H.F. 1343 (Powell); S.F. 1235 (Belanger) would authorize a teacher who works in the Burnsville-Eagan-Savage school district, who was on a sabbatical leave or leaves at some unspecified time between January 1, 1982 and December 31, 1989, and who was unable to obtain service credit for the leave or leaves because the leaves were not reported to the Teachers Retirement Association (TRA), to obtain service credit for the leave period or periods, not to exceed three years, by purchasing that service credit at full actuarial value.

Commission staff has no information about the factual situation beyond the information provided by the language of H.F. 1343 (Powell); S.F. 1235 (Belanger). The period of the sabbatical leave or leaves is unspecified, other than indicating that they occurred between the start of calendar 1982 and the end of 1989. Attached is a copy of the TRA sabbatical leave provision, Section 354.092, from 1984 statutes, which hopefully provides an indication of the leave requirements that actually applied to the leave of leaves. According to the 1984 statute, an individual on sabbatical leave had to be paid at least one-third salary, and contributions were to be made to the retirement fund. If the individual made full-time equivalent contributions, based on the salary the individual received in the year prior to the leave, the individual would receive full-time salary and service credit. These contributions had to be made before the end of the fiscal year following the fiscal year in which the leave occurred. No more than three years of full service credit can be obtained, regardless of the number of years of leave. If the individual contributed less than the contributions required based on full-time salary, the salary and service credit were prorated.

A copy of the current version of Section 354.092 is also attached. The provision has been altered over time. One difference is a sentence in what is now Subdivision 2 of the law which requires the school district to certify the leave to TRA. In the past, there was a problem with TRA not promptly being informed about various leaves of absence. Another difference is the addition of required employer contributions. The earlier version did not have an employer contribution because at that time the employer contributions were paid by the state. A third difference is that full time equivalent employee contributions are deducted from pay, and those contributions and corresponding employer contributions are to be transmitted to TRA shortly after the payroll period in which the deductions occur. Given those changes, there is no need for the service credit prorating language, so it has been removed. A final difference is that an individual who does not have a right to reinstatement is not permitted to receive service credit under the sabbatical leave provision.

H.F. 1343 (Powell); S.F. 1235 (Belanger): TRA: Service Credit Purchase for Certain Sabbatical Leaves, would authorize a teacher who works in the Burnsville-Eagan-Savage school district, who was on a sabbatical leave or leaves at some unspecified time between January 1, 1982 and December 31, 1989, and who was unable to obtain service credit for the leave or leaves because the leaves were not reported to the Teachers Retirement Association (TRA), to obtain service credit for the leave period or periods, not to exceed three years, by purchasing that service credit at full actuarial value.

The proposed legislation raises several pension and related public policy issues that may merit Commission consideration and discussion, as follows:

1. Need to Consider. The issue is whether there is sufficient justification to consider recommending this bill to pass, particularly if there is no issue of harm. The error, if any, occurred during the 1980s. It is preferable to address problems promptly, while the cost of addressing the problems are still modest, and while relevant records continue to exist. With cases such as this, where a fairly long time period has occurred since the problem was created, relevant school district records may no longer exist.

2. Factual Situation; Equity Issues. LCPR staff has no information about the case covered by H.F. 1343; S.F. 1235. The bills are drafted with little specification, creating some risk that the individual is not sufficiently identified. The factual circumstances are largely unstated, making it difficult for the Commission to determine the merit of the situation or situations. Presumably, the LCPR will need to hear brief testimony from the individual covered by the bills, from the school district, and from TRA to determine what specifically occurred with these leaves, and whether any special action can be justified.

3. The Issue of Harm. As drafted, H.F. 1343 (Powell); S.F. 1235 (Belanger) suggests that the school district may be at fault, creating an issue of whether the factual circumstances support a case of harm. If the LCPR were to conclude that the school district caused harm, that would be a justification to consider an amendment to require the school district to cover the full actuarial value, after netting out employee contributions plus interest. We have no information on whether the school district accepts a contention that it caused harm and is willing to make the individual whole.

4. Full Actuarial Value Issue. The issue is whether the Commission feels the full actuarial value payment procedure to be used is sufficiently accurate to ensure that neither the individual nor pension fund will be harmed by the bills. A Commission staff memo the Commission reviewed cast considerable doubt about the accuracy of the full actuarial value estimation process. The available evidence suggests that the full actuarial value service credit payment procedure often provides large underestimates or overestimates of the proper cost.

5. Scope. The issue is whether there are other individuals in similar circumstance who will seek similar treatment.

Amendment LCPR03-134. This amendment provides minor changes in the bills to better identify the eligible individual and to the bills more consistent with requirements the Commission usually requires in full actuarial value service credit purchase special laws. The amendment adds a date of birth (to be filed in when that information is provided), requires that payment to TRA to be made in a lump sum, sets a September 1, 2003 end date for payment, and requires that the payment be made by that date or prior to retirement, whichever is earlier. The Commission almost always requires that payment be received before retirement occurs.

Amendment LCPR03-135. This amendment makes the same changes as LCPR03-134 and also requires the individual to pay employee contributions plus interest, and the school district to pay remainder of the full actuarial value. If the school district does not pay, necessary amounts will be withheld from state aid and transmitted to TRA. Amendment LCPR03-135 would be appropriate if the LCPR concludes that the school district harmed the individual.