TO: Members of the Legislative Commission on Pensions and Retirement
FROM: Susan Lenczewski, Executive Director
RE: Update on Bills regarding Fairview Employees: Reduction in the Enhanced Augmentation Rate and Changes to the Exception to Enhanced Augmentation for Return to Public Service
DATE: April 5, 2016
H.F. 3716 (O'Driscoll)/S.F. XXXX (formerly LCPR16-016). This bill both reduces the rate of future augmentation and revises the exception from enhanced augmentation for return to public service. This bill was heard by the Pension Commission at its meeting on February 24, 2016. At the meeting, the Commission heard from David Bergstrom, Executive Director of the Minnesota State Retirement System (MSRS), Representative Phyllis Kahn, and several testifiers, including Fairview employees or their spouses, and representatives from AFSCME Council 5. No action was taken. The focus of the testimony and discussion was on the proposed reduction in the future rate of augmentation from 5.5% to 2%. (For Fairview employees who are at least age 55, the reduction in the future rate of augmentation would be from 7.5% to 2%.)
H.F. xxxx (Hornstein/Thissen); S.F. xxxx (Dibble); Revisor #16-6647. This bill only revises the exception from enhanced augmentation for return to public service and mirrors the exception language in H.F. 3716, as to substance. (This bill reflects changes made by the Revisor's Office to clarify the retroactive application of the changes, but these changes are not intended to change the substance of the bill.) This bill was heard by the Pension Commission at its meeting on March 22, 2016. The authors presented the bill and Mr. Bergstrom provided testimony. Amendment #16-6647-1A, which would apply the change to all current and future retirees was distributed. No action was taken on the bill or the amendment.
Commission Meeting on April 5, 2016. The Commission will hear an update from Mr. Bergstrom at the meeting on April 5. The Chair will determine the extent to which the Commission will hear additional testimony from members of the public.
In connection with the U of M Hospital/Fairview spin-off transaction at the end of 1996, MSRS provided information to all Fairview employees regarding the supplemental pension benefit package through a mailing and a series of informational meetings. Copies attached for your consideration:
MSRS reports that an informational page was included with benefit estimates prepared as requested by Fairview employees for a period, up to approximately 2013. A copy of that information sheet is at page 13 of the packet.
Beginning in July 2014, benefit estimates for the Fairview employees included an explanation of augmentation and the exception for return to public service. A copy of a benefit estimate begins on page 15 of the packet. See page 17 of the packet for the paragraph on the Fairview benefits.
We understand that annual statements are not customized for this particular group of former employees, for cost reasons because the size of the group is small compared to the total MSRS member population. Therefore, annual statements typically have not specifically addressed enhanced augmentation or the exceptions to receiving it.