Summary of H.F. ____ (       ); S.F. 2297 (Kiscaden)

H.F. ____ (      ); S.F. 2297 (Kiscaden) allows a member of the Teachers Retirement Association (TRA) to designate the person’s children or a trust established for them as the recipient of the TRA active member survivor benefit coverage. The benefit is the second life recipient portion of the 100 percent joint-and-survivor optional annuity form imputed by law to have been selected by a deceased active TRA member as of the date of death, which will be the person’s accrued TRA retirement annuity, reduced for the early commencement of payment, and will be payable for the life of the beneficiary.

Public Pension Problem of Marilyn Thompson-Hoerl

H.F. ____ (       ); S.F. 2297 (Kiscaden) is intended to assist Marilyn Thompson-Hoerl. Ms. Thompson-Hoerl is a resident of Rochester, Minnesota, who is a teacher for Independent School District No. 535, Rochester, who is a member of the Teachers Retirement Association (TRA), who is divorced, who has two children (ages 19 and 16) from that marriage, and who reportedly has a terminal medical condition. In the event of Ms. Thompson-Hoerl’s death, she desires to have her two children receive her TRA benefit and has established a trust for the children, with her sister as the executor of her will and trustee. Ms. Thompson-Hoerl received a legal opinion from Daniel P. Doda, an attorney with the law firm of Wendland, Utz, Stahl, & Mintz, Ltd., outlining the lack of authority within TRA law for her to pursue her intended result.

Discussion

H.F. ____ (       ); S.F. 2297 (Kiscaden) allows Marilyn Thompson-Hoerl to designate her son, or her daughter, or both children, or a trust established for either child or both children, for a survivor benefit based on her accrued Teachers Retirement Association (TRA) retirement annuity.

The proposed legislation raises several pension and related public policy issues for consideration by the Legislative Commission on Pensions and Retirement, as follows:

1. Sufficient Justifying Equitable Consideration. The policy issue is the question of whether or not Ms. Thompson-Hoerl’s equitable considerations are sufficient to justify the Legislature fashioning a special solution to her public pension coverage complaint. The equitable considerations are that Ms. Thompson-Hoerl has a terminal condition, that Ms. Thompson-Hoerl might qualify for a TRA disability benefit at this time based on her medical condition, and that Ms. Thompson-Hoerl’s children are of an age that complicates the duration of their eligibility for survivor coverage. The Commission should seek some assurance that Ms. Thompson-Hoerl is currently in unfortunate circumstances sufficient to merit special legislative attention at this time.

2. Extent of Any Non-Legislative Self-Help Remedies. The policy issue is the question of whether or not any self-help remedies exist that would make a legislative remedy unnecessary. The self-help remedies identified by the Commission staff and available to Ms. Thompson-Hoerl appear to be either unworkable, inappropriate, or of questionable policy advantages. If Ms. Thompson-Hoerl were to die before August 6, 2004, the birth date of her eldest child, her children would receive survivor benefits from TRA for five years. If she were to die between August 6, 2004, and August 20, 2007, the birth date of her youngest child, Ms. Thompson-Hoerl’s daughter would receive a survivor benefit from TRA for five years, but her son would receive no benefit. If Ms. Thompson-Hoerl’s death occurs after August 20, 2007, her children would be eligible to a refund of her TRA member contributions only, plus interest. If Ms. Thompson-Hoerl applied for and received a TRA disability benefit now or in the near future, she could take an optional annuity form, such as a term certain annuity, that would provide her children with survivor coverage, although the disability benefit optional annuity amount reportedly would be less than the accrued retirement annuity amount otherwise payable to Ms. Thompson-Hoerl, would require Ms. Thompson-Hoerl to discontinue teaching, and may interrupt her health insurance coverage. Finally, if Ms. Thompson-Hoerl was currently married instead of being single, she could make the same designation under current TRA law, Minnesota Statutes, Section 356.46, Subdivision 5, that she could make under the proposed legislation.

3. Actuarial Cost. The policy issue is any actuarial cost for TRA caused by the proposed legislation. From the information provided by TRA, indicating that the potential survivor coverage is an actuarial equivalent optional retirement annuity, there should be no additional actuarial cost to TRA from the proposed legislation. Testimony should be sought by the Commission from TRA to verify that the proposed legislation has no new actuarial cost for the plan.

4. Special or General Legislation. The policy issue is whether or not the draft proposed legislation is more appropriate as special legislation for Ms. Thompson-Hoerl or as general legislation. If the legislation is not so dependent on the equitable considerations that are unique to Ms. Thompson-Hoerl and is deemed by the Commission to be appropriate for TRA members at large, the proposed legislation should be recrafted as general legislation rather than as special legislation. Amendment LCPR04-097 would make a comparable general change in TRA law in addition to the special legislative authority proposed in H.F. ____ (       ); S.F. 2297 (Kiscaden), providing single TRA members with the same beneficiary survivor coverage as is accorded under current State law for married TRA members.