Benefits

HOME  /  Benefits  /  Privatization

Privatization


What happens when a public medical facility becomes a private organization?

When a PERA-covered medical facility becomes a private organization, employees are no longer considered public employees and state law does not allow active membership in PERA.

The law (Minnesota Statutes, Chapter 353F) provides several benefit options to privatized former public employees. The intent is to ensure that employees of public medical facilities that are privatized will be entitled to receive future retirement benefits even though the employees are no longer covered by PERA.

What is the purpose of privatization and what does it mean?

Minnesota Statute §353F governs local government (PERA) public medical facilities that are sold to private entities. The purpose and intent is to ensure, to the extent possible, that persons employed at public medical facilities that are privatized and consequently are excluded from retirement coverage by the Public Employees Retirement Association, will be entitled to receive future benefits. In other words, your city or county owned medical facility employer is sold to a private owner and is no longer covered under PERA. 

Your medical facility employer must go through a process to determine whether the sale qualifies for coverage under Minnesota Statute §353F.3

If my public medical facility sells and becomes private, what happens?

If the sale qualifies for inclusion under Minnesota Statute §353F, you will no longer contribute to PERA beginning on the date of privatization. If you are employed the day before the sale, you will immediately become a vested member of PERA, no matter how much service you have accrued up until that time. You will qualify for a monthly retirement benefit any time after you reach retirement age (55), based on your PERA service credit and high-5 salary earned while you worked for the PERA employer. An enhanced monthly retirement benefit accrues only to those who continue working at the facility and retire under the regular PERA retirement requirements.

If §353F does not apply, you will be considered a regular deferred member of PERA. Deferred members are former PERA participants who have left public service or are now employed in positions covered by any other Minnesota public pension plan.  Deferred members can be either vested or non-vested.

Will PERA come to our medical facility and explain benefits under §353F?

Yes. PERA will coordinate informational meetings with your employer at a mutually agreed-upon date, and we will conduct several meetings in order to accommodate all staff members’ schedules. PERA will provide retirement estimates to each affected employee at the time of the meetings.

Can I get a retirement benefit estimate while the sale of the medical facility is pending?

No. PERA will provide retirement estimates at the meetings that are scheduled with your employer.

After privatization is complete, you can get retirement benefit estimates any time by setting up an account in My PERA on the PERA website.

What about my Rule of 90?

If you qualified for PERA membership prior to 7-1-1989, and as long as you continue your employment with the Privatized Former Public Employer (PFPE), your Rule of 90 date will not change. Eligibility for a Rule of 90 enhanced retirement benefit requires that you terminate your employment with the PFPE and have a 30-day break in service.

Even if you stop working for the PFPE, you will not lose the Rule of 90; however, it will take longer to reach the Rule of 90 date as service credit will no longer accrue, and only your age will affect the calculation.

NOTE: While your continued service with the PFPE is used to reach your Rule of 90 date, PERA uses only your years of PERA service credit and high-5 salary prior to privatization to calculate your retirement benefit.

What about my High-5 salary?

Under Minnesota Statute §353F, your high-5 salary is frozen on the day before privatization. When you retire, your benefits are calculated using a formula that averages your highest 60 consecutive months of salary (high-5 salary) in public employment. If you have worked fewer than 60 months in public service, PERA uses the average of your total years of service.

What about me? I’m not vested.

If you are employed by the facility on the day before the sale, you will immediately become a vested member of PERA under §353F, regardless of the amount of service you have.

I am currently working under a Phased Retirement Option (PRO) Agreement. What happens to the agreement if the facility goes private?

The PRO Agreement will end because the employer is no longer PERA-covered. You can continue working, collect your PERA benefit, and be under no earnings limits.

I took a refund of PERA contributions a while ago. Can I buy that service back?

Yes. However, repayment of prior refunds plus interest must be completed before the privatization takes place.

Can I take a refund of my PERA contributions after privatization?

Yes. An employee who leaves public service or whose job is no longer covered by PERA (e.g. Privatization) may immediately request a refund of their employee contributions to the Association, plus interest. By accepting a refund, you forfeit any future monthly retirement benefit from PERA. Further, the refund may be subject to federal and state taxes and penalties at withdrawal unless it is rolled over to another tax-qualified retirement plan.

To obtain a refund application, click here: Application for Refund

NOTE: You are not eligible for a refund if you continue public service in another PERA-covered position.

What if I am eligible for a monthly retirement benefit prior to privatization (vested and have met minimum age requirement)?

You have several options. You may:

1)   Apply for a refund of your PERA contributions plus interest now or at any time until age 70½;
NOTEYou are not eligible for a refund if you continue public service in another PERA-covered position. By accepting a refund, you forfeit any future monthly retirement benefit from PERA. Further, the refund may be subject to federal and state taxes and penalties at withdrawal, unless it is rolled over to another tax-qualified retirement plan.

2)   Receive a monthly retirement benefit without terminating employment (§353F enhanced benefits DO NOT apply); or

3)   Receive a monthly retirement benefit after terminating your employment (§353F enhanced benefits MAY apply).
What if I am vested prior to privatization, and have not yet met the minimum age requirement?

You have several options. You may:

1)  Take a refund of your contributions plus interest after privatization or at any time until age 70½; or NOTE: You are not eligible for a refund if you continue public service in another PERA-covered position. By accepting a refund, you forfeit any future monthly retirement benefit from PERA. Further, the refund may be subject to Federal and State taxes and penalties at withdrawal, unless rolled over to another tax-qualified retirement plan.

2)  Defer your monthly retirement benefit until you meet the minimum age requirement, or at any time until age 70½.

What happens if I keep working for the PFPE?

A number of things are important to remember:

1) There is NO RUSH to do anything.

2) Your employer will continue to report your salary to PERA;

3) You will no longer make contributions to PERA;

4) Eligibility toward Rule of 90 will continue (if hired into public employment prior to July 1, 1989);

5) You will no longer earn PERA service credit (except as it applies to Rule of 90);

6) Your high-5 salary is frozen on the day before privatization;

7) You may be eligible for enhanced retirement benefits.

What exactly are enhanced benefits?

PERA calculates your monthly retirement benefit using the deferred augmentation rate specified in §353F so that your benefit is enhanced, or increased, each year (pro-rated by month), while you continue working for the PFPE.

Your eligibility for enhanced benefits requires:

1) That you are at least age 55, or have 30 years of service, or have met Rule of 90, and

2) You must terminate the PFPE service for at least 30 days.

What are my options when I terminate my position with the PFPE after privatization?

If you have reached retirement age:

1)  You may take a refund of your contributions plus interest. You will, however, forfeit your right to a monthly benefit from PERA at retirement AND any enhanced benefits allowed under §353F, or

2)  You may begin receiving your enhanced monthly lifetime benefit from PERA, or

3)   You may defer your monthly enhanced benefit until a later time; however, no additional enhanced benefit augmentation under §353F will be added to your benefit as of the first of the month following your termination from the PFPE.

If you have NOT reached retirement age:

1)  You may take a refund of your contributions plus interest. You will, however, forfeit your right to a monthly benefit from PERA at retirement AND any enhanced benefits allowed under §353F.

2)  You may defer your monthly enhanced benefit until a later time; however, no additional enhanced benefit augmentation under §353F will be added to your benefit as of the first of the month following your termination from the PFPE.

What happens if I retire, collect my enhanced monthly benefit, and then return to work with the PFPE?

Eligibility for the enhanced monthly benefit requires:

1)   That you have a 30-day break in service, and

2)   You will have earnings limits until you reach your full Social Security retirement age.

NOTE: If you are considering taking a different position or working in a different facility owned by the privatized employer, please contact PERA.
What if I retire prior to privatization, collect my monthly retirement benefit, and return to another PERA-covered position?

If you begin collecting your pension benefits and return to a PERA employer, you must follow the return-to-work requirements:

1)  You must have a 30-day break in service, and

2)  You must NOT have a prior agreement to return to PERA-covered service, and

3)  You will be subject to earnings limits until your full (normal) Social Security retirement age, and

4)  You will no longer make PERA contributions.

What happens if I return to a PERA Coordinated Plan position prior to collecting my benefit?

You will forfeit all enhanced augmentation and start contributing to PERA when you are eligible. Your high-5 salary could increase. Your future PERA retirement benefit will include only your PERA-covered service.

If more than two years have elapsed since the date of privatization, the best of several calculations will be used by PERA to calculate your benefit.

What if I continue working for the PFPE and begin work with another Minnesota public pension plan employer that is not a PERA Coordinated Plan employer (defined by M.S. §356.30, Subdivision 3, excluding paragraph 6)?

There are several possibilities:

1)  If you work in another position covered by one of the Minnesota public pension plans for a total of 6 months or more (consecutive or non-consecutive): Enhanced augmentation is forfeited as of the date your new employment began, and you will accrue service credit from the applicable plan. You will qualify for a combined service annuity after accruing 6 or more months of service in another Minnesota public pension plan.

2)  If you work for another Minnesota public pension plan for 5 months or less (consecutive or non-consecutive): Enhanced augmentation does not begin again until termination of the subsequent covered service. Essentially, no augmentation is earned while employed in the second position.

3)  If more than two years have elapsed since the date of privatization, the best of several calculations will be used by PERA to calculate your benefit.

How do I get the paperwork needed to begin privatized retirement benefits?

If you are eligible to receive a monthly benefit at the time of privatization, you will receive the proper paperwork at the informational meeting prior to privatization.

Alternatively, click the following links:

Application for PERA Retirement Benefits (For Employees of Privatized Facilities)

Verification of Employment Status - Privatization Plan-16

Plan to submit your paperwork 60 – 90 days prior to the time you would like your monthly benefits to begin.

If you are a privatized member and are thinking about going back to work in public employment, please call PERA to discuss how this may impact your privatized benefits.