As an interim topic, the Commission chair, Senator Dean E. Johnson, has designated consideration of a recodification of Minnesota Statutes, Chapter 356, relating to retirement systems generally.

The topic is not an outgrowth of any specific 2001 proposed legislation, but is part of a long-term tradition and responsibility of the Commission and the Commission staff to update and to revise obsolete or disorganized pension laws.

This meeting is expected to be the only Commission interim consideration of the draft proposed recodification legislation resulting from the Commission staff work on the topic.

This Commission staff issue memorandum is the only issue memorandum expected on the topic. The memorandum will summarize the development of Minnesota Statutes, Chapter 356, will provide an example of the disorganization of the chapter, will summarize draft proposed legislation LCPR01-244, and will discuss the policy issues that arise in connection with the draft legislation.

Before 1965, Minnesota Statutes, Chapter 356, related to the Legislative Advisory Committee, and contained four sections, two of which were not printed after 1957 because they were obsolete and two of which were renumbered, one as Minnesota Statutes, Section 3.30, relating to membership, duties, and appropriation transfer authority of the Legislative Advisory Committee, and the other as Minnesota Statutes, Section 9.28, now repealed.

In 1963, the Legislature enacted Laws 1963, Chapter 521, Section 1, which required pensioners and other benefit recipients of all Minnesota pension plans to request each future post retirement increase in writing before that increase would be payable. When the codified Minnesota Statutes were next published following the 1965 Legislative Session, the 1963 post retirement increase request law was combined with Laws 1965, Chapter 359, detailing the contents of periodic financial reports and of actuarial surveys of the State Employees Retirement Fund (predecessor of the Minnesota State Retirement System), the Public Employees Retirement Fund, the Teachers Retirement Fund, the Highway Patrolman’s Retirement Fund, and the State Police Officers Retirement Fund, to constitute Minnesota Statutes 1965, Chapter 356, entitled "Retirement Systems, Generally." The 1965 financial report and actuarial survey (i.e., valuation) laws, which updated the prior actuarial valuation requirement legislation, Extra Session 1957, Chapter 11. The 1965 actuarial valuation requirement law was necessitated by the use of a variant actuarial method (the Unit Credit Method rather than the Entry Age Normal Cost Method) and variant actuarial assumptions by the actuary of the State Employees Retirement Fund, A. A. Weinberg. Minnesota Statutes 1965, Section 356.21, was the initial legislative enactment in Minnesota that mandated the use of a specific actuarial valuation method in preparing actuarial valuations and the use of specific actuarial assumptions (i.e., three percent interest rate assumption).

Until the early and mid-1970’s, Minnesota Statutes, Chapter 356, primarily related to financial reporting and actuarial valuations. Laws 1971, Chapter 222, Section 1, added Minnesota Statutes, Section 356.24, prohibiting governmental units from creating employer-supported supplemental pension plans or deferred compensation plans. In 1975, four generally applicable substantive provisions were added to Minnesota Statutes, Chapter 356, and, in 1976, three generally applicable substantive provisions were added. Laws 1975, Chapter 183, added the restoration of survivor benefit (Minnesota Statutes, Section 356.31) and proportionate annuity at mandatory retirement age (Minnesota Statutes, Section 356.32) provisions. Laws 1975, Chapter 232, added the Combined Service Annuity portability provision (Minnesota Statutes, Section 356.30). Laws 1975, Chapter 405, added the prohibition on the creation of additional local pension plans other than volunteer firefighter relief associations (Minnesota Statutes, Section 356.25). Laws 1976, Chapter 326, provided an ad hoc post retirement adjustment to pre-1973 retirees. Laws 1976, Chapter 329, provided a proportionate annuity to certain Hennepin County retirees and placed a limit on the salary figures includable in a highest five successive years average salary base for benefit calculations. Since 1976, 33 additional substantive provisions (two actuarial valuation provisions) were added to Minnesota Statutes, Chapter 356. The additions, listed chronologically, are as follows:

With the primary exceptions of Minnesota Statutes, Sections 356.20 through 356.23, relating to financial, actuarial, and investment reporting, of Minnesota Statutes, Sections 356.30 to 356.303, relating to portability provisions, and of Minnesota Statutes, Sections 356.55 to 356.555, relating to service credit purchases, there is no obvious organizing principle of the chapter, meaning that related or similar provisions are scattered throughout the chapter.

Examples of scattered or disorganized provisions are the six provisions that relate to retirement annuities, namely:

A similar set of disorganized provisions relates to the two current refund repayment provisions, which are Minnesota Statutes, Section 356.306, governing the partial payment of refunds, and Minnesota Statutes, Section 356.81, governing the payment of refunds form other pension and related plans.

Draft Proposed Legislation LCPR01-244 revises and restructures Minnesota Statutes, Chapter 356, governing retirement systems, generally, to reposition related or similar provisions together, to create an additional chapter in Minnesota Statutes for purely retirement system provisions, and to repeal obsolete provisions, by making the following changes:

1. Moves 13 Sections within Minnesota Statutes, Chapter 356. Thirteen current provisions are repealed and reenacted adjoining related or similar provisions. The provisions are:

Current Provision	Description	Renumbered Provision
Section 356.19	Retirement Annuity Benefit Accrual Rates	Section 356.315
Section 356.305	Limit on Survivor Benefit Entitlement	Section 356.406
Section 356.306	Partial Payment of Refund	Section 356.44
Section 356.31	Survivor Benefit Restoration	Section 356.407
Section 356.371	Optional Annuity Form Information	Section 356.46
Section 356.372	Supplemental Needs Trust Optional Annuity	Section 356.465
Section 356.615	Limitation on Pension Fund Asset Borrowing	Section 356.63
Section 356.71	Pension Fund Real Estate Investments	Section 356.64
Section 356.80	Marriage Dissolution Retirement Information	Section 356.49
Section 356.81	Refund Repayment From Other Funds	Section 356.441
Section 356.86	Pre-1973 Retiree Post Retirement Adjustments	Section 356.42
Section 356.865	MERF Pre-1974 Retiree Post Retirement Adjustments	Section 356.43
Section 356.866	Annuitization of Pre-1973 Post Retirement Adjustments	Section 356.431

2. Moves Two Sections to Newly Created Minnesota Statutes, Chapter 356B. Two current provisions are repealed and reenacted with new coding as Minnesota Statutes, Chapter 356B. The provisions are:

Current Provision	Description	Renumbered Provision
Section 356.88	Public Pension Administrative Legislation	Section 356B.05
Section 356.89	Public Pension Building	Section 356B.10

3. Repeals 12 Sections as Obsolete. Twelve current provisions are repealed because the applicable provision has been determined to be obsolete. The provisions are:

Current Provision	Description
Section 356.325	Hennepin County Proportionate Annuity
Section 356.35	1976 Ad Hoc Post Retirement Adjustment Definition
Section 356.36	1976 Ad Hoc Annuity and Disability Benefit Adjustments
Section 356.37	1976 Ad Hoc Survivor Benefit Adjustments
Section 356.38	1976 Ad Hoc Post Retirement Adjustment Limitations
Section 356.39	1976 Ad Hoc Post Retirement Adjustment Basis Reset
Section 356.45	CETA Employee Plan Membership Exclusion
Section 356.451	CETA Employee Provisional Membership
Section 356.452	CETA Employee Refund Eligibility
Section 356.453	CETA Employee Prior Service Credit Purchase
Section 356.454	CETA Employee Exclusion Intent
Section 356.455	CETA Employee Exclusion Interpretation Correction

4. Repeals Section to Eliminate Revisor Note. Laws 1997, Chapter 233, Article 1, Section 58, which amended Minnesota Statutes 1996, Section 356.215. Subdivision 4d, relating to actuarial valuation interest and salary assumptions, when Laws 1997, Chapter 241, Article 4, Section 1, amended the same subdivision differently, is repealed, thereby resolving a revisor’s note currently contained in Minnesota Statutes.

Draft Proposed Legislation LCPR01-244, while drafted by the Commission staff to be a substantively neutral recodification of the existing Minnesota Statutes, Chapter 356, does raise several pension and related public policy issues for Commission consideration, as follows:

1. Accuracy of the Recodification. With any recodification, the primary policy issue is the accuracy of the recodification in capturing the substance of the prior law, without substantive omissions or additions. The Commission staff believes that the draft legislation replicates the currently applicable substance of Minnesota Statutes 2000, Chapter 356, as amended through the 2001 Legislative Session. By circulating the draft proposed legislation at this time, prior to the 2002 Legislative Session, interested parties will have an opportunity to review the draft and to identify any unintended substantive omissions or changes and for the Commission staff to make the required corrections.

2. Appropriateness of Proposed Obsolete Provision Repeals. The policy issue is the appropriateness of the proposed repeal of 12 sections on the grounds that the provisions are obsolete. The proposed obsolete provision repeals relate to three sets of statutes. Minnesota Statutes, Section 356.325, provided certain Hennepin County employees with proportionate annuities. The provision is limited to members of the General Employee Retirement Plan of the Public Employees Retirement Association (PERA-General) who were Hennepin County employees on May 1, 1975, and had more than three years of Minnesota public pension plan service credit, but less than ten years, on that date. As such, 26 years later, the section is obsolete on its face. Minnesota Statutes, Sections 356.35, 356.36, 356.37, 356.38, and 356.39, provided various pre-1973 and related retirees from several public pension plans with an ad hoc post retirement adjustment in 1976. The 1976 post retirement adjustment was a permanent, but single occurrence, annuity and benefit increase and, as a consequence, has no ongoing relevance and either should not have been coded or should have been repealed after the first post-1976 post retirement adjustment. Minnesota Statutes, Sections 356.45, 356.451, 356.452, 356.453, 356.454, and 356.455, implemented a 1978 federal Department of Labor change in interpretation of the federal comprehensive Employment and Training Act of 1973 (CETA) in requiring either public pension plan exclusions of CETA employees or provisional public pension plan membership for CETA employees. Since CETA was superseded in 1982 by the federal Job Training Partnership Act, the provisions are no longer relevant.

3. Appropriateness of Creating New Minnesota Statutes, Chapter 356B. The policy issue is the appropriateness of repealing and segregating the reenactment of two current sections of Minnesota Statutes, Chapter 356, as new Minnesota Statutes, Chapter 356B. The sections are Minnesota Statutes, Sections 356.88 and 356.89. Unlike the balance of current Minnesota Statutes, Chapter 356, which either relate to information to be provided to retirement plan members and others or benefit coverage to be provided to retirement plan members, Minnesota Statutes, Sections 356.88 and 356.89, relate wholly to public retirement plans. Minnesota Statutes, Section 356.88, requires the various statewide and major local Minnesota public retirement plans to submit its proposed administrative legislation in advance for review and comment by the Commission staff. Minnesota Statutes, Section 356.89, governs the new statewide public retirement plan building. A separation of general statutes relating to public pension plan members from general statutes relating solely to public pension plans arguable provides greater clarity in the organization of Minnesota Statutes.

4. Appropriateness of the Timing of the Recodification. The policy issue is the appropriateness of the timing of the proposed recodification of Minnesota Statutes, Chapter 356. The timing of this proposed recodification is a function of the availability of Commission staff time to devote sufficient time to the proposal to undertake it with adequate care and attention to detail. A benefit of the recodification, if enacted by the 2002 Legislature, would be the inclusion of the revised statutes in the next edition of Minnesota Statues. Other interested parties are better positioned to identify if there are any countervailing timing considerations for the Commission to weigh.

5. Clarity of the Attempted Resulting Reorganization. The policy issue is the extent of the clarity achieved in Minnesota Statutes, Chapter 356, as a result of the proposed recodification and reorganization. While there are other (and possibly better) approaches to reorganizing and revising Minnesota Statutes, Chapter 356, the approach in Draft LCPR01-244 attempts to align similar or related provisions while moving as few current statutory provisions as possible. Of the 53 sections contained in Minnesota Statutes, Chapter 356, the proposed draft legislation repeals 15 sections (28.3 percent) for reenactment in a different placement and repeals 12 sections (22.6 percent) as obsolete. Greater organizational clarity potentially could be obtained in recodifying the chapter, but that greater clarity would undoubtedly require the repeal and reenactment of a greater number of current statutory provisions.