HF3953

Purpose

• To change how disability benefits for police officers, firefighters, and paramedics are reduced when they return to work and earn money. The bill distinguishes rules for people who started disability payments before July 1, 2023 and those who start on or after July 1, 2023, and it aims to keep total benefits from exceeding the original disability amount.

Main Provisions

• Applies to disability benefits under the public employees retirement plan for police, fire, and paramedic personnel, specifically Minnesota Statutes 353.656, subdivision 4 (Limitation on disability benefit payments).

• Defines who is covered by the new rules, including when a member began disability payments and whether they must reapply for benefits.

• For members who began disability payments before July 1, 2023 (and who are not required to reapply or have not finished the applicable reapplication period):

  • If a disabled member returns to gainful work and the sum of the disability benefit, workers’ compensation (if any), and actual earnings exceeds a reemployment earnings limit, the disability benefit must be reduced during the months of work.
  • Reemployment earnings limit: greater of (a) the monthly salary at the date of disability, or (b) 125% of the base monthly salary currently paid by the government employer for similar positions.
  • The reduction is $1 of disability benefit for every $3 by which the total exceeds the limit.
  • The disability benefit cannot be reduced below zero and may not exceed the amount originally allowed.

• For members who begin disability payments or must reapply on or after July 1, 2023:

  • Starting the calendar year after application or reapplication, if the member resumes work with earnings, the disability benefit must be reduced each year by the amount described in the law, up to the amount of the disability benefit, and not to exceed it.
  • For members with less than 20 years of service (duty disability) or less than 15 years of service (regular disability), the reduction uses a two-part method:
  • Option i: a dollar-for-dollar calculation tied to the employee contribution rate, the average salary used to determine the disability benefit, the years of service, and age at the time of disability (with a specific formula that blends service, age, and salary).
  • Option ii: a simplified approach of 50% of the member’s yearly reemployment earnings.
  • For all members, there is an alternative approach that uses the sum of the current disability benefit plus actual monthly reemployment earnings and base monthly salary. In this approach, reductions are triggered when this sum exceeds 125% of the base monthly salary, with the specific dollar-for-dollar adjustments outlined in the bill.
  • Base monthly salary is defined as the current base salary paid by the employer for similar positions.

• Exclusions/Limitations:

  • The above paragraphs (b and c) do not apply to members receiving total and permanent disability benefits under section 353.656, subdivision 1a or 3a.

Significant Changes to Existing Law

• Introduces a dual-track system based on when disability benefits began (before July 1, 2023 vs. on/after July 1, 2023).
• Adds annual reductions for post-2023 cases, with different formulas depending on service years and disability type (duty vs. regular).
• Keeps a hard cap so disability benefits cannot exceed the original amount and cannot drop below zero.
• Clarifies interaction with workers’ compensation and reemployment earnings, including a defined reemployment earnings limit that uses either the disability date salary or 125% of the base salary.
• Explicitly excludes total and permanent disability cases from the new reduction provisions.

Effect on Affected Individuals

• Police officers, firefighters, and paramedics who receive disability benefits and later return to work could see their disability payments reduced if they earn wages, with reductions calculated under the new rules.
• The amount of a reduction depends on when disability began, years of service, disability type (duty vs. regular), age, and current earnings.
• Those with total and permanent disability benefits are not subject to these reduction provisions.

Practical Implications

• The rule changes aim to balance continued disability support with ongoing work earnings, potentially limiting the total benefits received while working.
• The revised formulas introduce more detail and variation in how much an individual’s disability benefit is reduced, particularly for those who started benefits after July 1, 2023.
• The bill emphasizes that earnings plus disability benefits should not excessively exceed the regular salary for similar roles.

Scope and Departments Affected

• Minnesota Police and Fire Retirement Plan administered benefits for police officers, firefighters, and paramedics.

Relevant Sections Mentioned (for context) - Minnesota Statutes 2024 section 353.656, subdivision 4 (Limitation on disability benefit payments) - Definitions related to police, firefighters, and paramedics (as in section 353.64, subdivision 10) - Interaction with workers’ compensation benefits - Distinctions between duty disability and regular disability - Provisions not applying to total and permanent disability under 353.656 subdivisions 1a or 3a

Relevant Terms - disability benefit - reemployment earnings limit - reemployment earnings - base monthly salary - duty disability - regular disability - total and permanent disability - workers’ compensation - gainful occupation - employee contribution rate - average salary - normal retirement age - earnings threshold - impairment of salary - police officer - firefighter - paramedic - governmental subdivision - reapplication (for disability benefits) - Minnesota Statutes 353.656 - subdivision 4 (Limitation on disability benefit payments)