Introduction

H.F. 1412 (Hornstein); S.F. 1293 (Dibble): TRA; Authorizing TRA to Use a Salary for Pension Purposes in Excess of Actual Compensation for a Certain Teacher, would authorize a teacher who provided teaching service to Normandale Community College and to the Mounds View School District, and who was removed from the Qualified Part-Time Teacher Program because the individual was ineligible, to a have a salary for pension purposes for the 2001-2002 school year of $89,187, which exceeds his salary for pension purposes under general law in that year.

Background Information

Mr. Stephen Schwandt, the individual covered by H.F. 1412 (Hornstein); S.F. 1293 (Dibble), is a teacher with Teachers Retirement Association (TRA) coverage for all of his teaching employment. His employment situation is uncommon, although not unique, because Mr. Schwandt teaches both in the K-12 system (in the Mounds View School District, Independent School District No. 621) and he teaches at the community college level, at Normandale Community College (Normandale). He began this dual teaching arrangement in 1982, and it has continued until the present time. For different periods, Mr. Schwandt may have been teaching part-time for both employers; at other times, he has worked full-time for one and part-time for the other. To the best of our knowledge, after talking to Mr. Schwandt and to TRA, at no time did he simultaneously work full-time for both employers.

Mr. Schwandt’s retirement issue originated in the 2000-2001 school year. Mr. Schwandt indicates that in February 2000, Normandale offered him a full-time contract, which he accepted, and he continued teaching in the Mounds View School District but on a part-time rather than full-time basis. He indicates that he applied through the Mounds View School District for the Qualified Part-Time Teaching Program (QPTP), and an agreement between the Mounds View School District and Mr. Schwandt was reached. The required form was transmitted to TRA. Mr. Schwandt was also in the QPTP for the 2001-2002 school year.

Mr. Schwandt should not have been in the QPTP. The type of arrangement created by his entering that program is considered to be an abuse and is not authorized under law. He did not meet the program’s requirements and he should be excluded because he is working for two TRA-covered employers. Mr. Schwandt works full time for one employer and part time for another. Mr. Schwandt should receive full salary credit in TRA for the service he is actually rendering. Since he is actually working more than full-time in total, his salary credit should reflect all that employment, and under general TRA law it will. However, if he were in the QPTP for the Mounds View employment, his total salary credit for pension purposes would be excessive. He receives full salary and service credit for the Minnesota State Colleges and Universities System (MnSCU) employment and he would receive full-time equivalent salary credit for the part-time Mounds View employment. In total, he would receive salary credit as though he held two full-time positions simultaneously, although that never occurred.

TRA became aware of this in February 2002. According to materials provided by Mr. Schwandt, on February 19, 2002, Mr. Schwandt and his wife (who is also a TRA-covered teacher) were meeting with a TRA retirement counselor when a search of his records indicated that he was never eligible for the QPTP because he was simultaneously working for two TRA employers. TRA staff began actions to correct the situation by eliminating Mr. Schwandt from the program, revising his salary credit, and refunding applicable excess contributions.

This was not acceptable to Mr. Schwandt. On May 1, 2002, he sent a letter to Mr. Gary Austin, TRA’s Executive Director, indicating that he had contacted legal counsel who urged him to document his concerns in writing. The letter presents Mr. Schwandt’s position. He contends that his situation is caused by TRA negligence. If he were not eligible for the QPTP, TRA should have informed him of that before he was admitted to the program, not a few years later. He contends that that delay caused harm. Alternatively, he contends the situation could have been avoided if TRA had provided a full and fair disclosure of all QPTP requirements. Mr. Schwandt contends that if he were presented with a document indicating all of the program requirements, he would have recognized that he was not eligible for the program and never would have applied. What Mr. Schwandt contends he needed was a clear statement that an individual cannot be employed by a school district and MnSCU at the same time and be eligible for QPTP or, what amounts to the same thing, a statement that for purposes of the QPTP, MnSCU is a school district. With that clarification, he would have recognized that for purposes of the law he is employed by two school districts.

In the last section of his May 1, 2002, letter (attached; the section is titled "Possible Resolutions to This Conflict"), Mr. Schwandt stated what he felt would be a proper resolution. He demanded that he be permitted to remain in the QPTP through 2005, when he intends to retire. As noted, that would greatly increase his pension, since his pension would be computed using a salary that is the sum of two full-time jobs, although he never held both positions full time at the same point in time. If this solution is not possible, his fallback position is to give him the advantage of the QPTP to date, and to eliminate him from that program prospectively. Under this approach, the distorted salary information due to the QPTP impacts some of his high-five years, but not all.

At a later date, May 20,2002, Mr. Schwandt suggested a third alternative. He suggested that all his QPTP program service be eliminated but that TRA should use a salary of $94,000 for the 2001-2002 school year in his high-five. This is the figure that Mr. Schwandt claims would be his total salary for that year if he were never in the QPTP. Mr. Schwandt contends that he altered his employment because of the Qualified Part-Time Teacher Program. He argues that he took the full-time Normandale employment, coupled with part-time Mounds View School District employment, because that arrangement was advantageous under the QPTP. Mr. Schwandt claims it was advantageous because of the sizable increase that he expected in his pension due to the QPTP, and the expected pension increase was more than sufficient to offset a slight reduction in his current salary. Mr. Schwandt contends that if he were not in the QPTP, he would have continued full time in the Mounds View School District, retained part-time Normandale employment, and that his income would have been about $94,000.

On August 8, 2002, Mr. Austin denied Mr. Schwandt’s request to use $94,000 as his TRA salary for pension purposes for fiscal year 2001-2002. Mr. Schwandt’s issues were heard by the TRA board on September 12, 2002, and a Findings of Fact, Conclusions of Law, and Final Order was issued on September 24, 2002. The board concluded that Mr. Schwandt was not eligible for the QPTP. Therefore, various salary revisions for TRA pension purposes must be made to eliminate the impact of the QPTP. The board also concluded that it had no legal authority to substitute $94,000 in place Mr. Schwandt’s actual income in that year.

Mr. Schwandt then contacted legislators seeking a legislative remedy. In another letter he suggested yet another remedy. He wants his credited salary in 2000, which was $89,186, to be substituted for his 2002 credited salary, which was about $79,000. He claims this would cause the $89,186 to appear in his high-five, rather than his $79,000, which would provide him with some increase in his pension benefit.

Background on Pension Computation

The Teachers Retirement Association (TRA) is a defined benefit plan, meaning that the benefit that any individual receives from the plan has no direct relation to the contributions that individual made. Rather, the benefit is determined by formulas in law. The TRA pension is the product of three factors: the high-five average salary, the years of service credit, and the accrual rate (or rates) per year of service. The high-five average salary is the average salary for the five successive years that produce the highest average. Since salaries tend to escalate over time, typically this occurs close to retirement. The accrual rate is the portion of the high-five average salary that the individual receives for each year of service. In TRA, and in the other teacher and general employee plans, if an individual remains in service until normal retirement age (approximately age 65) the accrual rate is 1.7 percent, meaning that the individual receives 1.7 percent of the high-five average salary for each year of service. Multiply this amount by the years of service credit, and the individual’s pension is determined. For example, if a teacher retired at normal retirement age and had a $50,000 high five, the individual would receive $850 ($50,000 x 1.7 percent = $850) for each year of service. If the individual had 30 years of service credit, the pension would be $25,500 ($850 x 30 years = $25,500).

Background on Qualified Part-Time Teacher Program

The Qualified Part-Time Teacher Program (QPTP), found in Section 354.66 of TRA’s statutes, was enacted in 1977. The program was initially aimed at individuals who had 20 or more years of service credit, but it was amended over the years to permit the provision to be used by any vested teacher (a vested teacher is any teacher with three or more years of service credit). The program can be used by teachers who wish to work part time without having that part-time teaching harm their eventual retirement benefits. Without the program, the teacher might earn only a fraction of a year of service credit, rather than a whole year of service credit. Having a fraction of a year of service credit rather than a whole year of service credit will reduce the eventual pension because as noted above, years of service credit is used in the calculation. An individual approaching retirement would also be concerned about the impact that part-time employment would have on the high-five average salary.

Under the QPTP, the teacher works part time but retirement contributions are made on full-time equivalent salary. The individual earns full-time equivalent salary credit and full-time service credit in TRA for the part-time employment. Since the program is available to all vested teachers, the program can be used by individuals approaching retirement, but also by younger teachers who, due to family considerations or for other reasons, want to work part-time. In all cases, the QPTP keeps these individuals from being harmed relative to their full-time counterparts.

The program requirements are specified in Section 354.66. An individual cannot be in the program for more than ten years. The intention is that this program would be used occasionally by individuals who at a point in their full-time careers want or need to work part-time, while this ten-year requirement serves to avoid abuse. To be in the program, the teacher must:

1. be vested (have at least three years of service credit);
2. have an agreement approved by the school board on or before October 1 to work part time, and the school district must file that agreement with TRA;
3. work the equivalent of at least 50 days, but not more than 80 percent of full-time employment; and
4. perform TRA-covered service in only one school district.

For purposes of this law and program, the Minnesota State Colleges and Universities System (MnSCU) is deemed to be a school district. Thus, if a teacher works simultaneously for a school district and MnSCU, the teacher is not eligible to take part in this program.

The program requires that contributions be made on full-time equivalent salary. The employee must make the full-time equivalent employee contributions (currently five percent of pay) and the employer must make employer contributions (also five percent) reflecting the part-time employment. The employer contribution relating to the difference between the full-time and part-time salary must be paid in proportions agreed to between the teacher and the school district. The teacher could be responsible for that payment, or the school district, or some combination of the two.

Reason for QPTP "One-School-District Only" Requirement

To be in the QPTP, the teacher can be working for only one school district during the applicable school year. This restriction is intended to avoid abuse. The program is intended to treat a teacher, whose total TRA-covered employment during the applicable year is less than full time, comparably to their full-time counterpart for purposes of the retirement plan. In this way, their high-five average salary and service credit is not harmed by taking the part-time employment. For an individual approaching retirement, the annuity will be the same as if they had continued to work full-time. Thus an individual transitioning into retirement is not harmed by moving to part-time employment.

If individuals were permitted to be in the QPTP while employed by two districts, or by a school district and MnSCU, the results are considered to be an abuse because, rather than being treated comparably to their full-time coworkers, individuals in the QPTP would be treated much better than the full-time workers and could receive much higher annuities than the coworkers who had comparable employment under a single employer. For example, a teacher could be employed by one district at 50 percent time and another district at 50 percent time. The two part-time jobs are comparable to one full-time position. Since the individual is working the equivalent of one full-time position, under TRA law they should be treated comparably to other individuals holding a full-time position. Contributions should be made to TRA from both positions based on the half-time salary, and in total the salary and service credit received in TRA would be comparable to what would be expected from one full-time position. However, if this individual were approved by one school district to be in the QPTP, contributions from that district would be made as though the individual were employed full-time in that district, and contributions would also be made for the other half-time employment. The salary credit in TRA would be 150 percent of the actual full-time equivalent earnings. If the individual were in his or her high-five years, this would be a considerable windfall. If both school districts put this individual in the QPTP (because each district was unaware of the other employment) the individual would be working in total the equivalent of one full-time position but would be credited for TRA salary purposes at twice the salary of a comparable full-time employee. In this latter case, if this were to be permitted under the QPTP and if it were to continue for all five years of the high-five, the individual would double his or her pension.

Discussion

Mr. Schwandt provided considerable material, which is attached. Any handwritten comments on those documents were written by Mr. Schwandt.

Mr. Austin and the TRA Board acted properly in its review. Mr. Schwandt approached this situation as though TRA could devise some informal arrangement to address his concerns. We would argue that TRA does not have that authority. TRA is an organization governed by law and it must act consistent with law. TRA’s Board and Executive Director made determinations, all of which seem proper, within the scope permitted to TRA under law. TRA correctly concluded that Mr. Schwandt did not meet the QPTP eligibility requirements and should not have been in that program. That is a conclusion which Mr. Schwandt readily admits is correct. However, Mr. Schwandt contends that TRA is to blame for his being in the program, and that he deserves to be compensated. In his first letter to Mr. Austin, he demanded that he be permitted to remain in the QPTP until he retired. If TRA were to permit this it would be acting contrary to law. If TRA would not accept that demand, then he suggested that Mr. Austin consider a fallback option--terminate him from the QPTP prospectively only. That option would have ignored the violation of law to date. When both those demands were rejected, Mr. Schwandt then turned to remedies to address the shifts in relative employment time that Mr. Schwandt claims he made in order to maximize his pension at the expense of his current income. The first of those suggestions was to use $94,000 as his 2002 TRA salary for pension purposes. When that was also rejected by the TRA Board, he is now suggesting that TRA should use $89,186 as his salary for 2002, rather than $79,000.

The TRA findings correctly state that TRA does not have legal authority to act on any of Mr. Schwandt’s suggested remedies. Regarding the specific matter that Mr. Schwandt raises--his contention that he entered the QPTP due to misleading material provided by TRA relating to that program--it would be improper for TRA to make that determination and devise a remedy. That determination is appropriately made by another party--either the courts or the Legislature. If TRA or any other pension fund administration were to make its own determinations of blame and appropriate remedies, situations of this type could degenerate into an excuse to assist friends or individuals who possess power or other influence. An error and blame could be declared and a financial payout, contrary to law and at the expense of all other employees and employers who contribute to the plan, could occur. Therefore, determinations of harm and just compensation to remedy that harm are best left to neutral parties.

The Issue of Blame or Harm

Mr. Schwandt’s initial demands were that he should bear no responsibility for the situation or the consequences that occurred. His contention is that the fault lies with TRA who provided misleading statements which led him to incorrectly assume that he could be in the QPTP, by failing to indicate that an individual who is teaching at the K-12 level and at Normandale is not eligible for this program.

The Legislative Commission on Pensions and Retirement might conclude that Mr. Schwandt bears some responsibility, perhaps considerable responsibility, for what occurred. Mr. Schwandt is a highly intelligent individual. Material he provided indicates that he has been teaching for many years, has a masters degree, is the author of several books, and was a literary critic and book reviewer for 15 years for the Minneapolis Star Tribune. He has considerable ability to read, write, and do research. It seems reasonable that he would be aware that his dual K-12/MnSCU employment situation was not typical, and that it would be reasonable to research the QPTP to ensure that program was available and intended for someone in his situation.

In his letters, Mr. Schwandt contends that he carefully studied material provided to him (see second page of his May 1, 2002, letter to Mr. Austin) and no document provided to him stated that an individual could not hold simultaneous employment in K-12 and MnSCU and be in QPTP. While that exact statement may not have appeared in those documents, that restriction is captured within the program eligibility requirements for that program, as stated in TRA’s 2000 Handbook of Benefits and Services, which presumably is the document to which Mr. Schwandt refers. Mr. Schwandt provided a copy of relevant pages from that document as support for his position, but it appears to partially or totally undermine his claims. The QPTP eligibility requirements stated in that document include a requirement that the individual must work for a single TRA school district or for MnSCU. In Mr. Schwandt’s case, he was not working for a K-12 district or MnSCU; he was working for both. If that statement did not convince Mr. Schwandt that he was not eligible for QPTP, it should have, at a minimum, raised questions, which he should have resolved with TRA.

If Mr. Schwandt continued to believe that he might be eligible for the QPTP despite the statement in the 2000 TRA benefits handbook, a reasonable course would have been to contact TRA to ask if someone with joint K-12/MnSCU employment can be in the QPTP. When I spoke with Mr. Schwandt, he indicated that he never took that action. The May 1, 2002, letter Mr. Schwandt wrote to Mr. Austin claims that Mr. Schwandt relied heavily on the advice of a union representative at the high school in which he worked (Irondale High School), who assured him that he was eligible for the QPTP. Mr. Schwandt then indicates in that letter that he applied to the Mounds View School District to be in the program, and the application was accepted by the school district and TRA.

Section 354.66, TRA’s QPTP program provision, suggests that the school district and not TRA has primary responsibility for ensuring that the individual is qualified to be in this program. The school district should not have entered into a QPTP agreement with the individual if the district was aware of Mr. Schwandt’s MnSCU employment and the requirements of law. TRA’s role in the enrollment phase of the QPTP is limited. Section 354.66 does not specify any action TRA is required to take other than to act as a repository for the agreements negotiated at the school district level. These should be sent to TRA by October 1, to avoid any penalty. Agreements could also be sent as late as 15 months after that date, but the school district is assessed a fine for late filing. The implication is that the school district bears primary responsibility for determining whether an individual is eligible for the QPTP, and that determination should occur before the QPTP agreement is signed. Since the QPTP agreement can be sent to TRA as late as 15 months after October 1, an individual could be in this program for more than a year before TRA is aware of the individual’s enrollment. With QPTP agreements coming into TRA as late as 15 months after the agreements are initiated, TRA is in a weak position to act as a gatekeeper. It is possible using computer runs to detect if an individual enrolled in the QPTP is receiving salary from more than one TRA-covered employer. But because of late filings, some individuals who might be detected by such a review could have already been in that program for considerable lengths of time.

After TRA was notified that Mr. Schwandt had been placed in the program, it sent a form letter to Mr. Schwandt indicating his participation. The letter in part asked the individual to review the eligibility criteria contained in an attachment to the letter to ensure that the individual was eligible for the program and to contact TRA if there were any questions. The eligibility criteria as stated in that attachment are admittedly vague; considerably less clear than in the TRA benefits handbook. The bulleted eligibility criteria listed in the attachment to the form letter are as follows:

You are eligible to participate in the part-time teacher program for up to 10 years if you

• Have at least 3 full years of allowable service
• Establish an agreement with your employer before the beginning of the school year
• Work the equivalent of 50 full days
• Perform TRA-covered service in only one school district
• Are not a superintendent.

MnSCU is not mentioned by name in these criteria. What is stated is that the individual can provide service to only one school district. Mr. Schwandt claims he was not aware that for purposes of the applicable law, MnSCU is a school district. For purposes of argument, if we assume that MnSCU is not a school district, and since MnSCU is not mentioned by name in the list of eligibility criteria, it would appear that the QPTP is not offered to MnSCU employees. However, under this interpretation the "Eligibility Criteria" section of that document is inconsistent. The QPTP is offered to MnSCU employees--a few paragraphs later in bold type titled "MnSCU Provision" is a provision specific to MnSCU, stating that "If teaching (by a MnSCU employee) occurs only in the first semester and you retire immediately thereafter, participation in the part-time program will be based on one-half year. Service must include at least the equivalent of 25 full days, and your compensation for that service may not exceed 40 percent of a full-time contract." Since MnSCU employees are eligible for QPTP, MnSCU must be a school district for purposes of QPTP law if the above bulleted criteria are to apply to MnSCU employees, and Mr. Schwandt is not eligible because he is employed by two school districts.

As noted, the program eligibility requirements stated in the attachment that Mr. Schwandt received is not a model of clarity. But what appeared to be inconsistencies in the criteria section should have raised questions in Mr. Schwandt’s mind, and it would have been reasonable to seek clarification from TRA. Mr. Schwandt contends that he studied all eligibility-related documents carefully, but none caused him to have reservations about his eligibility. The eligibility material did state elsewhere on the page that if there is any discrepancy between the law and this summary, the law governs, and the applicable law, Section 354.66, is mentioned. Mr. Schwandt’s situation could have been clarified by a call to TRA or by reviewing the statute itself. The statute is very clear that MnSCU is a school district for purposes of the provision, and that a teacher therefore cannot teach in a K-12 district and MnSCU and be in this program. Mr. Schwandt could have reviewed the law itself at any library, and possibly at school district offices, and the statute is readily viewable on Internet sites. Alternatively, TRA could have provided him with a copy. Presumably, Mr. Schwandt never reviewed that provision.

A similar letter was provided by TRA the next year, with similar attachments. Mr. Schwandt did contact TRA, possibly more than once, to verify that the necessary contributions for the program were being received, but he never inquired about whether someone in his unusual circumstance, being an employee of both a K-12 school district and MnSCU, actually met the eligibility requirements.

Mr. Schwandt would have also had reservations about his eligibility if he considered the public purpose of the QPTP. Providing windfalls is not a public purpose. Mr. Schwandt has stated that he is aware that if he could have remained in the QPTP, his high-five average salary would be based on two full-time equivalent positions, although he never worked in those positions full time simultaneously at any point in his career. Mr. Schwandt is aware that the eligibility criteria, since he claimed to have studied these criteria as stated in the materials he received, explicitly prohibited any individual who held two simultaneous K-12 employment positions from being in the QPTP. Thus he was aware that an individual in two K-12 positions is explicitly prohibited from receiving the type of windfall that Mr. Schwandt hoped to receive. There seems to be no public policy reason why the Legislature would prohibit this windfall to those who held multiple K-12 positions, while allowing it for individuals holding K-12/MnSCU appointments. Again, it seems reasonable that Mr. Schwandt should have developed some reservations about his interpretation of the law, and directly addressed TRA regarding his eligibility for the program.

Pension Policy Issues

H.F. 1412 (Hornstein); S.F. 1293 (Dibble): TRA; Authorizing TRA to Use a Salary for Pension Purposes in Excess of Actual Compensation for a Certain Teacher, would authorize a teacher who provided teaching service to Normandale Community College and to the Mounds View School District, and who was removed from the Qualified Part-Time Teacher Program because the individual was ineligible, to a have a salary for pension purposes for the 2001-2002 school year of $89,187, which exceeds his salary for pension purposes under general law in that year.

Mr. Schwandt’s situation raises considerable complex pension policy issues, and could take significant Commission time to fully investigate and resolve. Some issues are:

1. Need to Consider. The issue is whether this situation warrants the time necessary to obtain any legislative resolution of this matter. The Commission may view the individual’s frequent change in what he considers to be an acceptable resolution as undermining the credibility of the request. Also, his more recent requests will have significantly less positive impact on his high-five average salary than his initial request to TRA. This also means that there is less justification for the Commission to consider the issue. It is a complex situation requiring considerable Commission time to understand, and the resolution, if any, may have insufficient impact on the individual to warrant the Commission’s time.

2. Unusual Nature of Request. This request has unique features. Occasionally, the Legislature is asked to resolve issues where a person claims they were denied a right under law. An example of situations that the Commission has considered in the past are cases where an individual is on a valid leave of absence, as provided under TRA law, and the plan administration harmed the individual by failing to inform the individual in a timely manner of contribution requirements under the leave to obtain service credit. Because the individual did not obtain the necessary information, deadlines to make the contributions passed and the individual is no longer able to obtain service credit. The Legislature occasionally has addressed situations like that through legislation to remove the harm by permitting the contributions, notwithstanding the deadline in general law.

In contrast, the current case does not stem from improperly being denied assess to a right or benefit. Rather, the Legislature must address the question of whether correcting a violation of law (TRA’s action to remove an ineligible individual from the QPTP) can be deemed to harm the individual who was in violation of the law. The claim of harm stems from a contention that his situation should have been caught sooner, either before he entered the program or very soon thereafter. He now claims that removing him from the program creates harm, in part because of employment actions he took while in the program or just before entering the program in anticipation of being in that program.

3. Precedent. The Commission may be concerned that recommending H.F. 1412 (Hornstein); S.F. 1293 (Dibble) to pass may lead to many other legislative requests. The basic contention is that the correct application of law harmed the individual, justifying compensation.

4. Harm Issues. Determining whether harm occurred and what parties may have caused harm, and in what proportion, could take considerable time. One issue is the extent to which Mr. Schwandt is responsible for creating the situation. The Commission may conclude that he is fully responsible, in which case no legislative action may be justified. If he is partly responsible or bears no responsibility, a remedy may be warranted. The Commission usually is reluctant to make a determination that a pension fund or other party created harm unless that party admits its responsibility.

Mr. Schwandt claims the QPTP eligibility statements TRA made available to him were misleading. However, the pages from the 2000 TRA Benefits Handbook, which he sent in defense of his position, do not support his case. That document states that an eligible individual can be employed in a single school district or in MnSCU. Mr. Schwandt was employed by a K-12 district and MnSCU. Mr. Schwandt claims to have studied this and other documents but they raised no reservations in his mind. The Commission may conclude that the statement in the 2000 TRA Benefits handbook is sufficiently clear and that Mr. Schwandt should have recognized that he was not eligible for this program. The Commission may also wish to consider whether Mr. Schwandt did at any time review the applicable statute. That statute is clear; Mr. Schwandt clearly did not qualify for the program. If he did review that statute, and we do know that he was provided with forms that stated the specific statute which governs the program, Section 354.66, then the contention that he makes--that he placed complete reliance on the description of program requirements as stated in the 2000 TRA Benefits handbook and other forms, and that those forms were unusually vague--has no basis.

The materials Mr. Schwandt provided also suggest that TRA staff may have given him assurances that he was eligible for the QPTP. In part these assurances may stem from the form letters he received signed by TRA staff, acknowledging the receipt of QPTP forms from the school district. There may also have been verbal discussion between TRA and Mr. Schwandt about the QPTP, and it is possible that statements were made which Mr. Schwandt interpreted as assurance that he was eligible. The Commission would need to investigate that matter and hear testimony from Mr. Schwandt and TRA. However, Mr. Schwandt acknowledged to Commission staff that at no time did he discuss with TRA the full scope of what he intended to do. His intention was to get into the QPTP while remaining employed at Mound View and at MnSCU. If TRA was not provided with a critical piece of information needed to provide correct advice, the Commission may conclude that TRA should not be responsible for harm due to any comments it made regarding Mr. Schwandt’s eligibility.

If the Commission concludes that harm did occur and Mr. Schwandt is not fully responsible for that harm, the Commission will need to consider the role of the school district. The school district plays a gatekeeper function. If it knew about Mr. Schwandt’s MnSCU employment, it should not have authorized his participation in the QPTP. Perhaps the school district was also confused by eligibility language on TRA forms. Perhaps it had no knowledge of Mr. Schwandt’s other TRA-covered employment. Another party is the union and the union representative. Mr. Schwandt claims in his May 1, 2002, letter to Mr. Austin to have relied heavily on advice from the union representative, who assured him that he was eligible to participate in the QPTP. If Mr. Schwandt had instead spent similar time discussing his exact circumstance with TRA, there would be no need to address pension issues for Mr. Schwandt.

5. Information on Mr. Schwandt’s Employment. The Commission may wish to explore what employment information Mr. Schwandt disclosed to the various parties involved in Mr. Schwandt’s pension issues. This certainly has relevance in considering the issue of harm. Mr. Schwandt has indicated to Commission staff that at no time did he disclose to TRA that he wished to take part in the QPTP while he continued to provide MnSCU and K-12 simultaneous employment. The Commission may also wish to explore whether the school district was aware of that simultaneous employment when it approved Mr. Schwandt for the QPTP, or whether that information was provided to the union representative whom Mr. Schwandt relied upon so heavily for advice. If various parties did not have full information, it may be because Mr. Schwandt did not recognize any need to disclose it. He may have concluded that the information on the simultaneous employment was not relevant to the matter at hand. A less charitable possibility is that Mr. Schwandt sought to exploit what he believed to be a loophole in law, and that full disclosure of his circumstance might cause TRA, the Legislature, or some other party to act to remove the potential windfall by refusing him access to the program.

6. Cost. The issue is cost. Any remedy which provides additional benefits to Mr. Schwandt beyond what he is entitled to under general law will have a cost impact on TRA. Any remedy provided in whole or part by other parties (the school district or union) would financially impact those organizations. We do not have an estimate of that cost. Perhaps TRA can provide that information.

7. Justification for Specific Actions Taken. The issue is why Mr. Schwandt shifted employment to the full-time MnSCU employment/half-time Mounds View employment. Mr. Schwandt claims he took that action because he believed it was necessary to access the QPTP. He further claims that the employment shift reduced his current salary by several thousand dollars. Therefore, removing him from the QPTP caused him financial loss. The lower salary remained, but the benefits he hoped to obtain through the QPTP have been taken away. He is requesting legislative action to remove some of that harm.

If we assume that Mr. Schwandt was eligible for the QPTP, the employment shift may not have been necessary to access that program. He may have shifted his employment for other reasons, undercutting his request for relief. MnSCU and the Mounds View School District are TRA-covered employers. The QPTP is a TRA benefit provision in TRA law and, therefore, the program presumably is offered by both employers. If Mr. Schwandt were eligible for the QPTP, presumably he could have accessed the program through MnSCU, avoiding the need to shift employment. The Commission may be interested in whether he contacted MnSCU attempting to take part in the QPTP program while he was a part-time employee of that organization. If he did inquire about that program through MnSCU but was told in part that he was not eligible due to the Mounds View employment, that would undermine Mr. Schwandt’s contentions about his false assumptions about eligibility and undermine any justification for a remedy.

What ultimately occurred is that Mr. Schwandt shifted to full-time MnSCU employment and part-time Mounds View employment. Although Mr. Schwandt contends he made that shift in an effort to access the QPTP, he may have instead have been motivated by a desire to access a provision of TRA law (Section 354.445) which allows MnSCU faculty who have reached at least the minimum retirement age to terminate service and begin drawing the TRA annuity, and then return to MnSCU employment working between one-third and two-thirds time. TRA retiree benefit deferrals that would otherwise apply due to reemployment are waived, and health care benefits are provided. To be eligible for this program the individual must be a full-time MnSCU employee immediately preceding retirement. Mr. Schwandt is in his mid to late 50s and intends to begin drawing a TRA annuity soon, and shifting to full-time MnSCU employment positions him for the opportunities offered by Section 354.445. If Mr. Schwandt was motivated in part by a desire to become eligible for this program, then it undercuts a claim that he was harmed by his employment shift and deserves some form of compensation. Even if Mr. Schwandt was unaware of this program, the Commission may conclude that any harm in the form of current salary reduction is offset in whole or part by this opportunity.

8. Alternative Resolution. Alternatives to a legislative resolution may be possible. One possibility is to seek a financial payment from the school district, union, or other party. If the parties agree that harm occurred and that they caused the harm, at least in part, it may be possible to obtain a financial resolution without legislation or use of the courts. It may also be possible to seek a resolution through the courts. TRA does have an appeals provision (Section 354.071, Subdivision 9), which permits an individual to appeal the TRA Board conclusions to the Court of Appeals, but the appeal must be made within 30 days following the TRA Board determinations. That time limit has now passed. However, Mr. Schwandt may be able to address the issue of harm, which was not directly addressed in the TRA Board determinations, through the courts. Another alternative is a self-help remedy, by continuing to work beyond 2005 when the individual intended to retire. This would eliminate or reduce negative impacts on the high five and to further increase the eventual pension through additional service credit.

Amendments

LCPR04-070. If the Commission decides that H.F. 1412 (Hornstein); S.F. 1293 (Dibble) should be recommended to pass, the Commission may wish to revise the date on page 2, line 23, from 2003 to 2004, to make it feasible to provide payments. LCPR04-070 would provide that change.

LCPR04-071. If the Commission wishes to revise the salary amount on page 2, line 7, that could be done by attached amendment LCPR04-071.

LCPR04-072. If the Commission wishes to use an administrative hearing to determine whether the treatment provided under H.F. 1412 (Hornstein); S.F. 1293 (Dibble) should occur, then the Commission may wish to consider LCPR04-072.

LCPR04-073. If the Commission concludes that the Mounds View School District caused harm by allowing the individual to be in the Qualified Part-Time Teacher Program, the Commission may wish to consider LCPR04-73. This amendment, drafted to H.F. 1412; S.F. 1293, would require the school district to pay the cost of any increase in the annuity that results from this bill, net of any contributions receivable. If payment is not made by the school district, amounts would be deducted from state aid.