HF4162

Purpose

This bill changes rules for teachers who retire and later return to teach. It focuses on how the retirement annuity (pension) is affected when a reemployed annuitant earns salary after coming back to work, and it requires the employer to contribute to the retirement fund during that reemployment.

Key definitions and terms

• Reemployed annuitant: a person who retired under the Teachers Retirement Association and then resumed teaching in an eligible employer unit.
• Annuity deferral: a reduction or withholding of part of the retirement annuity in a specific future year due to earned salary after retirement.
• Salary from teaching service: all income earned as a teacher, including income from consulting, independent contracting, or third-party work for an employer unit covered by the retirement chapter; it also includes the higher of actual income or a benchmark amount for certain positions.
• Employer contributions: payments an employer must make to the retirement fund for a reemployed annuitant.
• Social Security normal retirement age: the age which, for most people, is considered the standard point to claim full Social Security benefits.

Main provisions

• Deferral trigger and amount

  • If a reemployed annuitant earns a salary from teaching service greater than 46,000 in a fiscal year, all or part of that person’s annuity payments must be deferred during the calendar year after that fiscal year.
  • The deferral amount is one-half of the salary amount in excess of 46,000. This amount is deducted from the annuity for the calendar year after the excess was earned.

• Proration rules

  • If the person retires for only part of a fiscal year, the maximum salary exempt from deferral is prorated for that year.

• No deferral after reaching Social Security age

  • Once the reemployed annuitant reaches the Social Security normal retirement age, no deferral is required, regardless of salary.

• Handling of the deferral

  • The deferral amount must be handled or disposed of in accordance with another section of law (section 356.47).

• How salary is defined for this purpose

  • Salary from teaching service includes all income earned as a teacher, plus income from services like consulting, independent contracting, or third-party providing services to an employer unit covered by this law.
  • It also includes the greater of the actual income earned or an amount based on the pay rate for administrative positions or similar roles, for positions in employer units with a similar number of pupils and at the same level as the position the person holds upon returning to teaching.

• Former spouse protection

  • If the reemployed annuitant has a former spouse receiving a portion of the annuity, that portion cannot be deferred.

• Employer contributions during reemployment

  • During the period of reemployment, the employer must make employer contributions to the retirement fund as specified in existing law (section 354.42, subdivision 3).

How this bill changes current law

• Adds specific rules for deferring part of a retirement annuity when a reemployed annuitant earns more than a fixed salary threshold after coming back to teaching.
• Requires employer contributions to continue during the reemployment period.
• Expands how “salary from teaching service” is calculated to include a broad range of income sources and comparable pay rates for similar positions.

Practical impact and who is affected

• Affects retirees who return to teaching and earn more than 46,000 in a fiscal year.
• Reduces future annuity payments in the calendar year following the year in which the excess salary is earned, until the deferral is used or disposed of under the law.
• Ensures employers continue to contribute to the retirement fund while a retiree is back in teaching roles.

Relevant changes to statutes involved in this bill include amendments to Minnesota Statutes 2024 sections 354.44, subdivision 5 and 354.444, subdivision 5.

Relevant terms reemployed annuitant; annuity deferral; fiscal year; calendar year; salary from teaching service; 46,000 threshold; Social Security normal retirement age; employer contributions; Minnesota Statutes 2024; section 356.47; section 354.42 subdivision 3; former spouse; section 518.58 subdivision 1; consulting; independent contractor; third-party supplier; employer unit; teaching service; retirement annuity.