H.F. 666 (Murphy); S.F. 670 (Solon) allows a class of DTRFA members, presumably drawn sufficiently narrow to apply only to Mr. Kerry Louks, to pay the differential between part-time member and employer contributions actually made during the 2001-2002 school year and the full-time equivalent member and employer contributions, plus interest at the DTRFA pre-retirement interest rate actuarial assumption from June 30, 2002, to the actual date of payment, and acquire a full year of salary credit.

Teachers Retirement Association (TRA) and the first class city teacher retirement fund associations (the Duluth Teachers Retirement Fund Association (DTRFA), the Minneapolis Teachers Retirement Fund Association (MTRFA), and the St. Paul Teachers Retirement Fund Association (SPTRFA) have long had provisions permitting teachers who, by agreement with the employing district, are in the part-time teacher program. Teachers in the program can receive full-time retirement fund service and salary credit if the necessary contributions are made.

The relevant provisions are Minnesota Statutes, Section 354.66, for TRA and Minnesota Statutes, Section 354A.094, for first class city teacher retirement fund associations. To participate, the teacher is required to have three years of service to qualify for the part-time program. Under the program, the employee pays an employee contribution based on full-time equivalent salary. The law requires the employing unit to pay the employer contribution on the part-time salary. The difference between this amount and a full-time equivalent employer contribution also is to be contributed to the teacher pension plan, with the payment shared by the employee and employing unit as agreed to by the parties.

To qualify for the part-time teaching program, the position must constitute at least 50 full days of teaching service or its equivalent and must not be compensated in excess of 80 percent of the compensation of a full-time teacher with identical education and experience in the district. The qualified part-time teacher retirement fund participation is limited to a period of ten years. While utilizing the qualified part-time teacher retirement fund participation provision, the teacher is not allowed to:

1. simultaneously be a member of, make contributions to, and receive service credit from another Minnesota public pension plan other than a volunteer firefighter relief association;

2. utilize the qualified part-time teacher retirement fund participation provision in more than one employing unit simultaneously; and

3. utilize the provision in one district during a year when the teacher also takes a full-time or a part-time teaching position in another employing unit other than that of a substitute teacher.

The agreement between a teacher and the teacher’s school district or other eligible employer must be executed before October 1 of the year for which the teacher wishes to make the full-time equivalent contribution. A copy of the agreement must be filed with the teacher retirement plan. If filed with the teacher retirement plan after October 1 of the year for which the teacher wishes to make the full-time equivalent contribution, the school district is required to pay a $5 per calendar day fine for each late filing day. The retirement plan is not permitted to accept and executed agreement that is more than 15 months late.

Kerry Louks of Duluth, Minnesota, is a 53-year-old, 30 years of service teacher with Independent School District No. 709 (Duluth) who is currently employed as the Activities Director at the Duluth Central High School. Mr. Louks has been the Duluth Central High School Athletic/Activities Director for 19 years. Mr. Louks was employed full time as an activities director until the 2000-2001 school year, when he was reduced to a half-time activities director and a half-time classroom teacher. Subsequently, Mr. Louks became an 80 percent of full time activities director during the 2001-2002 school year. He is also an 80 percent of full time activities director for the 2002-2003 school year.

Mr. Louks apparently did not enter into an agreement under the Qualified Part-Time Teacher/Full-Time Service Credit provision, Minnesota Statutes, Section 354A.094, for the 2001-2002 school year, thereby receiving less than a full year of salary credit for the 2001-2002 school year. Mr. Louks wishes to receive a full year of salary credit for the 2001-2002 school year by being granted authority to make a late payment of the remaining full-time equivalent member and employer contributions for the 2001-2002 school year, plus 8.5 percent interest from June 30, 2002, until the date of payment.

J. Michael Stoffel, Executive Secretary of the Duluth Teachers Retirement Fund Association (DTRFA), indicates that, in the past, DTRFA would notify the member of the Qualified Part-Time Teacher/Full-Time Service Credit provision when Independent School District No. 709 (Duluth) notifies DTRFA that a DTRFA member is working part time, but that DTRFA has no records of notifying Mr. Louks of the program and he believes that DTRFA likely failed to notify him of his eligibility for the program.

Kerry Louks is currently a member of the DTRFA Board of Trustees as an elected active member representative.

H.F. 666 (Murphy); S.F. 670 (Solon) would allow Kerry Louks, a long-term Independent School District No. 709 (Duluth) teacher, to obtain two-tenths of a year of salary credit from the Duluth Teachers Retirement Fund Association (DTRFA) with the payment of the member and employer contribution differential between his part-time 2001-2002 salary and his full-time equivalent salary, plus compound interest at 8.5 percent per annum from June 30, 2002, to the actual date of payment.

The proposed legislation raises various pension and related public policy issues that may merit Commission consideration and discussion, including:

1. Inapplicability of Part-Time Teaching Program to Mr. Louks for the 2001-2002 School Year. The policy issue is whether or not Kerry Louks qualified to participate in the Part-Time Teacher/Full-Time Service Credit Program under Minnesota Statutes, Section 354A.094, for the 2001-2002 school year. The argument presented for Mr. Louks’ special legislation is that he missed a deadline for the program simply because DTRFA failed in its duty to inform him of the program. The program has three qualification requirements. The program applies to a teacher who teaches at least 50 full days or the equivalent of 50 full-time days (Minnesota Statutes, Section 354A.094, Subdivision 2, definition of part-time teaching), who is compensated at no more than 80 percent of the full-time equivalent salary (Minnesota Statutes, Section 354A.094, Subdivision 2, definition of part-time teaching), and who is assigned to a qualified part-time teaching position by agreement between the teacher and the school district, executed before October 1 of the applicable school year, filed by the school district within 15 months of execution (with a school district late fee after October 1), and covering the responsibility for the payment of the full-time equivalent employer contributions (Minnesota Statutes, Section 354A.094, Subdivision 3, qualified part-time teacher/full-time service credit program participation requirements). Mr. Louks may have met the Minnesota Statutes, Section 354A.094, Subdivision 2, definition, but clearly Mr. Louks’ situation does not meet the Minnesota Statutes, Section 354A.094, Subdivision 3, program participation requirements, since there does not appear to have been any pre-October 1, 2001, qualified part-time teaching program agreement. DTRFA may have been administering the program looser than the law provides in the past, but that does not bear favorably on Mr. Louks’ situation. If there was a pre-October 1, 2001, qualified part-time teacher program agreement involving Mr. Louks and Independent School District No. 709 (Duluth), the deadline on filing that agreement and making contributions under it has long since run.

2. Correctness of the Contention that Mr. Louks Was Uninformed About the Part-Time Teaching Program. The policy issue is whether or not Mr. Stoffel’s contention that Mr. Louks was uninformed about the part-time teaching/full-time service credit program is correct. Mr. Louks is not an ordinary DTRFA member unaware of the particulars of his retirement coverage, but is a member of the DTRFA Board and has a greater than ordinary exposure to and opportunity to get information about DTRFA benefit coverage. Testimony may be necessary to ascertain the sequence of events, how Mr. Louks shifted from a full-time athletic director at Central High School during the 1999-2000 school year to a half-time athletic director and half-time classroom teacher during the 2000-2001 school year, to an 80 percent of full-time activities director for the 2001-2002 and 2002-2003 school years, and what communications, negotiations, and arrangements occurred between Mr. Louks, the Duluth Public Schools, and DTRFA during the period to determine Mr. Louks’ level of information about the program.

3. Potentially Inappropriate Special Legislation for a Person of Influence. The policy issue relates to Kerry Louks’ position on the DTRFA Board of Trustees and whether special retirement legislation drafted and apparently sponsored by DTRFA on his behalf is appropriate. It is rare for a public pension plan to sponsor or promote special legislation for one of its board members. While DTRFA has apparently not taken any official action on the draft proposed legislation, Mr. Stoffel prepared the initial draft of the proposed special legislation, is an employee of the DTRFA board, and represents DTRFA and its board in his actions. The Duluth News Tribune reported that two other activities directors in Duluth were reduced to part-time status at the same time as Mr. Louks, but the proposed legislation drafted by DTRFA applies only to Mr. Louks and does not include the other two activities directors.

4. Consistency of Mr. Louks’ Situation With the Purpose of the Part-Time Teaching Program. The policy issue is the consistency of Mr. Louks’ situation with the purpose for the Part-Time Teacher/Full-Time Service Credit Program under Minnesota Statutes, Section 354A.094. When the program was initially enacted for TRA in 1977 as Minnesota Statutes, Section 354.66 (and extended to the first class city teacher retirement plans in 1979), the program was intended to allow senior high paid teachers to begin phasing out of teaching without jeopardizing their retirement benefit coverage. In the early 1990s, the program was expanded to cover teachers involved in job sharing, where two teachers undertake to fill one full-time position. The program was not designed to provide windfall coverage after the fact for teachers who happen to be employed part-time. Mr. Louks’ situation does not appear to be a job-sharing situation and it is unclear whether, at age 53, he is beginning his phase out into retirement.

5. Appropriate Responsibility for Part-Time Program Participation Eligibility Notification. The policy issue is the determination of what party or entity bore the responsibility, if any, of notifying Mr. Louks of his potential eligibility to participate in the Part-Time Teacher/Full-Time Service Credit Program under Minnesota Statutes, Section 354A.094, and, based on that responsibility, what party or entity should bear some or all of the financial burden of any notification failure. Under Minnesota Statutes, Section 354A.094, Subdivision 3, the Duluth School District had the responsibility to file a copy of the program participation agreement with DTRFA, if an agreement was executed between Mr. Louks and the Duluth Public Schools, but no one has any statutory responsibility to inform a member of their potential eligibility for a retirement benefit. Under statute, DTRFA has no specific responsibility to notify a member about this program, but if DTRFA has undertaken such a duty, common law will assign liability to a party when there is the assumption of a duty that is negligently performed. When the employing unit has been determined to be at fault in a pension service credit situation in recent years, the Commission has mandated the employer’s substantial contribution towards the purchase.

6. Inappropriate Service Credit Purchase. The policy issue is whether the proposed special legislation is a low-cost/low-liability correction of a clerical error made by the Duluth Teachers Retirement Fund Association (DTRFA) with respect to one of its members who was unaware of his retirement benefits, as Mr. Stoffel seems to argue, or whether the proposed special legislation is a service/salary credit purchase that is circumventing the normal full actuarial value prior service credit purchase procedure. Because Mr. Louks missed the applicable deadlines for the Part-Time Teacher/Full-Time Service Credit Program and appears not to have met the participation requirements for the program even if his actions had been more timely, the special legislation really is a prior service/salary credit purchase authorization. To undertake the prior service credit purchase in the appropriate manner, Amendment LCPR03-098 is attached as an alternative. The alternative allows Mr. Louks to purchase the salary/service credit at its full actuarial value, with authority for the Duluth School District to pay a portion of the purchase price.

7. Precedent. The policy issue is whether or not there is a past precedent for the requested retirement legislation and what potential future adverse precedent the requested retirement legislation would create. A precedent does exist for Mr. Louks’ proposed legislation, in the form of Laws 1996, Chapter 438, Article 9, Sections 3 and 4, where the payment deadline was extended for a New York Mills part-time teacher and a Hastings part-time teacher who qualified for the program in all respects except that the applicable school districts failed to meet the then-absolute October 1 agreement filing. The corrective legislation occurred during the same school year. The October 1 filing deadline was ultimately relaxed in statute. The precedent can be distinguished from Mr. Louks’ situation because of the time delay involved in Mr. Louks’ situation and because there does not appear to have been a pre-October 1, 2001 part-time teaching agreement with respect to Mr. Louks. Enacting Mr. Louks’ requested special legislation, rather than the alternative service credit purchase authority, would establish a precedent for most any teacher with past part-time teaching service to gain additional service or salary credit with the payment of what is likely to be a bargain payment obligation.