1.1                          A bill for an act 
  1.2             relating to retirement; establishing a health care 
  1.3             reimbursement plan for retirees of retirement funds 
  1.4             administered by the Minnesota state retirement system; 
  1.5             establishing a task force to study postretirement and 
  1.6             active employee health care for all public employees; 
  1.7             appropriating money; proposing coding for new law as 
  1.8             Minnesota Statutes, chapter 352G. 
  1.9   BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.10     Section 1.  [352G.01] [DEFINITIONS.] 
  1.11     Subdivision 1.  [APPLICATION.] The definitions in this 
  1.12  section apply to this chapter. 
  1.13     Subd. 2.  [ACCUMULATED CONTRIBUTIONS.] "Accumulated 
  1.14  contributions" means the total deductions made from the salary 
  1.15  of an employee into the health care reimbursement plan. 
  1.16     Subd. 3.  [ALLOWABLE SERVICE.] "Allowable service" means 
  1.17  allowable service under chapter 3A, 352, 352B, 352D, or 490 
  1.18  except any allowable service reinstated by repaying a refund on 
  1.19  or after July 1, 2000. 
  1.20     Subd. 4.  [BOARD.] "Board" means the board of directors of 
  1.21  the Minnesota state retirement system established under section 
  1.22  352.03. 
  1.23     Subd. 5.  [DESIGNATED BENEFICIARY.] "Designated 
  1.24  beneficiary" means the designated beneficiary established by the 
  1.25  included participants or eligible retired employees under the 
  1.26  retirement plan under chapter 3A, 352, 352B, 352D, or 490. 
  1.27     Subd. 6.  [DISABLED EMPLOYEE.] "Disabled employee" means an 
  2.1   employee who has been determined disabled under chapter 3A, 352, 
  2.2   352B, 352D, or 490 and who has at least 15 years of allowable 
  2.3   service and was eligible to draw retirement benefits at the time 
  2.4   of separation from state service. 
  2.5      Subd. 7.  [ELIGIBLE RETIRED EMPLOYEE.] "Eligible retired 
  2.6   employee" means a former employee who is drawing monthly 
  2.7   retirement benefits under chapter 3A, 352, 352B, 352D, or 490, 
  2.8      Subd. 8.  [EMPLOYEE.] "Employee" means a person 
  2.9   contributing to a retirement plan under chapter 3A, 352, 352B, 
  2.10  352D, or 490. 
  2.11     Subd. 9.  [EXECUTIVE DIRECTOR.] "Executive director" means 
  2.12  the executive director of the Minnesota state retirement system 
  2.13  under section 352.03, subdivision 5. 
  2.14     Subd. 10.  [INCLUDED PARTICIPANTS.] "Included participants" 
  2.15  means persons contributing to a retirement plan under chapter 
  2.16  3A, 352, 352B, 352D, or 490 on or after July 1, 2000. 
  2.17     Subd. 11.  [INELIGIBLE TERMINATED EMPLOYEE.] "Ineligible 
  2.18  terminated employee" means a former state employee who is not 
  2.19  eligible for benefits from the health care reimbursement plan. 
  2.20     Subd. 12.  [SALARY.] "Salary" means wages or other periodic 
  2.21  compensation paid to an employee before deductions for deferred 
  2.22  compensation, supplemental retirement plans, or other voluntary 
  2.23  salary reduction programs.  Lump sum sick leave payments, 
  2.24  severance payments, lump sum annual leave payments and overtime 
  2.25  payments made at the time of separation from state service, 
  2.26  payments in lieu of any employee-paid group insurance coverage, 
  2.27  including the difference between single and family rates that 
  2.28  may be paid to an employee with single coverage, and payments 
  2.29  made as an employer-paid fringe benefit, workers' compensation 
  2.30  payments, employer contributions to a deferred compensation or 
  2.31  tax sheltered annuity program, and amounts contributed under a 
  2.32  benevolent vacation and sick leave donation program are not 
  2.33  salary. 
  2.34     Sec. 2.  [352G.02] [HEALTH CARE REIMBURSEMENT PLAN.] 
  2.35     Subdivision 1.  [ESTABLISHMENT.] There is established the 
  2.36  health care reimbursement plan for state employees covered under 
  3.1   chapter 3A, 352, 352B, 352D, or 490.  This plan must meet 
  3.2   qualification requirements under the Internal Revenue Code, 
  3.3   section 401(h), to ensure that both contributions and benefit 
  3.4   payments are tax free. 
  3.5      Subd. 2.  [STATE EMPLOYEES COVERED.] Every state employee 
  3.6   contributing to a plan under chapter 3A, 352, 352B, 352D, or 490 
  3.7   on or after July 1, 2000, is covered by the health care 
  3.8   reimbursement plan.  Acceptance of state employment or 
  3.9   continuance in state service in which contributions are made 
  3.10  under chapter 3A, 352, 352B, 352D, or 490 is deemed consent to 
  3.11  have deductions made from salary for deposit to the credit of 
  3.12  the account of the state employee in the health care 
  3.13  reimbursement plan. 
  3.14     Sec. 3.  [352G.03] [COVERAGE TERMINATION.] 
  3.15     Coverage of any person under the health care reimbursement 
  3.16  plan ends when the person ceases to be a state employee or is no 
  3.17  longer covered by a pension plan under chapter 3A, 352, 352B, 
  3.18  352D, or 490. 
  3.19     Sec. 4.  [352G.04] [APPEALS PROCEDURE.] 
  3.20     A decision by the executive director may be appealed in the 
  3.21  manner provided in section 352.031. 
  3.22     Sec. 5.  [352G.05] [STATE EMPLOYEES HEALTH CARE 
  3.23  REIMBURSEMENT FUND.] 
  3.24     Subdivision 1.  [FUND CREATED.] There is created in the 
  3.25  state treasury a special account to be known as the state 
  3.26  employees health care reimbursement fund.  Employee 
  3.27  contributions, employer contributions, investment returns, and 
  3.28  any other receipts authorized by law must be deposited in the 
  3.29  state treasury and credited to the account. 
  3.30     Subd. 2.  [EMPLOYEE CONTRIBUTIONS.] The employee 
  3.31  contribution to the fund equals .5 percent of salary.  The 
  3.32  contribution must be made by deduction from salary as provided 
  3.33  in section 352.04, subdivision 4. 
  3.34     Subd. 3.  [EMPLOYER CONTRIBUTIONS.] The employer 
  3.35  contribution to the fund equals .5 percent of salary.  The 
  3.36  contribution must be made under section 352.04, subdivisions 5 
  4.1   and 6. 
  4.2      Subd. 4.  [OMITTED SALARY DEDUCTIONS.] If a department 
  4.3   fails to take deductions from an employee's salary as provided 
  4.4   in this section, the collection of omitted deductions must be 
  4.5   made in accordance with section 352.04, subdivision 8, 
  4.6   paragraphs (a), (b), and (c). 
  4.7      Subd. 5.  [ERRONEOUS DEDUCTIONS; CANCELED WARRANTS.] 
  4.8   Deductions taken from the salary of an employee for the health 
  4.9   care reimbursement plan in error must, upon discovery and 
  4.10  verification by the department making the deduction, be refunded 
  4.11  to the employee in accordance with section 352.04, subdivision 9.
  4.12     Subd. 6.  [DISBURSEMENTS.] The expenses of the health care 
  4.13  reimbursement plan and any benefits provided by law must be paid 
  4.14  from the health care reimbursement fund.  
  4.15     Sec. 6.  [352G.06] [TREASURER OF THE FUND.] 
  4.16     The state treasurer is ex officio treasurer of the health 
  4.17  care reimbursement fund.  The treasurer shall deliver to the 
  4.18  executive director copies of all payroll abstracts of the state 
  4.19  together with the commissioner of finance's warrants covering 
  4.20  the deductions made on the payroll abstracts for the health care 
  4.21  reimbursement plan.  The executive director shall have a list 
  4.22  made of the commissioner of finance's warrants.  These warrants 
  4.23  must then be deposited in the state treasury and credited to the 
  4.24  health care reimbursement fund.  The treasurer shall pay out of 
  4.25  the fund only on warrants issued by the commissioner of finance, 
  4.26  upon abstracts signed by the executive director, or by the 
  4.27  finance officer designated by the executive director during the 
  4.28  disability or the absence of the executive director.  Abstracts 
  4.29  for investments may be signed by the executive director of the 
  4.30  state board of investment. 
  4.31     Sec. 7.  [352G.07] [INVESTMENT BOARD TO INVEST FUND.] 
  4.32     The executive director shall, from time to time, certify to 
  4.33  the state board of investment any portions of the health care 
  4.34  reimbursement fund that in the judgment of the executive 
  4.35  director are not required for immediate use.  The state board of 
  4.36  investment shall invest and reinvest sums so transferred, or 
  5.1   certified, in securities that are duly authorized legal 
  5.2   investments under section 11A.24.  Assets of the health care 
  5.3   reimbursement fund must be accounted for separately from the 
  5.4   retirement funds invested by the investment board. 
  5.5      Sec. 8.  [352G.08] [HEALTH CARE REIMBURSEMENT PLAN 
  5.6   BENEFITS.] 
  5.7      Subdivision 1.  [AGE AND SERVICE REQUIREMENTS.] After 
  5.8   separation from state service, an employee who has attained the 
  5.9   age of at least 60 years, who has at least 15 years of allowable 
  5.10  service, and who is immediately eligible for retirement or 
  5.11  disability benefits, or an employee who qualifies for the rule 
  5.12  of 90 regardless of age, is entitled upon application to 
  5.13  benefits from the health care reimbursement plan as long as the 
  5.14  employee has not accepted a refund under section 352G.10, 
  5.15  subdivisions 1 and 2, or has repaid all refunds to the health 
  5.16  care reimbursement plan under section 352G.10, subdivision 4.  
  5.17  Benefits are not payable to an eligible disabled employee who is 
  5.18  no longer collecting disability or retirement benefits. 
  5.19     Subd. 2.  [BENEFIT SCHEDULE.] Those meeting the eligibility 
  5.20  requirements in subdivision 1 will be entitled to the following 
  5.21  monthly benefits: 
  5.22                  Retirement Date           Monthly Benefits
  5.23           July 1, 2000 - June 30, 2002           $55
  5.24           July 1, 2002 - June 30, 2003           $64
  5.25           July 1, 2003 - June 30, 2004           $73
  5.26           July 1, 2004 - June 30, 2005           $82
  5.27           July 1, 2005 - June 30, 2006           $92
  5.28           July 1, 2006 - June 30, 2007           $102
  5.29           July 1, 2007 - June 30, 2008           $113
  5.30           July 1, 2008 - June 30, 2009           $123
  5.31           July 1, 2009 - June 30, 2010           $134
  5.32           July 1, 2010 - June 30, 2011           $146
  5.33           July 1, 2011 - and after               $158
  5.34     Subd. 3.  [PAYMENTS.] The first monthly payment will begin 
  5.35  on July 1, 2002, and will be based on the schedule above.  No 
  5.36  monthly payments will be made before July 1, 2002.  Payments 
  6.1   will be paid directly to the eligible retired employee, but only 
  6.2   upon providing documentation that the money will be used to 
  6.3   offset health insurance premiums or any other health expenses to 
  6.4   meet the requirements under the Internal Revenue Code, section 
  6.5   401(h).  At the discretion of the executive director, payments 
  6.6   may be added to the monthly retirement checks received by the 
  6.7   eligible retired employee. 
  6.8      Subd. 4.  [TERMINATION OF BENEFITS.] Monthly benefits will 
  6.9   terminate upon the death of the member and will not continue to 
  6.10  a survivor or designated beneficiary. 
  6.11     Sec. 9.  [352G.09] [ANNUAL INCREASES, CALCULATION OF HEALTH 
  6.12  INSURANCE PLAN INFLATION ADJUSTMENT.] 
  6.13     (a) Annually, following June 30, the Minnesota state 
  6.14  retirement system shall use the procedures in paragraph (b) to 
  6.15  determine whether an inflation adjustment is payable and to 
  6.16  determine the amount of the adjustment. 
  6.17     (b) If the medical inflation index increases from June 30 
  6.18  of the preceding year to June 30 of the current year, the 
  6.19  Minnesota state retirement system shall certify the percentage 
  6.20  increase.  The amount certified is the lesser of the medical 
  6.21  inflation index or five percent.  The board, at its discretion, 
  6.22  may decrease the adjustment in any year in order to maintain the 
  6.23  financial integrity of the health insurance plan, which includes 
  6.24  avoiding projected unfunded liability.  The board will seek 
  6.25  advice from an approved actuary in determining whether the 
  6.26  inflation adjustment should be lowered. 
  6.27     (c) If an increase is payable, it will occur the following 
  6.28  January 1.  An eligible retired employee who has been receiving 
  6.29  health insurance reimbursement benefits for at least 12 months 
  6.30  as of the current June 30 is eligible to receive a full 
  6.31  insurance plan inflation adjustment.  An eligible retired 
  6.32  employee who has been receiving a health insurance benefit for 
  6.33  at least one full month, but less than 12 full months as of the 
  6.34  current June 30, is eligible to receive a partial inflation 
  6.35  adjustment as follows: 
  6.36            Month Retired     Fraction of the Increase 
  7.1              July                    11/12
  7.2              August                  10/12
  7.3              September               9/12
  7.4              October                 8/12
  7.5              November                7/12
  7.6              December                6/12
  7.7              January                 5/12
  7.8              February                4/12
  7.9              March                   3/12
  7.10             April                   2/12
  7.11             May                     1/12
  7.12     Sec. 10.  [352G.10] [REFUND OF EMPLOYEE CONTRIBUTIONS.] 
  7.13     Subdivision 1.  [REFUND.] An ineligible terminated 
  7.14  employee, an eligible retired employee who has not yet begun 
  7.15  collecting benefits, or an employee who moves to a state 
  7.16  position no longer covered by chapter 3A, 352, 352B, 352D, or 
  7.17  490 may apply for a refund provided in subdivision 2.  
  7.18  Application for a refund may be made after the termination of 
  7.19  state service if the applicant has not again become a state 
  7.20  employee required to be covered by the plan. 
  7.21     Subd. 2.  [AMOUNT OF REFUND.] The refund payable to a 
  7.22  person defined in subdivision 1 is an amount equal to employee 
  7.23  contributions plus interest at a rate of five percent per year 
  7.24  compounded annually.  The amount of the refund must be paid from 
  7.25  contributions under section 352G.05 before the contributions are 
  7.26  credited to the health care reimbursement fund. 
  7.27     Subd. 3.  [TERMINATION OF RIGHTS.] When an ineligible 
  7.28  terminated employee or an eligible retired employee accepts a 
  7.29  refund as provided in subdivision 2, all existing service and 
  7.30  all rights and benefits to which the employee was entitled 
  7.31  before accepting the refund terminate. 
  7.32     Subd. 4.  [REPAYMENT OF REFUND.] An included participant 
  7.33  may repay a refund paid under subdivision 2 by paying the amount 
  7.34  refunded plus 8.5 percent interest compounded annually.  All 
  7.35  refunds must be paid before termination or within one month 
  7.36  following termination of state service. 
  8.1      Sec. 11.  [352G.11] [PAYMENTS UPON THE DEATH OF AN INCLUDED 
  8.2   PARTICIPANT.] 
  8.3      Upon the death of an included participant or a person not 
  8.4   yet collecting monthly benefits under this section, the 
  8.5   designated beneficiary is entitled to a refund of contributions 
  8.6   plus five percent interest, compounded annually. 
  8.7      Sec. 12.  [352G.12] [PAYMENT UPON THE DEATH OF AN ELIGIBLE 
  8.8   RETIRED EMPLOYEE.] 
  8.9      Upon the death of an eligible retired employee who has 
  8.10  started collecting monthly benefits, the designated beneficiary 
  8.11  is entitled to a refund of the eligible retired employee's 
  8.12  contributions plus five percent interest compounded annually 
  8.13  until the date of termination of state service, less the monthly 
  8.14  benefits that have been paid. 
  8.15     Sec. 13.  [352G.13] [UNLIMITED RIGHT TO AMEND.] 
  8.16     Notwithstanding any other provision of the health care 
  8.17  reimbursement plan or the Internal Revenue Code, the health care 
  8.18  reimbursement plan may be amended at any time and in any manner 
  8.19  for any reason whatsoever.  This right to amend includes, but is 
  8.20  not limited to, the right to reduce or eliminate prospectively 
  8.21  or retroactively any or all health benefits under the health 
  8.22  care reimbursement plan for any or all persons who may be 
  8.23  members, retirees, and other recipients or otherwise may be 
  8.24  entitled to health benefits under the plan.  Benefits may be 
  8.25  reduced or eliminated for any or all persons including members, 
  8.26  retirees, and other recipients even if they are then entitled to 
  8.27  or are receiving health benefits. 
  8.28     Sec. 14.  [CURRENT RETIREES AND DISABLED EMPLOYEES.] 
  8.29     Any current retiree or disabled employee receiving monthly 
  8.30  benefits under Minnesota Statutes, chapter 3A, 352, 352B, 352D, 
  8.31  or 490, who has 15 or more years of service and is age 60 or who 
  8.32  qualified for the rule of 90 at the time of termination of 
  8.33  public employment must be paid an additional $55 per month.  
  8.34  This additional payment must be added to the retired or disabled 
  8.35  employee's monthly retirement check and is eligible for future 
  8.36  postretirement adjustments under Minnesota Statutes, section 
  9.1   11A.18, subdivision 9.  The present value necessary to provide 
  9.2   this benefit increase to retired and disabled employees must be 
  9.3   transferred to the postretirement fund under Minnesota Statutes, 
  9.4   section 11A.18, subdivision 6, from the retirement fund the 
  9.5   person is currently receiving the benefits.  If the retired or 
  9.6   disabled employee is receiving payments from more than one 
  9.7   retirement plan meeting qualifications under this subdivision, 
  9.8   the required reserves must be transferred from the plan with the 
  9.9   most service credit. 
  9.10     Sec. 15.  [RETIREES AND DISABLED EMPLOYEES UNDER AGE 60.] 
  9.11     A retired or disabled employee who has 15 or more years of 
  9.12  service, but has not yet reached age 60 must be paid an 
  9.13  additional $55 per month upon attainment of age 60.  The present 
  9.14  value necessary to provide the benefit increase to those who 
  9.15  become eligible later must be transferred to the postretirement 
  9.16  fund when they reach age 60. 
  9.17     Sec. 16.  [FIRST INCREASE.] 
  9.18     An eligible or retired eligible employee is first eligible 
  9.19  for an increase under section 14 or 15 on January 1, 2003.  The 
  9.20  required reserves to support the payment must be transferred on 
  9.21  July 1, 2001. 
  9.22     Sec. 17.  [POSTRETIREMENT AND ACTIVE EMPLOYEE HEALTH CARE 
  9.23  TASK FORCE.] 
  9.24     (a) The commissioner of employee relations shall convene a 
  9.25  task force on postretirement and active employee health care.  
  9.26  The task force shall identify strategies for providing 
  9.27  postretirement and active employee health care coverage for 
  9.28  public employees and make recommendations regarding the most 
  9.29  appropriate and efficient manner for providing postretirement 
  9.30  and active employee health care. 
  9.31     (b) One-half of the task force membership must be composed 
  9.32  of employees and the other half of the membership must be 
  9.33  composed of employers.  The task force shall include, but not be 
  9.34  limited to, the following: 
  9.35     (1) a representative of the department of employee 
  9.36  relations; 
 10.1      (2) a representative of the Minnesota state retirement 
 10.2   system; 
 10.3      (3) a representative of the teachers retirement 
 10.4   association; 
 10.5      (4) a representative of the public employees retirement 
 10.6   association; 
 10.7      (5) a representative of the first class city teacher 
 10.8   retirement fund associations; 
 10.9      (6) a representative of the first class city police and 
 10.10  fire department relief associations; 
 10.11     (7) a representative of the Minneapolis employees 
 10.12  retirement fund; 
 10.13     (8) a representative of the legislative coordinating 
 10.14  commission subcommittee on employee relations; 
 10.15     (9) one representative each from the Minnesota school 
 10.16  boards association, Minnesota service cooperatives, the 
 10.17  association of Minnesota counties, the Minnesota association of 
 10.18  townships, and the league of Minnesota cities; 
 10.19     (10) exclusive representatives of affected public 
 10.20  employees; and 
 10.21     (11) representatives of major public employers. 
 10.22     (c) The task force shall report its findings and 
 10.23  recommendations to the legislature by November 15, 2000.  The 
 10.24  report shall address: 
 10.25     (1) alternative methods of providing and paying for 
 10.26  postretirement and active employee health care; 
 10.27     (2) the estimated cost of providing postretirement and 
 10.28  active employee health care under various alternatives, 
 10.29  including statewide, regional, or market alternatives; 
 10.30     (3) the most efficient administrative structure for 
 10.31  providing for postretirement and active employee health care; 
 10.32  and 
 10.33     (4) issues of adverse selection, cost containment, consumer 
 10.34  choice, and consider options for dealing with other employee 
 10.35  concerns. 
 10.36     (d) The task force shall conduct the study and assemble 
 11.1   data in a manner that will provide for the ability to conduct 
 11.2   analysis for subsets of the groups being studied by employer and 
 11.3   employee types. 
 11.4      Sec. 18.  [APPROPRIATIONS.] 
 11.5      Subdivision 1.  [TRANSFER TO COVER RETIREES AND DISABLED 
 11.6   EMPLOYEES.] A sum sufficient to make the transfers required by 
 11.7   sections 14 and 15 is appropriated from the respective 
 11.8   retirement funds. 
 11.9      Subd. 2.  [EMPLOYER CONTRIBUTIONS.] A sum sufficient to pay 
 11.10  the employer contribution required by section 5, subdivision 3, 
 11.11  for the fiscal year ending June 30, 2001, is appropriated from 
 11.12  the various funds in the state treasury from which salaries are 
 11.13  paid.  The legislature estimates the cost to the general fund 
 11.14  will be $4,408,000.  The commissioner of finance, in 
 11.15  consultation with the commissioner of employee relations, shall 
 11.16  determine the amounts needed, make the necessary transfers to 
 11.17  the various appropriation accounts from which salaries are paid, 
 11.18  and report the amounts transferred to the chairs of the senate 
 11.19  finance committees and the house ways and means committee. 
 11.20     Subd. 3.  [POSTRETIREMENT HEALTH CARE STUDY.] $232,000 is 
 11.21  appropriated from the general fund to the commissioner of 
 11.22  employee relations to pay the costs of conducting the 
 11.23  postretirement health care study and preparing the report 
 11.24  required by section 17, to be available until June 30, 2001. 
 11.25     Sec. 19.  [EFFECTIVE DATE.] 
 11.26     This act is effective July 1, 2000.