TO: | Members of the Legislative Commission on Pensions and Retirement |
FROM: | Susan Lenczewski, Executive Director |
RE: | S.F. 746 (Rosen); H.F. 721 (O'Driscoll): TRA Administrative Bill |
DATE: | February 20, 2017 |
S.F. 746 (Rosen); S.F. 721 (Murphy, M,) makes administrative or technical changes to the statutes governing the Teachers Retirement Association (TRA). The changes impact only TRA and amend Chapter 354. The changes bring statutory language into conformity with actual practice, clarify language that is ambiguous or confusing, and repeal provisions that are no longer needed. Commission staff worked closely with TRA staff to make the resulting statutory language as clear and concise as possible.
All sections in the bill take effect on July 1, 2017, except Sections 2 and 6, which take effect on July 1, 2018, and Section 5, which takes effect immediately upon enactment.
Section 1 makes a number of changes to the definition of "teacher." Subdivision 2, Paragraph (a), specifies the categories of persons who are considered teachers and, therefore, are subject to pension coverage under TRA. Section 1 of the bill makes the following changes to Paragraph (a):
Section 1 also makes changes to paragraph (b) of subdivision 2, which sets forth the categories of persons that are not considered teachers and, therefore, are not subject to pension coverage under TRA. Section 1 of the bill makes the following changes to paragraph (b):
Under subdivision 3 of section 354.44, a member can apply to begin a pension no earlier than 120 days before the member's termination of employment. Section 2 revises subdivision 3 by lengthening the application period from 120 days to 180 days prior to termination of employment.
Section 3 adds new subdivision 3 that provides that, upon the death of a former spouse who was receiving a 15-year certain annuity or other guaranteed stream of payments, the remaining payments will be made to the former spouse's designated beneficiary or, if there is none, then to the former spouse's estate or as otherwise ordered by a court. "Former spouse" is defined as a member's former spouse as a result of the dissolution of the marriage. New subdivision 3 is intended to address problems that have arisen over the years when TRA was forced, due to other Minnesota law, to make the remaining payments to the former spouse's estate. This can be administratively burdensome for TRA and the estate's beneficiaries, who may have to keep the estate open for many years in order to continue receiving the payments. (This provision had been approved by the Pension Commission last session and included in the vetoed 2016 omnibus pension bill, but because TRA wished to make additional changes to this subdivision, it is included for approval in this year's TRA administrative bill.)
If a school district or other employer fails to transmit contributions to TRA, TRA can notify Minnesota Management and Budget, and MMB will deduct the unpaid amount from any state aid or appropriation due to the employer and transmit it to TRA. Section 354.512 requires TRA to wait 60 days after notifying the employer before contacting MMB. Section 4 deletes the 60-day waiting requirement, allowing TRA to receive payment for missed or late contributions more quickly.
School districts and other employers are required to report certain information to TRA by specified due dates. If the employer fails to provide the required information by the due date, the employer must pay TRA a fine of $5 per day until the information is provided. This section eliminates the requirement that beginning and ending dates for the school work year be provided to TRA on or before June 30 of each fiscal year, because TRA no longer needs this information and not all employers have established school calendars by the June 30 due date.
Section 6 deletes a requirement regarding how to calculate the automatic 2% annual increase on a pension for a former teacher (referred to as "augmentation") in the case where the teacher had more than one period of service. The language of the provision is incomprehensible so relies heavily on TRA staff to interpret and apply the provision. According to TRA, the language created a substantial amount of manual estimate work, increased the potential for error, and rarely resulted in a higher monthly retirement benefit for the member.
Part-time teachers are covered by TRA and are required to contribute as if they were full-time employees, subject to payment to TRA of employer contributions as if the teacher were full-time. Section 7 clarifies requirements in subdivision 2 of section 354.66 regarding the agreement that must be in place between the teacher and the school district with regard to the part-time employment. Section 7 also permits TRA to waive a fine that would otherwise be imposed for failure to deliver the agreement to TRA according to the due date in the statute.
Section 8 deletes language ("without pay") that limits the application of the procedures in this section 354.72 to only leaves that are unpaid. The deletion will permit the procedures to be applied in the case of leaves that are paid, such as when a teacher takes a sabbatical leave.