HF3449

Purpose

This bill aims to reform how certain state employees, including some lawmakers and university staff, participate in Minnesota retirement systems. It allows legislators to elect coverage under the general state employees retirement plan and broadens who can be part of the “unclassified program.” It also sets up a process for eligible workers in the unclassified program to transfer their retirement coverage to the general state employees retirement plan, with specific rules on timing, contributions, and funding.

Key Provisions

• Expanded inclusion in the unclassified program

  • The bill adds a wide range of employees to the list of people considered “included employees” for retirement purposes. This includes various state agencies, commissions, and entities (such as certain state historical, horticultural, and agricultural groups), university-related staff, legislative staff, and other public service roles. It also allows members of the legislature to elect retirement coverage under the general state employees plan.
  • It lists specific positions and groups that can be covered, including some university heating plant staff, seasonal workers, certain public authority and commission staff, and several named organizations and offices.

• Transfer option from unclassified program to the general plan

  • Employees who are in the unclassified program may choose to terminate participation in that program and move to the general state employees retirement plan under certain conditions.
  • Eligibility conditions (examples):
  • If the employee began current covered employment before July 1, 2010, and has at least 10 years of covered employment.
  • If the employee began after June 30, 2010, and has no more than seven years of allowable service in the unclassified program.
  • If the employee is a member of the legislature.
  • Deadlines for making the transfer election are specified (e.g., within one month after termination of covered employment for most cases, and by the end of the seventh year of allowable service in other cases).
  • The transfer is irrevocable during any period of covered employment.

• Financial and contribution mechanics of the transfer

  • When a transfer is chosen, the executive director of the Minnesota State Retirement System will determine and redeem the employee’s total shares in the unclassified program.
  • The employee will receive credit for contributions that would have been paid to the general plan during the employee’s entire period of covered employment had they been in the general plan.
  • Any remaining balance (the “redeemed” amount not credited to the general plan) is transferred to the general plan, with calculations showing:
  • Employee contributions actually paid vs. contributions that would have been paid under the general plan for the same period.
  • If the amount calculated as the actual employee contributions is greater than the calculated general-plan contributions, the difference is refunded to the employee.
  • If the general-plan contributions are greater, the employee must pay the difference within six months of electing the transfer (or by the date of the annuity, whichever is sooner).
  • The transfer election is irrevocable during the period of covered employment.
  • Employees who hold “employee shares” in the unclassified program may not terminate participation to join the general plan if they are credited with those shares.

• Employer contributions

  • For certain positions (notably those operating the heating plant facilities at the University of Minnesota or its successors), employer contributions remain the sole obligation of the employer operating that facility, even after transfer options are created.

Significant Changes Compared to Current Law

• Broader eligibility for the unclassified retirement program

  • More state employees and related personnel are designated as eligible participants in the unclassified retirement program.

• New option for migration to the general state employees retirement plan

  • Legislators and other eligible unclassified-program participants can elect to move to the general state employees retirement plan, with a structured process and financial reconciliation.

• Defined financial reconciliation for transfers

  • The bill creates a detailed method to reconcile contributions and credits when transferring, including refunds or required payments by the employee.

• Irrevocability and restrictions

  • The transfer is irrevocable during periods of covered employment, and certain employees with “shares” in the unclassified program cannot terminate participation to join the general plan.

Potential Impacts

• Retirement benefits and service credits

  • The changes could affect how service credits are counted and how benefits accrue for a broad set of state employees and legislators, depending on whether they stay in the unclassified program or transfer to the general plan.

• Financial obligations for employers and employees

  • The transfer mechanics affect how much employees pay vs. what the state contributes, and how funds are allocated between plans.

• Administrative workload

  • The expanded eligibility and transfer option will require administrative handling by the Minnesota State Retirement System to process elections, calculate balances, and manage reconciliations.

Implementation Notes

• Timing and deadlines are specified for elections to transfer.
• The process requires formal written elections and actions by the executive director of the Minnesota State Retirement System.
• The bill sets specific conditions and timelines for when transfers must occur relative to employment status and legislative terms.

Relevant Terms - unclassified program - general state employees retirement plan - Minnesota State Retirement System - transfer to general plan / transfer election - employee shares - contributions / employee contributions - employer contributions - allowable service / service credit - irrevocable (during period of covered employment) - termination of participation - University of Minnesota heating plant facilities - covered employment - end of month deadlines - legislative coverage / legislators - 10 years / 7 years thresholds - July 1, 2010 / June 30, 2010 deadlines