H.F. 947 (Dempsey); S.F. 947 (Murphy) amends Minnesota Statutes, Section 353.01, Subdivision 6, the provision of the General Employees Retirement Plan of the Public Employees Retirement Association (PERA-General) that defines "governmental subdivision" for purposes of determining plan membership, by adding the Red Wing Environmental Learning Center to the enumeration of governmental subdivisions eligible for PERA-General coverage and by providing that Independent School District No. 256 (Red Wing) may continue to certify full-time Red Wing Environmental Learning Center employees as PERA-General members.

The Red Wing Environmental Learning Center was created in 1970. Since its creation, the Red Wing School District has acted as the fiscal agent for the Learning Center and the employees of the Learning Center have the employment benefits provided to the Red Wing School District employees, including retirement coverage by the General Employees Retirement Plan of the Public Employees Retirement Association (PERA-General).

The Director of Finance and Operations of Independent School District No. 256 has raised the issue of the continuing relationship of the school district and the Red Wing Environmental Learning Center, hoping to clarify the manner in which the employee benefits and fiscal affairs of the Learning Center are handled. The Red Wing Environmental Learning Center employees currently do not meet the general definition of "public employee" for PERA-General retirement coverage.

The inclusion of quasi-public sector employees or private sector employees in the membership of a public pension plan may bring policy and regulatory implications. In regulating pension plans, the federal government (the IRS and the Department of Labor) differ between public sector pension plans and private sector pension plans. Under the Employee Retirement Income Security Act of 1974 (ERISA) and amendatory enactments, public sector pension plans are exempt from broad areas of regulation, such as fiduciary regulation or plan termination insurance, or are held to less stringent regulatory criteria than private sector pension plans. The federal government has permitted "de minimis" numbers of public pension plan participants who are not purely governmental employees, without clearly defining the "de minimis" maximum.

Some Minnesota public pension plan administrators have expressed concern that if quasi-public sector employees are included in plan coverage, the plan may lose its governmental plan designation because the employees may not qualify as "public employees." The fear is that the plan would be subject to the more complex qualification and reporting standards of the Employee Retirement Income Security Act (ERISA), which governs private section plans. If these ERISA standards are not met, the plan could, in turn, lose its tax-qualified status. This is not a new issue. Prior to the recent University of Minnesota steam plant legislation and the inclusion in PERA of the Minneapolis Community Action Agency, several other groups had been provided coverage which raise the same issue of continued exemption from ERISA.

ERISA and the Internal Revenue Code define a "governmental plan" as a plan "established and maintained for its employees by the Government of the United States, by the government of any state or political subdivision thereof, or by any agency or instrumentality of any of the foregoing." The Pension and Welfare Benefits Administration (PWBA) of the federal Department of Labor (DOL) is the agency charged, in part, with making that determination. The PWBA has taken a fairly broad view of what constitutes an agency or instrumentality of government and has viewed "de minimis" numbers of nonpublic employees in a public plan as not affecting the governmental status of the public pension plan, even without any clear statutory underpinning. The "de minimis" nonpublic participation rule of the PWBA also has been liberally applied when the nonpublic employees are union representatives of public employees or are former public employees, which is the case in most privatizations. The number of nonpublic employees that constitute "de minimis" participation is unclear, but the following summarizes the levels of nonpublic employee involvement that have been considered "de minimis" by the PWBA in the 12 relevant advisory opinions dealing with the issue during the period 1992-2001:

Chart A, attached, summarizes a number of PWBA advisory opinions during the period 1992-2001.

Beyond federal regulatory impacts, including private sector employees in public pension plans appears to be or is favoritism for some businesses. Quasi-public sector employees can blur the demarcation line and confuse the public about the appropriate role of government. Minnesota public pension plans already include potentially quasi-public sector employees or private sector employees, as follows:

H.F. 947 (Dempsey); S.F. 947 (Murphy) essentially replicates the 2001 special legislation providing the Dakota County Agricultural Society employees with General Employee Retirement Plan of the Public Employees Retirement Association (PERA-General) coverage by including the Red Wing Environmental Learning Center in the definition of "governmental subdivision" for PERA-General retirement coverage and by specifically deeming full-time Red Wing Environmental Learning Center employees to be Red Wing School District employees solely for retirement coverage purposes. The special legislation is effective upon Red Wing School Board approval. If approved by the school board of the Red Wing School District, the proposed legislation would permit the full-time employees of the Red Wing Environmental Learning Center to retain PERA-General retirement coverage as employees of the Center. The proposed special legislation does not attempt to resolve the issue of how the Red Wing School District will be compensated for acting as the fiscal agent for the Learning Center or to resolve the issue of how the totality of employment benefit coverage for Learning Center employees should be structured.

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

1. Connection of Learning Center Employment to Public Employment. The policy issue is how akin Red Wing Learning Center employment is to public employment scenarios that public pension plan coverage would be appropriate. According to its website, the Red Wing Environmental Learning Center is a nonprofit organization that was created in 1970 and is intended to conduct year round educational programs to install awareness and appreciation for the environment in the Red Wing community. The Learning Center offers the following programs:

Levels 1 through 3 in Backpacking, Winter Camping, Cross Country Skiing, Canoeing, Rock Climbing, Bike Touring, and one level of Basic Archery, Competitive Archery, Bowhunting for Deer, Orienteering, Sugar Maple Tapping, Trout Fishing, Wildlife Ecology-Birds, Mountain Voyager, and numerous one day activities which may include Floodwater Kayaking, Dog Sledding, Skijoring, Forestry, Winter Scavenger Hunt, Raccoon Hunting, Beaver Trapping, Ice Climbing, and Snow Climbing.

2. Appropriateness of Limiting Retirement Coverage to Full-Time Employees of the Learning Center. The policy issue is the appropriateness of excluding part-time employees of the Red Wing Environmental Learning Center from public pension plan coverage. With the exception of the General Employees Retirement Plan of the Public Employees Retirement Association (PERA-General), where part-time employees who consistently earn less than $450 per month are excluded from coverage, Minnesota public pension plans cover all public employees. If the Commission’s general policy of universal mandatory public retirement plan coverage, set forth in Pension Policy Principle II.B.2., is to be pursued, coverage should be made available for all Red Wing Environmental Learning Center employees. Amendment LCPR03-094 eliminates the restriction on public retirement coverage for Red Wing Environmental Learning Center full-time employees, thereby providing PERA-General coverage for part-time Learning Center employees who meet the $450 per month salary threshold.

3. Appropriateness of PERA-General Coverage for Red Wing Environmental Learning Center Employees. The policy issue is the appropriateness of PERA-General coverage for the entire Red Wing Environmental Learning Center staff, which includes instructors who potentially are more comparable to teachers covered by the Teachers Retirement Association (TRA). The Red Wing Environmental Learning Center, according to its website, has five employees, as follows:

 

Name	Position	Experience/Qualifications
Jason Jech	Director	B.S. (Outdoor Education); M.A. (Educational Administration)
Chad Nelson	Field Instructor	B.A. (Psychology/Philosophy)
Brad Nagel	Instructor	Undisclosed
Alex Fosado	Instructor	Undisclosed
Marlene Nordby	Administrative Assistant	Undisclosed

If the instructors are not teachers with state licenses, their inclusion in TRA would not be appropriate, and PERA-General coverage would remain appropriate.

4. Non-Legislative Alternative Solutions. The policy issue is the appropriateness of the proposed legislation in light of potential alternative solutions that do not involve proposed legislative changes. The primary alternative mechanisms for resolving this pension coverage problem would be for the Red Wing School District either to acquire the Red Wing Environmental Learning Center, thereby terminating its nonprofit organization status and making the center’s employees school district employees, or to contract with the Red Wing Environmental Learning Center for the provision of the instructors and related staff to the Learning Center and to change the status of the current Learning Center staff to school district employees. In either event, the employees would retain public pension plan coverage. Additionally, the staff who are licensed teachers would gain TRA coverage. Also, the solution could be resolved by agreement between the two entities locally, in Red Wing, and without requiring legislation.