ADMINISTRATIVE LEGISLATION SUBCOMMITTEE
OF THE
LEGISLATIVE COMMISSION ON PENSIONS AND RETIREMENT

Call to order:
Representative Steve Smith called the meeting to order at 9:15 a.m.

Subcommittee Members Present:
Representative Eric Lipman, Representative Steve Smith, and Senator Don Betzold

Subcommittee Members Absent:
Senator Geoff Michel

Mr. Lawrence Martin, Executive Director, Legislative Commission on Pensions and Retirement, reviewed the items in members’ packets.

Sen. Betzold moved amendments LCPR0-221 and LCPR03-222. MOTION PREVAILED.

Mr. Edward Burek, Deputy Director, Legislative Commission on Pensions and Retirement, reviewed the staff memo and the proposed legislation for Subcommittee consideration.

Mr. Burek reviewed Article 1, Section 1, and the policy issues raised by the section.

Ms. Paige Purcell, Legislative Coordinator, MSRS, testified in support of the provision and responded to members’ questions.

Mr. Ernest Palmston, Manger Pension Services Division, MSRS, testified in support of the provision.

Ms. Mary Vanek, Executive Director, PERA, testified that PERA excludes individuals who are receiving credit for compensation earned in positions that would be covered by the other funds, but if an individual is employed in a position that would be covered under PERA and qualifies for coverage contributions would be reported.

Ms. Purcell suggested the possibility of adding a sentence to include "meet the definition of public employee" and said that MSRS is willing to work with Commission staff to develop appropriate language.

Mr. Burek reviewed Article 1, Sections 2 and 3, and the policy issues raised by the sections.

Mr. Gary Janikowski, Assistant Director Personnel, MnSCU, and Ms. Mary Millar, Personnel Director, MnSCU, testified in support of the provisions and provided background information. Ms. Millar recommended amending the effective date to read "July 1, 2001".

Mr. Martin clarified that the effective date on page 6 would be corrected so Section 2 would be effective July 1, 2004, retroactive to the date of employment of each individual covered by the change in Section 2 (ratifying past actions), and that Section 3 would be effective retroactive to July 1, 2001.

Rep. Lipman moved Article 1, Sections 2 and 3, as amended, for inclusion in the Subcommittee work product. MOTION PREVAILED.

Mr. Burek reviewed Article 2 and the related policy issues.

Mr. Gary Austin, Executive Director, TRA, testified that TRA had 5 or 6 Basic members as of the last valuation and that there are probably a few who have not retired.

Ms. Paige Purcell, Legislative Coordinator, MSRS, testified that a few years ago, MSRS worked with MnSCU to clean up the language and the repealer would serve to do so.

Ms. Mary Millar, Personnel Director, MnSCU, testified that MnSCU had only one individual covered by TRA Basic and that individual has retired.

Rep. Lipman moved Article 2 for inclusion in the Subcommittee work product. MOTION PREVAILED.

Mr. Burek reviewed Article 3 and the related policy issues.

Ms. Paige Purcell, Legislative Coordinator, MSRS, testified that the mission of MSRS is to keep the funds whole and they also have to educate the members on their benefits. Ms. Purcell said that this benefit is worrisome to MSRS and is costly to the fund, but if the policy remains MSRS needs more time to counsel employees, particularly in the event of employee layoffs.

Mr. Martin informed members that the Unclassified Plan is a small plan, and the largest group of individuals covered by the plan is legislative employees. Mr. Martin also noted that when past administrative bills have attempted to limit or eliminate the reversion there has been opposition from Senate staff.

Rep. Lipman moved to exclude Article 3 from the Subcommittee work product. Rep. Smith noted that the motion was not required, as the Subcommittee would only take action on those items for inclusion. There was no action on this article.

Mr. Burek reviewed Article 4, Section 1, and the related policy issues.

Ms. Paige Purcell, Legislative Coordinator, MSRS, testified in support of the provision and responded to members’ questions.

Mr. Ernest Palmston, Manger Pension Services Division, MSRS, testified in support of the provision.

Mr. Martin pointed out that there is in current law a delegation to the TRA Executive Director to not include certain compensation items in salary and there is a similar provision in first class city teacher law, so there is precedent for this type of authority.

Ms. Mary Vanek, Executive Director, PERA, testified that PERA also has a provision that gives the Executive Director authority to make decisions and pointed out that an individual who has been denied coverage for salary has the right to appeal the decision to the Board of Trustees and then to the Court of Appeals.

Rep. Lipman moved to amend page 15, line 11, to insert "and prior determinations" before the period. MOTION PREVAILED.

Sen. Betzold moved Article 4, Section 1, as amended, for inclusion in the Subcommittee work product.

Mr. Martin pointed out that this provision applies to MSRS only, and questioned whether Subcommittee members wished to add similar authority to other plans. Sen. Betzold indicated that he preferred to have the provision apply only to MSRS at this time.

Rep. Smith indicated that if there were no opposition the provision, as amended, would be included in the Subcommittee work product by consensus. There was no opposition.

Mr. Burek reviewed Article 4, Sections 2 and 7, and the related policy issues.

Ms. Paige Purcell, Legislative Coordinator, MSRS, testified in support of the legislation and provided background information.

Mr. Ernest Palmston, Manger Pension Services Division, MSRS, testified to his agreement with staff’s suggestion to cross-reference the State Patrol Plan definition of salary.

Rep. Smith directed staff to incorporate the recommended cross-reference.

As there was not a quorum present at the time, Sections 2 and 7 were laid over.

Mr. Burek reviewed Article 4, Sections 3, 4, 5, and 6, and the related policy issues.

Mr. Philip Kapler, Executive Director, SPTRFA, testified in support of the legislation and provided background information. Mr. Kapler stated that the IRS informed SPTRFA that the repealed language would need to be reinstated in order to renew SPTRFA’s qualified plan status.

Mr. Ed Emerson, Oppenheimer Wolff and Donnelly, testified in support of the legislation, and provided additional information regarding the IRS requirements and handout materials.

Mr. Gary Austin, Executive Director, TRA, testified regarding the process TRA has gone through and the nature and extent of that process.

Mr. Kapler testified that it is his understanding that the IRS is looking for evidence that is the plan documents are not only currently in compliance but have been compliant over the entire period since they last received a determination letter.

Ms. Mary Vanek, Executive Director, PERA, testified that when the 415(e) provision was repealed, PERA had one individual who was receiving a PERA pension and a union pension to whom PERA was applying the limitations, and she believes it was retroactively applied to January 1 as a result of that repeal.

A quorum was present.

Rep. Lipman moved Article 4, Sections 5 and 6, for inclusion in the Subcommittee work product. MOTION PREVAILED.

Sen. Betzold moved Article 4, Section 2, amended by reinstating the stricken language dealing with the compensation issue, and Section 7, amended to delete the repealer on page 19, lines 23-25, for inclusion in the Subcommittee work product. MOTION PREVAILED.

Sen. Betzold moved consensus to create a cross-reference to MSRS-General salary definition within the State Patrol Plan procedure. MOTION PREVAILED.

Mr. Burek reviewed Article 5 and the related policy issues.

Mr. Gary Austin, Executive Director, TRA, recommended a revision on page 20, line 23, changing the date to "July 1, 2003".

Sen. Betzold moved Article 5, incorporating Mr. Austin’s recommendation, for inclusion in the Subcommittee work product. MOTION PREVAILED.

Mr. Burek reviewed Article 6 and the related policy issues.

Sen. Betzold expressed concern regarding the language referring to a specific type of discharge and separation under honorable conditions or under "other than honorable conditions" as opposed to "less than honorable conditions."

Rep. Lipman moved to insert "under honorable conditions" on page 21, line 17.

Sen. Betzold suggested adopting language similar to that on the bottom of page 23, or making a reference that it is characterized as defined within U.S. Code, Title 38, Section 4304.

Rep. Lipman amended his motion to insert on page 21, line 17, the clause found on page 23, line 35. MOTION PREVAILED.

Mr. Gary Austin, Executive Director, TRA, testified that TRA has not reviewed an individual’s separation from military service to determine if it was honorable or dishonorable and did not see any reason to start making this qualification.

Mr. Philip Kapler, Executive Director, SPTRFA, testified that he believes the USERRA language is fairly clear that a person can not be made to pay anything other than what they would have paid had they continued in employment instead of going into military service; therefore, the individual can not be charged interest.

Mr. Ed Emerson, Oppenheimer Wolff and Donnelly, testified that the House Report #103-65 to the USERRA Statutes clearly states "no interest or penalty shall be charged on the employee contribution."

The meeting adjourned at 12:05 p.m.