1.1                          A bill for an act
  1.2             relating to retirement; providing an annuity increment 
  1.3             for certain teachers based upon the difference between 
  1.4             certain teacher salaries and the average salaries paid 
  1.5             in metropolitan area school districts; amending 
  1.6             Minnesota Statutes 1994, sections 124.916, by adding a 
  1.7             subdivision; 354.05, subdivision 35; 354.42, by adding 
  1.8             a subdivision; and 354.44, subdivision 6, and by 
  1.9             adding a subdivision. 
  1.10  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.11     Section 1.  Minnesota Statutes 1994, section 124.916, is 
  1.12  amended by adding a subdivision to read: 
  1.13     Subd. 5.  [INCREMENTAL PENSION CONTRIBUTION.] A school 
  1.14  district may levy the amount necessary to make the incremental 
  1.15  employer contribution required under section 354.42, subdivision 
  1.16  4a. 
  1.17     Sec. 2.  Minnesota Statutes 1994, section 354.05, 
  1.18  subdivision 35, is amended to read: 
  1.19     Subd. 35.  [SALARY.] (a) "Salary" means the higher of:  (1) 
  1.20  compensation, upon which member contributions are required and 
  1.21  made,; or (2) the average of the annual salaries paid to members 
  1.22  who are elementary and secondary teachers with the same number 
  1.23  of years of formula service credit in the public schools in 
  1.24  districts located in whole or in part within the metropolitan 
  1.25  area, as defined in section 473.121, but not school districts in 
  1.26  Minneapolis or St. Paul.  Salary is that amount which is paid to 
  1.27  a teacher before employee-paid fringe benefits, tax sheltered 
  2.1   annuities, deferred compensation, or any combination of these 
  2.2   employee-paid items are deducted. 
  2.3      (b) "Salary" does not mean: 
  2.4      (1) lump sum annual leave payments; 
  2.5      (2) lump sum wellness and sick leave payments; 
  2.6      (3) payments in lieu of any employer-paid group insurance 
  2.7   coverage; 
  2.8      (4) payments for the difference between single and family 
  2.9   premium rates that may be paid to a member with single coverage; 
  2.10     (5) employer-paid fringe benefits including, but not 
  2.11  limited to, flexible spending accounts, cafeteria plans, health 
  2.12  care expense accounts, day care expenses, or automobile 
  2.13  allowances and expenses; 
  2.14     (6) any form of payment made in lieu of any other 
  2.15  employer-paid fringe benefit or expense; 
  2.16     (7) any form of severance payments; 
  2.17     (8) workers' compensation payments; 
  2.18     (9) disability insurance payments including self-insured 
  2.19  disability payments; 
  2.20     (10) payments to school principals and all other 
  2.21  administrators for services in addition to the normal work year 
  2.22  contract if these additional services are performed on an 
  2.23  extended duty day, Saturday, Sunday, holiday, annual leave day, 
  2.24  sick leave day, or any other nonduty day; 
  2.25     (11) payments under section 356.24, subdivision 1, clause 
  2.26  (4)(ii); and 
  2.27     (12) payments made under section 125.12, subdivision 7, 
  2.28  except for payments for sick leave accumulated under the 
  2.29  provisions of a uniform school district policy that applies 
  2.30  equally to all similarly situated persons in the district. 
  2.31     Sec. 3.  Minnesota Statutes 1994, section 354.42, is 
  2.32  amended by adding a subdivision to read: 
  2.33     Subd. 4a.  [ADDITIONAL CONTRIBUTION FOR DISPARITY.] The 
  2.34  additional employer contribution required due to the increment 
  2.35  between the salary determined under section 354.05, subdivision 
  2.36  35, paragraph (a), clause (1), and the salary calculated under 
  3.1   clause (2) of that paragraph must be paid as follows: 
  3.2      (1) 40 percent from the state general fund; 
  3.3      (2) 40 percent by the employing district; and 
  3.4      (3) 20 percent by the employee. 
  3.5   The incremental employer and employee contributions shall be 
  3.6   added to and paid along with and in the same manner as other 
  3.7   employer and employee contributions.  The executive director of 
  3.8   the teachers retirement association shall certify the required 
  3.9   state contribution to the commissioner of finance each month, 
  3.10  and the commissioner shall transfer the required amount to the 
  3.11  association within 30 days.  The amount needed to make the state 
  3.12  contribution is appropriated annually from the state general 
  3.13  fund. 
  3.14     Sec. 4.  Minnesota Statutes 1994, section 354.44, 
  3.15  subdivision 6, is amended to read: 
  3.16     Subd. 6.  [COMPUTATION OF FORMULA PROGRAM RETIREMENT 
  3.17  ANNUITY.] (1) The formula retirement annuity hereunder shall be 
  3.18  computed in accordance with the applicable provisions of the 
  3.19  formulas stated in clause (2) or (4) on the basis of each 
  3.20  member's average salary for the period of the member's formula 
  3.21  service credit.  
  3.22     For all years of formula service credit, "average salary," 
  3.23  for the purpose of determining the member's retirement annuity, 
  3.24  means the higher of:  (i) average salary upon which 
  3.25  contributions were made and upon which payments were made to 
  3.26  increase the salary limitation provided in Minnesota Statutes 
  3.27  1971, section 354.511, for the highest five successive years of 
  3.28  formula service credit provided, however, that such "average 
  3.29  salary" shall not include any more than the equivalent of 60 
  3.30  monthly salary payments; or (ii) the average of the annual 
  3.31  salaries during the five successive year period in clause (i) 
  3.32  paid to members who are elementary and secondary teachers with 
  3.33  the same number of years of formula service credit in the public 
  3.34  schools in districts located in whole or in part within the 
  3.35  metropolitan area, as defined in section 473.121, but not school 
  3.36  districts in Minneapolis or St. Paul.  Average salary must be 
  4.1   based upon all years of formula service credit if this service 
  4.2   credit is less than five years. 
  4.3      (2) This clause, in conjunction with clause (3), applies to 
  4.4   a person who first became a member of the fund or a member of a 
  4.5   pension fund listed in section 356.30, subdivision 3, before 
  4.6   July 1, 1989, unless clause (4), in conjunction with clause (5), 
  4.7   produces a higher annuity amount, in which case clause (4) 
  4.8   applies.  The average salary as defined in clause (1), 
  4.9   multiplied by the following percentages per year of formula 
  4.10  service credit shall determine the amount of the annuity to 
  4.11  which the member qualifying therefor is entitled: 
  4.12                         Coordinated Member   Basic Member
  4.13  Each year of service     1.13 percent       2.13 percent
  4.14   during first ten        per year           per year
  4.15  Each year of service     1.63 percent       2.63 percent
  4.16   thereafter              per year           per year
  4.17     (3)(i) This clause applies only to a person who first 
  4.18  became a member of the fund or a member of a pension fund listed 
  4.19  in section 356.30, subdivision 3, before July 1, 1989, and whose 
  4.20  annuity is higher when calculated under clause (2), in 
  4.21  conjunction with this clause than when calculated under clause 
  4.22  (4), in conjunction with clause (5). 
  4.23     (ii) Where any member retires prior to normal retirement 
  4.24  age under a formula annuity, the member shall be paid a 
  4.25  retirement annuity in an amount equal to the normal annuity 
  4.26  provided in clause (2) reduced by one-quarter of one percent for 
  4.27  each month that the member is under normal retirement age at the 
  4.28  time of retirement except that for any member who has 30 or more 
  4.29  years of allowable service credit, the reduction shall be 
  4.30  applied only for each month that the member is under age 62. 
  4.31     (iii) Any member whose attained age plus credited allowable 
  4.32  service totals 90 years is entitled, upon application, to a 
  4.33  retirement annuity in an amount equal to the normal annuity 
  4.34  provided in clause (2), without any reduction by reason of early 
  4.35  retirement. 
  4.36     (4) This clause applies to a member who has become at least 
  5.1   55 years old and first became a member of the fund after June 
  5.2   30, 1989, and to any other member who has become at least 55 
  5.3   years old and whose annuity amount when calculated under this 
  5.4   clause and in conjunction with clause (5), is higher than it is 
  5.5   when calculated under clause (2), in conjunction with clause (3).
  5.6   The average salary, as defined in clause (1) multiplied by 2.63 
  5.7   percent for each year of service for a basic member and by 1.63 
  5.8   percent for each year of service for a coordinated member shall 
  5.9   determine the amount of the retirement annuity to which the 
  5.10  member is entitled. 
  5.11     (5) This clause applies to a person who has become at least 
  5.12  55 years old and first becomes a member of the fund after June 
  5.13  30, 1989, and to any other member who has become at least 55 
  5.14  years old and whose annuity is higher when calculated under 
  5.15  clause (4) in conjunction with this clause than when calculated 
  5.16  under clause (2), in conjunction with clause (3).  An employee 
  5.17  who retires under the formula annuity before the normal 
  5.18  retirement age shall be paid the normal annuity provided in 
  5.19  clause (4) reduced so that the reduced annuity is the actuarial 
  5.20  equivalent of the annuity that would be payable to the employee 
  5.21  if the employee deferred receipt of the annuity and the annuity 
  5.22  amount were augmented at an annual rate of three percent 
  5.23  compounded annually from the day the annuity begins to accrue 
  5.24  until the normal retirement age. 
  5.25     Sec. 5.  Minnesota Statutes 1994, section 354.44, is 
  5.26  amended by adding a subdivision to read: 
  5.27     Subd. 6a.  [METRO AVERAGE SALARY CALCULATION.] (a) By 
  5.28  November 1 each year, the executive director shall make the 
  5.29  average salary calculations required by section 354.05, 
  5.30  subdivision 35, paragraph (a), clause (2), and by subdivision 6, 
  5.31  clause (1)(ii), for metropolitan area school districts.  These 
  5.32  calculations must be based on salaries reported to the 
  5.33  association for the 12 months ending on June 30 of that year.  
  5.34  The executive director must calculate a separate average salary 
  5.35  for people who have completed each different level of formula 
  5.36  service credit in increments of one full year.  For example, the 
  6.1   executive director must calculate average salary for persons who 
  6.2   have completed one year of formula service credit, two years of 
  6.3   service credit, and every other full year.  The director shall 
  6.4   certify the average salaries calculated under this paragraph to 
  6.5   the commissioner of finance, the legislative commission on 
  6.6   pensions and retirement, and each school district. 
  6.7      (b) The average salaries calculated under this section take 
  6.8   effect on the first day of the first full payroll period 
  6.9   beginning after the January 1 next following the calculation.  
  6.10  For purposes of calculating a person's imputed salary for 
  6.11  purposes of section 354.05, subdivision 35, and the person's 
  6.12  imputed average salary under section 354.44, subdivision 6, 
  6.13  clause (1)(ii), the executive director shall determine how many 
  6.14  full years of formula service credit the person has completed on 
  6.15  January 1, and that number of years of formula service credit 
  6.16  shall be used as the basis for calculating the person's imputed 
  6.17  salary for the entire calendar year. 
  6.18     Sec. 6.  [EFFECTIVE DATE.] 
  6.19     Sections 1 and 5 are effective July 1, 1995.  Sections 2 to 
  6.20  4 are effective January 1, 1996, and apply to salary received 
  6.21  after that date.