Legislative Commission on Pensions and Retirement Staff Memo

Summary of S.F. 522 (Frentz); H.F. 637 (Johnson, C.)

TO: Members of the Legislative Commission on Pensions and Retirement
FROM:Rachel Barth, Deputy Director
RE:S.F. 522 (Frentz); H.F. 637 (Johnson, C.): MSRS-Correctional; Including additional Department of Human Services employment positions in plan coverage.
DATE:March 6, 2017

Summary of S.F. 522 (Frentz); H.F. 637 (Johnson, C.)

S.F. 522 (Frentz); H.F. 637 (Johnson, C.) amends Minn. Stat. § 352.91, subd. 3f, by adding the Department of Human Services ("DHS") "physical therapist" position at the St. Peter Hospital to the statutory list of positions that are eligible for retirement coverage under the Minnesota State Retirement System Correctional plan ("MSRS-Correctional").

The coverage for "physical therapist" will be prospective only for the one individual currently employed in the position. Neither the member nor the employer are required to pay additional amounts under section 352.955, subd. 3.

Background Information

Under section 352.91, subd. 3f, positions within DHS that are eligible for MSRS-Correctional plan coverage must spend at least 75% of working time in direct contact with patients and the commissioner of human services must certify that the position satisfies that contact threshold.

In order for the commissioner of corrections to certify eligibility, DHS must use an established procedure for evaluating whether an employment position satisfies specific requirements under section 352.91, subd. 4a and DHS internal policy. The procedure must provide for an evaluation of the position to determine if:

  1. at least 75% of employee's time is in direct contact with inmates or patients; and
  2. the employee is regularly engaged in the rehabilitation, treatment, custody, or supervision of inmates or patients.

If the employee satisfies the two requirements, the DHS commissioner may recommend the employment position be included in MSRS-Correctional coverage. The commissioner must submit the recommendation, along with supporting documentation, to the legislature by January 15.

Unlike the Department of Corrections, the DHS procedure for reviewing and evaluating an employment position is not codified in statute. The DHS procedure is instead contained in an internal policy document. DHS uses a review committee to evaluate position eligibility and forwards any recommendation to include or exclude a position from MSRS-Correctional coverage to the commissioner, who then sends the recommendation the legislature. The DHS review procedure is very similar to the DOC procedure under section 352.91, subd. 4b.

Discussion and Analysis

  1. Cost. Including additional employees in MSRS-Correctional coverage will result in additional costs to both the employer and employee. DHS employees who work in the state-operated forensic services program or the Minnesota sex offender program are either covered by MSRS-General or MSRS-Correctional. MSRS-General employee and employer contribution rates are currently both set at 5.5% of pay, which are lower than the current MSRS-Correctional employee and employer contribution rates of 9.1% and 12.85% of pay, respectively. The MSRS board recently approved a funding proposal that increases both MSRS-General and MSRS-Correctional employee and employer contribution rates and will maintain the difference in employee and employer rates between the two plans.
    MSRS has no objections to including these employees in the MSRS-Correctional plan. The addition of one employee in the MSRS-Correctional plan will not have a significant financial impact on the plan. Adding additional employees to a pension plan can have an impact on both the liabilities and assets. Although more people in a plan results in more benefits being paid out, which adds to the liability, the employee and employer contribution rates are intended to pay for that additional liability, aiming for a cost neutral outcome.
  2. Procedure. As described above, DHS must implement and follow specific procedures in order to evaluate employment positions and recommend additions to the MSRS-Correctional plan. Based on the information provided by DHS, the review committee conducted a proper evaluation and both the review committee and DHS commissioner approved the addition of "physical therapist". Further, the appropriate legislative committees were provided notice by the statutory deadline. There is no indication that the position should not be included in the MSRS-Correctional plan and all required procedures appear to have been followed based on the information DHS provided.

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