During the 2003 Legislative Session, several retirement-related pieces of proposed legislation that were partially or wholly administrative in nature were introduced. Due to time constraints on the Commission during the 2003 Session, these administrative bills were deferred for consideration during the 2003-2004 Interim.

The proposed pension legislation relating in whole or in part to administrative issues included:

• H.F. 519 (Smith); S.F. 807 (Betzold): TRA; Administrative and Benefit Provisions
• H.F. 871 (Smith); S.F. 844 (Higgins): Various Plans; Disability Determinations by Licensed Psychologists
• H.F. 890 (Smith); S.F. 676 (Betzold): PERA; Administrative and Benefit Provisions
• H.F. 1086 (Smith); S.F. 806 (Betzold): Various Plans; USERRA and Internal Revenue Code Compliance
• H.F. 1430 (Smith); S.F. 1460 (Betzold): MSRS; Administrative Provisions
• H.F. 1474 (Erickson); S.F. 1420 (Pogemiller): MnSCU; Administrative and Plan Coverage Provisions

On July 14, 2003, Representative Steve Smith, the Commission Chair, appointed a four-member subcommittee to consider the substance of the various administrative bills and to recommend the appropriate action on these bills to the Commission. The Administrative Legislative Subcommittee membership was:

Because the various retirement administrative bills remaining from the 2003 Legislative Session covered disparate provisions of retirement law and because there was some topical overlap in the proposed legislation, the Commission staff recommended that the administrative bills be considered by the subcommittee in its component parts, based on their substantive area of change, rather than as individual bills. The Commission staff reconfigured the contents of the six administrative bills into three sets of amendments. Amendment LCPR03-220 contained the provisions of the administrative bills relating to membership issues, service credit (including credit in Minnesota plans for periods of military service), salary definitions, and plan reporting. Amendment LCPR03-223 contained the provisions of the administrative bills relating to retirement annuity accrual, early retirement, disability, and Internal Revenue compliance issues. Amendment LCPR03-225 contained the provisions of the administrative bills relating to survivorship and death benefit coverage and to member contribution refunds. The Commission staff also prepared Amendments LCPR03-221, LCPR03-224, and LCPR03-226, which made various non-substantive technical, stylistic, or language usage corrections and revisions.

The Administrative Legislation Subcommittee held four meetings, with the July 29, 2003, Subcommittee meeting focused on Amendment LCPR03-220, with the August 12, 2003, Subcommittee meeting completing consideration of Amendment LCPR03-220 and beginning consideration of Amendment LCPR03-223, with the September 16, 2003, Subcommittee meeting completing consideration of Amendment LCPR03-223, and with the October 14, 2003, Subcommittee meeting initiating and completing consideration of Amendment LCPR03-225. During the meetings, the Subcommittee took testimony from various retirement plan administrators and other interested individuals.

Document LCPR03-243, recommended by the Commission’s Administrative Legislation Subcommittee, amends various provisions of Minnesota Statutes, Chapters 3A, 352, 352B, 352D, 352F, 353, 353F, 354, 354A, 354B, 354C, 356, and 490, making changes that are largely of an administrative nature, including the following revisions with some substance that merits note:

1. Exclusion of Grievance Awards from MSRS-General or MSRS-Correctional Salary Definition. (Article 2, Section 1) Amounts received as grievance awards or legal settlements are excluded from salary covered by the General State Employees Retirement Plan of the Minnesota State Retirement System (MSRS-General) or by the MSRS Correctional State Employees Retirement Plan (MSRS-Correctional) unless reviewed by the MSRS Executive Director and determined to be consistent with the statutory definition.

2. Clarification of the Definition of Average Salary for the State Patrol Retirement Plan. (Article 2, Section 2) The State Patrol Retirement Plan "average salary" definition is clarified by adding a cross-reference to the MSRS-General definition.

3. Special TRA Service Credit Rules for MnSCU Faculty. (Article 3, Section 1; and Article 6, Section 3) For Minnesota State Colleges and Universities System (MnSCU) faculty members covered by the Teachers Retirement Association (TRA), years and days of service will be credited based on the relationship to full-time employment contained in the applicable collective bargaining agreement or personnel plans.

4. TRA and First Class City Teacher Retirement Fund Association on Leave Military Service Credit Conformity with USERRA. (Article 3, Sections 3 and 4) The provisions governing the crediting of allowable service for military service during a leave of absence for the Teachers Retirement Association (TRA) or the first class city teacher retirement fund associations are modified to conform with the federal Uniformed Service Employment and Reemployment Rights Act of 1994, 38 U.S.C.
   §§ 4301-4333, with the TRA provision newly excluding credit for less than honorable armed services discharges and with interest on member service credit contribution-equivalent payments for all teacher retirement plans newly made payable by the applicable employing unit.

5. Revised Deadline for TRA Part-Time Teaching Program Participation by Teacher-Legislators. (Article 4, Section 1) The normal October 1 annual deadline for filing part-time teaching/full-time service credit program agreements for the Teachers Retirement Association (TRA) is postponed to March 1 for teachers who are legislators.

6. Federal Tax Code Compliance Changes. (Article 2, Sections 3, 4, and 5; Article 5, Section 2; and Article 10) The General Employee Retirement Plan of the Public Employees Retirement Association (PERA-General) definition of salary is amended to exclude compensation amounts in excess of federal tax law limits, the general law compensation limit is updated for federal tax law changes, a generally applicable maximum benefit limit based on the federal tax laws is added, the Teachers Retirement Association (TRA) erroneous payment provision is amended to accommodate federal tax law transfer limitation, and various current and expired federal tax law requirements that were previously not specifically implemented are adopted or enacted.

7. TRA Omitted Deduction Provision Adjusted for Certain Part-Time MnSCU Faculty Members. (Article 5, Section 3) The employer payment of omitted Teachers Retirement Association (TRA) member contributions provision is amended to exclude minimal service part-time Minnesota State Colleges and Universities System (MnSCU) faculty members who elect TRA coverage upon beginning to teach at least 25 percent of a full-time schedule.

8. MSRS-General Restriction on Disabilitant Reemployment Relaxation Demonstration Program. (Article 8, Sections 1 and 22) The General State Employees Retirement Plan of the Minnesota State Retirement System (MSRS-General) reduction in disability benefits upon reemployment provision is suspended for the first six months of reemployment as a demonstration program until 2006.

9. Psychologists Qualified to Provide Expert Opinion on Disabilities for MSRS-General, TRA, and First Class City Teacher Retirement Plans. (Article 8, Sections 4, 12, 13, 14, 17, 18, 19, 20, and 21) Expert testimony from psychologists on the existence of or the continuation of a disability is permitted for the Correctional State Employees Retirement Plan of the Minnesota State Retirement System (MSRS-Correctional), the General Employee Retirement Plan of the Public Employees Retirement Association (PERA-General), the Teachers Retirement Association (TRA), and the three first class city teacher retirement fund associations.

10. Chiropractors Qualified to Provide Expert Opinion on Disabilities for PERA-General. (Article 8, Sections 12, 13, and 14) Expert assistance from chiropractors on the existence of a disability or the continuation of a disability is permitted as an augmentation of other expert reports for the General Employee Retirement Plan of the Public Employees Retirement Association (PERA-General).

11. Daily Interest Rather than Fiscal Year Interest on Refunds for the Legislators Retirement Plan, MSRS-General, MSRS-Correctional, the State Patrol Retirement Plan, and the Judges Retirement Plan. (Article 9, Sections 1, 2, 3, 4, 7, and 23) Interest on various refunds of member contributions would be calculated daily rather than on fiscal year balances for the Legislators Retirement Plan, the General State Employees Retirement Plan of the Minnesota State Retirement System (MSRS-General), the MSRS Correctional State Employees Retirement Plan (MSRS-Correctional), the State Patrol Retirement Plan, and the Judges Retirement Plan.

12. Survivor Coverage under MSRS-General and PERA-General Plans to Privatized Public Employees. (Article 9, Sections 15 and 16) The continuing retirement coverage under the General State Employees Retirement Plan of the Minnesota State Retirement System (MSRS-General) or the General Employee Retirement Plan of the Public Employees Retirement Association (PERA-General) provided to involuntarily privatized public employees is clarified to include any applicable survivor benefit coverage.

13. Increase in the TRA Death-While-Eligible Survivor Benefit. (Article 9, Section 18) The second portion of a 100 percent joint and survivor optional annuity payable to an active or deferred Teachers Retirement Association (TRA) member is to be calculated based on the surviving spouse’s age when the benefit accrues, rather than the surviving spouse’s age at the member’s date of death.

14. Refund Repayments or Leave Contribution Equivalent Payments from Tax Sheltered Annuities or Deferred Compensation Programs. (Article 9, Section 22) The general law authority permitting refund repayments from other pension plan accumulations is expanded to also allow leave of absence member contribution-equivalent payments and to permit the transfers or payments from tax sheltered annuity or deferred compensation program accumulations.

15. Interest on Judges Retirement Plan Refunds Increased. (Article 9, Section 23) The interest payable on member contribution refunds for the Judges Retirement Plan is increased from five percent to six percent.

A section-by-section summary of the Administrative Legislation Subcommittee’s recommendations as contained in Document LCPR03-243 can be found on pages 7 to 13.

Amendment LCPR03-251 makes some additional technical or stylistic modifications of a non-substantive nature in Document LCPR03-243.

There are six changes contained in Document LCPR03-243 which may merit consideration by the Commission for extension beyond the retirement benefit plan or plans amended in Document LCPR03-243. These potential extensions and a brief policy analysis of each potential extension are as follows:

1. Grievance Awards and Covered Salary (Amendment LCPR03-244). Article 2, Section 1, of Document LCPR03-243 modifies the definition of covered salary for the General State Employees Retirement Plan of the Minnesota State Retirement System (MSRS-General) to clarify under what conditions a salary grievance award of lawsuit settlement will be considered "salary" for retirement plan and benefit purposes. Amendment LCPR03-244 extends the same grievance award treatment to the General Employee Retirement Plan of the Public Employees Retirement Association (PERA-General) and the Public Employees Police and Fire Retirement Plan (PERA-P&F), the Teachers Retirement Association (TRA), and the first class city teacher retirement fund associations. The basic change in Article 2, Section 1, was requested by MSRS because various MSRS-General Plan members are receiving grievance awards or legal settlements in the five-year period proceeding retirement and some of the award settlements did not appear to be clearly a salary replacement. Because salary currently has a workable definition in the six retirement plans for a potential extension, the retirement administrations involved already should be able to determine the underlying character of any award of settlement and its consistency with the "covered salary" definition and this would make the provision potentially redundant or superfluous. The provisions also provide retirement administrators with very broad discretion in interpreting whether an award or a settlement constitutes "salary." Generally, retirement plan laws are specific in their provisions and contain little plan administrator substantive discretion.

2. Service Credit for Interim or On Leave Military Service (Amendment LCPR03-245). Article 3, Sections 3 and 4, of Document LCPR03-243 modify the on-leave military service credit provisions of the Teachers Retirement Association (TRA) and of the first class city teacher retirement fund associations to make them conform to the interpretation of the legal counsels of TRA and the St. Paul Teachers Retirement Fund Association (SPTRFA) of the federal Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), 38 U.S.C. §§ 4301-4333. Amendment LCPR03-245 extends language implementing the same interpretation to the on-leave military service credit provisions of the General State Employees Retirement Plan of the Minnesota State Retirement System (MSRS-General), the General Employee Retirement Plan of the Public Employees Retirement Association (PERA-General), and the Public Employees Police and Fire Retirement Plan (PERA-P&F) and adds the identical military service credit provisions to the State Patrol Retirement Plan and the Judges Retirement Plan. The basic change in Article 3, Sections 3 and 4, of Document LCPR03-243, were requested by TRA and by SPTRFA on behalf of the three first class city teacher retirement fund associations. The change is argued as required by a 1994 federal law, although that federal law lacks clarity to some degree. The chief impacts on Minnesota public pension plans are a lengthening of the potential service credit acquisition period to five years instead of the current two or four years (initial enlistment, period of conscription, or call to active duty, without voluntary extension), a shortening of the period for the person to make payments to three times the length of military service, up to five years, from a current general five-year limit), and a shift of the burden to pay interest on the member contributions from the person currently to the employer. There also is no current payment limit on MSRS-General or MSRS-Correctional interim military service credit payments, but there would be a limit under Amendment LCPR03-245. There are no interim military service credit provisions in the State Patrol Retirement Plan and the Judges Retirement Plan, although there could be plan members who have rendered or will render military service.

3. Teacher-Legislator Participation in Qualified Part-Time Teacher Program Amendment LCPR03-246). Article 4, Section 1, of Document LCPR03-243, delays the deadline for a Teachers Retirement Association (TRA) member who is also a legislator to participate in the 1977 part-time teaching/full-time retirement plan service credit program from October to March, annually. Amendment LCPR03-246 extends the change to the part-time teaching/full-time service credit provisions of the three first class city teacher retirement fund associations. The basic change in Article 4, Section 1, of Document LCPR03-243 was proposed by TRA, although TRA did not indicate its motivation for making the proposal. Since the program was first enacted in 1977, 26 years ago, teacher-legislators have been able to accommodate their employment situations without a delayed participation deadline date. If, however, some teacher-legislators are to be benefited by a relaxation in the participation deadline, the change arguably should be extended to teachers covered by the first class city teacher retirement fund associations.

4. Trial Disabilitant Return to Employment (Amendment LCPR03-247). Article 8, Section 1, of Document LCPR03-243 exempts a disability benefit recipient of the General State Employees Retirement Plan of the Minnesota State Retirement System (MSRS-General) who returns to State employment from a discontinuation of the disability benefit for a six-month trial period. Amendment LCPR03-247 extends a similar six-month disabilitant return-to-employment trial period change to the General Employees Retirement Plan of the Public Employees Retirement Association (PERA-General), based on the plan’s expressed interest in having the same trial period authority. The basic change in Article 8, Section 1, of Document LCPR03-243 was requested by MSRS as a potential mechanism for encouraging disabilitants to return to work and for insulating these disabilitants from a loss of benefits if the return to employment is unsuccessful. Article 8, Section 1, of Document LCPR03-243 expires on July 1, 2006. From a pension policy standpoint, there are several issues that may merit some discussion before the provision is extended to PERA-General:

1. Adequacy of Initial Disability Determination. The standard for a PERA-General disability benefit is the existence of a total and permanent disability, meaning that the person is incapable of any gainful employment and that the person’s condition is expected to be of a long duration (at least one year). Disabilitants who "recover" sufficiently to return to employment may represent individuals who never should have been found to be disabled in the first instance.

2. Appropriateness of Six-Month Exemption. The proposed exemption period is six months, although it is unclear why six months is the appropriate trial return to work period. If a person is truly totally and permanently disabled when the disability occurred, the recovery of the person likely would be clear in a shorter period than six months.

3. Potential Abuse from A Sequence of Short-Term Recoveries. The existing MSRS-General provision and the language suggested by PERA do not limit the number of times one disabilitant can qualify for a trial recovery exemption, meaning that a disabilitant could have numerous instances of four or five months of reemployment while continuing to receive a disability benefit.

4. Appropriateness of Further Extensions to Teacher Plans, MERF, and Public Safety Plans. PERA indicated an interest in adding a trial disability reemployment provision for PERA-General and provided suggested language, reflected in Amendment LCPR03-247. If enacted for MSRS-General and PERA-General, extensions to the other general employee retirement plans and the public safety retirement plans perhaps should be considered.

5. Use of Psychologists in Determining Disabilitants (Amendment LCPR03-248). Article 8, Sections 4, 12, 13, 14, 17, 18, 19, 20, and 21 of Document LCPR03-243 expands the category of experts who can provide assistance to the retirement plan administration and board in determining a disability to include psychologists for the Correctional State Employees Retirement Plan of the Minnesota State Retirement System (MSRS-Correctional), the General Employees Retirement Plan of the Public Employees Retirement Association (PERA-General), the Teachers Retirement Association (TRA), and the first class city teachers retirement fund associations. Amendment LCPR03-248 expands the disability determination process to include psychologists for the State Patrol Retirement Plan, the Public Employees Police and Fire Retirement Plan (PERA-P&F), the Minneapolis Employees Retirement Fund (MERF), the Minneapolis Police Relief Association, and the Minneapolis Firefighters Relief Association. The basic change in Article 8, Sections 4, 12-14, and 17-21, was proposed on behalf of the Minnesota Psychological Association, extending the addition of a 2001 MSRS-General and MSRS-Correctional addition of psychologists as experts empowered to provide disability determination evidence (First Special Session Laws 2001, Chapter 10, Article 3, Sections 6, 7, and 11). If evidence of a disability from a psychologist is appropriate for consideration for some pension plans, the similar change would be appropriate for the remaining statewide and major local retirement plans. The policy issue is whether or not the expertise represented by psychologists adds beneficial information to the disability determination process.

6. Interest Compounded Daily Rather Than On Fiscal Year Basis (Amendment LCPR03-249). Article 9, Sections 1, 2, 3, 4, 7, and 23, of Document LCPR03-243 changes the manner in which interest is calculated on various refunds from interest compounded on fiscal year balances to daily compounding for the Legislators Retirement Plan, the General State Employees Retirement Plan of the Minnesota State Retirement System (MSRS-General), the State Patrol Retirement Plan, and the Judges Retirement Plan. Amendment LCPR03-249 extends the daily interest compounding change to the Elective State Officers Retirement Plan, the MSRS-General Privatized Employee Retirement Coverage chapter, the General Employees Retirement Plan of the Public Employees Retirement Association (PERA-General), the PERA-General Privatized Employee Retirement Coverage chapter, the Teachers Retirement Association (TRA), and the first class city teachers retirement fund associations. The change would constitute a modest benefit improvement for the affected plans, because a slightly greater amount of interest is payable under daily compounding rather than the current compounding based on fiscal year balances. The basic benefit change in Article 9, Sections 1, 2, 3, 4, 7, and 23, was requested by MSRS, apparently in order to modernize the financial operations of its retirement plans. The policy issues that arise in the amendment are the appropriateness of providing benefit increases in an administrative bill and the administrative costs and difficulties that may arise in some or all retirement plans in shifting to daily compounding interest.

The Teachers Retirement Association (TRA) submitted three additional administrative changes for consideration by the Commission. The changes are contained in Amendment LCPR03-250, as follows:

1. Clarification of the Age at Which Reemployed Annuitant Limits Do Not Apply. (Section 1) The provision amends Minnesota Statutes, Section 354.44, Subdivision 5, the reemployed annuitant earnings limit of the Teachers Retirement Association (TRA), by shifting from age 70 as the age at which no limit is applicable to the Social Security full retirement age. The age at which a full Social Security benefit was payable has changed over time, as has the age at which a Social Security benefit is unaffected by subsequent employment. Age 70 was once the age at which Social Security benefits were first unaffected by continued employment, but that age is now the full Social Security retirement age. The full retirement age varies based on the year of a person’s birth, as follows:

Year of Birth	Full Retirement Age
1937 or earlier	65
1938	65 and 2 months
1939	65 and 4 months
1940	65 and 6 months
1941	65 and 8 months
1942	65 and 10 months
1943-1954	66
1955	66 and 2 months
1956	66 and 4 months
1957	66 and 6 months
1958	66 and 8 months
1959	66 and 10 months
1960 and later	67

2. Replacement of the Disability Benefit Recomputation Age 65 References with Normal Retirement References. (Section 2) The provision amends Minnesota Statutes, Section 354.48, Subdivision 10, the conversation of a disability benefit into a retirement annuity at the end of a normal working career age, by consistently making a reference change from age 65 to the normal retirement age.

3. Replacement of the Combined Service Disability Benefit Age 65 Requirement with Normal Retirement Reference. (Section 3) The provision amends Minnesota Statutes, Section 356.302, Subdivision 3, the general employee retirement plan combined service eligibility requirements, by replacing the under age 65 requirement with an under normal retirement age reference.

The three changes proposed by TRA do not appear to raise any significant public pension issues.

The Commission should consider acting on the various potential amendments so that the administrative legislation for the 2004 Legislative Session can be reduced by the Commission staff to a single document. The Commission can then recommend the desired administrative provisions for inclusion in an eventual 2004 omnibus retirement bill at this time or can defer final action on the compiled proposed administrative legislation until some future date during the 2004 Session.