Summary

H.F. 2248 (Thissen); S.F. 2200 (Ranum): Teacher Plans; Authorizing Service Credit Purchases for Out-of-State Public College and University Teaching, revises the TRA and first class city teacher plan out-of-state-teaching service credit purchase provisions (Sections 354.534, Subdivision 1, and 354A.098, Subdivision 1, respectively) to also permit service credit purchases (up to ten years) for teaching performed for a college or university which receives partial funding by another state.

Background Information on Purchases of Service Credit

It is useful to begin by reviewing recent history, starting with the Commission’s service credit purchase policy statement as it appears in the Legislative Commission on Pensions and Retirement Principles of Pension Policy. That general policy statement, last revised in 1996, guided the Commission for a few decades. Recently, the Legislature has enacted several general law service credit purchase provisions, which are set to expire, which deviate from this policy document.

The Commission’s Principles of Pension Policy states in relevant part that any period of time proposed to be purchased should have a Minnesota connection. An individual providing out-of-state teaching service is not providing a service to Minnesota. Thus, there is no clear justification why Minnesota taxpayers should take on the risk involved in ensuring payment of the additional pension that would result from another year of teaching service in a Minnesota public plan.

1. Review of Service Credit Purchase Policy. Principle II.C.10. of the Commission’s Principles of Pension Policy covers purchases of service credit. It reads as follows:

10.   Purchases of Prior Service Credit

Purchases of public pension plan credit for periods of prior service should be permitted only if, on a case-by-case basis, it is determined that the period to be purchased is public employment or substantially akin to public employment, that the prior service period must have a significant connection to Minnesota, that the purchase payment from the member or from a combination of the member and the employer must equal the actuarial liability to be incurred by the pension plan for the benefit associated with the purchase, appropriately calculated, without the provision of a subsidy from the pension plan, and that the purchase must not violate notions of equity.

This principle has the following elements:

• Individual Review. The Commission considers each service credit purchase request separately, whether the request is proposed legislation for a single person or is proposed legislation relating to a group of similarly situated individuals.

• Public Employment. The period requested for purchase should be a period of public employment or service that is substantially akin to public employment.

• Minnesota Connection. The employment period to be purchased should have a significant Minnesota connection.

• Presumption of Active Member Status at the Time of Purchase. The principle states that contributions should be made by the member or in combination by the member and by the employer. It is presumed that the individual covered by the service purchase request is an active employee, because retirees generally are not considered to be "members" of a plan and these individuals no longer have a public employer.

• Presumption of Purchase in a Defined Benefit Plan. The prior service credit purchase contributions in total should match the associated actuarial liability. The specific procedures in Minnesota Statutes and law for computing service credit purchase amounts, Minnesota Statutes, Sections 356.55 and 356.551, presume that the purchase is in a defined benefit plan with a benefit based on the individual’s high-five average salary.

• Full Actuarial Value Purchase. The pension fund should receive a payment from the employee, or from the employee and employer in combination, which equals the additional liability placed on the fund due to the purchase. This amount is referred to as the full actuarial value of the service credit purchase.

• No Violation of Equity Considerations. Purchases of service credit should not violate equity considerations. Equity is a resort to general principles of fairness and justice whenever the existing law is inadequate.

2. Overview of Generalized Service Credit Purchase Provisions Enacted After 1998. The Commission followed this policy statement rather faithfully through 1998. In 1999, the Commission began to depart from these policy statements, at least in certain cases involving groups of individuals. The Commission was persuaded to support several proposed generalized service credit purchase provisions applicable to the 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)). Under these provisions, classes of individuals (those with prior military service, out-of-state teaching service in a K-12 situation, individuals who taught in parochial schools, provided Peace Corps service and various other groups) were permitted to purchase service credit in the applicable Minnesota plan for the specified service. These provisions, which were strongly supported by teacher groups, conflicted with the Commission’s policy statement in several ways. All lacked any requirement of an individual review of the circumstance. Others were not related to public service or had no Minnesota connection.

In 2000, more service credit purchase provisions were added to law, this time for non-teacher plans, providing a full actuarial value service credit provision for individuals who had military service prior to becoming a public employee, or who failed to pay contribution requirements in a timely manner under other military leave service credit purchase provisions. These provisions enacted in 2000 were comparable to the military service credit provisions added to teacher plan law a year earlier. In 2000, teacher plan law was also revised to permit full actuarial value service credit purchases for nonprofit community-based teaching service.

In 2001, several other service credit purchase provisions were enacted. An out-of-country teaching service credit purchase provision was created in teacher plan law, and also one for Development Achievement Center teaching. These new provisions included sections of law permitting purchase of service credit, not to exceed ten years, in the teacher plans for service while teaching at the University of Minnesota which was not covered by a pension plan at the University. These provisions stemmed from a legislative request for the executive director of the Minneapolis Employees Retirement Fund MERF), who many years earlier taught some accounting courses at the University while employed in a position that was excluded from pension plan coverage. The final generalized service credit provision enacted was a family leave provision permitting individuals who may be covered by a teacher plan, or any of several other general employee and public safety plans, to purchase service credit for the past family leaves or family-related breaks-in-service.

A more complete summary of each of these generalized service credit purchase provisions, including statutory citations and comments, and conflicts between the provision and the Commission’s policy statement, is attached as an appendix.

3. Justification of Legislative Support.  There are a few reasons why the Commission and Legislature may have supported the above provisions. First, the provisions were intended to be temporary. Each was set to expire a few years after enactment. The departure from policy may have been viewed as a short-term departure from established policy to address short-term market conditions for teachers. Second, the Legislature was given assurances that the provisions created no financial harm to the pension funds because the purchases would be at full actuarial value. The methodology to compute full actuarial value purchase prices had been revised in 1998, and the teacher unions and the administrators of the teacher pension funds were confident the procedures would produce accurate price estimates, thereby shielding other fund contributors from subsidizing these purchases. When the revised methodology was enacted in 1998 as Section 356.55, the section included a provision requiring data to be retained and analyzed on every service credit purchase made using the procedure, and the section included an expiration date. If legislative review of these purchases suggested that the procedure was not accurate and was causing subsidies to occur, the section would be permitted to expire. If it expired, a previous procedure used to estimate full actuarial value, coded as Section 356.551, would again become effective. That prior procedure in Section 356.551 tended to produce higher cost estimates than the revised procedure. Teacher unions and other constituent groups favor continuing the revised procedure in Section 356.55, because it tends to produce lower prices. From a policy standpoint, the Section 356.55 procedure is better if it is more accurate than the prior procedure. If the lower prices are resulting in subsidies, its use harms the pension funds.

4. Current Situation. As the repeal date for the revised full actuarial methodology and each of these temporary generalized service credit provisions approached, the repeal dates were extended by the Legislature due to strong support for these provisions from the teacher unions and other constituent groups. Most of the provisions have now been extended more than once. All are currently set to expire in May or July 2004, depending upon the provision.

The extension to May or July 2004 of the service credit purchase provisions and method for computing the prices was a result of action during the 2003 session. The Commission heard a bill that as drafted would have made the purchase provisions and the pricing method permanent, rather than expiring during 2003. The Commission chose instead to recommend extending the purchase provisions and the methodology one more year, pending a thorough review of the pricing method and purchase provisions.

During the 2003 Interim, the Commission reviewed these matters over the course of three meetings, hearing testimony from fund directors, teacher union representatives and other interested parties, and considered the three Commission staff memos provided for those meetings. The first meeting was on September 9, 2003, and the staff memo provided a general overview. The second meeting was on October 7, 2003, and the staff memo reviewed each generalized service credit purchase provision enacted after 1998, noted conflicts with the Commission’s policy document and other policy concerns, and reviewed the accuracy of the service credit purchase methodology. To review that methodology, Commission staff examined the purchase price produced by the procedure and paid by the individual to the pension plan, and compared that to the additional liability created in the next actuarial valuation due to the specific purchase. The plans and the actuary were required by law to retain and report that information to permit study of the procedure. In reviewing several hundred purchases, in no case did the purchase price match the liability due to that purchase as reflected in the plan actuarial valuation following the purchase. Differences tended to be large, generally several thousands of dollars, and in many cases tens of thousands of dollars. This raised concerns that the pricing method was not accurately estimating the full actuarial value of the service credit purchases, resulting in considerable subsidies in many cases, and possible overcharges in others.

The data suggested that individuals who purchase service credit very shortly before retirement tend to be considerably undercharged relative to the full additional liability the purchase adds to the plan. Those purchases by individuals further from retirement may be less likely to be subsidized, and might be overcharged. However, a broader view of the situation suggests that even those who appear to be overcharged may eventually impose additional liability on the fund. Estimating the proper price to charge involves a few actuarial assumptions, including estimating when the individual will retire, projecting the individual’s salary until retirement, and assumptions about life spans. To the extent that future events do not match these estimates, errors are created, exposing the fund to risk. Perhaps the biggest concern is that the computed purchase price is keyed to the benefits offered by the current pension plan. If benefit improvements are enacted after the purchase occurs, and the improved benefit applies to all years of service (including those that were purchased), then the individual receives a windfall. That service credit was more valuable than was recognized at the time it was purchased. If a benefit improvement were expected in the future, it would be economically wise for teachers or other public employees to purchase service credit now. Despite efforts to accurately price the service credit, the price is actually discounted. Thus, viewing the results in a fuller context, the data suggests that under the current procedures, individuals purchasing service credit very close to retirement are likely to be subsidized. The pension fund also is exposed to risk for those further from retirement, because the individuals may live longer than currently estimated due to medical advances over time, and because of benefit improvements enacted after the purchase but prior to retirement which may increase the value of the purchased service.

The review of results from the full actuarial pricing methodology concerned Commission members. Commission members were aware that the various full actuarial value service credit purchase provisions enacted in 1999 and later conflicted with the Commission’s policy statement, by including purchases for periods of private or nonprofit employment rather than public employment, and in other cases by lack of any Minnesota connection. But these policy departures were believed to create no burden on the pension funds. The Commission’s review of results of those purchases raises considerable doubt about the accuracy of the current pricing method, and also whether any system could be devised that can be consistently accurate, because any method must use assumptions about future events. If the Commission cannot be confident in the pricing mechanism, it cannot be confident that the pension funds are not being harmed. Departures from policy, which were assumed to cause no financial harm, may have monetary consequences.

The various general law service credit provisions added to law since 1998 have greatly increased the number of purchases than would have otherwise occurred. While the Commission will need a full actuarial value methodology in place for those situations where it must be used, the Commission may decide to take the position of limiting its use by allowing the various full actuarial value service credit provisions to expire. The Commission reviewed this option and various others at the third meeting on this topic, on November 4, 2003.

Discussion

H.F. 2248 (Thissen); S.F. 2200 (Ranum): Teacher Plans; Authorizing Service Credit Purchases for Out-of-State Public College and University Teaching, revises the TRA and first class city teacher plan out-of-state teaching service credit purchase provisions (Sections 354.534, Subdivision 1, and 354A.098, Subdivision 1, respectively) to also permit service credit purchases (up to ten years) for teaching performed for a college or university which is partially funded by another state.

The provisions being revised are full actuarial value service credit purchase provisions. The bills revise provisions of law that will expire in May or July 2004, and the bills do not extend the expiration date of the provisions. Thus, if the Commission and Legislature do not extend the expiration date of these provisions the revised provisions will have no effect.

H.F. 2248 (Thissen); S.F. 2200 (Ranum) stem from interest by an individual who is a member of the Minneapolis Teachers Retirement Fund Association (MTRFA), and who was a teaching assistant at the University of Wisconsin-Superior for a one-year period during the 1970s. He wanted to purchase service credit in the MTRFA for that year. It is possible that H.F. 2248 (Thissen); S.F. 2200 (Ranum) would not help that individual, because it is unclear whether a teaching assistant is considered to be a teacher for purposes of TRA and the first class city teacher plans. The duties of a teaching assistant, particularly at the college level, vary considerably. The duties might be nothing more than occasionally grading papers, or the duties might entail considerable classroom teaching. The Commission may wish to explore whether H.F. 2248 (Thissen); S.F. 2200 (Ranum) would cover this individual, and whether teaching assistants are generally allowed to receive service credit in Minnesota’s teacher plans when that service is provided in Minnesota. If Minnesota teaching assistants generally are not covered by Minnesota teacher plans, there is a weaker basis for allowing service credit purchases for out-of-state teaching assistant services.

If the Commission desires to take action on H.F. 2248 (Thissen); S.F. 2200 (Ranum), it may wish to decide whether to consider the general law revision proposed by the bills, given the issues these bills raise as drafted, or a special law version which is provided in the attached amendments.

Pension policy issues raised by H.F. 2248 (Thissen); S.F. 2200 (Ranum) are as follows:

1. Inconsistency with Commission’s Policy Principles.  Given concerns about the impact of the existing service credit purchase provisions, the Commission may, in considering any new proposals, choose to again be guided by the statements in its policy document. The current proposal lacks a Minnesota connection. It is unclear why Minnesota taxpayers should be required to take on the financial risks of providing pensions relating to service that was not provided to Minnesotans.

2. Problem of the Sunset of the General Law Service Credit Purchase Provisions. The out-of-state teaching service provisions being amended are set to sunset, along with many other general law service credit purchase provisions, in May or July 2004. As drafted, these provisions will have no effect unless the sunset date, at least for these two provisions, is extended. This places the Commission in a difficult position. It may be difficult to recommend an extension of these two provisions while allowing other service credit purchase provisions to sunset. In past years teacher unions were interested in having all these service credit purchase provisions extended without a sunset, and presumably that interest remains. On the other hand, there is also considerable information, reviewed by the Commission over the 2003 Interim, which strongly suggests that the full actuarial value service credit purchase methodology can harm the pension funds, and the Commission will never be able to revise the methodology to fully remove that risk, because the price must be based on predictions of future events (when the individual will retire, the expected trend in salary until the retirement date, future investment earnings, and other factors).

3. Risk to Plans Given Their Current Financial Condition. Consideration of H.F. 2248 (Thissen); S.F. 2200 (Ranum) may lead to an extension of all general law service credit purchase provisions enacted in recent years, or to making those provisions permanent. The issue is the current financial condition of the pension funds, given the risk to which they would be exposed if the full actuarial value service credit provisions continue in law, due to the difficulty in computing full actuarial value prices that prove to be accurate over time. There are some general law service credit purchase provisions which apply to most larger Minnesota public pension plans (such as the military service credit full actuarial value service credit purchase provisions, or family leave provisions). Most are specific to the teacher plans. Below is the current financial condition of the four teacher plans (TRA and the three first class city teacher plans). The funding ratios are all based on actuarial value, as are the computed contribution deficiencies, where they exist. All these plans have a market value of assets considerably below the actuarial value. Based on market value, the funding ratios and contribution sufficiency/deficiency situation would worsen. The plan in the worst condition is MTRFA. On its current course, the MTRFA is expected to run out of assets in ten to twelve years.

4. Coverage Issue for Constituent. The issue is whether these bills, if enacted and if the expiration date is extended, will be interpreted as permitting a service credit purchase by the constituent who initially brought this issue to the Legislature. If not, the Commission may be asked to review this situation again at a later date. That individual was a teaching assistant for one year at the University of Wisconsin-Superior. The Commission may wish to hear testimony on this issue, and also on whether college or university teaching assistants in Minnesota are covered by Minnesota teacher plans for that service.

5. Need for Change; Possible Double Compensation. Teacher plans provide coverage for individuals who provide "teaching services." A teaching assistant at a college might provide lectures or classroom teaching as generally associated with "teacher" and "teaching," but in other settings that individual may do little more than grade papers. University teaching assistant positions are generally given to graduate students to provide a means of financial support while working on an advanced degree. Within this context, the teaching assistant position may be more comparable to a "quasi-scholarship," a scholarship where some work is demanded in return, than it is to a typical employee/employer arrangement. Benefits of any kind, including retirement coverage, are not provided because of the unusual and temporary nature of the employment. Also, once an individual obtains an advanced degree, an individual teaching in a Minnesota school will receive additional salary due to that training due to requirements in contracts. Thus, one can contend that the individual is being compensated for the period of additional training by a higher salary, which in turn will increase the individual’s pension, which is salary-based in the Minnesota teacher plans. If the benefit of the training period is already to be reflected in the individual’s pension, allowing additional service credit due to that training period may be viewed as unnecessary and duplicative.

Amendments

Several amendments are provided for your consideration. If the Commission wishes H.F. 2248; S.F. 2200 to have any effect, the Commission will need to extend the expiration date of these two provisions beyond July 2004. The Commission may also wish to take more global action to extend sunset provisions.

LCPR04-090 could be used if the Commission wishes to remove any question that teaching assistants should be permitted to purchase service credit for out-of-state teaching at public colleges and universities. The amendment specifies that the applicable service credit purchase provision applies to teachers and teaching assistants.

LCPR04-091 extends the out-of-state teaching service provisions for another year.

LCPR04-092 could be used to extend the out-of-state teaching service provisions and the various military service credit purchase provisions for another year.

LCPR04-093 would extend all the full actuarial value service credit purchase provisions for another year, including the temporary methodology for computing full actuarial value.

LCPR04-094 would extend all the full actuarial value service credit purchase provisions for another year, but not the temporary methodology for computing full actuarial value. The prior full actuarial value methodology, coded as Section 356.551, would become effective in July 2004 when the existing method expires.

An alternative to all the above amendments is to consider a special law service credit purchase provision for the individual who initially requested this treatment. This would allow the Commission to not address the question of whether to move the sunset date for some or all of the full actuarial value service credit purchase provisions. Some policy issues with this special law single person delete-all amendment are:

• the lack of a Minnesota connection,

• the issue of whether teaching assistant service is generally covered by a teacher pension plan even when service is performed in Minnesota,

• the cost to the individual,

• the cost impact on Minneapolis Teachers Retirement Fund Association (MTRFA) due to possible errors or biases in the purchase price procedures, and

• whether there are more individuals who would want this treatment.

LCPR04-095 is a delete-all amendment which would allow an individual who had a year of service as a teaching assistant at the University of Wisconsin-Superior to purchase service credit in that plan at full actuarial value, providing that service would qualify for coverage if provided in Minnesota.

1. Full Actuarial Value Military Service Credit Purchase.  A vested TRA or first class city teacher plan member who performed service in the armed forces before becoming a Minnesota teacher plan member, or who did not make contributions to obtain service credit while on a teacher plan military leave of absence, is entitled to purchase service credit for the initial period of enlistment, induction, or call to active duty not including any voluntary extension. To receive the service credit, the member must pay the full actuarial value. The purchase is not permitted if the individual is eligible for a military pension or if the individual has service credit in another plan due to this military service. (Laws 1999, Chapter 222, Article 16, Sections 1 and 7. Coded as Minnesota Statutes, Section 354.533 for TRA and Section 354A.097 in first class city teacher plan statutes.)

Conflicts with Policy Statement: May lack any Minnesota connection. Raises several equity concerns, including failure by some to take advantage of a more generous treatment under military leave of absence provision, and lack of any requirement that the individual must honorably serve to be eligible. Other issue: The teacher plans have contended that the prohibition against purchases if the individual is entitled to a military pension may conflict with federal law.

2. Out-of-State Teaching Service Credit Purchase. A vested member may purchase up to ten years of service credit in the applicable teacher plan for out-of-state teaching in an educational institution established and operated by another state, a governmental subdivision of another state, or the federal government, providing the individual is not eligible for service credit in another plan. To receive the service credit, the member must pay the full actuarial value. (Laws 1999, Chapter 222, Article 16, Sections 2 and 8. Coded for TRA as Minnesota Statutes, Section 354.534, and for the first class city teacher plans as Section 354.A.098.)

Conflicts with Policy Statement: Lacks any Minnesota connection; this provision provides service credit in Minnesota plan for service provided to residents of other states.

3. Maternity Leave of Absence or Maternity Break in Service Purchase of Service Credit. A vested member may purchase up to five years of service credit in the applicable teacher plan for maternity leaves for which service credit was not received, or for a maternity break in teaching service, providing the individual is not eligible for service credit in another plan. To receive the service credit, the member must pay the full actuarial value. (Laws 1999, Chapter 222, Article 16, Sections 3 and 9. Coded for TRA as Minnesota Statutes, Section 354.535, and for the first class city teacher plans as Section 354A.099.)

Conflicts with Policy Statement: Provides service credit for period to time during which the individual was not providing service to a Minnesota employer.

4. Parochial or Private School Teaching, Purchase of Service Credit. A vested member may purchase up to ten years of service credit in the applicable teacher plan for private or parochial school teaching service, providing the individual is not eligible for service credit in another plan. To receive the service credit, the member must pay the full actuarial value. (Laws 1999, Chapter 222, Article 16, Sections 4 and 10. Coded for TRA as Minnesota Statutes, Section 354.536, and for the first class city teacher plans as Section 354A.101.)

Conflicts with Policy Statement: May lack any Minnesota connection. Provides Minnesota public plan coverage for private sector or church-related employment. May offer coverage for periods where the individual willfully took employment lacking any retirement coverage.

5. Peace Corps or VISTA (Volunteers in Service to America) Service Credit Purchase. A vested member may purchase up to ten years of service credit in the applicable teacher plan for Peace Corps or VISTA service providing the individual is not eligible for service credit in another plan. To receive the service credit, the member must pay the full actuarial value. (Laws 1999, Chapter 222, Article 16, Sections 5 and 11. Coded for TRA as Minnesota Statutes, Section 354.537, and for the first class city teacher plans as Section 354A.102.)

Conflicts with Policy Statement: May lack any Minnesota connection. Presumably offers coverage for periods where the individual willfully took employment lacking any retirement coverage.

6. Charter School Teaching, Purchase of Service Credit. A vested member may purchase up to ten years of service credit in the applicable teacher plan for charter school teaching service providing the individual is not eligible for service credit in another plan. To receive the service credit, the member must pay the full actuarial value. (Laws 1999, Chapter 222, Article 16, Sections 6 and 12. Coded for TRA as Minnesota Statutes, Section 354.538, and for the first class city teacher plans as Section 354A.103.)

Conflicts with Policy Statement: May lack any Minnesota connection. May raise public/ private concerns in some circumstances. May offer coverage for periods where the individual willfully took employment lacking any retirement coverage.

7. Previously Uncredited Part-Time Teacher Service, Purchase of Service Credit. This provision applied only to first class city teacher plans. A vested member with previously uncredited part-time teaching service may purchase service credit in the applicable first class city teacher plan for that teaching service providing the individual was not previously eligible for credit for that service. To receive the service credit, the member must pay the full actuarial value. (Laws 1999, Chapter 222, Article 16, Section 13. Coded as Minnesota Statutes, Section 354A.104.)

Conflicts with Policy Statement: May raise equity issue if the service was properly excluded from law at the time service was rendered.

1. Military Service Credit Purchase. A vested member of MSRS-General, MSRS-Correctional, the State Patrol Plan, PERA, or PERA-P&F who performed service in the armed forces before becoming a member of the applicable plan or who failed to make contributions to obtain service credit while on a military leave of absence is entitled to purchase service credit for the initial period of enlistment, induction, or call to active duty not including any voluntary extension. To receive the service credit, the member must pay the full actuarial value. The purchase is not permitted if the individual is eligible for a military pension or if the individual has service credit in another plan due to this military service. (Laws 2000, Chapter 461, Article 4, Sections 1 to 4. Coded as Minnesota Statutes, Section 352.275 for MSRS-General and MSRS-Correctional, Section 352B.01, Subdivision 3a, for the State Patrol Plan, and Section 353.01, Subdivision 16a, for PERA and PERA-P&F.)

Conflicts with Policy Statement: May lack any Minnesota connection. Raises several equity concerns, including failure by some to take advantage of a more generous treatment under military leave of absence provision, and lack of any requirement that the individual service honorably to be eligible.

2. TRA Service Credit Purchase for Nonprofit Community-Based Corporation Service. The TRA and first class city teacher plan provisions authorizing service credit purchases at full actuarial value for private or parochial school teaching service are revised to also authorize purchases of nonprofit community-based corporation teaching service. (Laws 2000, Chapter 461, Article 11, Sections 3 and 5.)

Conflicts with Policy Statement: May lack any Minnesota connection. The full section as revised provides Minnesota public plan coverage for private sector or church-related employment, and raises the issue of whether nonprofit community-based corporation is sufficiently akin to public employment. May offer coverage for periods where the individual willfully took employment lacking any retirement coverage.

1. Out-of-Country Teaching Service and Tribal Teaching Service Credit Purchase. The TRA and first class city teacher plan out-of-state teaching service credit purchase provisions were expanded to include teaching service provided in another country or teaching service where the employing unit is a federally recognized American Indian tribe. (Laws 2001, First Special Session, Chapter 10, Article 6, Sections 5 and 11.)

Conflicts with Policy Statement: Can lack any Minnesota connection. May offer coverage for periods where the individual willfully took employment lacking any retirement coverage.

2. Developmental Achievement Center Service Credit Purchase. The TRA and first class city teacher plan service credit purchase provisions permitting service credit purchase for teaching in a nonprofit community-based corporation, private school, or parochial school, were expanded to include teaching at a developmental achievement center. (Laws 2001, First Special Session, Chapter 10, Article 6, Sections 6 and 12.)

Conflicts with Policy Statement: May lack any Minnesota connection. Raises issue of whether this is proper coverage to add to a public plan. May offer coverage for periods where the individual willfully took employment lacking any retirement coverage.

3. Purchase of Service Credit for Uncovered Prior Teaching at the University of Minnesota. TRA or first class city teacher plan members who are vested and who provided University of Minnesota teaching service but who are not entitled to a current or deferred age and service retirement annuity or disability benefit related to that service may purchase service credit in TRA or a first class city teacher plan, as applicable, at full actuarial value reflecting that university service, not to exceed ten years. (Laws 2001, First Special Session, Chapter 10, Article 6, Sections 8 and 14. The TRA provision is coded as Minnesota Statutes, Section 354.541, and the first class city teacher plan provision is coded as 354A.109.)

Conflicts with Policy Statement: May offer coverage for periods where the individual willfully took employment lacking any retirement coverage.

4. Parental/Family Leave or Break-in-Service Service Credit Purchase Provision. A member of MSRS-General MSRS-Correctional, PERA-General, PERA-P&F, TRA, the first class city teacher plans, MERF, Minneapolis Firefighters Relief Association (MFRA) and Minneapolis Police Relief Association (MPRA), who had or has a family leave of absence, a parental leave, or a break in service from the same employer due to parental or family-related matters (due to birth of a child, adoption, or care of a near relative or in-laws), may purchase service credit for the period of the leave or break in service, not to exceed five years, by paying the full actuarial value of the service credit purchase. (Laws 2001, First Special Session, Chapter 10, Article 6, Sections 1 to 4, 10, 12, 16 to 20. The provision is coded as Minnesota Statutes, Section 356.555.)

Conflicts with Policy Statement: Provides coverage for a break in service, rather than for some period of uncovered service provided to a Minnesota public employer.

Minnesota Statutes, Section 354.05, TRA Definition of "Teacher"

354.05 Definitions.

    Subdivision 1. Terms. Unless the language or context clearly indicates that a different meaning is intended, the following terms, for the purposes of this chapter, shall be given the meanings subjoined to them.

    Subd. 2. Teacher. (a) "Teacher" means:

    (1) a person who renders service as a teacher, supervisor, principal, superintendent, librarian, nurse, counselor, social worker, therapist, or psychologist in a public school of the state located outside of the corporate limits of a city of the first class, or in any charter school, irrespective of the location of the school, or in any charitable, penal, or correctional institutions of a governmental subdivision, or who is engaged in educational administration in connection with the state public school system, but excluding the University of Minnesota, whether the position be a public office or an employment, not including members or officers of any general governing or managing board or body;

    (2) an employee of the Teachers Retirement Association;

    (3) a person who renders teaching service on a part-time basis and who also renders other services for a single employing unit. A person whose teaching service comprises at least 50 percent of the combined employment salary is a member of the association for all services with the single employing unit. If the person's teaching service comprises less than 50 percent of the combined employment salary, the executive director must determine whether all or none of the combined service is covered by the association; or

    (4) a person who is not covered by the plans established under chapter 352D, 354A, or 354B and who is employed by the Board of Trustees of the Minnesota State Colleges and Universities system in an unclassified position as:

    (i) a president, vice-president, or dean;

    (ii) a manager or a professional in an academic or an academic support program other than specified in item (i);

    (iii) an administrative or a service support faculty position; or

    (iv) a teacher or a research assistant.

    (b) "Teacher" does not mean:

    (1) a person who works for a school or institution as an independent contractor as defined by the Internal Revenue Service;

    (2) a person employed in subsidized on-the-job training, work experience or public service employment as an enrollee under the federal Comprehensive Employment and Training Act from and after March 30, 1978, unless the person has, as of the later of March 30, 1978, or the date of employment, sufficient service credit in the retirement association to meet the minimum vesting requirements for a deferred retirement annuity, or the employer agrees in writing on forms prescribed by the executive director to make the required employer contributions, including any employer additional contributions, on account of that person from revenue sources other than funds provided under the federal Comprehensive Training and Employment Act, or the person agrees in writing on forms prescribed by the executive director to make the required employer contribution in addition to the required employee contribution;

    (3) a person holding a part-time adult supplementary technical college license who renders part-time teaching service or a customized trainer as defined by the Minnesota State Colleges and Universities system in a technical college if (i) the service is incidental to the regular nonteaching occupation of the person; and (ii) the applicable technical college stipulates annually in advance that the part-time teaching service or customized training service will not exceed 300 hours in a fiscal year and retains the stipulation in its records; and (iii) the part-time teaching service or customized training service actually does not exceed 300 hours in a fiscal year; or

    (4) a person exempt from licensure under section 122A.30.

    Subd. 2a. Exceptions. (a) Notwithstanding subdivision 2, a person specified in paragraph (b) is not a member of the association except for purposes of social security coverage unless the person is covered by section 354B.21, and elects coverage by the Teachers Retirement Association.

    (b) A teacher is excluded from association membership other than social security coverage under paragraph (a) if the person is covered by the individual retirement account plan established under chapter 354B.

    Subd. 3. Teaching. The word "teaching" includes the service performed by any person coming within the definition of "teacher" as set forth in subdivision 2.

Statutes, Section 354A.011, Cities of the First Class Definition of "Teacher"

354A.011 Definitions.

    Subd. 27. Teacher. (a) "Teacher" means any person who renders service for a public school district, other than a charter school, located in the corporate limits of one of the cities of the first class which was so classified on January 1, 1979, as any of the following:

    (1) a full-time employee in a position for which a valid license from the state Department of Education is required;

    (2) an employee of the teachers retirement fund association located in the city of the first class unless the employee has exercised the option pursuant to Laws 1955, chapter 10, section 1, to retain membership in the Minneapolis Employees Retirement Fund established pursuant to chapter 422A;

    (3) a part-time employee in a position for which a valid license from the state Department of Education is required; or

    (4) a part-time employee in a position for which a valid license from the state Department of Education is required who also renders other nonteaching services for the school district, unless the board of trustees of the teachers retirement fund association determines that the combined employment is on the whole so substantially dissimilar to teaching service that the service may not be covered by the association.

    (b) The term does not mean any person who renders service in the school district as any of the following:

    (1) an independent contractor or the employee of an independent contractor;

    (2) an employee who is a full-time teacher covered by the Teachers Retirement Association or by another teachers retirement fund association established pursuant to this chapter or chapter 354;

    (3) an employee exempt from licensure pursuant to section 122A.30;

    (4) an employee who is a teacher in a technical college located in a city of the first class unless the person elects coverage by the applicable first class city teacher retirement fund association under section 354B.21, subdivision 2;

    (5) a teacher employed by a charter school, irrespective of the location of the school; or

    (6) an employee who is a part-time teacher in a technical college in a city of the first class and who has elected coverage by the applicable first class city teacher retirement fund association under section 354B.21, subdivision 2, but (i) the teaching service is incidental to the regular nonteaching occupation of the person; (ii) the applicable technical college stipulates annually in advance that the part-time teaching service will not exceed 300 hours in a fiscal year; and (iii) the part-time teaching actually does not exceed 300 hours in the fiscal year to which the certification applies.

    Subd. 28. Teaching service. "Teaching service" means any service as a teacher performed by any person included within the definition of teacher.