HF4957

Purpose

• The bill changes how retirement benefits can be collected when a person has earned service credits in more than one covered retirement plan. It creates a framework for a combined service annuity across multiple plans and sets conditions, calculations, and limits for combining benefits.

Main Provisions

• Eligibility for a combined annuity
  • A person may elect to receive retirement annuities from each covered retirement plan if they have allowable service in two or more plans.
  • Each plan must have at least 0.5 year of allowable service.
  • The total allowable service must equal or exceed the longest vesting requirement of the applicable plan.
  • The retirement annuity effective dates for each plan must be within a one-year period.
• How the annuities are calculated
  • If eligible, each plan’s annuity is based on the plan’s own accrual rates and the plan’s average salary, with several cross-plan rules preserved.
  • The laws governing annuities are the laws in effect on the date of termination from the last public service under a covered plan where the person earned at least 0.5 year of service.
  • The average salary for each formula plan is based on the employee’s highest five consecutive years of covered salary across all covered plans.
  • Accrual rates used come from each plan’s formula for the relevant years, recognizing credit across plans.
  • All allowable service across the covered plans is combined when determining eligibility and when applying provisions that reduce annuities before normal retirement age.
  • For any service counted under a nonformula plan that is part of a covered plan, that service and salary must still be used in the calculation, but the plan’s own formula applies to its portion.
  • If the member qualifies for early retirement, the member may be treated as eligible for an early retirement benefit and may elect to receive an unreduced annuity as if they were in public service with the Teachers Retirement Association before July 1, 1989.
• Deferred annuity augmentation
  • If a person eligible for annuities from multiple plans terminates all public service, the deferred annuity must be augmented (increased) from the termination date until the earlier of:
  • the retirement effective date, or
  • the following cut-off dates: December 31, 2018 for the Minnesota State Retirement System and the Public Employees Retirement Association, or June 30, 2019 for the Teachers Retirement Association and the St. Paul Teachers Retirement Association.
  • The augmentation rate uses the rate in effect when the person first entered public employment and is adjusted according to the laws of each plan.
• Applicability and plan-specific limits
  • The section does not apply to anyone whose final termination from public service under a covered plan occurred before May 1, 1975.
  • Accrual rate caps (per year of service) apply by plan:
  • Judges Retirement Fund: not to exceed 3.2%
  • Public Employees Police and Fire Plan and State Patrol Retirement Plan: not to exceed 3.0%
  • Legislators Retirement Plan: not to exceed 2.5% (except for certain adjustments under a specified section)
  • All other covered plans: not to exceed 2.7%
• Handling duplicated service across plans
  • Any period of time with credit in more than one plan must be counted only once toward total allowable service.
  • If duplicated service is more than 0.5 year (or more than 0.5 year with each plan), each plan must apply its own formula to a prorated portion of the duplicated service based on the plan-specific salary share for that period relative to total salary across all plans.
  • If duplicated service is less than 0.5 year (or combined with other service makes the total less than 0.5 year), the service credit is ignored and a refund of contributions is provided per each plan’s refund provisions.

Significant Changes to Existing Law

• Establishes a formal framework for combining retirement benefits from multiple plans (a “combined service annuity”) with explicit eligibility, calculation, and augmentation rules.
• Requires recognition of service across all plans for eligibility and certain benefit features, while maintaining each plan’s own accrual rules for the calculation.
• Adds specific caps on annual accrual rates by plan and detailed rules for prorating or excluding duplicated service credits.
• Introduces a structured augmentation timeline for deferred annuities upon termination, with different cut-off dates by plan.
• Creates limitations based on when a person’s final termination occurred (pre-1975 exclusions).

Relevant Terms - combined service annuity - covered retirement plans - allowable service - vesting / vesting requirement - longest vesting requirement - eligible service - average salary (highest five years) - accrual rate - formula plan / nonformula plan - early retirement - augmentation (deferred annuity augmentation) - termination / termination date - termination from last public service - reflected plans: Minnesota State Retirement System (MSRS), Public Employees Retirement Association (PERA), Teachers Retirement Association (TRA), St. Paul Teachers Retirement Association (SPTRA), Judges Retirement Fund, Public Employees Police and Fire Plan, State Patrol Retirement Plan, Legislators Retirement Plan - duplicated service credit - prorated service credit - refunds of contributions - unreduced annuity