Minnesota State Retirement System, Public Employees Retirement Association, Teachers Retirement Association, St. Paul Teachers' Retirement Fund Association "Salary" definition modification to exclude pay from the family and medical benefit insurance account for Minnesota Paid Leave

A bill for an act

relating to retirement; Minnesota State Retirement System; Public Employees

Retirement Association; Teachers Retirement Association; St. Paul Teachers'

Retirement Fund Association; modifying the definition of "salary" to exclude pay

from the family and medical benefit insurance account for Minnesota paid leave;

amending Minnesota Statutes 2024, sections 352.01, subdivision 13; 353.01,

subdivision 10; 354.05, subdivision 35; 354A.011, subdivision 24.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2024, section 352.01, subdivision 13, is amended to read:

Subd. 13.

Salary.

(a) Subject to the limitations of section
356.611
, "salary" means wages,

or other periodic compensation, paid to an employee before deductions for deferred

compensation, supplemental retirement plans, or other voluntary salary reduction programs.

(b)
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Salary
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does not include:

(1) lump-sum sick leave payments;

(2) severance payments;

(3) lump-sum annual leave payments and overtime payments made at the time of

separation from state service;

(4) payments in lieu of any employer-paid group insurance coverage, including the

difference between single and family rates that may be paid to an employee with single

coverage;

(5) payments made as an employer-paid fringe benefit;

(6) workers' compensation payments;

(7) employer contributions to a deferred compensation or tax-sheltered annuity program;
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and
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(8) amounts contributed under a benevolent vacation and sick leave donation program
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.
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;

and
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(9) payments from the family and medical benefit insurance account for Minnesota paid

leave under chapter 268B.

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(c) Amounts paid to an employee by the employer through a grievance proceeding or a

legal settlement are salary only if the grievance or settlement agreement is received by the

executive director no fewer than 14 days before payment is made and the executive director

determines that:

(1) the grievance or settlement agreement describes with sufficient specificity the period

or periods of time worked or not worked by the employee for which the amounts are

compensation; and

(2) the amounts are salary as defined in paragraph (a) and the determination is consistent

with prior determinations.

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EFFECTIVE DATE.

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This section is effective retroactively from January 1, 2026.

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Sec. 2.

Minnesota Statutes 2024, section 353.01, subdivision 10, is amended to read:

Subd. 10.

Salary.

(a) Subject to the limitations of section
356.611
, "salary" means:

(1) the wages or periodic compensation payable to a public employee by the employing

governmental subdivision before:

(i) employee retirement deductions that are designated as picked-up contributions under

section
356.62
;

(ii) any employee-elected deductions for deferred compensation, supplemental retirement

plans, or other voluntary salary reduction programs that would have otherwise been available

as a cash payment to the employee; and

(iii) employee deductions for contributions to a supplemental plan or to a governmental

trust established under section
356.24, subdivision 1
, clause (7), to save for postretirement

health care expenses, unless otherwise excluded under paragraph (b);

(2) for a public employee who is covered by a supplemental retirement plan under section

356.24, subdivision 1
, clause (8), (9), (10), or (12), the employer contributions to the

applicable supplemental retirement plan when an agreement between the parties establishes

that the contributions will either result in a mandatory reduction of employees' wages through

payroll withholdings, or be made in lieu of an amount that would otherwise be paid as

wages;

(3) a payment from a public employer through a grievance proceeding, settlement, or

court order that is attached to a specific earnings period in which the employee's regular

salary was not earned or paid to the member due to a suspension or a period of involuntary

termination that is not a wrongful discharge under section
356.50
; provided the amount is

not less than the equivalent of the average of the hourly base salary rate in effect during the

last six months of allowable service prior to the suspension or period of involuntary

termination, plus any applicable increases awarded during the period that would have been

paid under a collective bargaining agreement or personnel policy but for the suspension or

involuntary termination, multiplied by the average number of regular hours for which the

employee was compensated during the six months of allowable service prior to the suspension

or period of involuntary termination, but not to exceed the compensation that the public

employee would have earned if regularly employed during the applicable period;

(4) compensation paid during an authorized leave of absence
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, other than an authorized

medical leave of absence, as long as the compensation paid during a pay period is not less

than the lesser of:
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; and

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(i) the product of the average hourly base salary rate in effect during the six months of

allowable service immediately preceding the leave, multiplied by the average number of

regular hours for which the employee was compensated each pay period during the six

months of allowable service immediately preceding the leave of absence; or

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(ii) compensation equal to the value of the employee's total available accrued leave

hours;

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(5) compensation paid during an authorized medical leave of absence, other than a

workers' compensation leave, as long as the compensation paid during a pay period is not

less than the lesser of:

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(i) the product of one-half and the average hourly base salary rate in effect during the

six months of allowable service immediately preceding the leave of absence; or

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(ii) compensation equal to the value of the employee's total available accrued leave

hours; and

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(6)
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(5)
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for a public employee who receives performance or merit bonus payment under

a written compensation plan, policy, or collective bargaining agreement in addition to regular

salary or in lieu of regular salary increases, the compensation paid to the employee for

attaining or exceeding performance goals, duties, or measures during a specified period of

employment.

(b) Salary does not mean:

(1) fees paid to district court reporters;

(2) unused annual leave, vacation, or sick leave payments, in the form of lump-sum or

periodic payments;

(3) for the donor, payment to another person of the value of hours donated under a

benevolent vacation, personal, or sick leave donation program;

(4) any form of severance or retirement incentive payments;

(5) an allowance payment or per diem payments for or reimbursement of expenses;

(6) lump-sum settlements not attached to a specific earnings period;

(7) workers' compensation payments
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, payments from the family and medical benefit

insurance account for Minnesota paid leave under chapter 268B,
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or disability insurance

payments, including payments from employer self-insurance arrangements;

(8) employer-paid amounts used by an employee toward the cost of insurance coverage,

flexible spending accounts, cafeteria plans, health care expense accounts, day care expenses,

or any payments in lieu of any employer-paid group insurance coverage, including the

difference between single and family rates that may be paid to a member with single coverage

and certain amounts determined by the executive director to be ineligible;

(9) employer-paid fringe benefits, including
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,
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but not limited to:

(i) employer-paid premiums or supplemental contributions for employees for all types

of insurance;

(ii) membership dues or fees for the use of fitness or recreational facilities;

(iii) incentive payments or cash awards relating to a wellness program;

(iv) the value of any nonmonetary benefits;

(v) any form of payment made in lieu of an employer-paid fringe benefit;

(vi) an employer-paid amount made to a deferred compensation or tax-sheltered annuity

program; and

(vii) any amount paid by the employer as a supplement to salary, either as a lump-sum

amount or a fixed or matching amount paid on a recurring basis, that is not available to the

employee as cash;

(10) the amount equal to that which the employing governmental subdivision would

otherwise pay toward single or family insurance coverage for a covered employee when,

through a contract or agreement with some but not all employees, the employer:

(i) discontinues, or for new hires does not provide, payment toward the cost of the

employee's selected insurance coverages under a group plan offered by the employer;

(ii) makes the employee solely responsible for all contributions toward the cost of the

employee's selected insurance coverages under a group plan offered by the employer,

including any amount the employer makes toward other employees' selected insurance

coverages under a group plan offered by the employer; and

(iii) provides increased salary rates for employees who do not have any employer-paid

group insurance coverages;

(11) except as provided in section
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353.86
or
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353.87
, compensation of any kind paid to

volunteer ambulance service personnel or volunteer firefighters, as defined in subdivision

35 or 36;

(12) the amount of compensation that exceeds the limitation provided in section
356.611
;

(13) amounts paid by a federal or state grant for which the grant specifically prohibits

grant proceeds from being used to make pension plan contributions, unless the contributions

to the plan are made from sources other than the federal or state grant; and

(14) bonus pay that is not performance or merit pay under paragraph (a), clause
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(6)
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(5)
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.

(c) Amounts, other than those provided under paragraph (a), clause (3), provided to an

employee by the employer through a grievance proceeding, a court order, or a legal settlement

are salary only if the settlement or court order is reviewed by the executive director and the

amounts are determined by the executive director to be consistent with paragraph (a) and

prior determinations.

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EFFECTIVE DATE.

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The amendments to paragraph (a), clauses (4) and (5), and

paragraph (b), clause (11), are effective July 1, 2026. The amendment to paragraph (b),

clause (7), is effective retroactively from January 1, 2026.

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Sec. 3.

Minnesota Statutes 2024, section 354.05, subdivision 35, is amended to read:

Subd. 35.

Salary.

(a) Subject to the limitations of section
356.611
, "salary" means the

periodic compensation, upon which member contributions are required before deductions

for deferred compensation, supplemental retirement plans, or other voluntary salary reduction

programs.

(b)
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Salary
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does not mean:

(1) lump-sum annual leave payments;

(2) lump-sum wellness and sick leave payments;

(3) employer-paid amounts used by an employee toward the cost of insurance coverage,

employer-paid fringe benefits, flexible spending accounts, cafeteria plans, health care

expense accounts, day care expenses, or any payments in lieu of any employer-paid group

insurance coverage, including the difference between single and family rates that may be

paid to a member with single coverage and certain amounts determined by the executive

director to be ineligible;

(4) any form of payment made in lieu of any other employer-paid fringe benefit or

expense;

(5) any form of severance payments;

(6) workers' compensation payments;

(7) disability insurance payments, including self-insured disability payments;

(8) payments to school principals and all other administrators for services that are in

addition to the normal work year contract if these additional services are performed on an

extended duty day, Saturday, Sunday, holiday, annual leave day, sick leave day, or any

other nonduty day;

(9) payments under section
356.24, subdivision 1
, clause (4);
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and
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(10) payments made under section
122A.40, subdivision 12
, except for payments for

sick leave that are accumulated under the provisions of a uniform school district policy that

applies equally to all similarly situated persons in the district
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.
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; and
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(11) payments from the family and medical benefit insurance account for Minnesota

paid leave under chapter 268B.

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(c) Amounts provided to an employee by the employer through a grievance proceeding

or a legal settlement are salary only if the settlement is reviewed by the executive director

and the amounts are determined by the executive director to be consistent with paragraph

(a) and prior determinations.

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EFFECTIVE DATE.

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This section is effective retroactively from January 1, 2026.

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Sec. 4.

Minnesota Statutes 2024, section 354A.011, subdivision 24, is amended to read:

Subd. 24.

Salary; covered salary.

(a) Subject to the limitations of section
356.611
,

"salary" or "covered salary" means the entire compensation, upon which member

contributions are required and made, that is paid to a teacher before deductions for deferred

compensation, supplemental retirement plans, or other voluntary salary reduction programs.

(b)
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Salary
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does not mean:

(1) lump-sum annual leave payments;

(2) lump-sum wellness and sick leave payments;

(3) employer-paid amounts used by an employee toward the cost of insurance coverage,

employer-paid fringe benefits, flexible spending accounts, cafeteria plans, health care

expense accounts, day care expenses, or any payments in lieu of any employer-paid group

insurance coverage, including the difference between single and family rates that may be

paid to a member with single coverage, and certain amounts determined by the executive

secretary or director to be ineligible;

(4) any form of payment that is made in lieu of any other employer-paid fringe benefit

or expense;

(5) any form of severance payments;

(6) workers' compensation payments;

(7) disability insurance payments, including self-insured disability payments;

(8) payments to school principals and all other administrators for services that are in

addition to the normal work year contract if these additional services are performed on an

extended duty day, Saturday, Sunday, holiday, annual leave day, sick leave day, or any

other nonduty day;

(9) payments under section
356.24, subdivision 1
, clause (4)
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(ii)
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;
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and
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(10) payments made under section
122A.40, subdivision 12
, except for payments for

sick leave that are accumulated under the provisions of a uniform school district policy that

applies equally to all similarly situated persons in the district
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.
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; and
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(11) payments from the family and medical benefit insurance account for Minnesota

paid leave under chapter 268B.

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(c) Amounts provided to an employee by the employer through a grievance proceeding

or a legal settlement are salary only if the settlement is reviewed by the executive director

and the amounts are determined by the executive director to be consistent with paragraph

(a) and prior determinations.

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EFFECTIVE DATE.

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This section is effective retroactively from January 1, 2026.

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