ADMINISTRATIVE LEGISLATION SUBCOMMITTEE
OF THE
LEGISLATIVE COMMISSION ON PENSIONS AND RETIREMENT

Representative Steve Smith, Chair of the Legislative Commission on Pensions and Retirement, called the meeting to order at 9:10 a.m.

Representative Eric Lipman, Representative Steve Smith, and Senator Don Betzold

Senator Geoff Michel

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

Mr. Edward Burek, Deputy Director, Legislative Commission on Pensions and Retirement, reviewed Article 6, which was under discussion at the end of the previous Subcommittee meeting.

As there was not a quorum present, the article was laid over.

Mr. Burek reviewed Article 7 and the related policy issues.

Mr. Gary Austin, Executive Director, TRA, testified in support of the legislation and stated that this is an issue TRA and SPTRFA are dealing with now and would like to see action on this provision at this time.

Mr. Philip Kapler, Executive Director, SPTRFA, testified that SPTRFA is in the process of attempting to receive approval of their qualified plan status from the IRS and that the IRS will be looking for such language in the draft legislation SPTRFA forwards.

Mr. Ed Emerson, Oppenheimer Wolff and Donnelly, testified in support of the provision and provided further information regarding USERRA compliance.

Mr. Kapler stated that SPTRFA’s position is that they are less vulnerable from a legal standpoint if they pursue this language; that this is a defensive strategy to avoid and minimize the possibility that someone could claim discrimination because one group of members is allowed to purchase up to 10 years of service and another group is not.

Mr. Burek pointed out that there is no basis for any discrimination because this is a full actuarial value service credit purchase – if it is computed correctly, what is being offered has no value whatsoever.

Mr. Kapler responded that if the purchase allows the individual to reach the Rule of 90 at an earlier age, so there is a time value.

Mr. Burek reviewed Article 8 and stated that the proposal simply avoids a conflict in TRA statute.

Mr. Burek reviewed Article 9 and the related policy issues.

Mr. Gary Janikowski, Assistant Personnel Director, MnSCU, testified in support of the provision and provided background information on the issue. Mr. Janikowski stated that MnSCU is trying to make the language consistent with MnSCU’s Individual Retirement Account Plan (IRAP).

Ms. Mary Millar, Personnel Director, MnSCU, provided three potential amendments.

The article was laid over for staff and MnSCU personnel to meet to further refine the language.

Rep. Smith recessed the meeting at 10:20 a.m. Rep. Smith called the meeting back to order at 10:40 a.m. A quorum was present.

Rep. Lipman moved Article 6 for inclusion in the Subcommittee work product. MOTION PREVAILED.

Rep. Smith moved to delete Article 7. MOTION PREVAILED.

Rep. Lipman moved Article 8 for inclusion in the Subcommittee work product. MOTION PREVAILED.

Mr. Burek reviewed Article 10 and the related policy issues.

Mr. Gary Austin, Executive Director, TRA, testified in support of Article 10.

Sen. Betzold moved Article 10 for inclusion in the Subcommittee work product. MOTION PREVAILED.

Mr. Burek reviewed Article 11 and the related policy issues.

Mr. David Bergstrom, Executive Director, MSRS, testified that the unfunded liability to MSRS-General based on those people who transfer from MSRS-Unclassified as determined by the LCPR actuary, was $22 million as of July 1, 2002, and that liability may be understated. Mr. Bergstrom said that this is a serious problem and that MSRS has been trying for 10 years to get this issue addressed.

Mr. Paul Schweitzer, House Controller, testified that his estimate of the budget impact of the provision would be approximately $181,000 per year to the House, approx. $80,000 to the LCC, and an estimated $120,000 to the Senate. Mr. Schweitzer said the House figure represents the equivalent of four full-time positions.

There was no action on the article.

Mr. Burek reviewed Article 10 and the related policy issues, and recommended the following changes to address a drafting issue:

Mr. Gary Austin, Executive Director, TRA, testified that TRA would like to begin collecting gender data because there is an associated actuarial impact. Mr. Austin also suggested the following amendment:

Sen. Betzold moved Article 12, amended by incorporating both Mr. Burek’s and Mr. Austin’s recommended changes, for inclusion in the Subcommittee work product. MOTION PREVAILED.

Mr. Burek reviewed Article 13, and stated that this article represents a technical change and raises no significant policy issues.

Sen. Betzold moved Article 13 for inclusion in the Subcommittee work product. MOTION PREVAILED.

Sen. Betzold moved amendment LCPR03-222. MOTION PREVAILED.

Mr. Martin reviewed the packet materials related to the second part of the administrative legislation.

Mr. Burek reviewed Article 14 and the related policy issues.

Mr. Gary Austin, Executive Director, TRA, testified in support of the provision, stating that a delay in some school district automated payroll systems may force some individuals to also delay the effective date of their retirement and are therefore penalized because of the payroll system. Mr. Austin said that a retirement benefit can not accrue until after the termination of service, and the termination of service should be the determining factor rather than final payment from the employer.

Sen. Betzold moved Article 14 for inclusion in the Subcommittee work product. MOTION PREVAILED.

Mr. Burek reviewed Article 15 and the related policy issues.

Mr. David Bergstrom, Executive Director, MSRS, indicated that MSRS would like to withdraw Section 2.

Mr. Gary Janikowski, Assistant Director Personnel, MnSCU, testified in support Article 11, Section 2. Mr. Janikowski said that they polled their members by e-mail and received only positive comments.

Sen. Betzold moved Article 11, Section 2, for inclusion in the Subcommittee work product. MOTION PREVAILED.

Mr. Burek reviewed Article 16 and stated that the proposal is merely a technical clean-up.

Sen. Betzold moved Article 16 for inclusion in the Subcommittee work product. MOTION PREVAILED.

Mr. Burek reviewed Article 17 and the related policy issues.

Mr. David Bergstrom, Executive Director, MSRS, testified that the there is now only one person who would be affected by the change in the Elected State Officers Plan, so it might be best to leave this provision out. Mr. Bergstrom said that the Judges Plan will be the only plan that doesn’t allow for age 55 early retirement, so the proposed legislation would provide consistency. Mr. Bergstrom also noted that it would be good to work with the court system to establish a reemployed annuitant provision.

The article was laid over.

Mr. Burek reviewed Article 18 and the related policy issues.

Mr. David Bergstrom, Executive Director, MSRS, testified that the proposal was intended to preserve the benefits the judges currently have and to offer them additional flexibility .

The article was laid over.

Mr. Martin reviewed technical amendment LCPR03-224.

Sen. Betzold moved LCPR03-224, verbally amended by not including the date provisions on page 8, lines 28 and 31, and page 9, line 15. MOTION PREVAILED.

The meeting adjourned at 12:00 noon.