Local government groups raised concerns about the potential budget impacts of the bill as introduced.
The Legislative Commission on Pensions and Retirement on March 23 considered a bill that would extend the time frame for a person returning from military duty to purchase service credit in the pension system from up to five years to up to 15 years.
Under the federal Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA), state and local governments must allow employees who take leave to perform military duty the opportunity to pay the employee contributions not paid during the leave. The employees must also be allowed to receive service credit for the period of the leave.
The employer must pay the employer share of contributions for that time period, as well as the accrued interest on both the employee and the employer contributions. Minnesota law reflects the minimum requirements of USERRA; however, states can choose to provide more generous requirements.
Sen. Howe presented the bill, acknowledging several constituents and his own personal challenges related to the current service credit purchase requirements. He expressed his desire to make the purchase more affordable for military personnel who may be experiencing challenges of returning to civilian life.
Concerns about additional costs
The League, along with the Association of Minnesota Counties (AMC) and the Minnesota Inter-County Association (MICA), submitted a letter raising concerns about the potential local budget impacts of the delayed repurchase time frame, especially on smaller jurisdictions.
Under current law, an employee earning a $50,000 salary would have a maximum of five years following their return to work to pay military service credit. In this scenario, the employee would pay $30,680 and the employer would pay $96,881, including the employer’s higher contribution rate plus interest for both the employee and employer.
Under the proposed law, that same employee earning a $50,000 salary would have 15 years following return to work to purchase service credit. In this case, the employee would still pay $30,680, but the employer would pay $232,226, again including the employer’s higher contribution share plus interest on both the employee and employer contributions.
Amendment addresses concerns
Based on concerns raised by the League, AMC, and MICA, Sen. Howe offered an amendment to the bill to change the time frame for repayment to be between three years and the current five-year maximum, which will reduce the potential impact compared to the bill as introduced.
The Pension Commission unanimously approved the amendment and voted to add the amended language to the pending omnibus pension bill.