S.F. 1362 (Pogemiller); H.F. 1646 (Wenzel) amends Minnesota Statutes, Section 354.41, Subdivision 4, which is a provision of the Teachers Retirement Association (TRA) law governing TRA membership eligibility for labor organization employees, by replacing specific organization designations with a generic labor organization reference, and by including union officers in the membership eligibility, and repeals Minnesota Statutes, Section 54.41, Subdivision 9, which is a TRA provision allowing the purchase of service credit for certain labor organization officer service. The changes are made retroactive to July 1, 1996, and are made applicable to employment on or after July 1, 1996.

Minnesota Statutes, Section 354.41, is a portion of the Teacher Retirement Association (TRA) law that relates to the eligibility for pension plan membership. As currently constituted, Minnesota Statutes, Section 354.41, contains three membership eligibility provisions, which are:

1. TRA Membership Mandatory For Post-1957 Teachers (Subdivision 2). Teachers in service or entering service after June 30, 1957, are required to be members of the Teachers Retirement Association (TRA); and

2. On-Leave Teachers Employed By a Labor Organization Are Eligible For TRA Membership, With Restrictions (Subdivisions 4, 4a, 4b, 5, and 7). Teachers on leave to serve with one of five labor organizations, the Minnesota Federation of Teachers, the Minnesota Education Association, the Minnesota Association of School Principals, the Minnesota Association of Secondary School Principals, or the Minnesota Association of School Administrators, are eligible for TRA membership if the person is not also a member of a first class city teacher retirement association. The covered salary and contributions of labor organization members are limited. The labor organization member is obligated to pay all member and employer contributions, although the labor organization is entitled to pay the employer contributions. A retiring labor organization member is subject to any reemployed annuitant earnings limitation. Labor organization members are ineligible for TRA Board election.

3. On-Leave Teachers Who Are Teacher Organization Elected Officials Allowed Service and Salary Credit Purchase (Subdivision 9). Labor organization elected officials are authorized to purchase TRA service and salary credit for past uncredited labor organization employment, at a subsidized rate (member contributions only).

The professional teacher organization TRA membership provisions first entered TRA law in 1975, when Minnesota Statutes, Section 354.41, Subdivisions 4, 5, 6 (now repealed), and 7, were enacted. Prior to 1975, teachers who were on leave for a period of employment by a teacher union were not included in TRA membership. In 1975, the laws governing the three major statewide Minnesota public pension plans (the General State Employees Retirement Plan of the Minnesota State Retirement System (MSRS-General), the Public Employees Retirement Association (PERA), and TRA) were amended to allow labor organization employees to be members of the respective pension plan. The 1975 enactment included a service credit purchase provision, limited to five years of service credit, and expiring in 1980.

In 1981, in an amendment to the TRA Administrative Provisions bill for that session that was sponsored by TRA, the professional teacher organization elected officer TRA service credit purchase provision, Minnesota Statutes, Section 354.41, Subdivision 9, was added. The provision allows a purchase of service credit for TRA members who were granted a leave of absence for service as an elected officer of a teachers organization, by requiring the payment of equivalent member contributions only (since the employer contribution at the time was made by State appropriation directly to TRA rather than by school district concurrent payments). The covered salary was limited to the pre-leave teacher contract salary of the teacher. The provision was intended to assist a North St. Paul teacher who in 1981 was concluding a term in office as president of the National Education Association (NEA).

In 1994, when the various labor organization membership provisions were revised in the light of the controversy over the PERA pension benefit application of John Allers, the former president of a Service Employees International Union (SEIU) local, the professional teacher organization TRA membership provisions were amended. TRA eligibility for labor organization officers and employees was restricted to TRA members on an authorized leave of absence, rather than applicable only to former TRA members. Limitations on covered salary and allowable contribution amounts were also added for labor organization employees, as were reemployed annuitant earning restrictions.

S.F. 1362 (Pogemiller); H.F. 1646 (Wenzel) clarifies the retirement coverage for presidents of the Inter Faculty Organization (IFO), which represents various Minnesota State Colleges and Universities System (MnSCU) faculty members at the State Universities as collective bargaining representative, and treats them the same as labor organization employees. It also makes the Teachers Retirement Association (TRA) labor organization employee and officer pension coverage provision applicable generically to all teacher labor organizations. Additionally, it extends the change back to 1996 to cover the circumstance of former IFO president, Dr. Dave Abel.

The proposed legislation raises a number of pension and related public policy issues for Commission consideration, as follows:

1. Appropriateness of Including the IFO and Other Teacher Labor Organization in TRA Labor Organization Membership Provision. The policy issue is the appropriateness of restructuring Minnesota Statutes, Section 354.41, Subdivision 4, to include IFO and other labor organization employees and officers in TRA coverage. Currently, Minnesota Statutes, Section 354.41, Subdivision 4, parallels Minnesota Statutes, Sections 352.029 (General State Employees Retirement Plan of the Minnesota State Retirement System (MSRS-General)) and 353.017 (General Employee Retirement Plan of the Public Employees Retirement Association (PERA-General)), but references specific teacher labor organizations rather than utilizing the generic labor organization specification found in MSRS-General and PERA-General law. The IFO is not referenced in Minnesota Statutes, Section 354.41, probably because the IFO either did not exist when the provision was initially enacted in 1975 (Laws 1975, Chapter 306, Section 10) or did not have a full-time president at that time. It would be appropriate to include the IFO in the same teacher-on-leave TRA pension coverage provision that applies to the other major teacher labor organizations by replacing the current specific references with a single broadly-applicable generic description of collective bargaining representative organizations.

2. Appropriateness of the Proposed Repeal of Minnesota Statutes, Section 354.41, Subdivision 9. The policy issue is the appropriateness of the proposed repeal of a current service credit purchase provision relating to labor organization officials. Minnesota Statutes, Section 354.41, Subdivision 9, was enacted in 1981 (Laws 1981, Chapter 160, Section 5) to address the situation of a North St. Paul teacher who was concluding a term as president of the National Education Association (NEA). The provision was added before the time when the Commission fully and comprehensively implemented its full actuarial value payment prior service credit purchase policy, was consistent with the then-established (1981) Commission policy on service credit during authorized leaves, and specifically was designed not to let the affected teacher and the person in any future comparable circumstance gain credit for that official’s NEA salary that is disproportionately larger than the person’s past salary history. Because the provision is a subsidized service credit purchase and is outdated, the provision should now either be repealed or be amended to require a full actuarial value purchase payment. The proposed legislation repeals the provision.

3. Appropriateness of 1996 Retroactive Effective Date. The policy issue is the appropriateness of making the proposed legislation retroactive to July 1, 1996. The retroactivity apparently is intended to assist the former IFO president, Dr. Dave Abel. The IFO presidency is a full-year position, and the incumbent has a 220-day-per-year assignment rather than a 168-duty-day per year MnSCU faculty position. IFO contends that TRA contributions have been made for Dr. Abel on a 220-day assignment, while TRA will ultimately be crediting Dr. Abel salary for calculating his TRA highest five years average salary figure based on his 168-duty-day salary for the year before he became the IFO president. Under Minnesota Statutes, Section 354.41, Subdivision 4, if it had governed Dr. Abel’s TRA coverage, he would have been covered on his actual IFO salary (and any other concurrent salary obtained from overtime service or additional employment) up to an amount equal to 75 percent of the salary of the Governor.

4. Substantive Issue: Need For Commission Review of the Continuing Appropriateness of Various Single Member and Small Group Provisions. The policy issue is the need for the Commission to undertake a review of the various one person or small group provisions that currently litter Minnesota public pension statutes. Minnesota Statutes, Section 354.41, Subdivision 9, proposed for repeal in the proposed legislation, is one of a potentially large number of public pension plan provisions that apply only to one plan member or to a very small group of pension plan participants. Many of these provisions, like Minnesota Statutes, Section 354.41, Subdivision 9, were enacted to resolve a particular problem, but can have continuing life and can complicate future policy making. These one person or small group provisions frequently should have been sunsetted or scheduled for expiration at some date in the past at the time of enactment. Although this was not done by past legislatures, the Commission could improve the situation and assist future legislatures by immediately repealing the most obsolete of these provisions, scheduling the other one person or small group provisions for expiration in a year or two, and automatically including in all future one person or small group provisions an expiration date. By doing so, the Commission could avoid a problem similar to the one that it encountered with the TRA Improved Money Purchase Program savings clause, which virtually everyone had presumed to have become obsolete long ago, but which reemerged with significant liability consequences for TRA.

Amendment LCPR01-127 is a technical amendment recommended by the Commission staff to correct a drafting error in the proposed legislation and to clarify the actual nature of the retroactivity in the proposed legislation. Making the repeal of Minnesota Statutes, Section 354.41, Subdivision 9, retroactive to July 1, 1996, is not legally necessary to accomplish the intent of the Inter Faculty Organization (IFO) and may raise some confusion about the July 27, 1999, Court of Appeals case In the Matter of the Petition of Dr. Edgar Twedt, which relied on Minnesota Statutes, Section 354.41, Subdivision 9.