Summary of S.F. 2791 (Betzold); H.F. 3272 (Mares)

S.F. 2791 (Betzold); H.F. 3272 (Mares) 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  Thirteen current provisions are repealed and reenacted adjoining related or similar provisions.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  Two current provisions which relate to plan administration, but not benefits, are repealed and reenacted with new coding as Minnesota Statutes, Chapter 356B.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  Twelve current provisions are repealed because the applicable provision has been determined to be obsolete.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.

1. Development of Minnesota Statutes, Chapter 356

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:

Year	Session Law Citation	Code Placement	Summary
1977	Chapter 388, Section 3	356.40	Annuity and Benefit Payment Date
1978	Chapter 563, Section 11	356.216	Local Police and Fire Plan Actuarial Valuations
	Chapter 665, Section 1	356.41	Disability and Survivor Benefit Post Retirement Adjustments
	Chapter 720, Sections 10, 11, 20, 21, and 22	356.45 356.451 356.452 356.453 356.454	Pension Plan Membership for Employees Under the Federal Comprehensive Employment and Training Act of 1973 (CETA)
1979	Chapter 216, Section 22	356.455	CETA Exclusion Interpretative Correction
1981	Chapter 68, Section 29	356.371	Optional Annuity Form Information
	Chapter 224, Section 178	356.65	Disposition of Abandoned Pension Property
Year	Session Law Citation	Code Placement	Summary
1982	Third Special Session, Chapter 1, Article 2, Section 7	356.62	Employer Member Contribution Pick-Up
1983	Chapter 291, Section 1	356.71	Pension Fund Real Estate Investments
	Chapter 286, Section 23	356.001	Public Pension Plan Purpose
1987	Chapter 157, Section 8	356.80	Marriage Dissolution Information
	Chapter 284, Article 8, Sections 1 and 2	356.302 356.303	Combined Disability and Survivor Benefit Portability Provisions
	Chapter 296, Section 32	356.615	No Pension Fund Asset Borrowing
1988	Chapter 709, Article 9, Section 3	356.245	Local Elected Officials Included In Deferred Compensation Plan
1989	Chapter 319, Article 2, Section 27	356.81	Refund Repayment From Other Plans
	Chapter 319, Article 13, Section 95	356.82	Normal Retirement Age Savings Clause
	Chapter 319, Article 15, Section 1	356.86	Pre-1973 Retiree Post Retirement Adjustment
1990	Chapter 589, Article 2, Section 2	356.87	Health Insurance Withholding
1991	Chapter 269, Article 3, Section 20	356.217	Commission Actuarial Services Modification
	Chapter 345, Article 4, Section 5	356.865	MERF Pre-1974 Retiree Post Retirement Adjustment
1992	Chapter 443, Section 1	356.50	Wrongful Discharge Pension Service Credit
1994	Chapter 528, Article 1, Section 13	356.88	Pension Plan Administrative Legislation
	Chapter 528, Article 4, Section 11	356.611	Public Pension Plan Salary Limits
	Chapter 565, Article 2, Section 1	356.219	Investment Performance Reporting
1995	Chapter 141, Article 1, Section 1	356.305	Loss Of Survivor Benefit Entitlement
1997	Chapter 233, Article 1, Section 55	356.19	Benefit Formula Percentages
1998	Chapter 390, Article 4, Sections 1 and 2	356.55 356.551	Service Credit Purchase Payment Amount Determination
1999	Chapter 222, Article 10, Section 1	356.372	Supplemental Needs Trust Optional Annuity Form
	Chapter 222, Article 22, Section 3	356.89	Public Pension Plan Building
2000	Chapter 461, Article 2, Section 10	356.58	Reemployed Annuitant Earnings Limitation Amount Disposition
	Chapter 461, Article 3, Section 45	356.90	MSRS/PERA Combined Annuity Or Benefit Payment

2. Current Organization of Minnesota Statutes, Chapter 356

LCPR02-042 corrects some additional stylistic errors and some additional obsolete cross-references that came to the attention of the Commission staff since the draft proposed legislation was circulated in November 2001.

S.F. 2791 (Betzold); H.F. 3272 (Mares), while drafted by the Commission staff and intended 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 proposed legislation replicates the currently applicable substance of Minnesota Statutes 2000, Chapter 356, as amended through the 2001 Legislative Session. The proposed legislation was circulated as a draft in November 2001 to interested parties so they have had 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 full printed 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 the proposed legislation 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.