Purpose

This bill modifies how disability benefits under the Minnesota police and fire public retirement system are reduced when a recipient has earnings from work while still receiving disability benefits. It specifically changes rules for members who began disability payments before July 1, 2023, and updates the applicable section of Minnesota law (Minnesota Statutes 2024 section 353.656 subdivision 4).

Main Provisions

• Limitation on disability payments when no salary impairment exists

  • A member is not entitled to a disability benefit if there is no impairment to the member’s salary during disability, considering factors such as remaining unused annual leave, sick leave, or other employer-provided salary continuation plans, or under other circumstances described in the law.

• Group A: Members who began disability payments before July 1, 2023 (and who are not required to reapply, or have not reached a required reapplication time)

  • If a disabled member resumes gainful employment and total monthly income from disability benefits, workers’ compensation (if any), and actual earnings exceeds the member’s “reemployment earnings limit,” the disability benefit must be reduced during the months they work and receive workers’ compensation (if applicable), as specified.
  • Reemployment earnings limit: the greater of
  • the monthly salary at the date of disability, or
  • 125% of the base monthly salary currently paid by the employer for similar positions.
  • The disability benefit is reduced by $1 for every $3 by which total monthly disability benefit plus workers’ compensation (if any) plus earnings exceed the reemployment earnings limit.
  • The reduction cannot cause the monthly disability benefit to exceed the original disability benefit amount.

• Group B: 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 gainful employment, the disability benefit must be reduced each year (until normal retirement age) by the sum of two components, but not to exceed the amount of the disability benefit.
  • Component 1 (based on years of service and disability type):
  • For members with less than 20 years of service (duty disability) or less than 15 years of service (regular disability), the annual reduction is calculated as $1 for each dollar of reemployment earnings, but not more than the lesser of two specified sub-calcualtions (described as i and ii in the bill), and not exceeding the employee contribution rate multiplied by the average salary used to determine the disability benefit, adjusted by a factor tied to years of service and age at disability.
  • The two sub-methods (i and ii) incorporate: a mix of the employee contribution rate, the average salary, years of service remaining, and age-related factors.
  • Component 2 (applicable to all members): In addition to Component 1, there is an alternative that provides $1 for every $2 up to 125% of the base monthly salary by which the sum of disability benefit and reemployment earnings exceeds the base monthly salary; and $1 for each dollar by which the sum exceeds 125% of the base monthly salary (with sum defined as current disability benefit plus actual monthly reemployment earnings plus base monthly salary).
  • Base monthly salary is the current base monthly salary paid by the employing governmental subdivision for similar positions.
  • The calculations refer to the employee contribution rate, average salary used to determine the disability benefit, and the difference between specific service-year thresholds (20 for duty disability or 15 for regular disability) and the member’s actual years of service, with adjustments that involve age at the time of disability.

• Group C: Exclusions

  • Paragraphs relating to the reemployment earnings reductions do not apply to a member who is receiving total and permanent disability benefits under section 353.656 subdivision 1a or subdivision 3a.

Key Changes to Law

• The bill clarifies and tightens the reduction framework for disability benefits when a recipient has earnings from work, with distinct rules for those who began disability payments before July 1, 2023, and those who begin or reapply on or after July 1, 2023.
• It introduces a two-group approach with detailed calculations for annual reductions after the application/reapplication date, aiming to align disability benefits with actual earnings and service history while preserving limits to prevent over-reduction.
• It maintains an upper bound that the disability benefit cannot be reduced below the original benefit amount, and it preserves a separate rule excluding total and permanent disability beneficiaries from certain reduction methods.

Targeted Groups and Application Dates

• Police officers, firefighters, and paramedics as defined in the relevant statute (section 353.64 subdivision 10).
• Members who began disability payments before July 1, 2023 (Group A).
• Members who begin disability payments or must reapply on or after July 1, 2023 (Group B).
• Total and permanent disability beneficiaries under 353.656 subdivision 1a or 3a are excluded from paragraphs b and c.

Relevant Terms - disability benefit - reemployment earnings limit - gainful employment / reemployment earnings - police officer, firefighter, paramedic - duty disability vs. regular disability - base monthly salary - employee contribution rate - Minnesota Statutes 2024 section 353.656 subdivision 4 - workers’ compensation benefits - unused annual leave / sick leave / salary continuation - normal retirement age - total and permanent disability (TPD) - section 353.64 subdivision 10 - section 353.31 subdivision 8 (reapplication timing) - base monthly salary (for similar positions) - the greater of (date-of-disability salary or 125% of base salary) - 1:3 and 1:2 reduction rules (as described in the calculations) - 353.65 subdivision 2 (employee contribution rate)