PERA Defined Benefit Plans General Membership Eligibility Rules October 10, 2011
One of the most important determinations an employer makes is if a position within the agency and the employee who holds it qualifies for coverage in PERA Rules and laws discussed in this presentation describe the membership eligibility requirements for PERA s Defined Benefit Plans 10/10/2011 2
PERA offers the following Defined Benefit Plans: General Employees Retirement Plan Consists of the Coordinated Plan and the Basic Plan; it is the widest encompassing of PERA s Defined Benefit Plans and covers most full or part time permanent employees, including certain school district employees who do not participate in the Teachers Retirement Association. Correctional Plan Specifically for correctional guards, officers, or joint jailer/dispatchers and those who supervise these employees Police and Fire Plan Planfor full time police officers and firefighters and those who work less than full time but were approved for participation by their employer Statewide Volunteer Firefighters Plan Note: Eligibility rules for the Statewide Volunteer Firefighter Retirement Plan are not covered in this presentation. For information on this plan, please visit the Web site or Chapter 2 of the PERA Employer Manual 10/10/2011 3
A Defined Benefit Plan provides a benefit based on a formula, not on a member s account balance at retirement. For PERA members, the benefit is based on: Years of service For each month in which there are PERA eligible earnings, the member receives one month service credit High five salary This is the highest 60 consecutive months of earnings wherever it falls in the member s employment (typically, it is the last five years worked, but it may come earlier in the person s career) Plan specific multiplier Age at time of retirement Note: The stated formula does not apply to the Statewide Volunteer Firefighter Retirement Plan. Refer to PERA s Web site for details about that plan s benefit calculation. 10/10/2011 4
Mandatory Coverage Membership in a PERA Defined Benefit Plan is mandatory for public employees filling non-elected positions whose salary from one governmental subdivision exceeds $425 in any one calendar month, unless otherwise prohibited by Minnesota law 1 and optional for certain other employees 2 Includes full- or part-time employees hired to fill positions that are permanent, as well as Temporary positions exceeding 6 months and Seasonal jobs that provide employment of more than 185 consecutive calendar days. 1 Exclusions will be discussed later in the presentation 2 Optional memberships will be covered in a later slide 10/10/2011 5
Determining Eligibility Assume employee is eligible until proven otherwise Individual only needs to exceed the $425 earnings threshold one month to become PERA eligible Earnings are calculated from the first day of the month through the last day of the month, not when salary is paid Look at both the position and the person who holds it when investigating possible exclusions Sometimes the person is the reason for the exclusion Sometimes position generates the exclusion Exclusions Full list of exclusions is in Statute 353.01 as well as Chapter 3 of the PERA Employer Manual 10/10/2011 6
Exclusions Most common Employee never reaches $425 threshold Full-time student under the age of 23 Temporary Employee (as defined in PERA law) Seasonal Employee (as defined in PERA law) Re-employed PERA Retirees Elected governing body official whose term of office began after June 30, 2002 10/10/2011 7
Exclusions Employee never reaches $425 threshold If an employee never earns $425 or more in a calendar month, he or she does not qualify for PERA However, person only needs to reach that threshold one time to meet the requirements eligible from that point on (until termination) 10/10/2011 8
Employee never reaches $425 threshold Example #1: John works part-time for a local governmental entity. His earnings in a calendar month range from $320 to $415. The employer makes sure to look at when John actually earned the dollars each month and, because he has yet to exceed the $425 earnings threshold, he is excluded from PERA participation. 10/10/2011 9
Exclusions Full-time student under the age of 23 Must be a full-time student (based on the requirements of the school attended) Must be 22 years old or younger Enroll if: Not a full-time student, or 23 years old (or older); and Earnings exceed $425 in any calendar month and no other exclusion is applicable 10/10/2011 10
Full-time Student Example #2: Sue works part-time for a city while she pursues a degree and makes, on average, $875 per month. She is attending college full-time and is 21 years old. As long as Sue maintains full-time student status, she is excluded from PERA. Earnings for a full-time student are irrelevant from a PERA eligibility standpoint. 10/10/2011 11
Full-time Student Example #3: Candice works part-time for a school district while attending college full-time. She is 22 years old and her birthday is September 8. Once Candice turns 23, she is no longer covered under the full-time student exclusion. At that time, the employer must monitor her earnings and if she exceeds the $425 threshold, she must be enrolled in the appropriate PERA plan 10/10/2011 12
Full-time Student Example #4: Bill is a 21 year-old, part-time employee and a fulltime student. During the school-year, he drops to part-time status as a student. With his change in student status, the employer must monitor his earnings and enroll him in the appropriate PERA plan if his earnings exceed $425 in a month (and no other exclusions are applicable) 10/10/2011 13
Exclusions Temporary Employees position predetermined to be limited in duration to six months or less Not restricted by the $425 earnings threshold If position goes beyond 6 months, no longer qualifies as temporary; monitor earnings at this point 30 day break between consecutive temporary positions resets the 6-month window Must continue counting the 6 months if no 30-day break between temporary positions Note: Athletic coaches fall within the realms of a seasonal employee refer to slide #22 10/10/2011 14
Temporary Employee Example #5: Jeff accepts a short-term position for a city. The job starts February 1 and ends June 30 a period of 5 months. Because the position falls within the boundaries of PERA s temporary exclusion definition, Jeff is excluded from PERA participation. His salary in this case is irrelevant for PERA purposes. 10/10/2011 15
Temporary Employee Example #6: Jennifer accepts a short-term position for a county. The job starts February 1 and ends September 30 a period of 8 months. Although the position is defined as temporary by the employer, it does not meet PERA s temporary exclusion definition; therefore, the employer must monitor Jennifer s earnings and enroll her if she meets the $425 earnings threshold. 10/10/2011 16
Temporary Employee Example #7: Roger is hired for a temporary position to replace a critical employee who is out on leave. The position began March 1 and was scheduled to end August 30 (an employment period of 6 months). However, in August, the employer learns that the employee is unable to come back to work and Roger is needed for at least another month. Beginning in September, the employer must monitor Roger s earnings and if he exceeds the $425 earnings threshold, he is PERA eligible (assuming no other exclusions are applicable). Roger s membership begins in September and no past contributions are due for the previous employment. 10/10/2011 17
Exclusions School District Substitute Employees School district employees who substitute in a position otherwise eligible are excluded as temporary employees if all three conditions are met: 1. The individual is called to work for pre-determined periods (one day, two days, one week, less than two months, etc) 2. The employment period with the school ends when the distinct substitute work assignment is completed, and 3. The person does not report for substitute work in more than 6 consecutive months without a 30 day break in employment with the school 10/10/2011 18
School District Substitute Employees Example #8: Mary works for a school district as a fill-in substitute worker for non-teaching positions. She works sporadically throughout the school year The following slides highlight the two options districts have regarding these types of employees for PERA purposes 10/10/2011 19
School District Substitute Employees Example #8: Option 1: The district can simply define Mary as an employee of the district whose employment period is the entire school year. Position is not considered temporary because it goes beyond the 6 months allowed under the PERA exclusion Earnings should be monitored; if the $425 is exceeded in any one calendar month, Mary is enrolled in PERA and remains until terminated 10/10/2011 20
School District Substitute Employees Example #8: Option 2: The district defines each time Mary works as an independent temporary assignment, with the idea that it is unknown as to whether or not she will work another assignment after the current one Employer must monitor to see if these multiple temporary assignments go beyond 6 months without a 30 day separation between positions 10/10/2011 21
School District Substitute Employees Example #8: Option 2 (continued): If there is a 30 day break between positions, the 6 month temporary window restarts and Mary would continue to be excluded until that wasn t the case and she then exceeded the $425 earnings threshold If there is no 30 day break between positions and the total employment period exceeds 6 months, the employer must then monitor earnings; if the $425 threshold is exceeded, enroll in PERA 10/10/2011 22
Exclusions Seasonal Employees - employees hired to do a job tied to a specific season of the year and is limited in duration to 185 consecutive calendar days or less Not restricted by the $425 earnings threshold If position goes beyond 185 calendar days, no longer qualifies as seasonal; monitor earnings at this point 30 day break between consecutive seasonal positions resets the 185-day window Must continue counting the 185 days if no 30-day break between seasonal positions Includes athletic coaches in school districts 10/10/2011 23
Seasonal Employee Example #9: Fred is hired to do lawn maintenance for a city. The position begins May 1 and ends October 31, an employment period of 184 calendar days. This position is limited in duration to less than 185 calendars days and is tied to a season of the year. Fred is excluded from PERA, regardless of his earnings. 10/10/2011 24
Seasonal Employee Example #10: Sam is hired as a seasonal employee. The position is expected to run from April 1 through September 30. Due to weather conditions, the job continues longer than originally expected. Beginning with the 186 th day of employment (in this case, approximately October 1), the employer must monitor Sam s earnings. If he earns more than $425 in a calendar month in Oct or a subsequent month, he must be enrolled in PERA (unless another exclusion is applicable), with an eligibility date of October (or later). Contributions are not due on earnings from April through September. 10/10/2011 25
Seasonal Employee Example #11: Bob is hired to work at the city-run golf course. The position begins in April and lasts until the course closes in the fall. Although this is defined as a seasonal position by the employer, it does not meet the PERA definition of a seasonal employee. In this case, Bob s earnings must be followed and if he exceeds $425 in earnings in any calendar month, he is PERA-eligible (unless another exclusion applies). 10/10/2011 26
Exclusions PERA Benefit Recipients - those receiving a retirement benefit from PERA are excluded from paying into PERA Must be receiving benefit from PERA If benefits from TRA or any other state pension plan or from private industry, that does not preclude participation in a PERA plan 10/10/2011 27
Exclusions Additional exclusions Election Officers (aka Election Judges) Volunteer firefighters who receive credit in a local relief association Foreign citizens with a work permit of less than 3 years or an H-1B visa valid for less than three years Independent contractors Certain employees receiving a disability benefit from PERA 10/10/2011 28
Optional Coverage 1 City Managers or chief administrative officers (must opt out within 6 months of beginning date of employment) Persons elected or appointed to local non-governing body positions Physicians who are employed by a governmental unit (must opt out within 90 days of start of employment) Employees who are members of the Coordinated Plan and who later become employed by a labor organization that represents public employees while on an authorized leave of absence from the PERA-covered employer 1 With the exception of those working for labor unions, the other employees on this list have the option of enrolling in the Defined Benefit Plan (if eligibility requirements are met) or PERA s Defined Contribution Plan (DCP). For more information on the DCP, refer to the Employer Manual, or PERA's Web site. 10/10/2011 29
Employees Holding Multiple Positions When salary is combined Both positions are with the same employer and Both positions are permanent and are not covered by a nonsalary exclusions (i.e. is not temporary, seasonal, etc). If the only applicable exclusion is that the salary doesn't meet the $425 threshold, earnings should be combined When salary is not combined Positions are with different employers, or One or both positions qualify for a non-salary exclusion (seasonal, temporary, etc) 10/10/2011 30
Determining Plan Coverage For employees required to participate, or who have exercised an option to join the Defined Benefit Plan, the employer must determine the specific plan to which the person will contribute Most employees have coverage under the Coordinated Plan Depending on position, person may qualify for either the Police and Fire Plan, the Correctional Plan or the Defined Contribution Plan Refer to the PERA Employer Manual for the enrollment process 10/10/2011 31
Additional Information and questions Refer to the Employer Manual, (Chapter 3 - Defined Benefit Plans) Contact PERA Employer Response Line 651 296-3636 1 888-892-7372 Web Site Contact Us 10/10/2011 32
Disclaimer This presentation is meant to serve as an educational tool for public employers and is based on the laws in effect on the date noted herein. PERA reserves the right to revise the content of this presentation. The membership eligibility statutes that govern the PERA defined benefit plans are in Minn. Stat. Sections 353.01, 353.64 and 353E.02. Should there be any conflict between this presentation and the governing statutes, the statutes will prevail. 10/10/2011 33