PERA phrase. The. Contribution Rate Increases On PERA's Legislative Agenda. 1st Quarter 2005 Published February 2005.

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1 The PERA phrase The employer newsletter of the Minnesota Public Employees Retirement Association 1st Quarter 2005 Published February 2005 In this issue: 1 Legislative Agenda 2 Finding ERIS Functions 3 Compensation for Volunteer Firefighter Service is Not Salary 5 Employer Seminars 6 Seminar Registration Form This document is available in alternative formats to individuals with disabilities by calling PERA or through the Minnesota Relay Service at 1 (800) Public Employees Retirement Association 60 Empire Drive Ste 200 St Paul MN Employer Line (metro area) (toll-free) Member Line (metro area) (toll-free) Web site Contribution Rate Increases On PERA's Legislative Agenda PERA is proposing several key pieces of legislation this year. Chief among these is a proposal to increase contribution rates for the Coordinated Plan in steps over the next several years and an increase in the Police and Fire Plan contribution rates. Other legislation that could impact employers include changes to the PERA's deferred augmentation, a repeal of the salary cap for local government employees, and a law that would allow PERA to collect money owed by charter schools via a deduction from the state aid to the school. Coordinated Plan Increase (Senate File 286) PERA's Board of Trustees is proposing a phased-in Coordinated Plan contribution rate increase to be shared by both employers and employees. The employer contribution rate would increase by 1.47 percent between January 2006 and January The employee rate would increase by 0.9 percent between January 2006 and January Date of Increase Employee Rate Employer Rate Current Rates 5.10% 5.53% January 1, 2006 January 1, 2007 January 1, 2008 January 1, 2009 January 1, % 5.75% 6.25% 6.50% 6.75% 7.00% The last time the legislature addressed the Coordinated Plan funding occurred in At that time, employer rates went from 5.18% to 5.53% and employee rates rose from 4.75% to 5.10%. These increases were approximately one-third of the additional funding actuaries determined was required to fully fund PERA. It was hoped that extending the date for full funding to 2031, awarding partial service cred for employees who work less than half-time, and a rebound in investment performance would limit the need for future increases. However, investment losses and the repeal of the partial service credit portion of the law made the 2001 legislation a short-term fix. The rate increase proposal approved by PERA's Board of Trustees is based on an in-depth study by PERA's actuarial consulting firm. The assessment was that a tota contribution rate (employer and employee) of 12 percent would meet the plans fund ing requirements if implemented immediately or 13 percent would be needed if the increases were spread out over several years. Conversations and inquiries betwee PERA and employers overwhelmingly supported the rate increases be phased-in to lessen the budgetary impact to employers. continued on page 1

2 Do You Need Help Finding ERIS Functions? With the recent enhancement of the Employer Reporting and Information System (ERIS), there is a dramatic increase in the number of employers using this Internet tool. In fact, as of January 14, 2005, there are 721 registered ERIS users, representing 626 employers. Of these users, 317 (284 employers) registered since December 7, 2004 when the latest modules were released. (Medical Leave, Military Leave, Return from Leave, etc.), go to the Member Employment page for the employee. There are two ways to access these records. If you know the individual's Social Security Number, use the Member Account module. Alternatively, if you do not know the Social Security Number, use the Employee Search under the Search module. Registered employers may use ERIS to search for employees (or types of employees), search for PERA benefit recipients, enroll new members, change the employment status, name or address of existing members, and add or change employer contact information. Additionally, those of you who previously submitted PERA contribution or demographic data files via our FTP software must use ERIS now to transmit your data files. We have learned through telephone calls and other inquiries, that some of you have had difficulty finding where in ERIS you need to go to perform reporting tasks. As a service to new users and to those who are not familiar with ERIS' features, we want to take this opportunity to provide basic information. You will find complete instructions on how to use the ERIS modules in an online help document. To access the help text, click the question mark (?) located at the top of each screen. At your option, you may print the online help manual. When using the Member Account module, enter the person's Social Security Number (without dashes) and click Submit. This action will take you to the Member Account Information page. From here, select the Employer Number, Employer Name or Plan Description field under the Employment List at the bottom of the page. This will bring you to the Member Employment page. If you use the Search module to access Member Employment, first select Employee from the Search menu. Then, enter enough information in any of the search fields to find the individual you need to update. For example, if you are looking for Sam Jones, you can enter the full name in the appropriate fields and select 'Submit.' Or, if you choose not to enter a full name, all names beginning with the letters entered will appear (searching by 'Jo' would result in Jones, Johnson, Johannsen, etc) after selecting 'Submit'. In either case, once the name(s) appear, click the appropriate name to access the Member ERIS modules are listed in the navigation bar on the left-hand side of the main page. To help you quickly navigate ERIS, we have compiled a list of tasks that most of you will be able to perform in ERIS and the module you should select. Enrollment If you need to enroll a member in PERA, whether the person is a new hire, a reinstating employee, or an employee who has now met eligibility requirements, use the Enroll Member module. Member data is entered in the New Enrollment Information screen. It is best if all fields are completed, but at a minimum you must enter data in fields with bold headings. Status Changes To change a member's employment status 2

3 ERIS Functions (continued) Account Information page for that individual. Then select the Employer Number, Employer Name or Plan Description field under the Employment List at the bottom of the page. This will bring you to the Member Employment page. To change the employee's status, select the appropriate status from the drop-down list and enter the effective date in the New Status Date field. Selecting the 'Submit' button at the bottom of the page will then save the status change in PERA's system. Changing Password Your password is changed in the Admin module. From there, select Change Password. On the Change Your Password screen, enter your current password, enter your new password, then confirm it by entering it a second time. When choosing a new password, make sure to follow the rules and guidelines as listed on the top of the Change Your Password screen. Transmit Files The Transmit File module is limited for use by employers who are approved by PERA to submit demographic and Salary Deduction Report data files. Prior to January 10, 2005, employers approved to send electronic files did so using File Transfer Protocol software. To submit data files electronically to PERA, use the browser in the Transmit File module to locate the appropriate file. Then, select the 'Submit' button. You will receive an immediate confirmation each time you transmit a file. Logging Out When logging out of ERIS, you must use the Log Out feature in the Navigation menu and follow the prompts. Simply closing the browser window does not properly log you out of ERIS. If you fail to log out properly, you will not be able to re-access ERIS for approximately 50 minutes. If you have additional questions concerning the use of ERIS, you can call the ERIS Help Line at (651) or 1 (888) , option '8.' Compensation for volunteer fire fighter service is not salary Minnesota law was amended in 1989 to exclude volunteer fire fighters from PERA's Coordinated and Police and Fire plans. Applying this exclusion may be confusing in instances when for the same employer a fire fighter has a position covered by the Police and Fire Plan and also serves the city as a volunteer earning a pension from a relief association plan governed by Minnesota Statutes Chapter 424A. Contributions withheld at the Police and Fire Plan rate from compensation for service as a professional fire fighter for a city count, of course, toward the person's PERA pension. However, when Police and Fire Plan contributions are also withheld on volunteer services the person performs for the same employer, the fire fighter's retirement benefit from PERA would be enhanced based upon service for which the fire fighter may already be earning a pension in a relief association plan. Getting pension credit in two retirement plans simultaneously for the same service activity is what the amendment to statute in 1989 sought to prevent. In these instances, PERA must refund the employer and employee contributions that had been based upon volunteer service rendered after It is important to note, however, that a "grandfather" provision was enacted in 1989, which permits PERA deductions to be taken from compensation for volunteer fire fighter service if the withholdings started before 1989 and have been continuous to the present. If you have questions about your employees who serve your city as both professional and volunteer fire fighters, please call PERA's employer phone line and select option 3 or 4. 3

4 Legislative Agenda (continued) Police and Fire Plan Increase (Senate File 621) Legislation to increase the Police and Fire Plan contribution rates for both employers and employees is also being supported by PERA's Board of Trustees. Changes in actuarial assumptions on life expectancies, when employees retire and usage of disability benefits, combined with the poor market investments have now made the Police and Fire Plan need additional funding. The cost of benefits earned each year is about 22.5 percent of the salaries of the covered members. However, PERA has been collecting only about 15.5 percent since Under existing state law, employers are required to cover 60 percent of any contribution rate increase and employees cover the other 40 percent. The actuarial assessment is that the total contributions (employer and employee) must increase by 7 percent to regain required full funding. If passed, employer contributions for the Police and Fire Plan will increase from 9.3 percent to 13.5 percent and employee rates will go from 6.2 percent to 9 percent. At this time, it has not been finalized whether it will be a onetime increase or phased in over time. Deferred Augmentation Process (Senate File 620) Another legislative proposal would modify the interest paid on benefits for those who are vested and terminate public employment prior to retirement age. Employees who are vested and terminate can defer payments of benefits rather than taking a refund. Under current law, these benefits are augmented by 3 percent per year until the individual reaches age 55 and then by 5 percent until the person chooses to draw a benefit. PERA is proposing an annual augmentation of 2.5 percent per year from the date of termination of service until the first month after the deferred member reaches age 55. No augmentation would occur after age 55. This change would only be applicable to terminations after January 1, 2006 and could save PERA an estimated $14.8 million per year. Those who are currently deferring benefits or those who terminate during 2005 would be covered under current laws. Charter School Deduction (Senate File 429) Legislation has also been introduced that would allow PERA to collect amounts due by charter schools from the state aid designated for that school. Under this proposal, if a charter school fails to submit contribution payments, PERA can certify the amount due to the Department of Finance which will then deduct the amount from any subsequent state-aid payment or state appropriation amount applicable to the charter school. Salary Cap (House File 29 and Senate File 857) Finally, under a bill introduced in the House of Representatives, the salary cap of 95 percent of the governor's salary for local governmental employees would be repealed. If passed, this would allow employers to compensate employees and not have the restriction of having to stay below the current salary of Minnesota's governor. A slightly different bill related to the salary cap was introduced in the Senate. Senate File 857 proposes a salary cap (as well as salary for pension purposes) at 125 percent of the Governor s salary. Like with any bills introduced, the House and the Senate would have to agree on the final language and the Governor would have to sign the bill before it is enacted into law. As of the writing of this newsletter, none of the above proposals have passed. Also, please keep in mind that, if passed, the final version of the laws may differ from what is reported here. The 2nd Quarter 2005 PERAphrase will include a complete breakdown of laws passed that impact PERA-eligible employers. Additionally, we will relay information concerning the bills via our Web site as it becomes available. More information is available concerning the progress of these proposals on the legislature s Bill Status Web site, If you have questions for PERA regarding the legislation please call PERA at (651) or 1 (888)

5 Employer Seminars Offer Opportunity to Learn PERA will once again be offering employer workshops this spring. Like last year, the seminars will be half-day sessions concentrating on specific topics that attendees can discuss as groups. At this time the curriculum is in development and we have not finalized the areas we will cover. Those of you who attended a session last spring know that these seminars are a great chance to dig deeper into topics, have discussions with your peers about business practices and address specific pension issues in a relaxed, informal environment. If you did not attend a PERA workshop last spring, we encourage you to register this year. Check our Web site for more information and, as we draw closer to the sessions, for a list of topics. A finalized curriculum will be posted on our Web site by the beginning of April. The training program uses a series of Fact Sheets that provide detailed information on a particular topic. The Fact Sheets are discussed as a group and may be supplemented by quizzes that generate additional discussion among attendees. Attendees are divided by employer type so that you sit with people who work for similar employers (schools, townships, counties, watershed districts, etc). Each session will include an overview of our Employer Reporting and Information System (ERIS). This part of the training will include updates on new features, offer opportunities for attendees to ask questions and provide feedback about ERIS and, if appropriate, provide details on registering for ERIS. Different this year from previous sessions is that some sessions begin in the morning while others are scheduled for the afternoon. Please make sure when you register to note the start time of the session. Registration To register for a seminar, please use our Web site, If you don't have access to the Internet, use the registration form on page 6. Registration forms can be faxed to (651) or mailed to PERA, Attn: Mark Lindner, 60 Empire Dr, Suite 200, St Paul, MN, TRA Training The Teachers' Retirement Association is also offering employer training seminars in conjunction with the PERA sessions. TRA representatives will be in the same locations as PERA, but the TRA sessions will be at different times than the PERA training. In cities in which the PERA training is held in the morning, the TRA session will be in the afternoon. When the PERA training is in the afternoon, the TRA session is in the morning. TRA has requested that registration for their training be handled through PERA's Web site. To register for the TRA training, check the appropriate button on the registration page. If you have questions about the TRA training, please contact TRA at 1 (800) or (651) More Information If you would like more information about the seminars, please call (651) or 1 (888) , option '4.' Wednesday, April 20, 2005 St Paul Retirement Systems Bldg Tuesday, May 3, 2005 Rochester Ramada Inn (Formerly Best Western - Apache) Tuesday, May 10, 2005 Duluth Best Western - Edgewater Wednesday, May 11, 2005 Grand Rapids District 318 Admin Bldg Tuesday, May 24, 2005 Fergus Falls Best Western - Falls Inn Wednesday, May 25, 2005 Thief River Falls C Mon Inn Wednesday, June 1, 2005 St Cloud Holiday Inn Tuesday, June 7, 2005 Baxter/Brainerd Comfort Suites Wednesday, June 8, 2005 Bemidji Holiday Inn Express Tuesday, June 14, 2005 Marshall Best Western Wednesday, June 15, 2005 Mankato Country Inn & Suites Tuesday, June 21, 2005 St Paul Retirement Systems Bldg * Times shown indicate the start time of the PERA seminar. If you are attending a TRA session and the time shown in the schedule above is listed as 1:00 PM 4:00 PM, the TRA session begins at 9:00 AM 5

6 Public Employees Retirement Association 60 Empire Drive, Suite 200 St. Paul, MN Prsrt Std U.S. POSTAGE PAID Permit No. 171 St. Paul, MN ADDRESS SERVICE REQUESTED The PERA phrase PERA Employer Seminar Registration Form The following form can be used to register for one of PERA s 2005 Employer Seminars. If you have Internet access, we would prefer if you registered online. Please refer to page 5 for a complete schedule PERA Employer Seminar Registration To register for a PERA Employer Seminar, complete the following information and send this form to: PERA, Attn: Mark Lindner, 60 Empire Drive, Suite 200, St Paul, MN Or, fax it to (651) You can also register online at Name (please print) Job Title Employer name and PERA Employer ID # Daytime Telephone Number Mailing Address City State Zip Code Address Location and Date of Seminar Special Accomodations (Sign Interpreter, etc)