H.F. 1507 (Smith); S.F. 1426 (Pogemiller) would provide a surviving spouse benefit to the surviving spouse of a St. Paul firefighter killed in a snowmobile accident, who was not married to the firefighter long enough to meeting surviving spouse benefit eligibility requirements. The deceased firefighter worked for the City of St. Paul and was member of the Public Employees Police and Fire Retirement Plan (PERA-P&F). The applicable provision of law governing survivor benefits under the plan is Minnesota Statutes, Section 353.657, Subdivision 1. If the accident occurred in the line of duty, the surviving spouse could obtain surviving spouse benefits. If death is due to a non-line-of-duty situation, as is the case in this situation, then the marriage had to occur at least one year prior to death. In the case of the situation covered by the current bills, the death occurred after about two months of marriage.

1. General. Under PERA-P&F law, the spouse is not entitled to a surviving spouse annuity because the marriage occurred only a few months prior to the plan member’s death, and law requires a period of marriage of at least one year to be benefit eligible. The firefighter had 5 years, 8 months of PERA-P&F service credit at the time of death.

1. Section 353.657 is the PERA-P&F survivor benefit section. Subdivision 1 of the survivor benefit section specifies that a surviving spouse benefit can be paid to the surviving spouse in situations where the death is not duty-related if the marriage occurred at least one year prior to the employee’s death. If the death was duty-related the one-year requirement is waived. If payable, the surviving spouse benefit is a monthly annuity of half the member’s monthly salary, based on the salary received in the last six month’s prior to death.

2. If the member died after becoming eligible to receive a retirement annuity under the plan (which is age 50 in PERA-P&F), Subdivision 2a specifies that the annuity is a 100 percent joint-and-survivor annuity based on the annuity to which the member was entitled on the date of death, and waiving any early retirement penalty that otherwise would be applied. In these death-while-eligible situations, the subdivision does not indicate a one-year-of marriage requirement. This suggests that PERA interpret this law as providing, if the member’s death occurred in a death-while-eligible situation, an annuity to the spouse without any restrictions related to the length of the marriage.

2. Length of Marriage Issues in PERA-P&F Death-While-Active Surviving Spouse Provisions. PERA-P&F law appears to apply no length-of-marriage requirements if death occurs after the member reaches age 50 (became benefit-eligible). If death occurs prior to benefit-eligible-age, PERA-P&F law waives any length-of-marriage requirement if the death is in the line of duty. If death occurs prior to benefit-eligible-age, but the death is not related to duty, the marriage must have occurred at least one year prior to death. Otherwise, the surviving spouse is not eligible for an annuity (only a death refund, if the spouse has been named as the beneficiary).

1. It is difficult at this time to determine the specific policy motives behind the length-of-marriage requirements relating to PERA-P&F surviving spouse benefits, but possible arguments can be noted. A common argument for not requiring any length-of-marriage requirement in duty-related death situations under public safety plans is that public safety personnel, in the course of doing their jobs, should not have any concerns regarding the financial welfare of their families if death should occur. Police officers and firefighters at times must put themselves in life-threatening situations to assist their follow police officers and firefighters and to protect the general public. The families of public safety officers who die in the line of duty deserve financial security.

2. A length-of-marriage requirement for surviving spouse annuities may not be unreasonable in situations where the death is not duty related, particularly when that benefit is generous and identical to that provided in duty-related situations, as is the case under PERA-P&F law. One argument for a marriage-duration requirement is concern about deathbed marriages. The PERA-P&F survivor benefit provisions apply to active members and disabled members. Particularly with disabilitants, some of these individuals could be in frail health. Perhaps one intention of the marriage duration requirement is to avoid paying survivor benefits in cases where marriage is motivated by a desire to gain access to the survivor benefits. When death occurs well before normal retirement age, the liability created by paying the survivor annuity may be considerably higher than the liability recognized for the plan member if that member had lived. Another possible reason for the marriage duration requirement is to limit plan liability when an active member’s death is not related in any way to assisting fellow public safety officers or to protecting the public. However, PERA-P&F law appears to not apply a one-year-of-marriage requirement in non-duty-related situations when the employee was benefit eligible. A possible justification in these situations is that paying the surviving spouse annuity does not add any liability above that recognized for the employee at the time of death.

3. The Minnesota State Retirement System State Patrol Plan is a statewide public safety plan similar in nature to PERA-P&F. The State Patrol Plan is an older plan than PERA-P&F. The State Patrol Plan traces back to the 1940s, PERA-P&F to the 1960s. The State Patrol Plan makes greater use of the one-year-of-marriage requirement. That plan appears to apply the one-year-of-marriage requirement to all its surviving spouse annuities, both duty-related and non-duty-related. The various possible annuities or benefits payable to a "surviving spouse" in death-while-active situations are stated in Section 352B.11, Subdivision 2. For purposes of any of those annuities in this State Patrol Plan, a "surviving spouse" is defined in relevant part in the definition section (Section 352B.01, Subdivision 9) as a legally married spouse who was married to the member or former member for a period of at least one year. Copies of these provisions are attached.

3. Nature of PERA-P&F Plan Funding. PERA-P&F is a statewide public safety plan, covering police officers and paid firefighters throughout the state, except for a few remaining local police and paid fire relief associations. Thus, PERA-P&F is a multi-employer plan. Because of this multiple employer nature, when bills are proposed which would waive existing law requirements in order to pay an annuity which is not payable under existing law, one question raised is who should cover the resulting liabilities. H.F. 1507 (Smith); S.F. 1426 (Pogemiller) presents this question. The bill proposes to pay a surviving spouse annuity to an individual who is not entitled to that annuity under existing law because the marriage did not occur at least one year prior to the member’s death and the death was not duty-related. If an exemption is granted without further language requiring the liability to be covered by a specific employer, the liability becomes a general liability of the plan. In the case of PERA-P&F, this plan has assets considerably in excess of its current liabilities. No new contribution need is created, although someone may question whether some of the current surplus, due to the combined past contributions of all contributing employees and employers plus investment earnings, should be used for the purpose proposed by H.F. 1507 (Smith); S.F. 1426 (Pogemiller). If language is added to the bill attempting to direct the liability to a specific employer, in this case the City of St. Paul, the city may object, arguing that it has met all its obligations under law to the deceased firefighter and his survivors.

H.F. 1507 (Smith); S.F. 1426 (Pogemiller) would provide a surviving spouse benefit to the surviving spouse of a St. Paul firefighter killed in a snowmobile accident, who was not married to the firefighter long enough to meeting surviving spouse benefit eligibility requirements.

The Commission heard a bill to address this situation once before, during the 2000 Legislative Session. The bill was 2000 Session H.F. 3931 (Holsten); S.F. 3625 (Laidig), which was heard on February 28, 2000. After discussion, the Commission decided to lay the bill over for possible further consideration at a later time. Policy issues raised by the proposed legislation, many of which were raised and discussed at the February 28, 2000, Commission meeting, are as follows:

1. Waiver of Requirement Issues. The PERA-P&F survivor benefit provision requires that marriage occur at least one year prior to death in these relatively short-service, non-duty-related death situations. In the case posed by this bill, the marriage occurred two months prior to death. One issue is whether that is sufficiently close to the one-year requirement to justify a waiver or exemption, given that any waiver may lead to an undermining of the requirement in general law.

2. Scope of Change, Possible General Law Revision; Other Plans. The issue is whether the one-year requirement serves reasonable policy purposes, and whether that requirement should be retained in general law. As noted above, one possible argument for the marriage duration requirement is to avoid the liabilities created by deathbed marriages. Another may be to limit access and the resulting liability created by generous surviving spouse benefits paid by this plan in cases where the member is too young to be benefit-eligible, and where the death was not related to the performance of public safety duties. One can argue that for short-service members, survivor benefit payments to a recently formed family should not be large if the member’s death was not duty-related. However, the one-year-of-marriage requirement in non-duty death situations is a clumsy hurdle, at best, if the intention is to avoid high liabilities in non-duty death situations. Perhaps the one-year marriage duration requirement serves a purpose in avoiding deathbed marriage situations. Regarding the more general non-duty-related death situations, it may be better to design a system with two sets of surviving spouse benefits--one payable if death is duty-related, and less generous benefits if the death is not duty-related.

   As noted above, the one-year-of-marriage requirement is found in the State Patrol Plan and may also appear in some other plans. In the State Patrol Plan, it appears that the one-year-of-marriage applies to all death-while-active situations, both long-service and short-service, and duty-related deaths and non-duty-related deaths. If the Commission were to conclude that the one-year-of-service requirement should be revised, the Commission would need to consider the impact and the possible need to revise similar provisions in several plans.

3. Cost. Information provided at the Commission meeting indicates that the cost of a survivor annuity to the deceased St. Paul firefighter’s survivor would be $394,000. Although the firefighter had less than six years of service credit at the time of death, the value of the survivor annuity is greater than the value of retirement annuities paid to many long service coordinated plan members.

4. Liability Issues – Who Pays. Given the liability for the survivor annuity if these bills were to pass in some form, one issue is who should cover that liability. PERA-P&F has not harmed the individual and plan administrators are likely to contend that the plan should not be forced to cover this liability. To do so would require all employees and contributing employers throughout the state to provide a considerable subsidy. The city is also unlikely to be willing to pay the cost of this benefit. A City of St. Paul representative testified at the 2000 Commission meeting and indicated that the city met all responsibilities it has to the relevant parties and that it should not be required to cover any further liabilities.

5. Questions of Need. At the 2000 Commission meeting, some Commission members suggested that information such as insurance settlements related to the employee’s death, other payments or benefits provided to the surviving spouse by the city, and possibly employment information by the spouse may help the Commission establish whether some form of further payment or payments could be justified based on compassion. Presumably, the Commission would need to weigh these factors against pension policy and precedent concerns.

6. Equity Issue. The Commission is being asked to reconsider a past Commission action (or alternatively, a past Commission decision not to act). The 2000 proposal did not pass the Legislature and the 2000 Pension Commission never took action to recommend the bill to pass. The Commission may choose to not view favorably a request to reconsider a past decision.

The Commission may wish to consider three amendments. The Commission could chose to consider none of the amendments, or use them in any combination.

Amendment LCPR03-152 requires that any survivor benefit paid must be adjusted downward in recognition of any death refund made by PERA-P&F regarding this employee’s death. Normally, a death refund is not paid if a survivor benefit is paid.

Amendment LCPR03-153 requires that the city provide a payment to PERA-P&F covering the entire cost of survivor benefit. If payment is not made, the cost will be deducted from any state aid otherwise payable to the city.

Amendment LCPR03-154 removes retroactivity. This would lessen the cost modestly, since retroactive benefits will not be paid.