In 1984, when the manner in which actuarial valuations and related actuarial reports for the various statewide and major local retirement plans was significantly revised, the Legislative Commission on Pensions and Retirement was charged with selecting and contracting with the consulting actuarial firm to prepare the actuarial valuations and reports and was required to promulgate the standards for pension valuations and proposed benefit increase cost estimates.

Minnesota Statutes, Section 3.85, Subdivision 10, requires the Commission to adopt the standards and to update them annually. The Commission adopted the initial set of standards as of June 30, 1985. After adopting additional amendments in 1986, 1987, 1988, 1989, and 1992, the Commission last amended the standards for actuarial work on June 13, 1996.

The principal consultant with the actuarial firm of Milliman USA with respect to the Commission’s account, Thomas K. Custis, F.S.A., reviewed the standards in 2000 and suggested a number of revisions. Following Mr. Custis’ review in 2000, the Commission staff also identified a number of additional revisions in the standards, which are largely stylistic and cross-reference corrections.

The various amendments to the standards, grouped topically, are as follows:

1. Addition of References to Newly Created Pension Plans. Recently created Minnesota public pension plans, such as the Local Correctional Employees Retirement Plan, are added to the enumeration of pension plans covered by the standards. Amendments to pages 2 and 26.
2. Update For Recent Statutory Actuarial Assumption Changes. Interest, individual salary increase, and payroll growth assumption references are updated. Amendment to page 5.
3. Clarification of Assumptions Related to Social Security. For pension plans where Social Security benefits are a factor, the manner for establishing the related actuarial assumption is clarified. Amendment to page 8.
4. Addition of Detail For Asset Valuation Smoothing Technique. The 2000 statutory change to a new mechanism for establishing the actuarial value of pension plan assets is augmented with applicable detail. Amendments to pages 9, 10, 11, 24, and 25.
5. Update on First Class City Teacher Post Retirement Adjustment Valuation. The past changes in the post retirement adjustment mechanisms of the Duluth Teachers Retirement Fund Association (DTRFA), the Minneapolis Teachers Retirement Fund Association (MTRFA), and the St. Paul Teachers Retirement Fund Association (StPTRFA) are incorporated into the standards. Amendments to pages 15 and 16.
6. Update on Minnesota Post Retirement Investment Fund Interest Rate Assumption. The past changes in the interest rate governing the Minnesota Post Retirement Investment Fund, the statewide pension plan post retirement adjustment mechanism, are revised. Amendment to page 27.
7. Update for PERA-P&F/Consolidation Account Merger. The recent merger of the various local police and paid firefighter consolidation accounts into the Public Employees Police and Fire Plan is reflected in the standards. Amendment to page 37.
8. Revisions In Style, Grammar, and Language Usage. Amendments to pages 1-4, 6-10, and 12-54.

The attached document includes both the revisions proposed by Mr. Custis and the revisions suggested by the Commission staff. The revisions suggested by Mr. Custis are indicated by strikeout for suggested deletions and underscoring for suggested additions. The revisions suggested by the Commission staff are indicated by italicized strikeout for suggested deletions and italicized underscoring for suggested additions.

The attached document was circulated to all of the statewide and major local pension plan administrators during June-July 2000, with a request that each of those plan administrators forward a copy to their actuarial advisor, if any.

No favorable or unfavorable comments on the attached document have been received by the Commission staff since the document was circulated in June-July 2000.

The revisions in the standards for actuarial work require Commission approval before they take effect. Because the action does not involve a recommendation on proposed legislation, under Commission Rule 5.0, only a simple majority of the Commission members constituting a quorum is necessary for the Commission to approve the changes.

The Commission staff recommends Commission approval of the amendments to the standards for actuarial work following the taking of testimony or comments from interested parties at the August 23, 2001, meeting. The Commission staff and the consulting actuary retained by the Commission, Thomas K. Custis of Milliman USA, are prepared to review the proposed revisions in detail during the course of the August 23, 2001, meeting and to answer Commission member questions.