H.F. 740 (Hilstrom); S.F. 801 (Scheid) is proposed special legislation that will assist a class of individuals likely to be limited to Ms. Kathy Simmons, based on the recitation of various specific items, by permitting the person to withdraw an application for a retirement annuity from the General Employee Retirement Plan of the Public Employees Retirement Association (PERA-General), to reapply for a PERA-General disability benefit, and, if approved, to receive retroactive disability benefits to June 15, 2001. The provision would be effective upon final enactment, and the revocation/reapplication authority has a December 31, 2003, deadline.

Kathy Simmons is a 63-year-old recipient of a retirement annuity from the General Employees Retirement Plan of the Public Employees Retirement Association (PERA-General), based on employment by Hennepin County. Ms. Simmons applied for a PERA-General disability benefit on April 23, 2001, but her application was denied by PERA on July 6, 2001, and she ultimately withdrew the disability application on October 16, 2001, applying instead for a reduced early PERA-General retirement annuity, effective July 1, 2001. Subsequently, Ms. Simmons was determined to be disabled for purposes of the federal Old Age, Survivors, and Disability Insurance Program (OASDI, or Social Security).

Ms. Simmons believes that the PERA rejection of her disability benefit application was erroneous, based on her subsequent qualification for Social Security disability benefits, and seeks special authority to revoke her retirement annuity application and to apply for a PERA-General disability benefit retroactive to the date of her employment termination on June 15, 2001. She believes that her disability benefit will be approximately $120 more per month than her current retirement annuity.

H.F. 740 (Hilstrom); S.F. 801 (Scheid) permits Kathy Simmons to reapply for a disability benefit from the General Employee Retirement Plan of the Public Employees Retirement Association (PERA-General) and to receive retroactive disability benefits if she is determined to be disabled under PERA-General law.

If the draft proposed special legislation is introduced and is heard by the Legislative Commission on Pensions and Retirement (LCPR) during the 2003 Legislative Session, the draft proposed special legislation will likely raise the following pension and related public policy issues:

1. Likelihood that PERA-General Disability Benefit Entitlement Can Be Established. The policy issue is the likelihood that Kathy Simmons ultimately will be determined by the Public Employees Retirement Association (PERA) to be disabled under Minnesota Statutes, Section 353.01, Subdivision 19. Ms. Simmons has been determined by Social Security to be disabled.

. . . inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months. A person must not only be unable to do his or her previous work but cannot, considering age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy. It is immaterial whether such work exists in the immediate work area, or whether a specific job vacancy exists, or whether the worker would be hired if he or she applied for work.

Minnesota Statutes, Section 353.01, Subdivision 19, defines the status of having a "total and permanent disability" as the

. . . inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to be of long-continued and indefinite duration. Long-continued and indefinite duration means that the disability has been or is expected to be for a period of at least one year.

Although the standards appear highly similar to each other, the fact finder is different and the situation of Ms. Simmons’ receipt of a Social Security disability benefit will not automatically be binding on PERA. If Ms. Simmons is not likely to meet the PERA disability definition, the proposed legislation is not a sound exercise of legislative effort.

2. Actuarial and Administrative Cost to PERA. The policy issue is the appropriateness of the additional actuarial and administrative cost to be borne by PERA as a result of the potential special legislation. Providing an additional benefit to Ms. Simmons likely will be an actuarial loss to PERA and will further burden that somewhat troubled pension plan. PERA should be asked to testify about the actuarial cost of the proposal. However, if Ms. Simmons should have been determined to be disabled in 2001, but was not, PERA experienced an actuarial gain that it did not merit and any actuarial loss incurred by PERA now only rectifies the situation. The second disability application opportunity for Ms. Simmons will add slightly to PERA’s administrative duties, but the additional burden should not be excessive.

3. Precedent. The policy issue is the existence of a past precedent for this type of legislation and the potential for this proposed legislation to become a precedent for future legislative proposals. Laws 2002, Chapter 392, Article 14, Section 3, relating to a retired West St. Paul firefighter, permitted a retirement annuity application to be rescinded in favor of a disability benefit application, which appears to be an on-point precedent. This proposed legislation, if enacted, in combination with the 2002 special legislation, will function as a precedent for future legislative proposals to rescind retirement annuities in favor of disability applications. Because the affected person in both cases was or is required to established their disability status before any benefit revision occurs, the future precedent value of the 2002 legislation or this proposal does not appear particularly adverse.