragraph (b) reduced by one-quarter of 
        one percent for each month that the member is under normal 
        retirement age at the time of retirement except that for any 
        member who has 30 or more years of allowable service credit, the 
        reduction shall be applied only for each month that the member 
        is under age 62. 
           (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) paragraph (b), without any reduction by 
        reason of early retirement. 
           (4) (d) This clause paragraph applies to a member who has 
        become at least 55 years old and first became a member of the 
        association after June 30, 1989, and to any other member who has 
        become at least 55 years old and whose annuity amount when 
        calculated under this clause paragraph and in conjunction with 
        clause (5) paragraph (e), is higher than it is when calculated 
        under clause (2) paragraph (b), in conjunction with clause 
        (3) paragraph (c).  The average salary, as defined in clause (1) 
        paragraph (a) multiplied by the percent specified by section 
        356.315, subdivision 4, for each year of service for a basic 
        member and by the percent specified in section 356.315, 
        subdivision 2, for each year of service for a coordinated member 
        shall determine the amount of the retirement annuity to which 
        the member is entitled. 
           (5) (e) This clause paragraph applies to a person who has 
        become at least 55 years old and first becomes a member of the 
        association after June 30, 1989, and to any other member who has 
        become at least 55 years old and whose annuity is higher when 
        calculated under clause (4) paragraph (d) in conjunction with 
        this clause paragraph than when calculated under clause 
        (2) paragraph (b), in conjunction with clause (3) paragraph 
        (c).  An employee who retires under the formula annuity before 
        the normal retirement age shall be paid the normal annuity 
        provided in clause (4) paragraph (d) reduced so that the reduced 
        annuity is the actuarial equivalent of the annuity that would be 
        payable to the employee if the employee deferred receipt of the 
        annuity and the annuity amount were augmented at an annual rate 
        of three percent compounded annually from the day the annuity 
        begins to accrue until the normal retirement age. 
           (f) No retirement annuity is payable to a former employee 
        with a salary that exceeds 95 percent of the governor's salary 
        unless and until the salary figures used in computing the 
        highest five successive years average salary under paragraph (a) 
        have been audited by the Teachers Retirement Association and 
        determined by the executive director to comply with the 
        requirements and limitations of section 354.05, subdivisions 35 
        and 35a. 
           Sec. 7.  Minnesota Statutes 2002, section 490.121, 
        subdivision 10, is amended to read: 
           Subd. 10.  [EARLY RETIREMENT DATE.] "Early retirement date" 
        means the last day of any month after a judge attains the age of 
        62 60 until the normal retirement date. 
           Sec. 8.  [PERA-POLICE AND FIRE; TEMPORARY EXEMPTION FROM 
        REEMPLOYED ANNUITANT EARNINGS LIMITATIONS.] 
           Notwithstanding any provision of Minnesota Statutes, 
        section 353.37, to the contrary, a person who is receiving a 
        retirement annuity from the public employees police and fire 
        plan and who is employed as a sworn peace officer by the 
        Metropolitan Airports Commission is exempt from the limitation 
        on reemployed annuitant earnings for the period January 1, 2004, 
        until June 30, 2007. 
           Sec. 9.  [TRA; REPORT ON CERTAIN SALARY AUDITS.] 
           (a) The executive director shall report to the chair of the 
        Legislative Commission on Pensions and Retirement, the chair of 
        the Committee on Governmental Operations and Veterans Affairs 
        Policy of the house of representatives, and the chair of the 
        State and Local Government Operations Committee of the senate on 
        the number of superintendents, assistant superintendents, and 
        principals who retired during the most recent calendar year, the 
        number of superintendents, assistant superintendents, and 
        principals where the preretirement salary audit under Minnesota 
        Statutes, section 354.44, subdivision 6, paragraph (f), 
        disclosed an impermissible salary inclusion amount, the school 
        district or districts in which impermissible salary inclusions 
        occurred, the average amount of the impermissible salary 
        inclusions where there were impermissible salary inclusions, and 
        the range of impermissible salary inclusions. 
           (b) When a report is due, the report must be filed on or 
        before February 15. 
           (c) Reports under this section must be made for calendar 
        years 2004 and 2005.  A report under this section also must be 
        filed for calendar years 2006 and 2007 if the report for 
        calendar year 2005 indicates that there were impermissible 
        salary inclusions that occurred during the calendar year. 
           Sec. 10.  [EFFECTIVE DATE.] 
           (a) Section 1 is effective on the day following final 
        enactment 
           (b)  Sections 2, 3, 4, 5, 6, and 7 are effective on July 1, 
        2004. 
           (c) Section 8 is effective on the day following final 
        enactment and applies retroactively from January 1, 2004.  

                                   ARTICLE 8
                         DISABILITY BENEFIT PROVISIONS
           Section 1.  Minnesota Statutes 2002, section 352.113, 
        subdivision 4, is amended to read: 
           Subd. 4.  [MEDICAL OR PSYCHOLOGICAL EXAMINATIONS; 
        AUTHORIZATION FOR PAYMENT OF BENEFIT.] (a) An applicant shall 
        provide medical, chiropractic, or psychological evidence to 
        support an application for total and permanent disability.  
           (b) The director shall have the employee examined by at 
        least one additional licensed chiropractor, physician, or 
        psychologist designated by the medical adviser.  The 
        chiropractors, physicians, or psychologists shall make written 
        reports to the director concerning the employee's disability 
        including medical expert opinions as to whether the employee is 
        permanently and totally disabled within the meaning of section 
        352.01, subdivision 17.  
           (c) The director shall also obtain written certification 
        from the employer stating whether the employment has ceased or 
        whether the employee is on sick leave of absence because of a 
        disability that will prevent further service to the employer and 
        as a consequence the employee is not entitled to compensation 
        from the employer.  
           (d) The medical adviser shall consider the reports of the 
        physicians, psychologists, and chiropractors and any other 
        evidence supplied by the employee or other interested parties.  
        If the medical adviser finds the employee totally and 
        permanently disabled, the adviser shall make appropriate 
        recommendation to the director in writing together with the date 
        from which the employee has been totally disabled.  The director 
        shall then determine if the disability occurred within 180 days 
        of filing the application, while still in the employment of the 
        state, and the propriety of authorizing payment of a disability 
        benefit as provided in this section.  
           (e) A terminated employee may apply for a disability 
        benefit within 180 days of termination as long as the disability 
        occurred while in the employment of the state.  The fact that an 
        employee is placed on leave of absence without compensation 
        because of disability does not bar that employee from receiving 
        a disability benefit.  
           (f) Unless the payment of a disability benefit has 
        terminated because the employee is no longer totally disabled, 
        or because the employee has reached normal retirement age as 
        provided in this section, the disability benefit shall must 
        cease with the last payment received by the disabled employee or 
        which had accrued during the lifetime of the employee unless 
        there is a spouse surviving;.  In that event, the surviving 
        spouse is entitled to the disability benefit for the calendar 
        month in which the disabled employee died. 
           Sec. 2.  Minnesota Statutes 2002, section 352.113, 
        subdivision 6, is amended to read: 
           Subd. 6.  [REGULAR MEDICAL OR PSYCHOLOGICAL EXAMINATIONS.] 
        At least once each year during the first five years following 
        the allowance of a disability benefit to any employee, and at 
        least once in every three-year period thereafter, the director 
        may require any disabled employee to undergo a medical, 
        chiropractic, or psychological examination.  The examination 
        must be made at the place of residence of the employee, or at 
        any place mutually agreed upon, by a physician or physicians an 
        expert or experts designated by the medical adviser and engaged 
        by the director.  If any examination indicates to the medical 
        adviser that the employee is no longer permanently and totally 
        disabled, or is engaged in or can engage in a gainful 
        occupation, payments of the disability benefit by the fund must 
        be discontinued.  The payments shall discontinue must be 
        discontinued as soon as the employee is reinstated to the 
        payroll following sick leave, but in no case shall may payment 
        be made for more than 60 days after the medical adviser finds 
        that the employee is no longer permanently and totally disabled. 
           Sec. 3.  Minnesota Statutes 2002, section 352.113, is 
        amended by adding a subdivision to read: 
           Subd. 7a.  [TEMPORARY REEMPLOYMENT BENEFIT REDUCTION 
        WAIVER.] A reduction in benefits under subdivision 7, or a 
        termination of benefits due to the disabled employee resuming a 
        gainful occupation from which earnings are equal to or more than 
        the employee's salary at the date of disability or the salary 
        currently paid for similar positions does not apply until six 
        months after the individual returns to a gainful occupation. 
           Sec. 4.  Minnesota Statutes 2002, section 352.113, 
        subdivision 8, is amended to read: 
           Subd. 8.  [REFUSAL OF EXAMINATION.] If a disabled employee 
        refuses to submit to a medical an expert examination as 
        required, payments by the fund must be discontinued and the 
        director shall revoke all rights of the employee in any 
        disability benefit. 
           Sec. 5.  Minnesota Statutes 2002, section 352.95, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [JOB-RELATED DISABILITY.] A covered 
        correctional employee who becomes disabled and who is expected 
        to be physically or mentally unfit to perform the duties of the 
        position for at least one year as a direct result of an injury, 
        sickness, or other disability that incurred in or arising arose 
        out of any act of duty that makes the employee physically or 
        mentally unable to perform the duties, is entitled to a 
        disability benefit.  The disability benefit may be based on 
        covered correctional service only.  The benefit amount must 
        equal is 50 percent of the average salary defined in section 
        352.93, plus an additional percent equal to that specified in 
        section 356.315, subdivision 5, for each year of covered 
        correctional service in excess of 20 years, ten months, prorated 
        for completed months. 
           Sec. 6.  Minnesota Statutes 2002, section 352.95, 
        subdivision 2, is amended to read: 
           Subd. 2.  [NON-JOB-RELATED DISABILITY.] Any A covered 
        correctional employee who, after rendering at least one year of 
        covered correctional service, becomes disabled and who is 
        expected to be physically or mentally unfit to perform the 
        duties of the position for at least one year because of sickness 
        or injury occurring that occurred 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 must be computed as though the employee had at least 15 
        years of covered correctional service. 
           Sec. 7.  Minnesota Statutes 2002, section 352.95, 
        subdivision 4, is amended to read: 
           Subd. 4.  [MEDICAL OR PSYCHOLOGICAL EVIDENCE.] (a) An 
        applicant shall provide medical, chiropractic, or psychological 
        evidence to support an application for disability benefits.  The 
        director shall have the employee examined by at least one 
        additional licensed physician, chiropractor, or psychologist who 
        is designated by the medical adviser.  The physicians, 
        chiropractors, or psychologists with respect to a mental 
        impairment, shall make written reports to the director 
        concerning the question of the employee's disability, 
        including medical their expert opinions as to whether the 
        employee is disabled within the meaning of this section.  The 
        director shall also obtain written certification from the 
        employer stating whether or not the employee is on sick leave of 
        absence because of a disability that will prevent further 
        service to the employer, and as a consequence, the employee is 
        not entitled to compensation from the employer.  
           (b) If, on considering the physicians' reports by the 
        physicians, chiropractors, or psychologists and any other 
        evidence supplied by the employee or others, the medical adviser 
        finds the employee disabled within the meaning of this section, 
        the advisor shall make the appropriate recommendation to the 
        director, in writing, together with the date from which the 
        employee has been disabled.  The director shall then determine 
        the propriety of authorizing payment of a disability benefit as 
        provided in this section.  
           (c) Unless the payment of a disability benefit has 
        terminated because the employee is no longer disabled, or 
        because the employee has reached either age 65 or the five-year 
        anniversary of the effective date of the disability benefit, 
        whichever is later, the disability benefit shall must cease with 
        the last payment which was received by the disabled employee or 
        which had accrued during the employee's lifetime.  While 
        disability benefits are paid, the director has the right, at 
        reasonable times, to require the disabled employee to submit 
        proof of the continuance of the disability claimed.  If any 
        examination indicates to the medical adviser that the employee 
        is no longer disabled, the disability payment must be 
        discontinued upon the person's reinstatement to state service or 
        within 60 days of the finding, whichever is sooner.  
           Sec. 8.  Minnesota Statutes 2002, section 352B.10, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [INJURIES,; PAYMENT AMOUNTS.] Any A member 
        who becomes disabled and who is expected to be physically or 
        mentally unfit to perform duties for at least one year as a 
        direct result of an injury, sickness, or other disability that 
        incurred in or arising arose out of any act of duty, shall is 
        entitled to receive disability benefits while disabled.  The 
        benefits must be paid in monthly installments.  The benefit is 
        an amount equal to the member's average monthly salary 
        multiplied by 60 percent, plus an additional percent equal to 
        that specified in section 356.315, subdivision 6, for each year 
        and pro rata for completed months of service in excess of 20 
        years, if any. 
           Sec. 9.  Minnesota Statutes 2002, section 352B.10, 
        subdivision 2, is amended to read: 
           Subd. 2.  [DISABLED WHILE NOT ON DUTY.] If a member 
        terminates employment after with at least one year of service 
        because of sickness or injury occurring while not on duty and 
        not engaged in state work entitling the member to membership, 
        and the member becomes disabled and is expected to be physically 
        or mentally unfit to perform the duties of the position for at 
        least one year because of sickness or injury occurring that 
        occurred while not engaged in covered employment, the member 
        individual is entitled to disability benefits.  The benefit must 
        be in the same amount and computed in the same way as if the 
        member individual were 55 years old at the date of disability 
        and the annuity were paid was payable under section 352B.08.  If 
        a disability under this clause subdivision occurs after one year 
        of service but before 15 years of service, the disability 
        benefit must be computed as though the member individual had 
        credit for 15 years of service. 
           Sec. 10.  Minnesota Statutes 2002, section 352B.10, 
        subdivision 3, is amended to read: 
           Subd. 3.  [ANNUAL AND SICK LEAVE; WORK AT LOWER PAY.] No 
        member shall is entitled to receive any a disability benefit 
        payment when the member has unused annual leave or sick leave, 
        or under any other circumstances, when, during the period of 
        disability, there has been no impairment of salary.  Should If 
        the member or former member resume disabilitant resumes gainful 
        work employment, the disability benefit must be continued in an 
        amount which, when added to current earnings, does not exceed 
        the salary rate received of by the person at the date of 
        disability as, which must be adjusted over time by the same 
        percentage increase in United States average wages used by the 
        Social Security Administration in calculating average indexed 
        monthly earnings for the old age, survivors, and disability 
        insurance programs for the same period. 
           Sec. 11.  Minnesota Statutes 2002, section 352B.10, 
        subdivision 4, is amended to read: 
           Subd. 4.  [PROOF OF DISABILITY.] (a) No disability benefit 
        payment shall benefits may be made except upon paid unless 
        adequate proof is furnished to the executive director of the 
        existence of the disability.  While disability benefits are 
        being paid 
           (b) Adequate proof of a disability must include a written 
        expert report by a licensed physician, by a licensed 
        chiropractor, or with respect to a mental impairment, by a 
        licensed psychologist. 
           (c) Following the commencement of benefit payments, 
        the executive director has the right, at reasonable times, to 
        require the disabled former member disabilitant to submit proof 
        of the continuance of the disability claimed.  
           Sec. 12.  Minnesota Statutes 2002, section 352B.10, 
        subdivision 5, is amended to read: 
           Subd. 5.  [OPTIONAL ANNUITY.] A disabled member 
        disabilitant may, in lieu of survivorship coverage under section 
        352B.11, subdivision 2, choose the normal disability benefit or 
        an optional annuity as provided in section 352B.08, subdivision 
        3.  The choice of an optional annuity must be made in writing, 
        on a form prescribed by the executive director, and must be made 
        before the commencement of the payment of the disability 
        benefit, or within 90 days of attaining before reaching age 65 
        or before reaching the five-year anniversary of the effective 
        date of the disability benefit, whichever is later.  It The 
        optional annuity is effective on the date on which the 
        disability benefit begins to accrue, or the month following the 
        attainment of age 65 or following the five-year anniversary of 
        the effective date of the disability benefit, whichever is later.
           Sec. 13.  Minnesota Statutes 2002, section 352B.105, is 
        amended to read: 
           352B.105 [TERMINATION OF DISABILITY BENEFITS.] 
           Disability benefits payable under section 352B.10 shall 
        must terminate at on the transfer date, which is the end of the 
        month in which the beneficiary disabilitant becomes 65 years old 
        or the five-year anniversary of the effective date of the 
        disability benefit, whichever is later.  If the beneficiary 
        disabilitant is still disabled when on the beneficiary becomes 
        65 years old transfer date, the beneficiary shall disabilitant 
        must be deemed to be a retired member and, if the beneficiary 
        disabilitant had chosen an optional annuity under section 
        352B.10, subdivision 5, shall must receive an annuity in 
        accordance with under the terms of the optional annuity 
        previously chosen.  If the beneficiary disabilitant had not 
        chosen an optional annuity under section 352B.10, subdivision 5, 
        the beneficiary disabilitant may then choose to receive either a 
        normal retirement annuity computed under section 352B.08, 
        subdivision 2, or an optional annuity as provided in section 
        352B.08, subdivision 3.  An optional annuity must be chosen 
        within 90 days of attaining age 65 or reaching the five-year 
        anniversary of the effective date of the disability benefit, 
        whichever is later transfer date.  If an optional annuity is 
        chosen, the optional annuity shall begin to accrue accrues on 
        the first of the month next following attainment of age 65 or 
        the five-year anniversary of the effective transfer date of the 
        disability benefit, whichever is later. 
           Sec. 14.  Minnesota Statutes 2002, section 352D.065, 
        subdivision 2, is amended to read: 
           Subd. 2.  [DISABILITY BENEFIT AMOUNT.] A participant who 
        becomes totally and permanently disabled has the option, even if 
        on leave of absence without pay, to receive: 
           (1) the value of the participant's total shares; 
           (2) the value of one-half of a portion of the total shares 
        and an annuity based on the value of one-half remainder of the 
        total shares; or 
           (3) an annuity based on the value of the participant's 
        total shares. 
           Sec. 15.  Minnesota Statutes 2002, section 353.33, 
        subdivision 4, is amended to read: 
           Subd. 4.  [PROCEDURE TO DETERMINE ELIGIBILITY.] (a) The 
        applicant shall provide an expert report signed by a licensed 
        physician, psychologist, or chiropractor and the applicant must 
        authorize the release of medical and health care evidence, 
        including all medical records and relevant information from any 
        source, to support the application for total and permanent 
        disability benefits.  
           (b)  The medical adviser shall verify the medical evidence 
        and, if necessary for disability determination, suggest the 
        referral of the applicant to specialized medical consultants.  
           (c) The association shall also obtain from the employer, a 
        certification of the member's past public service, the dates of 
        any paid sick leave and vacation beyond the last working day and 
        whether or not any sick leave or annual leave has been allowed.  
           (d) If, upon consideration of the medical evidence received 
        and the recommendations of the medical adviser, it is determined 
        by the executive director that the applicant is totally and 
        permanently disabled within the meaning of the law, the 
        association shall grant the person a disability benefit.  The 
        fact that 
           (e) An employee who is placed on leave of absence without 
        compensation because of a disability does is not bar the person 
        barred from receiving a disability benefit. 
           Sec. 16.  Minnesota Statutes 2002, section 353.33, 
        subdivision 6, is amended to read: 
           Subd. 6.  [CONTINUING ELIGIBILITY FOR BENEFITS.] The 
        association shall determine eligibility for continuation of 
        disability benefits and require periodic examinations and 
        evaluations of disabled members as frequently as deemed 
        necessary.  The association shall require the disabled member to 
        provide an expert report signed by a licensed physician, 
        psychologist, or chiropractor and the disabled member shall 
        authorize the release of medical and health care evidence, 
        including all medical and health care records and information 
        from any source, relating to an application for continuation of 
        disability benefits.  Disability benefits are contingent upon a 
        disabled person's participation in a vocational 
        rehabilitation program evaluation 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, payments must cease the first 
        of the month following the expiration of a 30-day period after 
        the member receives a certified letter notifying the member that 
        payments will cease. 
           Sec. 17.  Minnesota Statutes 2002, section 353.33, 
        subdivision 6b, is amended to read: 
           Subd. 6b.  [DUTIES OF THE MEDICAL ADVISER.] At the request 
        of the executive director, the medical adviser shall designate 
        licensed physicians, psychologists, or chiropractors to examine 
        applicants for disability benefits and review the medical expert 
        reports based upon these examinations to determine whether an 
        applicant is totally and permanently disabled as defined in 
        section 353.01, subdivision 19, disabled as defined in section 
        353.656, or eligible for continuation of disability benefits 
        under subdivision 6.  The medical examiner shall also review, at 
        the request of the executive director, all medical and health 
        care statements on behalf of an applicant for disability 
        benefits, and shall report in writing to the executive 
        director the conclusions and recommendations of the examiner on 
        those matters referred for advice. 
           Sec. 18.  Minnesota Statutes 2002, section 353.33, 
        subdivision 7, is amended to read: 
           Subd. 7.  [PARTIAL REEMPLOYMENT.] If, following a work or 
        non-work-related injury or illness, a disabled person resumes a 
        gainful occupation from which who remains totally and 
        permanently disabled as defined in section 353.01, subdivision 
        19, has income from employment that is not substantial gainful 
        activity and the rate of earnings from that employment are less 
        than the salary rate at the date of disability or the 
        salary rate currently paid for similar positions similar to the 
        employment position held by the disabled person immediately 
        before becoming disabled, whichever is greater, the board 
        executive director shall continue the disability benefit in an 
        amount that, when added to the earnings and any workers' 
        compensation benefit, does not exceed the salary rate at the 
        date of disability or the salary currently paid for similar 
        positions similar to the employment position held by the 
        disabled person immediately before becoming disabled, whichever 
        is higher, provided. The disability benefit does under this 
        subdivision may 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. 19.  Minnesota Statutes 2002, section 353.33, is 
        amended by adding a subdivision to read: 
           Subd. 7a.  [TRIAL WORK PERIOD.] (a) If, following a work or 
        non-work related injury or illness, a disabled member attempts 
        to return to work for their previous public employer or attempts 
        to return to a similar position with another public employer, on 
        a full-time or less than full-time basis, the Public Employees 
        Retirement Association shall continue paying the disability 
        benefit for a period not to exceed six months.  The disability 
        benefit must continue in an amount that, when added to the 
        subsequent employment 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. 
           (b) No deductions for the retirement fund may be taken from 
        the salary of a disabled person who is attempting to return to 
        work under this provision unless the member waives further 
        disability benefits. 
           (c) A member only may return to employment and continue 
        disability benefit payments once while receiving disability 
        benefits from a plan administered by the Public Employees 
        Retirement Association. 
           Sec. 20.  Minnesota Statutes 2002, section 353.656, 
        subdivision 5, is amended to read: 
           Subd. 5.  [PROOF OF DISABILITY.] (a) A disability benefit 
        payment must not be made except upon adequate proof furnished to 
        the executive director of the association of the existence of 
        such a disability, and. 
           (b) During the time when disability benefits are being 
        paid, the executive director of the association has the right, 
        at reasonable times, to require the disabled member to submit 
        proof of the continuance of the disability claimed.  
           (c) Adequate proof of a disability must include a written 
        expert report by a licensed physician, by a licensed 
        chiropractor, or with respect to a mental impairment, by a 
        licensed psychologist. 
           (d) A person applying for or receiving a disability benefit 
        shall provide or authorize release of medical evidence, 
        including all medical records and information from any source, 
        relating to an application for disability benefits or the 
        continuation of those benefits. 
           Sec. 21.  Minnesota Statutes 2002, section 353.656, is 
        amended by adding a subdivision to read: 
           Subd. 8.  [APPLICATION PROCEDURE TO DETERMINE ELIGIBILITY 
        FOR POLICE AND FIRE PLAN DISABILITY BENEFITS.] (a) An 
        application for disability benefits must be made in writing on a 
        form or forms prescribed by the executive director. 
           (b) If an application for disability benefits is filed 
        within two years of the date of the injury or the onset of the 
        illness that gave rise to the disability application, the 
        application must be supported by evidence that the applicant is 
        unable to perform the duties of the position held by the 
        applicant on the date of the injury or the onset of the illness 
        causing the disability.  The employer must provide evidence 
        indicating whether the applicant is able or unable to perform 
        the duties of the position held on the date of the injury or 
        onset of illness causing the disability and the specifications 
        of any duties that the individual can or cannot perform. 
           (c) If an application for disability benefits is filed more 
        than two years after the date of the injury or the onset of an 
        illness causing the disability, the application must be 
        supported by evidence that the applicant is unable to perform 
        the most recent duties that are expected to be performed by the 
        applicant during the 90 days before the filing of the 
        application.  The employer must provide evidence of the duties 
        that are expected to be performed by the applicant during the 90 
        days before to the filing of the application, whether the applicant 
        can or cannot perform those duties overall, and the 
        specifications of any duties that the applicant can or cannot 
        perform. 
           (d) Unless otherwise permitted by law, no application for 
        disability benefits can be filed by a former member of the 
        police and fire plan more than three years after the former 
        member has terminated from Public Employees Retirement 
        Association police and fire plan covered employment.  If an 
        application is filed within three years after the termination of 
        public employment, the former member must provide evidence that 
        the disability is the direct result of an injury or the 
        contracting of an illness that occurred while the person was 
        still actively employed and participating in the police and fire 
        plan. 
           (e) Any application for duty-related disability must be 
        supported by a first report of injury as defined in section 
        176.231. 
           (f) If a member who has applied for and been approved for 
        disability benefits before the termination of service does not 
        terminate service or is not placed on an authorized leave of 
        absence as certified by the governmental subdivision within 45 
        days following the date on which the application is approved, 
        the application shall be canceled.  If an approved application 
        for disability benefits has been canceled, a subsequent 
        application for disability benefits may not be filed on the 
        basis of the same medical condition for a minimum of one year 
        from the date on which the previous application was canceled. 
           (g) An applicant may file a retirement application under 
        section 353.29, subdivision 4, at the same time as the 
        disability application is filed.  If the disability application 
        is approved, the retirement application is canceled.  If the 
        disability application is denied, the retirement application 
        must be initiated and processed upon the request of the 
        applicant.  A police and fire fund member may not receive a 
        disability benefit and a retirement annuity from the police and 
        fire fund at the same time. 
           (h) A repayment of a refund must be made within six months 
        after the effective date of disability benefits or within six 
        months after the date of the filing of the disability 
        application, whichever is later.  No purchase of prior service 
        or payment made in lieu of salary deductions otherwise 
        authorized under section 353.01 or 353.36, subdivision 2, may be 
        made after the occurrence of the disability for which an 
        application is filed under this section. 
           Sec. 22.  Minnesota Statutes 2002, section 353.656, is 
        amended by adding a subdivision to read: 
           Subd. 9.  [REFUSAL OF EXAMINATION OR MEDICAL EVIDENCE.] If 
        a person applying for or receiving a disability benefit refuses 
        to submit to a medical examination under subdivision 11, or 
        fails to provide or to authorize the release of medical evidence 
        under subdivisions 5 and 7, the association shall cease the 
        application process or shall discontinue the payment of a 
        disability benefit, whichever is applicable.  Upon the receipt 
        of the requested medical evidence, the association shall resume 
        the application process or the payment of a disability benefit 
        upon approval for the continuation, whichever is applicable. 
           Sec. 23.  Minnesota Statutes 2002, section 353.656, is 
        amended by adding a subdivision to read: 
           Subd. 10.  [ACCRUAL OF BENEFITS.] (a) A disability benefit 
        begins to accrue the day following the commencement of 
        disability, 90 days preceding the filing of an application, or, 
        if annual or sick leave is paid for more than the 90-day period, 
        from the date on which the payment of salary ceased, whichever 
        is later. 
           (b) Payment of the disability benefit must not continue 
        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 must be made 
        to the surviving spouse or, if none, to the designated 
        beneficiary or, if none, to the estate. 
           Sec. 24.  Minnesota Statutes 2002, section 353.656, is 
        amended by adding a subdivision to read: 
           Subd. 11.  [INDEPENDENT MEDICAL EXAMINATION; DUTIES OF THE 
        MEDICAL ADVISOR.] Any individual receiving disability benefits 
        or any applicant, if requested by the executive director, must 
        submit to an independent medical examination.  The medical 
        examination must be paid for by the association.  The medical 
        advisor shall review all medical reports submitted to the 
        association, including the findings of an independent medical 
        examination requested under this section, and shall advise the 
        executive director. 
           Sec. 25.  Minnesota Statutes 2002, section 353.656, is 
        amended by adding a subdivision to read: 
           Subd. 12.  [APPROVAL OF DISABILITY BENEFITS.] Review of 
        disability benefit applications and review of existing 
        disability cases must be made by the executive director based 
        upon all relevant evidence, including advice from the medical 
        advisor and the evidence provided by the member and employer.  A 
        member whose application for disability benefits or whose 
        continuation of disability benefits is denied may appeal the 
        executive director's decision to the board of trustees within 45 
        days of the receipt of a certified letter notifying the member 
        of the decision to deny the application or the benefit 
        continuation. 
           Sec. 26.  Minnesota Statutes 2002, section 354.48, 
        subdivision 2, is amended to read: 
           Subd. 2.  [APPLICATIONS; ACCRUAL.] (a) A person described 
        in subdivision 1, or another person authorized to act on behalf 
        of the person, may make written application on a form prescribed 
        by the executive director for a total and permanent disability 
        benefit only within the 18-month period following the 
        termination of teaching service.  This 
           (b) The benefit accrues from the day following the 
        commencement of the disability or the day following the last day 
        for which salary is paid, whichever is later, but does not begin 
        to accrue more than six months before the date on which the 
        written application is filed with the executive director.  If 
        salary is being received for either annual or sick leave during 
        the disability period, payments accrue the disability benefit 
        accrues from the day following the last day for which this 
        salary is paid. 
           Sec. 27.  Minnesota Statutes 2002, section 354.48, 
        subdivision 4, is amended to read: 
           Subd. 4.  [DETERMINATION BY THE EXECUTIVE DIRECTOR.] (a) 
        The executive director shall have the member examined by at 
        least two licensed physicians, licensed chiropractors, or 
        licensed psychologists selected by the medical adviser.  
           (b) These physicians, chiropractors, or psychologists with 
        respect to a mental impairment, shall make written reports to 
        the executive director concerning the member's disability, 
        including medical expert opinions as to whether or not the 
        member is permanently and totally disabled within the meaning of 
        section 354.05, subdivision 14.  
           (c) The executive director shall also obtain written 
        certification from the last employer stating whether or not the 
        member was separated from service because of a disability which 
        would reasonably prevent further service to the employer and as 
        a consequence the member is not entitled to compensation from 
        the employer.  
           (d) If, upon the consideration of the reports of the 
        physicians, chiropractors, or psychologists and any other 
        evidence presented by the member or by others interested 
        therein, the executive director finds that the member is totally 
        and permanently disabled, the executive director shall grant the 
        member a disability benefit.  The fact that 
           (e) An employee who is placed on leave of absence without 
        compensation because of disability shall is not bar the member 
        barred from receiving a disability benefit. 
           Sec. 28.  Minnesota Statutes 2002, section 354.48, 
        subdivision 6, is amended to read: 
           Subd. 6.  [REGULAR PHYSICAL EXAMINATIONS.] At least once 
        each year during the first five years following the allowance of 
        a disability benefit to any member, and at least once in every 
        three-year period thereafter, the executive director shall 
        require the disability beneficiary to undergo a medical an 
        expert examination by a physician or physicians, by a 
        chiropractor or chiropractors, or by one or more psychologists 
        with respect to a mental impairment, engaged by the executive 
        director.  If any an examination indicates that the member is no 
        longer permanently and totally disabled or that the member is 
        engaged or is able to engage in a substantial gainful 
        occupation, payments of the disability benefit by the 
        association shall must be discontinued.  The payments shall 
        discontinue must be discontinued as soon as the member is 
        reinstated to the payroll following sick leave, but payment may 
        not be made for more than 60 days after the physicians, the 
        chiropractors, or the psychologists engaged by the executive 
        director find that the person is no longer permanently and 
        totally disabled. 
           Sec. 29.  Minnesota Statutes 2002, section 354.48, 
        subdivision 6a, is amended to read: 
           Subd. 6a.  [MEDICAL ADVISER; DUTIES.] The state 
        commissioner of health or a licensed physician on the staff of 
        the department of health who is designated by the commissioner 
        shall be is the medical adviser of the executive director.  The 
        medical adviser shall designate licensed physicians, licensed 
        chiropractors, or licensed psychologists with respect to a 
        mental impairment, who shall examine applicants for disability 
        benefits.  The medical adviser shall pass upon all medical 
        expert reports based on any examinations performed in order to 
        determine whether a teacher is totally and permanently disabled 
        as defined in section 354.05, subdivision 14.  The medical 
        adviser shall also investigate all health and medical statements 
        and certificates by or on behalf of a teacher in connection with 
        a disability benefit, and shall report in writing to the 
        director setting forth any conclusions and recommendations on 
        all matters referred to the medical adviser.  
           Sec. 30.  Minnesota Statutes 2002, section 354.48, 
        subdivision 10, is amended to read: 
           Subd. 10.  [RETIREMENT STATUS AT NORMAL RETIREMENT AGE.] 
        (a) No person shall be is entitled to receive both a disability 
        benefit and a retirement annuity provided by this chapter.  
           (b) The disability benefit paid to a person hereunder shall 
        must terminate at the end of the month in which the person 
        attains the normal retirement age.  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, the person shall must be deemed to be on 
        retirement status and, if the person had elected an optional 
        annuity pursuant to under subdivision 3a, shall must 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 under subdivision 3a, may elect to 
        receive a straight life retirement annuity equal to the 
        disability benefit paid prior to before the date on which the 
        person attains the normal retirement age 65 or reaches the 
        five-year anniversary of the effective date of the disability 
        benefit, whichever is later, or may elect to receive an optional 
        annuity as provided in section 354.45, subdivision 1.  
           (c) Election of an optional annuity must be made within 90 
        days of the normal retirement age 65 or the five-year 
        anniversary of the effective date of the disability benefit, 
        whichever is later.  
           (d) If an optional annuity is elected, the election shall 
        be is effective on the date on which the person attains the 
        normal retirement age 65 or reaches the five-year anniversary of 
        the effective date of the disability benefit, whichever is 
        later.  The optional annuity shall begin begins to accrue on the 
        first day of the month next following the month in which the 
        person attains the normal retirement age 65 or reaches the 
        five-year anniversary of the effective date of the disability 
        benefit, whichever is later.  
           Sec. 31.  Minnesota Statutes 2002, section 354A.36, 
        subdivision 4, is amended to read: 
           Subd. 4.  [DETERMINATION OF DISABILITY.] The board of the 
        teachers retirement fund association shall make the final 
        determination of the existence of a permanent and total 
        disability.  The board shall have the coordinated member 
        examined by at least two licensed physicians, licensed 
        chiropractors, or licensed psychologists who shall be are 
        selected by the board.  After making any required examinations, 
        each physician, chiropractor, or psychologist with respect to a 
        mental impairment, shall make a written report to the board 
        concerning the coordinated member, which shall include a 
        statement of the physician's medical expert opinion of the 
        physician, chiropractor, or psychologist as to whether or not 
        the member is permanently and totally disabled within the 
        meaning of section 354A.011, subdivision 14.  The board shall 
        also obtain a written statement from the school district 
        employer as to whether or not the coordinated member was 
        terminated or separated from active employment due to a 
        disability which is deemed by the district employer to 
        reasonably prevent further service by the member to the district 
        employer and which caused the coordinated member not to be 
        entitled to further compensation from the district employer for 
        services rendered by the member.  If, after consideration of the 
        reports of the physicians, chiropractors, or psychologists with 
        respect to a mental impairment, and any evidence presented by 
        the member or by any other interested parties, the board 
        determines that the coordinated member is totally and 
        permanently disabled within the meaning of section 354A.011, 
        subdivision 14, it shall grant the coordinated member a 
        disability benefit.  The fact that A member has been who is 
        placed on a leave of absence without compensation as a result of 
        the disability shall is not operate to bar barred a 
        coordinated member from receiving a disability benefit under 
        this section.  
           Sec. 32.  Minnesota Statutes 2002, section 354A.36, 
        subdivision 6, is amended to read: 
           Subd. 6.  [REQUIREMENT FOR REGULAR PHYSICAL EXAMINATIONS.] 
        At least once each year during the first five years following 
        the granting of a disability benefit to a coordinated member by 
        the board and at least once in every three year period 
        thereafter, the board shall require the disability benefit 
        recipient to undergo a medical an expert examination as a 
        condition for continued entitlement of the benefit recipient to 
        receive a disability benefit.  The medical expert examination 
        shall must be made at the place of residence of the disability 
        benefit recipient or at any other place mutually agreeable to 
        the disability benefit recipient and the board.  The medical 
        expert examination shall must be made by a physician or 
        physicians, by a chiropractor or chiropractors, or by one or 
        more psychologists engaged by the board.  The physician or 
        physicians, the chiropractor or chiropractors, or the 
        psychologist or psychologists with respect to a mental 
        impairment, conducting the medical expert examination shall make 
        a written report to the board concerning the disability benefit 
        recipient and the recipient's disability, including a statement 
        of the physician's medical expert opinion of the physician, 
        chiropractor, or psychologist as to whether or not the member 
        remains permanently and totally disabled within the meaning of 
        section 354A.011, subdivision 14.  If the board determines from 
        consideration of the physician's written medical expert 
        examination report of the physician, of the chiropractor, or of 
        the psychologist, with respect to a mental impairment, that the 
        disability benefit recipient is no longer permanently and 
        totally disabled or if the board determines that the benefit 
        recipient is engaged or is able to engage in a gainful 
        occupation, unless the disability benefit recipient is partially 
        employed pursuant to under subdivision 7, then further 
        disability benefit payments from the fund shall must be 
        discontinued.  The discontinuation of disability benefits shall 
        must occur immediately if the disability recipient is reinstated 
        to the district payroll following sick leave and within 60 days 
        of the determination by the board following the medical expert 
        examination and report of the physician or physicians, 
        chiropractor or chiropractors, or psychologist or psychologists 
        engaged by the board that the disability benefit recipient is no 
        longer permanently and totally disabled within the meaning of 
        section 354A.011, subdivision 14. 
           Sec. 33.  Minnesota Statutes 2002, section 356.302, 
        subdivision 3, is amended to read: 
           Subd. 3.  [GENERAL EMPLOYEE PLAN ELIGIBILITY REQUIREMENTS.] 
        A disabled member of a covered retirement plan who has credit 
        for allowable service in a combination of general employee 
        retirement plans is entitled to a combined service disability 
        benefit if the member: 
           (1) is less than 65 years of the normal retirement age on 
        the date of the application for the disability benefit; 
           (2) has become totally and permanently disabled; 
           (3) has credit for allowable service in any combination of 
        general employee retirement plans totaling at least three years; 
           (4) has credit for at least one-half year of allowable 
        service with the current general employee retirement plan before 
        the commencement of the disability; 
           (5) has at least three continuous years of allowable 
        service credit by the general employee retirement plan or has at 
        least a total of three years of allowable service credit by a 
        combination of general employee retirement plans in a 72-month 
        period during which no interruption of allowable service credit 
        from a termination of employment exceeded 29 days; and 
           (6) was not receiving a retirement annuity or disability 
        benefit from any covered general employee retirement plan at the 
        time of the commencement of the disability.  
           Sec. 34.  Minnesota Statutes 2002, section 422A.18, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [MEDICAL EXPERT EXAMINATION.] (a) Upon the 
        application of the head of the department in which a 
        contributing employee is employed, or upon the application of 
        the contributing employee or of one acting in the employee's 
        behalf, the retirement board shall place the contributor on 
        disability, provided and pay the person a disability allowance 
        under this section if the medical board, after a medical an 
        expert examination of the contributor made at the place of 
        residence of the contributor or at a place mutually agreed upon, 
        shall certify to the retirement board that the contributor is 
        physically or mentally incapacitated for the performance of 
        further service to the city and recommend that the contributor 
        be placed on disability. 
           (b) The medical board shall consist of the city physician, 
        a physician, chiropractor, or licensed psychologist to be 
        selected by the retirement board, and a physician, chiropractor, 
        or licensed psychologist to be selected by the employee.  
           (c) Disability of an employee resulting from injury or 
        illness received in the performance of the duties of the city 
        service shall be defined as duty disability.  
           (d) Disability incurred as a result of injury or illness 
        not connected with the performance of such service shall be 
        defined as nonduty disability.  In order to be entitled to a 
        retirement allowance for a nonduty disability, an employee shall 
        have rendered five or more years of service to the city. 
           Sec. 35.  Minnesota Statutes 2002, section 422A.18, 
        subdivision 4, is amended to read: 
           Subd. 4.  [ADDITIONAL MEDICAL EXAMINATIONS.] (a) Once each 
        year, the retirement board may require any disability 
        beneficiary while still under the established age for retirement 
        to undergo medical an expert examination by a physician or one 
        or more physicians, one or more chiropractors, or one or more 
        licensed psychologists designated by the retirement board,.  The 
        examination to must be made at the place of residence of the 
        beneficiary or other place mutually agreed upon.  Should 
           (b) If the medical board report and certify certifies to 
        the retirement board that such the disability beneficiary is no 
        longer physically or mentally incapacitated for the performance 
        of duty, the beneficiary's allowance shall must be discontinued 
        and the head of the department in which the beneficiary was 
        employed at the time of retirement shall, upon notification by 
        the retirement board of the report of the medical board, 
        reemploy the beneficiary at a rate of salary not less than the 
        amount of the disability allowance, but. 
           (c)  After the expiration of five years subsequent to the 
        retirement of such the beneficiary, the restoration to duty, 
        notwithstanding the recommendation of the medical board, shall 
        be is optional with the head of the department.  Should If any 
        disability beneficiary, while under the established age for 
        retirement refuse, refuses to submit to at least one 
        medical expert examination in any year by a physician or one or 
        more physicians, one or more chiropractors, or one or more 
        licensed psychologists designated by the medical board, the 
        allowance shall must be discontinued until the withdrawal of 
        such refusal, and should such refusal continue for one year, all 
        the beneficiary's rights in and to any retirement or disability 
        allowance shall be are forfeited. 
           Sec. 36.  Minnesota Statutes 2002, section 423B.09, 
        subdivision 4, is amended to read: 
           Subd. 4.  [CERTIFICATE OF PHYSICIANS REQUIRED.] (a) No 
        member is entitled to a pension under subdivision 1, paragraph 
        (b) or (c), except upon the certificate of two or more 
        physicians or, surgeons, chiropractors, licensed psychologists, 
        or a combination of experts chosen by the governing board.  This 
        certificate must set forth the cause, nature, and extent of the 
        disability, disease, or injury of the member.  
           (b) No active member may be awarded, granted, or paid a 
        disability pension under subdivision 1, paragraph (c), unless 
        the certificate states that the disability, disease, or injury 
        was incurred or sustained by the member while in the service of 
        the police department of the city.  The certificate must be 
        filed with the secretary of the association. 
           Sec. 37.  Minnesota Statutes 2002, section 423C.05, 
        subdivision 4, is amended to read: 
           Subd. 4.  [TEMPORARY DISABILITY PENSION.] (a) An active 
        member who, by sickness or accident, becomes temporarily 
        disabled from performing firefighter duties for the fire 
        department shall be is entitled to a temporary disability 
        pension.  
           (b) No allowance for disability shall may be made unless 
        notice of the disability and an application for benefits is made 
        by or on behalf of the disabled member within 90 days after the 
        beginning of the disability.  This application shall must 
        include a certificate from a qualified medical professional 
        expert setting forth the cause, nature, and extent of the 
        disability.  This certificate must also conclude that the 
        disability was incurred or sustained while the member was in the 
        service of the fire department.  
           (c) The board shall utilize the board of examiners 
        established pursuant to under section 423C.03, subdivision 6, to 
        investigate and report on an application for benefits pursuant 
        to under this section and to make recommendations as to 
        eligibility and the benefit amount to be paid.  
           (d) A member entitled to a disability pension shall must 
        receive benefits in the amount and manner determined by the 
        board. 
           Sec. 38.  Minnesota Statutes 2002, section 423C.05, 
        subdivision 5, is amended to read: 
           Subd. 5.  [SERVICE-RELATED PERMANENT DISABILITY PENSION.] 
        An active member who becomes permanently disabled as the result 
        of a service-related disease or injury shall is, upon 
        application and approval of the board, be entitled to a pension 
        of 41 units or in the amount determined under subdivision 8.  
        The application for service-related permanent disability shall 
        must include a certificate from a qualified medical professional 
        expert setting forth the permanent nature of the disability or 
        disease and that it was service related.  
           Sec. 39.  Minnesota Statutes 2002, section 423C.05, 
        subdivision 6, is amended to read: 
           Subd. 6.  [NON-SERVICE-RELATED PERMANENT DISABILITY 
        PENSION.] An active member who, by reason of sickness or 
        accident, becomes permanently disabled and unable to perform 
        firefighter duties for the fire department due to 
        non-service-related disease or injury shall be is entitled to a 
        permanent disability pension.  No allowance for disability shall 
        may be made unless notice of the disability and an application 
        for benefits is made by or on behalf of the disabled member 
        within 90 days after the beginning of the disability.  This 
        application shall must include a certificate from a qualified 
        medical professional setting forth the cause, nature, and extent 
        of the disability.  A member who is entitled to a disability 
        pension under this subdivision shall must receive benefits in 
        the amount and manner determined by the board, not to exceed 41 
        units. 
           Sec. 40.  Minnesota Statutes 2002, section 423C.05, is 
        amended by adding a subdivision to read: 
           Subd. 6a.  [QUALIFIED EXPERT.] A qualified expert includes 
        a licensed physician or chiropractor, or in the case of mental 
        impairment, includes a licensed psychologist. 
           Sec. 41.  [REPEALER.] 
           (a) Minnesota Statutes 2002, sections 353.33, subdivision 
        5b; and 490.11, are repealed on July 1, 2004. 
           (b) Sections 3 and 19 are repealed on July 1, 2006. 
           Sec. 42.  [EFFECTIVE DATE.] 
           Sections 1 to 41 are effective on July 1, 2004. 

                                   ARTICLE 9
                    DEATH AND SURVIVOR BENEFITS AND REFUNDS
           Section 1.  Minnesota Statutes 2002, section 3A.03, 
        subdivision 2, is amended to read: 
           Subd. 2.  [REFUND.] (a) Any A former member who has made 
        contributions under subdivision 1 and who is no longer a member 
        of the legislature is entitled to receive, upon written 
        application to the executive director on a form prescribed by 
        the executive director, a refund of all contributions credited 
        to the member's account with interest at an annual rate of six 
        percent compounded annually computed as provided in section 
        352.22, subdivision 2. 
           (b) The refund of contributions as provided in paragraph (a)
        terminates all rights of a former member of the legislature or 
        and the survivors of the former member under this chapter. 
           (c) If the former member of the legislature again becomes a 
        member of the legislature after having taken a refund as 
        provided in paragraph (a), the member must be considered a new 
        member of this plan.  However, a new the member may reinstate 
        the rights and credit for service previously forfeited if the 
        new member repays all refunds taken plus interest at an annual 
        rate of 8.5 percent compounded annually from the date on which 
        the refund was taken to the date on which the refund is repaid.  
           (c) (d) No person may be required to apply for or to accept 
        a refund. 
           Sec. 2.  Minnesota Statutes 2002, 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 on 
        behalf of the employee, or if a former employee who has 
        sufficient service credit to be entitled to an annuity dies 
        before the benefit annuity has become payable, the director 
        shall make a refund with interest is payable upon filing a 
        written application on a form prescribed by the executive 
        director.  The refund is payable 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 at the 
        rate of six percent per annum compounded annually.  Interest 
        must be computed as provided in section 352.22, subdivision 2, 
        to the first day of the month in which the refund is processed.  
        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 the repayment.  If the repayment was made 
        in installments, interest must be paid only from the date on 
        which the installment payments began.  The designated 
        beneficiary, the surviving spouse, or the representative of the 
        estate of an employee who had received a disability benefit is 
        not entitled to the payment of interest upon any balance 
        remaining to the decedent's credit in the fund at the time of 
        death, unless the death occurred before any payment could be 
        negotiated.  
           Sec. 3.  Minnesota Statutes 2002, 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 who has not received an annuity, a retirement 
        allowance, or a disability benefit dies, a refund must be made 
        is payable 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 plus interest.  The refund must include 
        interest at the rate of six percent per year compounded 
        annually.  The interest on the refund must be computed as 
        provided in section 352.22, subdivision 2. 
           Sec. 4.  Minnesota Statutes 2002, section 352.22, 
        subdivision 2, is amended to read: 
           Subd. 2.  [AMOUNT OF REFUND.] Except as provided in 
        subdivision 3, the refund payable to a person who ceased to be a 
        state employee by reason of a termination of state service is in 
        an amount equal to employee accumulated contributions plus 
        interest at the rate of six percent per year compounded annually 
        daily from the date that the contribution was made until the 
        date on which the refund is paid.  Included with the refund is 
        any interest paid as part of repayment of a past refund, plus 
        interest thereon from the date of repayment.  Interest must be 
        computed to the first day of the month in which the refund is 
        processed and must be based on fiscal year or monthly balances, 
        whichever applies. 
           Sec. 5.  Minnesota Statutes 2002, section 352.22, 
        subdivision 3, is amended to read: 
           Subd. 3.  [DEFERRED ANNUITY.] (a) An employee who has at 
        least 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.  The 
        annuity must be computed under the law in effect when state 
        service terminated, on the basis of the allowable service 
        credited to the person before the termination of service. 
           (b) An employee on layoff or on leave of absence without 
        pay, except a leave of absence for health reasons, and who does 
        not return to state service shall must have an annuity, deferred 
        annuity, or other benefit to which the employee may become 
        entitled computed under the law in effect on the employee's last 
        working day. 
           (c) No application for a deferred annuity may 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 begins 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 on which 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 which is not covered by the retirement system. 
           (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 the termination of service. 
           Sec. 6.  Minnesota Statutes 2002, section 352B.10, 
        subdivision 5, is amended to read: 
           Subd. 5.  [OPTIONAL ANNUITY.] A disabled member 
        disabilitant may elect, in lieu of spousal survivorship coverage 
        under section 352B.11, subdivision 2 subdivisions 2b and 
        2c, choose the normal disability benefit or an optional annuity 
        as provided in section 352B.08, subdivision 3.  The choice of an 
        optional annuity must be made before the commencement of the 
        payment of the disability benefit, or within 90 days of 
        attaining before reaching age 65 or reaching the five-year 
        anniversary of the effective date of the disability benefit, 
        whichever is later.  It The optional annuity is effective on the 
        date on which the disability benefit begins to accrue, or the 
        month following attainment of age 65 or the five-year 
        anniversary of the effective date of the disability benefit, 
        whichever is later. 
           Sec. 7.  Minnesota Statutes 2002, section 352B.11, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [REFUND OF PAYMENTS.] (a) 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 the state service that entitled the member to membership.  
           (b) In the event of the member's death, if there are no 
        survivor benefits payable under this chapter, a refund plus 
        interest is payable to the last designated beneficiary on a form 
        filed with the director before death, or if no designation is 
        filed, the refund is payable to the member's estate.  Interest 
        under this subdivision must be computed at the rate of six 
        percent a year, compounded annually calculated as provided in 
        section 352.22, subdivision 2.  To receive a refund, the 
        application must be made on a form prescribed by the executive 
        director. 
           Sec. 8.  Minnesota Statutes 2002, section 352B.11, 
        subdivision 2, is amended to read: 
           Subd. 2.  [DEATH; PAYMENT TO SPOUSE AND DEPENDENT CHILDREN; 
        FAMILY MAXIMUMS.] If a member serving actively as a member, or a 
        member or former member receiving the disability benefit before 
        attaining age 65 or reaching the five-year anniversary of the 
        effective date of the disability benefit, whichever is later, 
        provided by section 352B.10, subdivisions 1 and 2, dies from any 
        cause before attaining age 65 or reaching the five-year 
        anniversary of the effective date of the disability benefit, 
        whichever is later, the surviving spouse and dependent children 
        are entitled to benefit payments as follows: 
           (a) A member with at least three 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 three years of service shall receive, for life, a 
        monthly annuity equal to 50 percent of that part of the average 
        monthly salary of the member from which deductions were made for 
        retirement.  
           (c) The surviving spouse of a member who had credit for at 
        least three years service and who died after becoming 55 years 
        old, 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 
        three years or more and who was not 55 years old at death, shall 
        receive the benefit equal to 50 percent of the average monthly 
        salary as described in clause (b) until the deceased member 
        would have become 55 years old, and beginning the first of the 
        month following that date, may elect to receive the 100 percent 
        joint and survivor annuity.  
           (e) Each dependent child, as defined in section 352B.01, 
        subdivision 10, shall is entitled to receive a monthly annuity 
        equal to ten percent of that part of the average monthly salary 
        of the former deceased member from which deductions were made 
        for retirement.  A dependent child over 18 and under 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 must cease at the 
        end of the month of separation.  In addition, a payment of $20 
        per month shall must be prorated equally to the surviving 
        dependent children when the former member is survived by more 
        than one or more dependent children child.  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 for any one family, 
        including a surviving spouse benefit, if applicable, must not be 
        less than 50 percent nor exceed 70 percent of the average 
        monthly salary for any number of children of the deceased member.
           (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 three or more years of allowable service, but not 
        the spouse of a former member receiving a disability benefit 
        under section 352B.10, subdivision 2, is entitled to receive the 
        100 percent joint and survivor annuity at the time the deceased 
        member would have become 55 years old.  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 six percent per year compounded annually.
           Sec. 9.  Minnesota Statutes 2002, section 352B.11, is 
        amended by adding a subdivision to read: 
           Subd. 2b.  [SURVIVING SPOUSE BENEFIT ELIGIBILITY.] (a) If 
        an active member with three or more years of allowable service 
        dies before attaining age 55, the surviving spouse is entitled 
        to the benefit specified in subdivision 2c, paragraph (b). 
           (b) If an active member with less than three years of 
        allowable service dies at any age, the surviving spouse is 
        entitled to receive the benefit specified in subdivision 2c, 
        paragraph (c). 
           (c) If an active member with three or more years of 
        allowable service dies on or after attaining exact age 55, the 
        surviving spouse is entitled to receive the benefits specified 
        in subdivision 2c, paragraph (d). 
           (d) If a disabilitant dies while receiving a disability 
        benefit under section 352B.10 or before the benefit under that 
        section commenced, and an optional annuity was not elected under 
        section 352B.10, subdivision 5, the surviving spouse is entitled 
        to receive the benefit specified in subdivision 2c, paragraph 
        (b). 
           (e) If a former member with three or more years of 
        allowable service, who terminated from service and has not 
        received a refund or commenced receipt of any other benefit 
        provided by this chapter, dies, the surviving spouse is entitled 
        to receive the benefit specified in subdivision 2c, paragraph 
        (e).  
           (f) If a former member with less than three years of 
        allowable service, who terminated from service and has not 
        received a refund or commenced receipt of any other benefit, if 
        applicable, provided by this chapter, dies, the surviving spouse 
        is entitled to receive the refund specified in subdivision 2c, 
        paragraph (f). 
           Sec. 10.  Minnesota Statutes 2002, section 352B.11, is 
        amended by adding a subdivision to read: 
           Subd. 2c.  [SURVIVING SPOUSE BENEFIT ENTITLEMENTS.] (a) A 
        surviving spouse specified in subdivision 2b is eligible to 
        receive, following the filing of a valid application and 
        consistent with any other applicable requirements, a benefit as 
        specified in this subdivision.  A 100 percent joint and survivor 
        annuity under paragraph (b) must be computed assuming the exact 
        age 55 for the deceased member and the age of the surviving 
        spouse on the date of death.  A 100 percent joint and survivor 
        annuity under paragraph (d) or (e) must be computed using the 
        age of the deceased member on the date of death and the age of 
        the surviving spouse on that same date. 
           (b) For a surviving spouse specified in subdivision 2b, 
        paragraph (a) or (d), the surviving spouse benefit is a benefit 
        for life equal to 50 percent of the average monthly salary of 
        the deceased member.  On the first of the month next following 
        the date on which the deceased member would have attained exact 
        age 55, in lieu of continued receipt of the prior benefit, the 
        surviving spouse is eligible to commence receipt of the second 
        half of a 100 percent joint and survivor annuity, if this 
        provides a larger benefit. 
           (c) For a surviving spouse specified in subdivision 2b, 
        paragraph (b), the surviving spouse benefit is a benefit for 
        life equal to 50 percent of the average monthly salary of the 
        deceased member. 
           (d) For a surviving spouse specified in subdivision 2b, 
        paragraph (c), the surviving spouse benefit is a benefit for 
        life equal to 50 percent of the average monthly salary of the 
        deceased member, or the second half of a 100 percent joint and 
        survivor annuity, whichever is larger. 
           (e) For a surviving spouse specified in subdivision 2b, 
        paragraph (e), the surviving spouse benefit is the second half 
        of a 100 percent joint and survivor annuity, commencing on the 
        first of the month next following the deceased member's date of 
        death, or the first of the month next following the date on 
        which the deceased member would have attained age 55, whichever 
        is later. 
           (f) For a surviving spouse specified in subdivision 2b, 
        paragraph (f), the surviving spouse or, if none, the children 
        or, if none, the deceased member's estate, is entitled to a 
        refund of the employee contributions plus interest computed as 
        specified in subdivision 1. 
           Sec. 11.  Minnesota Statutes 2002, section 352B.11, is 
        amended by adding a subdivision to read: 
           Subd. 2d.  [COORDINATION WITH WORKERS' COMPENSATION 
        BENEFITS.] If the deceased member died under circumstances that 
        entitle the surviving spouse and the dependent child or children 
        to receive benefits under workers' compensation law, the 
        workers' compensation benefits received by the deceased member's 
        survivor or survivors must not be deducted from the benefits 
        payable under this section. 
           Sec. 12.  Minnesota Statutes 2002, section 352D.075, 
        subdivision 2, is amended to read: 
           Subd. 2.  [SURVIVING SPOUSE BENEFIT.] (a) Notwithstanding 
        any designation of a beneficiary to the contrary, if a 
        participant or a former participant dies leaving a spouse and 
        there is no named beneficiary who survives to receive payment or 
        the spouse is named beneficiary before an annuity or a 
        disability benefit becomes payable, the surviving spouse may is 
        entitled to receive: 
           (1) a lump sum payment of the value of the participant's 
        total shares; 
           (2) The a lump sum payment of a portion of the value of 
        one-half of the total shares and beginning at age 55 or 
        thereafter, at any time after the participant's death, receive 
        an annuity based on the remaining value of one-half of the total 
        shares, provided that.  If the spouse dies before receiving any 
        annuity payments, the remaining value of said the shares shall 
        be paid is payable to the spouse's children in equal shares, but 
        and if no such children survive, then to the parents of the 
        spouse in equal shares, but and if no such children or parents 
        survive, then to the estate of the spouse; or 
           (3) Beginning at age 55 or thereafter at any time after the 
        participant's death, 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 the shares 
        shall be paid is payable to the spouse's children in equal 
        shares, but and if no such children survive, then to the parents 
        of the spouse in equal shares, but and if no such children or 
        parents survive, then to the estate of the spouse; and further 
        provided, if said the 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 is payable to the spouse's children in 
        equal shares, but and if no such children survive, then to the 
        parents of the spouse in equal shares, but and if no such 
        children or parents survive, then to the estate of the spouse.  
           (b) A participant or a former participant and the person's 
        spouse may make a joint specification, in writing, on a form 
        prescribed by the executive director, that the benefits provided 
        in this section must be paid only to the designated beneficiary. 
           Sec. 13.  Minnesota Statutes 2002, section 352D.075, is 
        amended by adding a subdivision to read: 
           Subd. 2a.  [SURVIVING SPOUSE COVERAGE TERM CERTAIN.] In 
        lieu of the annuity under subdivision 2, clause (2) or (3), or 
        in lieu of a distribution under subdivision 2, clause (1), the 
        surviving spouse of a deceased participant may elect to receive 
        survivor coverage in the form of a term certain annuity of five, 
        six, 15, or 20 years, based on the value of the remaining 
        shares.  The monthly term certain annuity must be calculated 
        under section 352D.06, subdivision 1. 
           Sec. 14.  Minnesota Statutes 2002, section 352D.075, 
        subdivision 3, is amended to read: 
           Subd. 3.  [REFUND TO BENEFICIARY.] If a participant dies 
        and has named a beneficiary no surviving spouse, the value of 
        the total shares shall be paid is payable to such a designated 
        beneficiary, but if such the beneficiary dies before receiving 
        payment, or if no beneficiary has been named and there is no 
        spouse, the value of said the shares shall be paid is payable 
        to the children of the participant in equal shares, but or if no 
        such children survive, then in equal shares to the parents of 
        the participant, but or if no such children or parents survive, 
        then to the estate of the participant.  
           Sec. 15.  [352F.052] [APPLICATION OF SURVIVING SPOUSE, 
        DEPENDENT CHILD PROVISION.] 
           Notwithstanding any provisions of law to the contrary, 
        subdivisions within section 352.12 of the edition of Minnesota 
        Statutes published in the year before the year in which a 
        privatization occurred, applicable to the surviving spouse or 
        dependent children of a former member, apply to the survivors of 
        a terminated hospital employee of Fairview, University of 
        Minnesota Physicians, or University Affiliated Family Physicians.
           Sec. 16.  [353F.052] [APPLICATION OF SURVIVING SPOUSE, 
        DEPENDENT CHILD PROVISION.] 
           Notwithstanding any provisions of law to the contrary, 
        subdivisions within section 353.32 of the edition of Minnesota 
        Statutes published in the year before the year in which a 
        privatization occurred, applicable to the surviving spouse or 
        dependent children of a former member as defined in section 
        353.01, subdivision 7a, apply to the survivors of a terminated 
        medical facility or other public employing unit employee. 
           Sec. 17.  Minnesota Statutes 2002, section 354.05, 
        subdivision 22, is amended to read: 
           Subd. 22.  [DESIGNATED BENEFICIARY.] "Designated 
        beneficiary" means the person, trust, or organization designated 
        by a retiree or member to receive the benefits to which a 
        beneficiary is entitled under this chapter.  A beneficiary 
        designation is valid only if it is made on an appropriate form 
        provided by the executive director that is signed by the member 
        and two witnesses to the member's signature.  The properly 
        completed form must be received by the association on or before 
        the date of death of the retiree or member.  If a retiree or a 
        member does not designate a person, trust, or organization, or 
        if the person who was designated predeceases the retiree or the 
        member, or if the trust or organization ceases to exist before 
        the death of the retiree or the member, the designated 
        beneficiary means is the estate of the deceased retiree or 
        member. 
           Sec. 18.  Minnesota Statutes 2002, section 354.46, 
        subdivision 2, is amended to read: 
           Subd. 2.  [DEATH WHILE ELIGIBLE DESIGNATED BENEFICIARY 
        BENEFIT SURVIVING SPOUSE SURVIVOR COVERAGE.] (a) The surviving 
        spouse of any member or former member who has If the active or 
        deferred member was at least age 55 and had credit for at least 
        three years of allowable service on the date of death, the 
        surviving spouse is entitled to the second portion of a 100 
        percent joint and survivor annuity 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 
        under subdivision 1, if applicable, or does not elect to receive 
        a refund of accumulated member contributions under section 
        354.47, subdivision 1, the surviving spouse is 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 specified under section 
        354.45, based on the age of the active or deferred member and 
        surviving spouse at the time of death of the member, and 
        computed under section 354.44, subdivision 2 or 6, whichever is 
        applicable the age of the surviving spouse at the time the 
        benefit accrues. 
           (b) If the active or deferred member was under age 55 and 
        has had credit for at least 30 years of allowable service on the 
        date of death, the surviving spouse may elect to receive the 
        second portion of a 100 percent joint and survivor annuity based 
        on the age of the active or deferred member and surviving spouse 
        on the date of death and the age of the surviving spouse at the 
        time the benefit accrues.  If section 354.44, subdivision 6, 
        applies, the annuity is payable using the full early retirement 
        reduction under section 354.44, subdivision 6, paragraph 
        clause (3)(ii), to age 55 and one-half of the early retirement 
        reduction from age 55 to the age payment begins. 
           (c) If the active or deferred member was under age 55 and 
        has had credit for at least three years of allowable service on 
        the date of death, but did not yet qualify for retirement, the 
        surviving spouse may elect to receive the second portion of a 
        100 percent joint and survivor annuity based on the age of 
        the active or deferred member and the surviving spouse at the 
        time of death and the age of the surviving spouse at the time 
        the benefit accrues.  If section 354.44, subdivision 6, applies, 
        the annuity is calculated using the full early retirement 
        reduction under section 354.44, subdivision 6, to age 55 and 
        one-half of the early retirement reduction from age 55 to the 
        age the annuity begins.  The surviving spouse eligible for a 
        surviving spouse benefit under paragraph (a) 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. 
           (d) The surviving spouse eligible for surviving spouse 
        benefits under paragraph (b) or (c) this subdivision may apply 
        for the annuity any time after the member's death.  This The 
        benefit accrues from the day following the date of the member's 
        death but may not begin to accrue more than six months before 
        the date the application is filed with the executive 
        director and may not accrue before the member's death.  Sections 
        354.55, subdivision 11, and 354.60 apply to a deferred annuity 
        payable under this section.  The benefit is payable for life.  
        Any benefit under this subdivision is in lieu of benefits under 
        subdivision 1, if applicable, and in lieu of a refund of 
        accumulated member contributions under section 354.47, 
        subdivision 1. 
           (e) For purposes of this subdivision, a designated 
        beneficiary must be a former spouse or a biological or adopted 
        child of the member. 
           Sec. 19.  Minnesota Statutes 2002, section 354.46, 
        subdivision 2b, is amended to read: 
           Subd. 2b.  [DEPENDENT CHILD SURVIVOR COVERAGE.] If there is 
        no surviving spouse eligible for benefits under subdivision 2, a 
        each dependent child or children as defined in section 354.05, 
        subdivision 8a, is eligible for monthly payments surviving child 
        benefits.  Payments Surviving child benefits to a dependent 
        child must be paid from the date of the member's death to the 
        date the dependent child attains age 20 if the child is under 
        age 15 on the date of the member's death.  If the child is 15 
        years or older on the date of the member's death, payment must 
        be made the surviving child benefit is payable for five years.  
        The payment to a dependent surviving child benefit is an amount 
        that is actuarially equivalent to the value of a 100 percent 
        optional annuity under subdivision 2 calculated using the age of 
        the member and age of the dependent child at as of the date of 
        death in lieu of the age of the member and the spouse.  If there 
        is more than one dependent child, each dependent child shall is 
        entitled to receive a proportionate share of the actuarial value 
        of the member's account.  
           Sec. 20.  Minnesota Statutes 2002, section 354.46, 
        subdivision 5, is amended to read: 
           Subd. 5.  [PAYMENT TO DESIGNATED BENEFICIARY.] A member and 
        who is single or, if the member is married, a member and the 
        spouse of the member jointly, may make a joint specification in 
        writing on a form prescribed by the executive director that the 
        benefits provided in subdivision 2, or in section 354.47, 
        subdivision 1, must be paid only to a designated beneficiary or 
        to designated beneficiaries.  For purposes of subdivision 2, a 
        designated beneficiary may only be either a former spouse or a 
        biological or an adopted child of the member. 
           Sec. 21.  Minnesota Statutes 2002, section 354.46, is 
        amended by adding a subdivision to read: 
           Subd. 6.  [APPLICATION.] (a) A beneficiary designation and 
        an application for benefits under this section must be in 
        writing on a form prescribed by the executive director. 
           (b) Sections 354.55, subdivision 11, and 354.60 apply to a 
        deferred annuity payable under this section. 
           (c) Unless otherwise specified, the annuity must be 
        computed under section 354.44, subdivision 2 or 6, whichever is 
        applicable. 
           Sec. 22.  Minnesota Statutes 2002, section 356.441, is 
        amended to read: 
           356.441 [REPAYMENT OF REFUNDS PAYMENT ACCEPTANCE ALLOWED.] 
           Subdivision 1.  [PAYMENT AUTHORIZATION.] The repayment of a 
        refund and interest on that refund or the payment of equivalent 
        contributions and interest for an eligible leave of absence, as 
        permitted under laws governing any public pension plan in 
        Minnesota, may be made: 
           (1) with funds distributed or transferred from a plan 
        qualified under the federal Internal Revenue Code of 1986, 
        section 401, subsection (a) or (k); 403; 408; or 457, subsection 
        (b), as amended through December 31, 1988, or an annuity 
        qualified under the federal Internal Revenue Code of 1986, 
        section 403(a).  Repayment may also be made from time to time; 
        or 
           (2) with funds distributed from an individual retirement 
        account used solely to receive a or individual retirement 
        annuity, if done solely in a manner that is eligible for 
        treatment as a nontaxable rollover from that type of a plan or 
        annuity or transfer under the applicable federal law.  The 
        repaid refund 
           Subd. 2.  [SEPARATE ACCOUNTING REQUIREMENT.] Nontaxable 
        rollovers or transfer amounts under subdivision 1 received by a 
        public pension fund must be separately accounted for as member 
        contributions not previously taxed.  Before accepting 
        any rollovers or transfers to which this section applies, the 
        executive director must shall require the member to provide 
        written documentation to demonstrate that the amounts to 
        be rolled over or transferred are eligible for a tax-free 
        rollover or transfer and qualify for that treatment under the 
        federal Internal Revenue Code of 1986, as amended.  
           Sec. 23.  Minnesota Statutes 2002, section 490.124, 
        subdivision 12, is amended to read: 
           Subd. 12.  [REFUND.] (a) Any A 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 is entitled to a refund 
        in an amount equal to all the person's member's employee 
        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 an annual rate of 
        five percent compounded annually under section 352.22, 
        subdivision 2. 
           (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 the previously terminated service credits, rights, and 
        benefits by repaying all refunds the total amount of the 
        previously received refund.  A The refund repayment must include 
        interest on the total amount previously received at an annual 
        rate of 8.5 percent compounded annually from the date on which 
        the refund was received until the date on which the refund is 
        repaid. 
           Sec. 24.  [TEACHERS RETIREMENT ASSOCIATION; BENEFICIARY 
        DESIGNATION.] 
           (a) An eligible person described in paragraph (b) is 
        entitled to make a specification that the benefits provided in 
        Minnesota Statutes, section 354.46, subdivision 2, or in 
        Minnesota Statutes, section 354.47, subdivision 1, may be paid 
        only to a designated beneficiary or beneficiaries.  
           (b) An eligible person is a person who: 
           (1) was born on July 9, 1956; 
           (2) is employed as a teacher by Independent School District 
        No. 535, Rochester; 
           (3) is a member of the Teachers Retirement Association; 
           (4) has more than 19 years of allowable service credit in 
        the Teachers Retirement Association; 
           (5) has two minor children; 
           (6) has no potential surviving spouse by virtue of a prior 
        marriage dissolution; and 
           (7) has been diagnosed with a serious medical condition 
        that is life threatening. 
           (c) The designated beneficiary or beneficiaries may only be 
        a biological or adopted child, the biological or adopted 
        children of the eligible person, or a trust established for the 
        child or children if the trust is required to provide for the 
        proper health, support, maintenance, and education of the 
        dependent child or children.  If two or more children are 
        designated or if a trust established for more than one child is 
        designated, the benefit payable to or on behalf of each child is 
        an equal share of the total benefit. 
           (d) The specification must be made in writing on a form 
        prescribed by the executive director of the Teachers Retirement 
        Association.  
           Sec. 25. [REPEALER.] 
           Minnesota Statutes 2002, section 354A.107, is repealed. 
           Sec. 26.  [EFFECTIVE DATE.] 
           (a) Sections 1 to 25 are effective on July 1, 2004. 
           (b) Sections 8 to 11 are not intended to increase, modify, 
        impair, or diminish the benefit entitlements specified in 
        Minnesota Statutes, chapter 352B.  If the Minnesota State 
        Retirement System executive director determines that any 
        provision of those sections does increase, modify, impair, or 
        diminish the benefit entitlements as reflected in applicable law 
        just prior to the effective date of this section, the executive 
        director shall certify that determination and a recommendation 
        as to the required legislative correction to the chairs of the 
        Legislative Commission on Pensions and Retirement, the house 
        Governmental Operations Committee, the senate Governmental 
        Operations Committee, and the executive director of the 
        Legislative Commission on Pensions and Retirement. 
           (c) Consistent with Minnesota Statutes, section 645.21, and 
        public pension policy in general, the increased interest rate 
        provided on a refund under section 23 applies only to judges 
        whose termination of service occurs on or after July 1, 2004. 

                                   ARTICLE 10
                            FEDERAL INTERNAL REVENUE
                                CODE COMPLIANCE
           Section 1.  Minnesota Statutes 2002, section 356.611, is 
        amended by adding a subdivision to read: 
           Subd. 4.  [COMPENSATION.] (a) For purposes of this section, 
        compensation means a member's compensation actually paid or made 
        available for any limitation year determined as provided by 
        Treasury Regulation Section 1.415-2(d)(10). 
           (b) Compensation for any period includes: 
           (1) any elective deferral as defined in section 402(g)(3) 
        of the Internal Revenue Code; 
           (2) any elective amounts that are not includable in a 
        member's gross income by reason of sections 125 or 457 of the 
        Internal Revenue Code; and 
           (3) any elective amounts that are not includable in a 
        member's gross income by reason of section 132(f)(4) of the 
        Internal Revenue Code.  
           Sec. 2.  [356.635] [INTERNAL REVENUE CODE COMPLIANCE.] 
           Subdivision 1.  [RETIREMENT BENEFIT COMMENCEMENT.] The 
        retirement benefit of a member who has terminated employment 
        must begin no later than the later of April 1 of the calendar 
        year following the calendar year that the member attains the 
        federal minimum distribution age under section 401(a)(9) of the 
        Internal Revenue Code or April 1 of the calendar year following 
        the calendar year in which the member terminated employment. 
           Subd. 2.  [DISTRIBUTIONS.] Distributions shall be made as 
        required under section 401(a)(9) of the Internal Revenue Code 
        and the treasury regulations adopted under that section, 
        including, but not limited to, the incidental death benefit 
        provisions of section 401(a)(9)(G) of the Internal Revenue Code. 
           Subd. 3.  [DIRECT ROLLOVERS.] A distributee may elect, at 
        the time and in the manner prescribed by the plan administrator, 
        to have all or any portion of an eligible rollover distribution 
        paid directly to an eligible retirement plan as specified by the 
        distributee. 
           Subd. 4.  [ELIGIBLE ROLLOVER DISTRIBUTION.] An "eligible 
        rollover distribution" is any distribution of all or any portion 
        of the balance to the credit of the distributee.  
           Subd. 5.  [INELIGIBLE AMOUNTS.] An eligible rollover 
        distribution does not include: 
           (1) a distribution that is one of a series of substantially 
        equal periodic payments, receivable annually or more frequently, 
        that is made for the life or life expectancy of the distributee, 
        the joint lives or joint life expectancies of the distributee 
        and the distributee's designated beneficiary, or for a specified 
        period of ten years or more; 
           (2) a distribution that is required under section 401(a)(9) 
        of the Internal Revenue Code; or 
           (3) any other exception required by law or the Internal 
        Revenue Code. 
           Subd. 6.  [ELIGIBLE RETIREMENT PLAN.] (a) An "eligible 
        retirement plan" is: 
           (1) an individual retirement account under section 408(a) 
        of the Internal Revenue Code; 
           (2) an individual retirement annuity plan under section 
        408(b) of the Internal Revenue Code; 
           (3) an annuity plan under section 403(a) of the Internal 
        Revenue Code; 
           (4) a qualified trust plan under section 401(a) of the 
        Internal Revenue Code that accepts the distributee's eligible 
        rollover distribution; 
           (5) an annuity contract under section 403(b) of the 
        Internal Revenue Code; or 
           (6) an eligible deferred compensation plan under section 
        457(b) of the Internal Revenue Code, which is maintained by a 
        state or local government and which agrees to separately account 
        for the amounts transferred into the plan. 
           (b) For distributions of after-tax contributions which are 
        not includable in gross income, the after-tax portion may be 
        transferred only to an individual retirement account or annuity 
        described in section 408(a) or (b) of the Internal Revenue Code, 
        or to a qualified defined contribution plan described in either 
        section 401(a), or section 403(a), of the Internal Revenue Code, that 
        agrees to separately account for the amounts transferred, 
        including separately accounting for the portion of the 
        distribution which is includable in gross income and the portion 
        of the distribution which is not includable. 
           Subd. 7.  [DISTRIBUTEE.] A "distributee" is: 
           (1) an employee or a former employee; 
           (2) the surviving spouse of an employee or former employee; 
        or 
           (3) the former spouse of the employee or former employee 
        who is the alternate payee under a qualified domestic relations 
        order as defined in section 414(p) of the Internal Revenue Code, 
        or who is a recipient of a court-ordered equitable distribution 
        of marital property, as provided in section 518.58. 
           Subd. 8.  [FORFEITURES.] For defined benefit plans, unless 
        otherwise permitted by section 401(a)(8) of the Internal Revenue 
        Code, forfeitures may not be applied to increase the benefits 
        that any employee would otherwise receive under the plan. 
           Subd. 9.  [MILITARY SERVICE.] Contributions, benefits, and 
        service credit with respect to qualified military service must 
        be provided according to section 414(u) of the Internal Revenue 
        Code. 
           Sec. 3.  [TRANSITIONAL PROVISION.] 
           (a) An eligible rollover distribution under Minnesota 
        Statutes, section 356.635, does not include the portion of a 
        distribution that is not included in gross income. 
           (b) For eligible rollover distributions to a surviving 
        spouse, an eligible retirement plan under Minnesota Statutes, 
        section 356.635, is limited to an individual retirement account 
        under section 408(a) of the Internal Revenue Code or an 
        individual retirement annuity plan under section 408(b) of the 
        Internal Revenue Code. 
           Sec. 4.  [EFFECTIVE DATE.] 
           (a) Section 1, paragraph (a), is effective on July 1, 2004. 
        Section 1, paragraph (b), is effective retroactively as 
        follows:  clauses (1) and (2) are effective for limitation years 
        beginning on and after January 1, 1998; and clause (3) is 
        effective for limitation years beginning on and after January 1, 
        2001. 
           (b) Sections 2 and 3 are effective on the day following 
        final enactment. 
           (c) Section 2 is effective retroactively as follows:  
        subdivision 1 is effective on and after January 1, 1989; 
        subdivision 2 is effective for distributions on and after 
        December 31, 1989; subdivision 3 is effective for distributions 
        on and after January 1, 1993; subdivision 6, paragraph (a), 
        clauses (5) and (6), are effective for distributions made after 
        December 31, 2001; subdivision 6, paragraph (b), is effective 
        for distributions after December 31, 2001; and subdivision 9 is 
        effective December 12, 1994. 
           (d) Section 3 is effective only for distributions made 
        before January 1, 2002. 

                                   ARTICLE 11
                              HEALTH CARE SAVINGS 
                               PLAN MODIFICATIONS 
           Section 1.  Minnesota Statutes 2002, section 352.98, is 
        amended to read: 
           352.98 [POSTRETIREMENT HEALTH CARE SAVINGS PLAN.] 
           Subdivision 1.  [PLAN CREATED.] The Minnesota State 
        Retirement System shall establish a plan or plans, known as 
        postretirement health care savings plans, through which public 
        employers and employees may save to cover postretirement health 
        care costs.  The Minnesota State Retirement System shall make 
        available one or more trusts, including a governmental trust or 
        governmental trusts, authorized under the Internal Revenue Code 
        to be eligible for tax-preferred or tax-free treatment through 
        which employers and employees can save to cover postretirement 
        health care costs.  
           Subd. 2.  [CONTRACTING AUTHORIZED.] The Minnesota State 
        Retirement System is authorized to administer the plan and to 
        contract with public and private entities to provide investment 
        services, record keeping, benefit payments, and other functions 
        necessary for the administration of the plan.  If allowed by the 
        Minnesota State Board of Investment, the Minnesota State Board 
        of Investment supplemental investment funds may be offered as 
        investment options under the postretirement health care savings 
        plan or plans.  
           Subd. 3.  [CONTRIBUTIONS.] (a) Contributions to the plan 
        shall must be determined through a personnel policy or in a 
        collective bargaining agreement of a public employer with the 
        exclusive representative of the covered employees in an 
        appropriate unit.  The Minnesota State Retirement System may 
        offer different types of trusts permitted under the Internal 
        Revenue Code to best meet the needs of different employee units. 
           (b) Contributions to the plan by or on behalf of the 
        employee shall must be held in trust for reimbursement of 
        employee and dependent health-related expenses following 
        retirement from public employment or during active employment.  
        The Minnesota State Retirement System shall maintain a separate 
        account of the contributions made by or on behalf of each 
        participant and the earnings thereon.  The Minnesota State 
        Retirement System shall make available a limited range of 
        investment options, and each employee may direct the investment 
        of the accumulations in the employee's account among the 
        investment options made available by the Minnesota State 
        Retirement System.  At the request of a participating employer 
        and employee group, the Minnesota State Retirement System may 
        determine how the assets of the affected employer and employee 
        group should be invested.  
           (c) This section does not obligate a public employer to 
        meet and negotiate in good faith with the exclusive bargaining 
        representative of any public employee group regarding an 
        employer contribution to a postretirement or active employee 
        health care savings plan authorized by this section and section 
        356.24, subdivision 1, clause (7).  It is not the intent of the 
        legislature to authorize the state to incur new funding 
        obligations for the costs of retiree health care or the costs of 
        administering retiree health care plans or accounts.  
           Subd. 4.  [REIMBURSEMENT FOR HEALTH-RELATED EXPENSES.] 
        Following termination of public service, The Minnesota State 
        Retirement System shall reimburse employees at least quarterly 
        for submitted health-related expenses, as required by federal 
        and state law, until the employee exhausts the accumulation in 
        the employee's account.  If an employee dies prior to exhausting 
        the employee's account balance, the employee's spouse or 
        dependents shall be are eligible to be reimbursed for health 
        care expenses from the account until the account balance is 
        exhausted.  If an account balance remains after the death of a 
        participant and all of the participant's legal dependents, the 
        remainder of the account shall must be paid to the employee's 
        beneficiaries or, if none, to the employee's estate.  
           Subd. 5.  [FEES.] The Minnesota state retirement plan is 
        authorized to charge uniform fees to participants to cover the 
        ongoing cost of operating the plan.  Any fees not needed shall 
        must revert to participant accounts or be used to reduce plan 
        fees the following year.  The Minnesota State Retirement System 
        is authorized to charge participating employers a fee, not to 
        exceed one-sixth of the Federal Insurance Contribution Act 
        savings realized by the employer as a result of participating in 
        the plan, until the initial costs of establishing the plan or 
        plans authorized by this section are recovered, or $75,000, 
        whichever is less.  
           Subd. 6.  [ADVISORY COMMITTEE.] (a) The Minnesota State 
        Retirement System shall establish a participant advisory 
        committee for the health care savings plan, made up of one 
        representative appointed by each employee unit participating in 
        the plan.  Each participating unit shall be responsible for the 
        expenses of its own representative.  
           (b) The advisory committee shall meet at least twice per 
        year and shall be consulted on plan offerings and vendor 
        selection.  By October 1 of each year, the Minnesota State 
        Retirement System shall give the advisory committee a statement 
        of fees collected and the use of the fees.  
           Subd. 7.  [CONTRACTING WITH PRIVATE ENTITIES.] Nothing in 
        this section shall prohibit prohibits employers from contracting 
        with private entities to provide for postretirement health care 
        reimbursement plans. 
           Sec. 2.  [EFFECTIVE DATE.] 
           Section 1 is effective on the day following final enactment.

                                   ARTICLE 12
                         RETIREMENT COVERAGE FOLLOWING
                                A PRIVATIZATION
           Section 1.  Minnesota Statutes 2003 Supplement, section 
        353F.02, subdivision 4, is amended to read: 
           Subd. 4.  [MEDICAL FACILITY.] "Medical facility" means: 
           (1) the Fair Oaks Lodge, Wadena; 
           (2) the Glencoe Area Health Center; 
           (2) (3) the Kanabec Hospital; 
           (4) the Luverne Public Hospital; 
           (5) the RenVilla Nursing Home; 
           (3) (6) the St. Peter Community Healthcare Center; and 
           (7) the Waconia-Ridgeview Medical Center; and 
           (4) the Kanabec Hospital. 
           Sec. 2.  [PERA-GENERAL RETENTION OF PUBLIC EMPLOYEE STATUS 
        FOR ANOKA ACHIEVE PROGRAM EMPLOYEES.] 
           Subdivision 1.  [APPLICATION.] This section applies to a 
        person who was: 
           (1) employed by Anoka County in connection with the Achieve 
        Program for adults with developmental disabilities on the day 
        before operation of the program is transferred to Achieve 
        Services, Inc; and 
           (2) a member of the Public Employees Retirement Association 
        on December 31, 2003. 
           Subd. 2. [CONTINUATION OF COVERAGE.] For purposes of 
        participation in the coordinated plan of the Public Employees 
        Retirement Association, a person to whom this section applies is 
        a "public employee" under chapter 353, while employed by Achieve 
        Services, Inc., which is a governmental subdivision under 
        section 353.01, subdivision 6(a) for the purposes of reporting 
        contributions for those persons to whom this section applies 
        only. 
           Sec. 3.  [PERA-GENERAL; RETENTION OF PUBLIC EMPLOYEE 
        COVERAGE FOR GOVERNMENT TRAINING SERVICES EMPLOYEES.] 
           Subdivision 1.  [APPLICATION.] Notwithstanding any 
        provision of Minnesota Statutes, chapter 353, this section 
        applies to a person who: 
           (1) was employed by the state and local government joint 
        powers organization, the Government Training Service, on the day 
        before the operation was transferred to a nonprofit 
        organization, Government Training Services; 
           (2) was a member of the general employees retirement plan 
        of the Public Employees Retirement Association; and 
           (3) is employed by Government Training Services. 
           Subd. 2.  [COVERAGE CONTINUATION.] (a) A person described 
        in subdivision 1 is a public employee for purposes of Minnesota 
        Statutes, section 353.01, subdivision 2, and is eligible to 
        continue participation in the coordinated program of the general 
        employees retirement plan of the Public Employees Retirement 
        Association. 
           (b) While employing a person described in subdivision 1, 
        Government Training Services is a governmental subdivision for 
        purposes of Minnesota Statutes, section 353.01, subdivision 6, 
        paragraph (a).  
           Sec. 4.  [EFFECTIVE DATE.] 
           (a) Section 1, relating to the Fair Oaks Lodge, Wadena, is 
        effective upon the latter of: 
           (1) the day after the governing body of Todd County and its 
        chief clerical officer timely complete their compliance with 
        Minnesota Statutes, section 645.021, subdivisions 2 and 3; and 
           (2) the day after the governing body of Wadena County and 
        its chief clerical officer timely complete their compliance with 
        Minnesota Statutes, section 645.021, subdivisions 2 and 3. 
           (b) Section 1, relating to the RenVilla Nursing Home, is 
        effective upon the latter of: 
           (1) the day after the governing body of the city of 
        Renville and its chief clerical officer timely complete their 
        compliance with Minnesota Statutes, section 645.021, 
        subdivisions 2 and 3; and 
           (2) the first day of the month next following certification 
        to the governing body of the city of Renville by the executive 
        director of the Public Employees Retirement Association that the 
        actuarial accrued liability of the special benefit coverage 
        proposed for extension to the privatized RenVilla Nursing Home 
        employees under section 1 does not exceed the actuarial gain 
        otherwise to be accrued by the Public Employees Retirement 
        Association, as calculated by the consulting actuary retained by 
        the Legislative Commission on Pensions and Retirement. 
           (c) The cost of the actuarial calculations must be borne by 
        the city of Renville or the purchaser of the RenVilla Nursing 
        Home. 
           (d) Section 1, relating to the St. Peter Community 
        Healthcare Center, is effective upon the latter of: 
           (1) the day after the governing body of the city of St. 
        Peter and its chief clerical officer timely complete their 
        compliance with Minnesota Statutes, section 645.021, 
        subdivisions 2 and 3; and 
           (2) the first day of the month next following certification 
        to the governing body of the city of St. Peter by the executive 
        director of the Public Employees Retirement Association that the 
        actuarial accrued liability of the special benefit coverage 
        proposed for extension to the privatized St. Peter Community 
        Healthcare Center employees under section 1 does not exceed the 
        actuarial gain otherwise to be accrued by the Public Employees 
        Retirement Association, as calculated by the consulting actuary 
        retained by the Legislative Commission on Pensions and 
        Retirement. 
           (e) The cost of the actuarial calculations must be borne by 
        the city of St. Peter or the purchaser of the St. Peter 
        Community Healthcare Center. 
           (f) If the required actions under paragraphs (b) and (c) 
        occur, section 1 applies retroactively to the RenVilla Nursing 
        Home as of the date of privatization. 
           (g) If the required actions under paragraph (a) occur, 
        section 1 applies retroactively to Fair Oaks Lodge, Wadena, as 
        of January 1, 2004. 
           (h) Sections 2 and 3 are effective on the day following 
        final enactment. 

                                   ARTICLE 13
                  MINNEAPOLIS FIREFIGHTERS RELIEF ASSOCIATION
           Section 1.  Minnesota Statutes 2003 Supplement, section 
        423C.03, subdivision 3, is amended to read: 
           Subd. 3.  [COMPENSATION OF OFFICERS AND BOARD MEMBERS.] (a) 
        Notwithstanding any other law to the contrary, the association 
        may provide for payment of the following salaries to its 
        officers and board members: as specified in this subdivision. 
           (1) (b) If the executive secretary is not an active member, 
        the executive secretary may receive a salary to be set by the 
        board, subject to the limitations stated in paragraph (d).  If 
        the executive secretary is an active member, the executive 
        secretary may receive a salary not exceeding 50 percent of the 
        maximum salary of a first grade firefighter;. 
           (2) (c) The president may receive a salary not exceeding 
        ten percent of the maximum salary of a first grade firefighter;, 
        and 
           (3) all other elected members of the board, other than the 
        executive secretary, may receive a salary not exceeding 2.5 
        percent of the maximum salary of a first grade firefighter. 
           (d) If the executive secretary is not an active member, the 
        executive secretary's salary may not exceed the highest salary 
        currently received by the executive director of the Minnesota 
        State Retirement System, the Public Employees Retirement 
        Association, or the Teachers Retirement Association. 
           Sec. 2.  [EFFECTIVE DATE.] 
           Section 1 is effective on the day on which the Minneapolis 
        City Council and the chief clerical officer of the city of 
        Minneapolis complete in a timely manner the requirements of 
        Minnesota Statutes, section 645.021, subdivisions 2 and 3. 

                                   ARTICLE 14
                          VOLUNTEER FIREFIGHTER RELIEF
                              ASSOCIATION CHANGES
           Section 1.  Minnesota Statutes 2002, 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 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.  
           For a volunteer firefighter relief association that pays a 
        lump sum service pension, a monthly benefit service pension, or 
        a lump sum service pension or a monthly benefit service pension 
        as alternative benefit forms, the 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 
           For a volunteer firefighter relief association that pays a 
        defined contribution service pension, the nonforfeitable 
        percentage of pension amounts are as follows:  
          Completed Years of Service   Nonforfeitable Percentage
                                           of Pension Amount
                     5                          40 percent 
                     6                          52 percent 
                     7                          64 percent 
                     8                          76 percent 
                     9                          88 percent 
                    10 and thereafter          100 percent 
           Sec. 2.  Minnesota Statutes 2002, section 424A.02, 
        subdivision 7, is amended to read: 
           Subd. 7.  [DEFERRED SERVICE PENSIONS.] (a) 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 five years of active membership 
        in the relief association; and 
           (3) separates from active service and membership before 
        reaching age 50 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 age 
        50.  
           (b) The deferred service pension starts when the former 
        member reaches age 50 or the minimum age specified in the bylaws 
        governing the relief association if that age is greater than age 
        50 and when the former member makes a valid written application. 
           (c) A relief association 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 in the bylaws, interest must be paid 
        in one of the following manners: 
           (1) at the investment performance rate actually earned on 
        that portion of the assets if the deferred benefit amount is 
        invested by the relief association in a separate account 
        established and maintained by the relief association or if the 
        deferred benefit amount is invested in a separate investment 
        vehicle held by the relief association or, if not,; 
           (2) at the interest rate of five percent, compounded 
        annually; or 
           (3) at a rate equal to the actual time weighted total rate 
        of return investment performance of the special fund as reported 
        by the office of the state auditor under section 356.219, up to 
        five percent, compounded annually, and applied consistently for 
        all deferred service pensioners. 
           (d) A relief association may not use the method provided 
        for in paragraph (c), clause (3), until it has modified its 
        bylaws to be consistent with that clause. 
           (e) For a deferred service pension that is transferred to a 
        separate account established and maintained by the relief 
        association or separate investment vehicle held by the relief 
        association, the deferred member bears the full investment risk 
        subsequent to transfer and in calculating the accrued liability 
        of the volunteer firefighters relief association that pays a 
        lump sum service pension, the accrued liability for deferred 
        service pensions is equal to the separate relief association 
        account balance or the fair market value of the separate 
        investment vehicle held by the relief association. 
           (e) (f) The deferred service pension is governed by and 
        must be calculated under the general statute, special law, 
        relief association articles of incorporation, and relief 
        association bylaw provisions applicable on the date on which the 
        member separated from active service with the fire department 
        and active membership in the relief association. 
           Sec. 3.  [MARINE ON ST. CROIX VOLUNTEER FIREFIGHTERS RELIEF 
        ASSOCIATION; EARLY VESTING.] 
           (a) Notwithstanding Minnesota Statutes, section 424A.02, 
        subdivision 2, to the contrary, the Marine on St. Croix 
        Volunteer Firefighters Relief Association may utilize an early 
        vesting schedule as provided in paragraphs (b) and (c). 
           (b) If the articles of incorporation or bylaws of the 
        Marine on St. Croix Volunteer Firefighters Relief Association so 
        provide, the relief association may pay a reduced service 
        pension to a retiring member who has completed fewer than ten 
        years of service.  The reduced service pension may be paid when 
        the retiring member meets the minimum age and service 
        requirements of Minnesota Statutes, section 424A.02, subdivision 
        1.  
           (c) The amount of the reduced service pension may not 
        exceed the amount calculated by multiplying the service pension 
        appropriate for the completed years of service as specified in 
        the articles of incorporation or bylaws by the applicable 
        nonforfeitable percentage of the service pension amount.  The 
        nonforfeitable percentage of service pension amounts are as 
        follows: 
                 Completed years           Nonforfeitable percentage 
                  of service               of service pension amount 
                      5                           40 percent 
                      6                           52 percent 
                      7                           64 percent 
                      8                           76 percent 
                      9                           88 percent 
                     10 and                      100 percent 
                     thereafter 
           Sec. 4.  [BELLINGHAM FIREFIGHTER RELIEF ASSOCIATION; 
        RATIFICATION OF PRIOR ANNUITY INVESTMENTS.] 
           Notwithstanding Minnesota Statutes, section 356A.06, 
        subdivision 7, any annuity purchases by the Bellingham 
        Firefighters Relief Association prior to the effective date of 
        this section are ratified as permissible investments. 
           Sec. 5.  [EFFECTIVE DATE.] 
           (a) Sections 1 and 2 are effective on July 1, 2004. 
           (b) Section 3 is effective on the day after the date on 
        which the city council of the city of Marine on St. Croix and 
        the chief clerical officer of the city of Marine on St. Croix 
        comply with Minnesota Statutes, section 645.02, subdivisions 2 
        and 3. 
           (c) Section 4 is effective on the day following final 
        enactment. 
           (d) The deferred service pension interest crediting 
        procedure of Minnesota Statutes, section 424A.02, subdivision 7, 
        paragraph (c), clause (3), expires on December 31, 2008. 

                                   ARTICLE 15
                           PERA POLICE AND FIRE PLAN
                             MEMBERSHIP INCLUSIONS
           Section 1.  Minnesota Statutes 2003 Supplement, section 
        353.01, subdivision 6, is amended to read: 
           Subd. 6.  [GOVERNMENTAL SUBDIVISION.] (a) "Governmental 
        subdivision" means a county, city, town, school district within 
        this state, or a department or unit of state government, or any 
        public body whose revenues are derived from taxation, fees, 
        assessments or from other sources. 
           (b) Governmental subdivision also means the Public 
        Employees Retirement Association, the League of Minnesota 
        Cities, the Association of Metropolitan Municipalities, public 
        hospitals owned or operated by, or an integral part of, a 
        governmental subdivision or governmental subdivisions, the 
        Association of Minnesota Counties, the Metropolitan Intercounty 
        Association, the Minnesota Municipal Utilities Association, the 
        Metropolitan Airports Commission, the Minneapolis Employees 
        Retirement Fund for employment initially commenced after June 
        30, 1979, the Range Association of Municipalities and Schools, 
        soil and water conservation districts, economic development 
        authorities created or operating under sections 469.090 to 
        469.108, the Port Authority of the city of St. Paul, the Spring 
        Lake Park Fire Department, incorporated, the Lake Johanna 
        Volunteer Fire Department, incorporated, the Red Wing 
        Environmental Learning Center, and the Dakota County 
        Agricultural Society. 
           (c) Governmental subdivision does not mean any municipal 
        housing and redevelopment authority organized under the 
        provisions of sections 469.001 to 469.047; or any port authority 
        organized under sections 469.048 to 469.089 other than the Port 
        Authority of the city of St. Paul; or any hospital district 
        organized or reorganized prior to July 1, 1975, under sections 
        447.31 to 447.37 or the successor of the district, nor the 
        Minneapolis Community Development Agency.  
           Sec. 2.  [EFFECTIVE DATE.] 
           Section 1 is effective on the day following final enactment.

                                   ARTICLE 16
                           ONE PERSON AND SMALL GROUP
                                PENSION CHANGES
           Section 1.  [PERA-GENERAL; PURCHASE OF PRIOR SERVICE 
        CREDIT.] 
           (a) An eligible person described in paragraph (b) is 
        entitled to purchase up to 33 months of allowable service credit 
        from the general employees retirement plan of the Public 
        Employees Retirement Association.  The service credit purchase 
        under this section must be made in accordance with Minnesota 
        Statutes, section 356.55 or 356.551, whichever applies. 
           (b) An eligible person is a person who: 
           (1) is currently a member of the Teachers Retirement 
        Association; 
           (2) was employed by Independent School District No. 621, 
        Mounds View, from May 1968 to December 1971, but was not covered 
        by the general employees retirement plan of the Public Employees 
        Retirement Association; 
           (3) was employed by Independent School District No. 31, 
        Bemidji, but was not covered by the general employees retirement 
        plan of the Public Employees Retirement Association; 
           (4) was employed as a special education teacher by 
        Independent School District No. 12, Centennial, for the 
        1974-1975 school year and for the 1977-1978, 1978-1979, and 
        1979-1980 school years; 
           (5) was employed as a special education teacher by 
        Independent School District No. 16, Spring Lake Park, for the 
        1975-1976 school year; 
           (6) was employed as a special education teacher by 
        Independent School District No. 138, North Branch, for the 
        1980-1981, 1981-1982, 1982-1983, 1983-1984, 1984-1985, and 
        1985-1986 school years; and 
           (7) has been employed by Independent School District No. 
        11, Anoka-Hennepin, since the 1986-1987 school year. 
           (c) An eligible person described in paragraph (b) must 
        apply with the executive director of the Public Employees 
        Retirement Association to make the service credit purchase under 
        this section.  The application must be in writing and must 
        include all necessary documentation of the applicability of this 
        section, documentation of the eligible person's eligibility for 
        retirement coverage by the general employees retirement plan of 
        the Public Employees Retirement Association if the employment 
        had been properly reported to the association at the time the 
        employment was rendered, and any other relevant information that 
        the executive director may require. 
           Sec. 2.  [PERA-GENERAL EMPLOYEES RETIREMENT PLAN COVERAGE 
        TERMINATION AUTHORIZATION.] 
           Subdivision 1.  [ELIGIBILITY.] (a) An eligible person 
        specified in paragraph (b) is authorized to apply for a 
        retirement annuity from the public employees police and fire 
        retirement plan, provided that the necessary age and service 
        requirements are met, under Minnesota Statutes, section 353.651, 
        as further specified under subdivision 2. 
           (b) An eligible person is a person who: 
           (1) was born on October 10, 1956; 
           (2) was employed as a police officer by the city of Red 
        Wing; 
           (3) was elected to the Goodhue County Board of 
        Commissioners in November 1998; and 
           (4) elected under the law then applicable to have 
        retirement coverage by the general employees retirement plan of 
        the Public Employees Retirement Association for the county board 
        service.  
           Subd. 2.  [RETIREMENT ANNUITY.] (a) Notwithstanding an 
        irrevocable election to participate in the general employees 
        retirement plan of the Public Employees Retirement Association 
        as an elected official and the person's continuation of elected 
        service, an eligible person under subdivision 1, paragraph (b), 
        is deemed to have terminated retirement plan membership under 
        Minnesota Statutes, section 353.01, subdivision 11b, on the 
        first day of the first pay period next following the date of 
        enactment. 
           (b) Upon the change in retirement coverage status under 
        paragraph (a), the eligible person may apply for a retirement 
        annuity under Minnesota Statutes, section 353.651.  In computing 
        that annuity, the Public Employees Retirement Association must 
        exclude the salary that was attributable to the Goodhue County 
        board service.  The deferred annuity augmentation under 
        Minnesota Statutes, section 353.71, applies to the annuity under 
        this subdivision.  
           Subd. 3.  [TREATMENT OF GOODHUE COUNTY BOARD CONTRIBUTIONS 
        TO PERA.] (a) All member contributions by the eligible person to 
        the coordinated program of the general employee retirement plan 
        of the Public Employees Retirement Association attributable to 
        the Goodhue County board elected service, and all corresponding 
        employer contributions, must be determined. 
           (b) An eligible person described in subdivision 1, 
        paragraph (b), must elect, within 90 days of the change in 
        retirement coverage status under paragraph (a), between 
        receiving a refund under Minnesota Statutes, section 353.34, 
        subdivision 2, of the member contributions determined under 
        paragraph (a) or having coverage by the public employees defined 
        contribution plan under Minnesota Statutes, chapter 353D, as 
        further specified in paragraph (c). 
           (c) If coverage by the public employees defined 
        contribution plan is elected under paragraph (b), contributions 
        to that plan commence as of the first day of the first pay 
        period following the election, and the accumulated member and 
        employer contributions determined under paragraph (a) must be 
        transferred with annual compound interest at the rate of six 
        percent to an account established for the eligible person in its 
        public employees defined contribution plan. 
           (d) If no election is made by an eligible person by the 
        required date in paragraph (b), the individual is assumed to 
        have elected the refund indicated in paragraph (b). 
           (e) Upon an election under paragraph (b), or upon a 
        mandatory refund under paragraph (d), all rights in the Public 
        Employees Retirement Association coordinated plan due to elected 
        Goodhue County board service are forfeited and may not be 
        reestablished.  
           Sec. 3.  [MSRS-UNCLASSIFIED PROGRAM; ELECTION BY SURVIVOR.] 
           (a) Notwithstanding any provision of Minnesota Statutes, 
        chapter 352 or 352D, to the contrary, a person described in 
        paragraph (b) may make the posthumous coverage election 
        specified in paragraph (c) and be eligible for the survivor 
        benefit specified in paragraph (d). 
           (b) An eligible person is the personal representative of 
        the estate of a person who: 
           (1) was born on March 26, 1942; 
           (2) was employed by the house of representatives for 
        several years prior to being laid off; 
           (3) was covered by the unclassified state employees 
        retirement program of the Minnesota State Retirement System as a 
        house employee until electing alternative coverage by the 
        general employee retirement plan at or prior to the termination 
        of house employment; 
           (4) was employed by the senate prior to death, but did not 
        make the election to transfer prior service contributions to the 
        unclassified state employees retirement program under Minnesota 
        Statutes, section 352D.12; and 
           (5) died on February 19, 2004. 
           (c) The posthumous coverage election is the transfer 
        election under Minnesota Statutes, section 352D.12, and the 
        personal representative of the estate of a person described in 
        paragraph (b) may make the election as if the representative was 
        a participant in the unclassified program. 
           (d) If the posthumous coverage election is made under 
        paragraph (c), the estate is entitled to a death benefit under 
        Minnesota Statutes, section 352D.075. 
           (e) The posthumous coverage election under this section 
        expires July 1, 2005. 
           Sec. 4.  [EFFECTIVE DATE.] 
           Sections 1 to 3 are effective on the day following final 
        enactment.  

                                   ARTICLE 17
                         PRIOR SERVICE CREDIT PURCHASES
           Section 1.  Minnesota Statutes 2002, section 352.275, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [SERVICE CREDIT PURCHASE AUTHORIZED.] A 
        state employee who has at least three years of allowable service 
        with the Minnesota State Retirement System and who performed 
        service in the United States armed forces before becoming a 
        state employee, or who failed to obtain service credit for a 
        military leave of absence under section 352.27, is entitled to 
        purchase allowable service credit for the initial period of 
        enlistment, induction, or call to active duty without any 
        voluntary extension by making payment under section 356.55 if 
        the employee is not entitled to receive a current or deferred 
        retirement annuity from a United States armed forces pension 
        plan and has not purchased service credit from any other 
        Minnesota defined benefit public employee pension plan for the 
        same period of service. 
           Sec. 2.  Minnesota Statutes 2002, section 352B.01, 
        subdivision 3a, is amended to read: 
           Subd. 3a.  [UNCREDITED MILITARY SERVICE CREDIT PURCHASE.] 
        (a) A member who has at least three years of allowable service 
        with the State Patrol retirement plan under subdivision 3 and 
        who performed service in the United States armed forces before 
        becoming a member is entitled to purchase allowable service 
        credit for the initial period of enlistment, induction, or call 
        to active duty without any voluntary extension by making payment 
        under section 356.55, if the employee is not entitled to receive 
        a current or deferred retirement annuity from a United States 
        armed forces pension plan and has not purchased service credit 
        from any other Minnesota defined benefit public employee pension 
        plan for the same period of service. 
           (b) A member who desires to purchase service credit under 
        paragraph (a) must apply with the executive director to make the 
        purchase.  The application must include all necessary 
        documentation of the member's qualifications to make the 
        purchase, signed written permission to allow the executive 
        director to request and receive necessary verification of 
        applicable facts and eligibility requirements, and any other 
        relevant information that the executive director may require. 
           (c) Allowable service credit for the purchase period must 
        be granted by the State Patrol retirement plan to the purchasing 
        employee upon receipt of the purchase payment amount.  Payment 
        must be made before the effective date of retirement of the 
        member. 
           Sec. 3.  Minnesota Statutes 2002, section 353.01, 
        subdivision 16a, is amended to read: 
           Subd. 16a.  [UNCREDITED MILITARY SERVICE CREDIT PURCHASE.] 
        (a) A public employee who has at least three years of allowable 
        service with the Public Employees Retirement Association or the 
        public employees police and fire plan and who performed service 
        in the United States armed forces before becoming a public 
        employee, or who failed to obtain service credit for a military 
        leave of absence under subdivision 16, paragraph (h), is 
        entitled to purchase allowable service credit for the initial 
        period of enlistment, induction, or call to active duty without 
        any voluntary extension by making payment under section 356.55 
        if the public employee is not entitled to receive a current or 
        deferred retirement annuity from a United States armed forces 
        pension plan and has not purchased service credit from any other 
        Minnesota defined benefit public employee pension plan for the 
        same period of service. 
           (b) A public employee who desires to purchase service 
        credit under paragraph (a) must apply with the executive 
        director to make the purchase.  The application must include all 
        necessary documentation of the public employee's qualifications 
        to make the purchase, signed written permission to allow the 
        executive director to request and receive necessary verification 
        of applicable facts and eligibility requirements, and any other 
        relevant information that the executive director may require. 
           (c) Allowable service credit for the purchase period must 
        be granted by the public employees association or the public 
        employees police and fire plan, whichever applies, to the 
        purchasing public employee upon receipt of the purchase payment 
        amount.  Payment must be made before the effective date of 
        retirement of the public employee. 
           Sec. 4.  Minnesota Statutes 2002, section 354.533, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [SERVICE CREDIT PURCHASE AUTHORIZED.] A 
        teacher who has at least three years of allowable service credit 
        with the Teachers Retirement Association and who performed 
        service in the United States armed forces before becoming a 
        teacher as defined in section 354.05, subdivision 2, or who 
        failed to obtain service credit for a military leave of absence 
        under the provisions of section 354.53, is entitled to purchase 
        allowable and formula service credit for the initial period of 
        enlistment, induction, or call to active duty without any 
        voluntary extension by making payment under section 356.55 
        provided the teacher is not entitled to receive a current or 
        deferred retirement annuity from a United States armed forces 
        pension plan and has not purchased service credit from any other 
        Minnesota defined benefit public employee pension plan for the 
        same period of service. 
           Sec. 5.  Minnesota Statutes 2002, section 354A.097, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [SERVICE CREDIT PURCHASE AUTHORIZED.] A 
        teacher who has at least three years of allowable service credit 
        with the teachers retirement fund association and who performed 
        service in the United States armed forces before becoming a 
        teacher as defined in section 354A.011, subdivision 27, or who 
        failed to obtain service credit for a military leave of absence 
        period under section 354A.093, is entitled to purchase allowable 
        service credit for the initial period of enlistment, induction, 
        or call to active duty without any voluntary extension by making 
        payment under section 356.55, provided the teacher is not 
        entitled to receive a current or deferred retirement annuity 
        from a United States armed forces pension plan and has not 
        purchased service credit from another Minnesota defined benefit 
        public employee pension plan for the same period of service. 
           Sec. 6.  Laws 1999, chapter 222, article 16, section 16, as 
        amended by Laws 2002, chapter 392, article 7, section 1, and 
        Laws 2003, First Special Session chapter 12, article 6, section 
        2, is amended to read: 
           Sec. 16.  [REPEALER.] 
           (a) Sections 1 2 to 6 and 8 to 13 are repealed on May 16, 
        2004. 
           (b) Sections 1 and 7 are repealed on May 16, 2006. 
           Sec. 7.  Laws 2000, chapter 461, article 4, section 4, as 
        amended by Laws 2003, First Special Session chapter 12, article 
        6, section 3, is amended to read: 
           Sec. 4.  [EFFECTIVE DATE; SUNSET REPEALER.] 
           (a) Sections 1, 2, and 3 are effective on the day following 
        final enactment. 
           (b) Sections 1, 2, and 3, are repealed on May 16, 2004 2006.
           Sec. 8.  [EFFECTIVE DATE.] 
           Sections 1 to 7 are effective on the day following final 
        enactment. 

                                   ARTICLE 18
                     MINNEAPOLIS POLICE RELIEF ASSOCIATION 
           Section 1.  Minnesota Statutes 2002, section 69.77, 
        subdivision 4, is amended to read: 
           Subd. 4.  [RELIEF ASSOCIATION FINANCIAL REQUIREMENTS; 
        MINIMUM MUNICIPAL OBLIGATION.] (a) 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 must be determined on or before the submission date 
        established by the municipality under subdivision 5. 
           (b) The financial requirements of the relief association 
        for the following calendar year must 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 15, and 356.216, as required under subdivision 
        10.  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 must be used in calculating 
        the subsequent financial requirements of the relief association. 
           (c) 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 under 
        clauses (1), (2), and (3), 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 under clauses (1) and (2) 
        constitute the financial requirements of the relief association 
        for the following year.  The financial requirement elements are: 
           (1) the normal level cost requirement for the following 
        year, expressed as a dollar amount, which must 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 change in the active membership, for the following 
        year; 
           (2) for the Bloomington Fire Department Relief Association, 
        the Fairmont Police Relief Association, and the Virginia Fire 
        Department Relief Association, to the dollar amount of normal 
        cost determined under clause (1) must 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.  The administrative expenses are those 
        authorized under section 69.80.  No amount of administrative 
        expenses under this clause are to be included in the financial 
        requirements of the Minneapolis Firefighters Relief Association 
        or the Minneapolis Police Relief Association; and 
           (3) to the dollar amount of normal cost and expenses 
        determined under clauses (1) and (2) must 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, for the Bloomington Fire Department Relief 
        Association, the Fairmont Police Relief Association, the 
        Minneapolis Firefighters Relief Association, and the Virginia 
        Fire Department Relief Association, and by December 31, 2020, 
        for the Minneapolis Police Relief Association, as determined 
        from the actuarial valuation or survey of the fund, using an 
        interest assumption set at the applicable rate specified in 
        section 356.215, subdivision 8.  The amortization date specified 
        in this clause applies to all local police or salaried 
        firefighters' relief associations and that date supersedes any 
        amortization date specified in any applicable special law. 
           (d) The minimum obligation of the municipality is 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 under 
        sections 69.011 to 69.051 receivable by the relief association 
        after any allocation made under section 69.031, subdivision 5, 
        paragraph (b), clause (2), or 423A.01, subdivision 2, clause 
        (6), from the local police and salaried firefighters' relief 
        association amortization aid program established under section 
        423A.02, subdivision 1, from the supplementary amortization 
        state-aid program established under section 423A.02, subdivision 
        1a, and from the additional amortization state aid under section 
        423A.02, subdivision 1b. 
           Sec. 2.  Minnesota Statutes 2002, 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 that govern the 
        contents of actuarial valuations must 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 must be 
        the maximum rate of salary on 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 11, the appropriate amortization target 
        date specified in section 69.77, subdivision 4, or 69.773, 
        subdivision 4, clause (c), must be used in calculating any 
        required amortization contribution except that the amortization 
        date for the Minneapolis Police Relief Association is December 
        31, 2020; 
           (3) in addition to the tabulation of active members and 
        annuitants provided for in section 356.215, subdivision 13, the 
        member contributions for active members for the calendar year 
        and the prospective annual retirement annuities under the 
        benefit plan for active members must be reported; 
           (4) actuarial valuations required under section 69.773, 
        subdivision 2, must be made at least every four years and 
        actuarial valuations required under section 69.77 shall be made 
        annually; 
           (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 (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 must include the 
        following required reserves: 
                 (i) For active members 
              1.  Retirement benefits 
              2.  Disability benefits 
              3.  Refund liability due to death or withdrawal 
              4.  Survivors' benefits 
                 (ii) For deferred annuitants' benefits 
                 (iii) For former members without vested rights 
                 (iv) 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 must 
        be shown for additional benefits, if any, which may not be 
        appropriately included in the reserves listed above; and 
           (6) actuarial valuations are due by the first day of the 
        seventh month after the end of the fiscal year which the 
        actuarial valuation covers. 
           (b) For the Minneapolis Firefighters Relief Association or 
        the Minneapolis Police Relief Association, 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. 3.  Minnesota Statutes 2002, section 423B.01, 
        subdivision 12, is amended to read: 
           Subd. 12.  [EXCESS INVESTMENT INCOME.] "Excess investment 
        income" means the amount, if any, by which the average time 
        weighted total rate of return earned by the fund in the most 
        recent prior five two fiscal years has exceeded the actual 
        average percentage increase in the current monthly salary of a 
        first grade patrol officer in the most recent prior five two 
        fiscal years plus two percent, and must be expressed as a dollar 
        amount.  The amount may not exceed one percent of the total 
        assets of the fund, except when the actuarial value of assets of 
        the fund according to the most recent annual actuarial valuation 
        prepared in accordance with sections 356.215 and 356.216 is 
        greater than 102 percent of its actuarial accrued liabilities, 
        in which case the amount must not exceed 1-1/2 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 two years exceeds by 
        two percent the yearly average percentage increase in monthly 
        salary of a first grade patrol officer during the previous five 
        two calendar years. 
           Sec. 4.  Minnesota Statutes 2002, section 423B.09, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [MINNEAPOLIS POLICE; PERSONS ENTITLED TO 
        RECEIVE PENSIONS.] The association shall grant pensions payable 
        from the police pension fund in monthly installments to persons 
        entitled to pensions in the manner and for the following 
        purposes. 
           (a) When the actuarial value of assets of the fund 
        according to the most recent annual actuarial valuation 
        performed in accordance with sections 356.215 and 356.216 is 
        less than 90 percent of the actuarial accrued liabilities, an 
        active member or a deferred pensioner who has performed duty as 
        a member of the police department of the city for five years or 
        more, upon written application after retiring from duty and 
        reaching at least age 50, is entitled to be paid monthly for 
        life a service pension equal to eight units.  For full years of 
        service beyond five years, the service pension increases by 1.6 
        units for each full year, to a maximum of 40 units.  When the 
        actuarial value of assets of the fund according to the most 
        recent annual actuarial valuation prepared in accordance with 
        sections 356.215 and 356.216 is greater than 90 percent of 
        actuarial accrued liabilities, Active members, deferred members, 
        and service pensioners are entitled to a service pension 
        according to the following schedule: 
                       5 years           8.0 units
                       6 years           9.6 units
                       7 years          11.2 units
                       8 years          12.8 units
                       9 years          14.4 units
                      10 years          16.0 units
                      11 years          17.6 units
                      12 years          19.2 units
                      13 years          20.8 units
                      14 years          22.4 units
                      15 years          24.0 units
                      16 years          25.6 units
                      17 years          27.2 units
                      18 years          28.8 units
                      19 years          30.4 units
                      20 years          34.0 35.0 units
                      21 years          35.6 36.6 units
                      22 years          37.2 38.2 units
                      23 years          38.8 39.8 units
                      24 years          40.4 41.4 units
                      25 years          42.0 43.0 units
           Fractional years of service may not be used in computing 
        pensions. 
           (b) An active member who after five years' service but less 
        than 20 years' service with the police department of the city, 
        becomes superannuated so as to be permanently unable to perform 
        the person's assigned duties, is entitled to be paid monthly for 
        life a superannuation pension equal to four units for five years 
        of service and an additional two units for each full year of 
        service over five years and less than 20 years. 
           (c) An active member who is not eligible for a service 
        pension and who, while a member of the police department of the 
        city, becomes diseased or sustains an injury while in the 
        service that permanently unfits the member for the performance 
        of police duties is entitled to be paid monthly for life a 
        pension equal to 34 units while so disabled. 
           Sec. 5.  Minnesota Statutes 2002, section 423B.09, is 
        amended by adding a subdivision to read: 
           Subd. 7.  [ADDITIONAL UNIT.] The additional unit provided 
        to members by subdivision 1 must also be provided to members who 
        selected a joint annuity option under subdivision 6 and must be 
        in an amount that is actuarially equivalent to the service 
        pension and the automatic survivor coverage for that additional 
        unit. 
           Sec. 6.  Minnesota Statutes 2002, section 423B.10, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ENTITLEMENT; BENEFIT AMOUNT.] (a) The 
        surviving spouse of a deceased service pensioner, disability 
        pensioner, deferred pensioner, superannuation pensioner, or 
        active member, who was the legally married spouse of the 
        decedent, residing with the decedent, and who was married while 
        or before the time the decedent was on the payroll of the police 
        department, and who, if the deceased member was a service or 
        deferred pensioner, was legally married to the member for a 
        period of at least one year before retirement from the police 
        department, is entitled to a surviving spouse benefit.  The 
        surviving spouse benefit is equal to 22 23 units per month if 
        the person is the surviving spouse of a deceased active member 
        or disabilitant.  The surviving spouse benefit is equal to six 
        units per month, plus an additional one unit for each year of 
        service to the credit of the decedent in excess of five years, 
        to a maximum of 22 23 units per month, if the person is the 
        surviving spouse of a deceased service pensioner, deferred 
        pensioner, or superannuation pensioner.  The surviving spouse 
        benefit is payable for the life of the surviving spouse. 
           (b) A surviving child of a deceased service pensioner, 
        disability pensioner, deferred pensioner, superannuation 
        pensioner, or active member, who was living while the decedent 
        was an active member of the police department or was born within 
        nine months after the decedent terminated active service in the 
        police department, is entitled to a surviving child benefit.  
        The surviving child benefit is equal to eight units per month if 
        the person is the surviving child of a deceased active member or 
        disabilitant.  The surviving child benefit is equal to two units 
        per month, plus an additional four-tenths of one unit per month 
        for each year of service to the credit of the decedent in excess 
        of five years, to a maximum of eight units, if the person is the 
        surviving child of a deceased service pensioner, deferred 
        pensioner, or superannuation pensioner.  The surviving child 
        benefit is payable until the person attains age 18, or, if in 
        full-time attendance during the normal school year, in a school 
        approved by the board of directors, until the person receives a 
        bachelor's degree or attains the age of 22 years, whichever 
        occurs first.  In the event of the death of both parents leaving 
        a surviving child or children entitled to a surviving child 
        benefit as determined in this paragraph, the surviving child is, 
        or the surviving children are, entitled to a surviving child 
        benefit in such sums as determined by the board of directors to 
        be necessary for the care and education of such surviving child 
        or children, but not to exceed the family maximum benefit per 
        month, to the children of any one family.  
           (c) The surviving spouse and surviving child benefits are 
        subject to a family maximum benefit.  The family maximum benefit 
        is 41 units per month. 
           (d) A surviving spouse who is otherwise not qualified may 
        receive a benefit if the surviving spouse was married to the 
        decedent for a period of five years and was residing with the 
        decedent at the time of death.  The surviving spouse benefit is 
        the same as that provided in paragraph (a), except that if the 
        surviving spouse is younger than the decedent, the surviving 
        spouse benefit must be actuarially equivalent to a surviving 
        spouse benefit that would have been paid to the member's spouse 
        had the member been married to a person of the same age or a 
        greater age than the member's age before retirement. 
           Sec. 7.  Minnesota Statutes 2002, section 423B.15, 
        subdivision 3, is amended to read: 
           Subd. 3.  [AMOUNT OF ANNUAL POSTRETIREMENT PAYMENT.] The 
        amount determined under subdivision 2 must be applied in 
        accordance with this subdivision.  When the actuarial value of 
        assets of the fund according to the most recent annual actuarial 
        valuation prepared in accordance with sections 356.215 and 
        356.216 is less than 102 percent of its total actuarial 
        liabilities, the relief association shall apply the first 
        one-half of excess investment income to the payment of an annual 
        postretirement payment as specified in this subdivision and the 
        second one-half of excess investment income up to one-half of 
        one percent of the assets of the fund must 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.  When the 
        actuarial value of assets of the fund according to the most 
        recent annual actuarial valuation prepared in accordance with 
        sections 356.215 and 356.216 is less than 102 percent funded and 
        other conditions are met, 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.  When the actuarial value of assets of the fund 
        according to the most recent annual actuarial valuation prepared 
        in accordance with sections 356.215 and 356.216 is greater than 
        102 percent of its actuarial accrued liabilities, the relief 
        association shall pay an annual postretirement payment to all 
        eligible members in an amount not to exceed 1-1/2 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 average time 
        weighted total rate of return for the most recent prior five two 
        years exceeds by two percent the actual average percentage 
        increase in the current monthly salary of a top grade patrol 
        officer in the most recent prior five two fiscal years.  The 
        total amount of all payments to members may not exceed the 
        amount determined under this subdivision.  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.  When the actuarial 
        value of assets of the fund according to the most recent annual 
        actuarial valuation prepared in accordance with sections 356.215 
        and 356.216 is less than 102 percent of its actuarial accrued 
        liabilities, 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.  When the actuarial value of assets of the fund 
        according to the most recent annual actuarial valuation prepared 
        in accordance with sections 356.215 and 356.216 is greater than 
        102 percent of its actuarial accrued liabilities, payment to 
        each eligible member must not exceed the member's proportionate 
        share of 1-1/2 percent of the assets of the fund. 
           A person who received a pension or benefit for the entire 
        12 months before the determination date is 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. 
           Sec. 8.  [423B.22] [GUARANTEED PENSION PROVISION.] 
           Once a pension benefit is properly paid in accordance with 
        this law to any member, the dollar amount of that pension 
        benefit shall not be reduced. 
           Sec. 9.  [LOCAL APPROVAL; NONSEVERABILITY.] 
           Sections 1 to 8 are not severable and are effective on the 
        day after the date of the approval by the city council of the 
        city of Minneapolis and the timely completion by the chief 
        clerical officer of the city of Minneapolis of compliance with 
        Minnesota Statutes, section 645.021, subdivisions 2 and 3. 
           Presented to the governor May 18, 2004 
           Signed by the governor May 29, 2004, 3:55 p.m.