2020 Pension and Retirement Bill Passed
The 2020 Pension and Retirement Bill was passed unanimously by the House and Senate, and was signed into law by Governor Walz on May 27, 2020. The Bill contains a number of provisions that affect volunteer fire relief associations. The changes will be discussed in more detail in our 2020 Legislative Update that will be released this summer. A brief summary of the relief association provisions is provided below.
State Auditor’s Working Group Provisions
The Volunteer Fire Relief Association Working Group convened by the State Auditor proposed several changes that were adopted unanimously by the Working Group members and passed into law. The changes:
- Reduce the length of time that fire chiefs must wait to certify service credit amounts to the relief association and municipality after the amounts have been communicated to active firefighters;
- Clarify that relief association audits are required to be conducted in compliance with generally accepted auditing standards;
- Update the deferred service pension provisions for defined contribution plans to make clear that deferred members must receive interest or additional investment performance during their periods of deferral;
- Adjust the accrued liability calculations for relief associations that pay a defined-benefit lump-sum benefit so they are based on a relief association’s specific vesting requirements and each member’s age and length of service (a more precise calculation than currently performed); and
- Make technical changes to clarify hard to understand language in the relief association statutes.
Other Relief Association Provisions
Other provisions included in the Bill were the product of other work groups or are changes sought for individual relief associations. The provisions that are applicable to all relief associations are summarized below, and will also be discussed in more detail in our 2020 Legislative Update.
Fire State Aid Allocation: Allows fire state aid to be allocated between a relief association and the affiliated city if the fire department is a combination department and both the city and relief association have mutually agreed to an allocation method. The city may use the portion of fire state aid it retains to pay employer contributions to the Public Employees Retirement Association on behalf of its full-time firefighters;
Dissolutions: Defines a new process for relief associations that dissolve, which replaces the current process in statute. The new process includes the following:
- All members are fully vested in their retirement benefits;
- The relief association is authorized to increase its benefit level to reduce any surplus, and pay the surplus to members in the form of larger retirement benefits;
- Requires the relief association to transfer any remaining surplus to the municipality up to the amount of required contributions made by the municipality during the preceding ten years, and allows any remaining surplus to be split equally between the relief association and municipality; and
- Requires that all retirement benefits be paid within 210 days of the plan termination, and allows payments to firefighters who are not yet 50.
Plan Conversions Authorized. Procedures are defined for relief associations that are defined benefit relief associations to convert their defined benefit plan to a defined contribution plan. It is anticipated that future legislation will authorize a similar process for relief associations to convert their defined contribution plan to a defined benefit plan.
Maximum Lump Sum Benefit Level Increased. The maximum allowable lump-sum benefit level is increased from $10,000 to $15,000 per year of service. Relief associations may only increase their benefit level to the new maximum if they have the required available financing needed per firefighter.
Published last in the May 2020 Pension Newsletter