LCPR04-006
1.1 A bill for an act
1.2 relating to retirement; various retirement plans;
1.3 modifying the responsibilities to provide actuarial
1.4 valuations and proposed legislative cost estimates;
1.5 amending Minnesota Statutes 2002, sections 352.03,
1.6 subdivision 6; 352B.02, subdivision 1e; 353.03,
1.7 subdivision 3; 354.06, subdivision 2a; 354A.021,
1.8 subdivision 7; 356.215, subdivisions 2 and 18; and
1.9 422A.06, subdivision 2; proposing coding for new law
1.10 in Minnesota Statutes, Chapter 356; repealing
1.11 Minnesota Statutes 2002, sections 3.85, subdivisions
1.12 11 and 12; and 356.217.
1.13 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
1.14 Section 1. Minnesota Statutes 2002, section 352.03,
1.15 subdivision 6, is amended to read:
1.16 Subd. 6. DUTIES AND POWERS OF EXECUTIVE DIRECTOR. The
1.17 management of the system is vested in the director, who is the
1.18 executive and administrative head of the system. The director
1.19 shall be advisor to the board on matters pertaining to the
1.20 system and shall also act as the secretary of the board. The
1.21 director shall:
1.22 (1) attend meetings of the board;
1.23 (2) prepare and recommend to the board appropriate rules to
1.24 carry out this chapter;
1.25 (3) establish and maintain an adequate system of records
1.26 and accounts following recognized accounting principles and
1.27 controls;
1.28 (4) designate an assistant director with the approval of
1.29 the board;
2.1 (5) appoint any employees, both permanent and temporary,
2.2 that are necessary to carry out the provisions of this chapter;
2.3 (6) organize the work of the system as the director deems
2.4 necessary to fulfill the functions of the system, and define the
2.5 duties of its employees and delegate to them any powers or
2.6 duties, subject to the control of the director and under
2.7 conditions the director may prescribe. Appointments to exercise
2.8 delegated power must be by written order and shall be filed with
2.9 the secretary of state;
2.10 (7) with the advice and consent of the board, contract for
2.11 the services of an approved actuary, professional management
2.12 services, and any other consulting services as necessary and fix
2.13 the compensation for those services. The contracts are not
2.14 subject to competitive bidding under chapter 16C. Any approved
2.15 actuary retained by the executive director shall function as the
2.16 actuarial advisor of the board and the executive director, and
2.17 may perform actuarial valuations and experience studies to
2.18 supplement those performed by the actuary retained by the
2.19 legislative commission on pensions and retirement under section
2.20 6. Any supplemental actuarial valuations or experience studies
2.21 shall be filed with the executive director of the Legislative
2.22 Commission on Pensions and Retirement. Professional management
2.23 services may not be contracted for more often than once in six
2.24 years. Copies of professional management survey reports must be
2.25 transmitted to the secretary of the senate, the chief clerk of
2.26 the house of representatives, and the legislative reference
2.27 library as provided by section 3.195, and to the executive
2.28 director of the commission at the time as reports are furnished
2.29 to the board. Only management firms experienced in conducting
2.30 management surveys of federal, state, or local public retirement
2.31 systems are qualified to contract with the director;
2.32 (8) with the advice and consent of the board provide
2.33 in-service training for the employees of the system;
2.34 (9) make refunds of accumulated contributions to former
2.35 state employees and to the designated beneficiary, surviving
2.36 spouse, legal representative, or next of kin of deceased state
3.1 employees or deceased former state employees, as provided in
3.2 this chapter;
3.3 (10) determine the amount of the annuities and disability
3.4 benefits of employees covered by the system and authorize
3.5 payment of the annuities and benefits beginning as of the dates
3.6 on which the annuities and benefits begin to accrue, in
3.7 accordance with the provisions of this chapter;
3.8 (11) pay annuities, refunds, survivor benefits, salaries,
3.9 and necessary operating expenses of the system;
3.10 (12) certify funds available for investment to the State
3.11 Board of Investment;
3.12 (13) with the advice and approval of the board request the
3.13 State Board of Investment to sell securities when the director
3.14 determines that funds are needed for the system;
3.15 (14) prepare and submit to the board and the legislature an
3.16 annual financial report covering the operation of the system, as
3.17 required by section 356.20;
3.18 (15) prepare and submit biennial and annual budgets to the
3.19 board and with the approval of the board submit the budgets to
3.20 the Department of Finance; and
3.21 (16) with the approval of the board, perform other duties
3.22 required to administer the retirement and other provisions of
3.23 this chapter and to do its business.
3.24 Sec. 2. Minnesota Statutes 2002, section 352B.02,
3.25 subdivision 1e, is amended to read:
3.26 Subd. 1e. AUDIT; ACTUARIAL VALUATION. The legislative
3.27 auditor shall audit the fund. Any actuarial valuation of the
3.28 fund required under section 356.215 shall must be prepared by
3.29 the actuary retained by the Legislative Commission on Pensions
3.30 and Retirement under section 6. Any approved actuary retained
3.31 by the executive director under section 352.03, subdivision 6,
3.32 may perform actuarial valuations and experience studies to
3.33 supplement those performed by the commission-retained actuary.
3.34 Any supplemental actuarial valuation or experience studies shall
3.35 be filed with the executive director of the Legislative
3.36 Commission on Pensions and Retirement.
4.1 Sec. 3. Minnesota Statutes 2002, section 353.03,
4.2 subdivision 3a, is amended to read:
4.3 Subd. 3a. EXECUTIVE DIRECTOR. (a) APPOINTMENT. The
4.4 board shall appoint, with the advice and consent of the senate,
4.5 an executive director on the basis of education, experience in
4.6 the retirement field, and leadership ability. The executive
4.7 director shall have had at least five years' experience in an
4.8 executive level management position, which has included
4.9 responsibility for pensions, deferred compensation, or employee
4.10 benefits. The executive director serves at the pleasure of the
4.11 board. The salary of the executive director is as provided by
4.12 section 15A.0815.
4.13 (b) DUTIES. The management of the association is vested
4.14 in the executive director who shall be the executive and
4.15 administrative head of the association. The executive director
4.16 shall act as adviser to the board on all matters pertaining to
4.17 the association and shall also act as the secretary of the
4.18 board. The executive director shall:
4.19 (1) attend all meetings of the board;
4.20 (2) prepare and recommend to the board appropriate rules to
4.21 carry out the provisions of this chapter;
4.22 (3) establish and maintain an adequate system of records
4.23 and accounts following recognized accounting principles and
4.24 controls;
4.25 (4) designate, with the approval of the board, up to two
4.26 persons who shall serve in the unclassified service and whose
4.27 salary is set in accordance with section 43A.18, subdivision 3,
4.28 appoint a confidential secretary in the unclassified service,
4.29 and appoint employees to carry out this chapter, who are subject
4.30 to chapters 43A and 179A in the same manner as are executive
4.31 branch employees;
4.32 (5) organize the work of the association as the director
4.33 deems necessary to fulfill the functions of the association, and
4.34 define the duties of its employees and delegate to them any
4.35 powers or duties, subject to the control of, and under such
4.36 conditions as, the executive director may prescribe;
5.1 (6) with the approval of the board, contract for the
5.2 services of an approved actuary, professional management
5.3 services, and any other consulting services as necessary to
5.4 fulfill the purposes of this chapter. All contracts are subject
5.5 to chapter 16C. The commissioner of administration shall not
5.6 approve, and the association shall not enter into, any contract
5.7 to provide lobbying services or legislative advocacy of any
5.8 kind. Any approved actuary retained by the executive director
5.9 shall function as the actuarial advisor of the board and the
5.10 executive director and may perform actuarial valuations and
5.11 experience studies to supplement those performed by the actuary
5.12 retained by the Legislative Commission on Pensions and
5.13 Retirement under section 6. Any supplemental actuarial
5.14 valuations or experience studies shall be filed with the
5.15 executive director of the Legislative Commission on Pensions and
5.16 Retirement. Copies of professional management survey reports
5.17 shall be transmitted to the secretary of the senate, the chief
5.18 clerk of the house of representatives, and the Legislative
5.19 Reference Library as provided by section 3.195, and to the
5.20 executive director of the commission at the same time as reports
5.21 are furnished to the board. Only management firms experienced
5.22 in conducting management surveys of federal, state, or local
5.23 public retirement systems shall be qualified to contract with
5.24 the director hereunder;
5.25 (7) with the approval of the board provide in-service
5.26 training for the employees of the association;
5.27 (8) make refunds of accumulated contributions to former
5.28 members and to the designated beneficiary, surviving spouse,
5.29 legal representative or next of kin of deceased members or
5.30 deceased former members, as provided in this chapter;
5.31 (9) determine the amount of the annuities and disability
5.32 benefits of members covered by the association and authorize
5.33 payment of the annuities and benefits beginning as of the dates
5.34 on which the annuities and benefits begin to accrue, in
5.35 accordance with the provisions of this chapter;
5.36 (10) pay annuities, refunds, survivor benefits, salaries,
6.1 and necessary operating expenses of the association;
6.2 (11) prepare and submit to the board and the legislature an
6.3 annual financial report covering the operation of the
6.4 association, as required by section 356.20;
6.5 (12) prepare and submit biennial and annual budgets to the
6.6 board for its approval and submit the approved budgets to the
6.7 department of finance for approval by the commissioner;
6.8 (13) reduce all or part of the accrued interest payable
6.9 under section 353.27, subdivisions 12, 12a, and 12b, or 353.28,
6.10 subdivision 5, upon receipt of proof by the association of an
6.11 unreasonable processing delay or other extenuating circumstances
6.12 of the employing unit. The executive director shall prescribe
6.13 and submit for approval by the board the conditions under which
6.14 such interest may be reduced; and
6.15 (14) with the approval of the board, perform such other
6.16 duties as may be required for the administration of the
6.17 association and the other provisions of this chapter and for the
6.18 transaction of its business.
6.19 Sec. 4. Minnesota Statutes 2002, section 354.06,
6.20 subdivision 2a, is amended to read:
6.21 Subd. 2a. DUTIES OF EXECUTIVE DIRECTOR. The management
6.22 of the association is vested in the executive director who shall
6.23 be the executive and administrative head of the association.
6.24 The executive director shall act as advisor to the board on all
6.25 matters pertaining to the association and shall also act as the
6.26 secretary of the board. The executive director shall:
6.27 (1) attend all meetings of the board;
6.28 (2) prepare and recommend to the board appropriate rules to
6.29 carry out the provisions of this chapter;
6.30 (3) establish and maintain an adequate system of records
6.31 and accounts following recognized accounting principles and
6.32 controls;
6.33 (4) designate an assistant executive director in the
6.34 unclassified service and two assistant executive directors in
6.35 the classified service with the approval of the board, and
6.36 appoint such employees, both permanent and temporary, as are
7.1 necessary to carry out the provisions of this chapter;
7.2 (5) organize the work of the association as the director
7.3 deems necessary to fulfill the functions of the association, and
7.4 define the duties of its employees and delegate to them any
7.5 powers or duties, subject to the director's control and under
7.6 such conditions as the director may prescribe;
7.7 (6) with the approval of the board, contract and set the
7.8 compensation for the services of an approved actuary,
7.9 professional management services, and any other consulting
7.10 services. These contracts are not subject to the competitive
7.11 bidding procedure prescribed by chapter 16C. An approved
7.12 actuary retained by the executive director shall function as the
7.13 actuarial advisor of the board and the executive director and
7.14 may perform actuarial valuations and experience studies to
7.15 supplement those performed by the actuary retained by the
7.16 legislative commission on pensions and retirement under section
7.17 6. Any supplemental actuarial valuations or experience studies
7.18 shall be filed with the executive director of the Legislative
7.19 Commission on Pensions and Retirement. Copies of professional
7.20 management survey reports must be transmitted to the secretary
7.21 of the senate, the chief clerk of the house of representatives,
7.22 and the legislative reference library as provided by section
7.23 3.195, and to the executive director of the commission at the
7.24 same time as reports are furnished to the board. Only
7.25 management firms experienced in conducting management surveys of
7.26 federal, state, or local public retirement systems are qualified
7.27 to contract with the executive director;
7.28 (7) with the approval of the board, provide in-service
7.29 training for the employees of the association;
7.30 (8) make refunds of accumulated contributions to former
7.31 members and to the designated beneficiary, surviving spouse,
7.32 legal representative, or next of kin of deceased members or
7.33 deceased former members, under this chapter;
7.34 (9) determine the amount of the annuities and disability
7.35 benefits of members covered by the association and authorize
7.36 payment of the annuities and benefits beginning as of the dates
8.1 on which the annuities and benefits begin to accrue, under this
8.2 chapter;
8.3 (10) pay annuities, refunds, survivor benefits, salaries,
8.4 and necessary operating expenses of the association;
8.5 (11) prepare and submit to the board and the legislature an
8.6 annual financial report covering the operation of the
8.7 association, as required by section 356.20;
8.8 (12) certify funds available for investment to the state
8.9 board of investment;
8.10 (13) with the advice and approval of the board, request the
8.11 State Board of Investment to sell securities on determining that
8.12 funds are needed for the purposes of the association;
8.13 (14) prepare and submit biennial and annual budgets to the
8.14 board and with the approval of the board submit those budgets to
8.15 the department of finance; and
8.16 (15) with the approval of the board, perform such other
8.17 duties as may be required for the administration of the
8.18 association and the other provisions of this chapter and for the
8.19 transaction of its business. The executive director may:
8.20 (i) reduce all or part of the accrued interest and fines
8.21 payable by an employing unit for reporting requirements under
8.22 section 354.52, based on an evaluation of any extenuating
8.23 circumstances of the employing unit;
8.24 (ii) assign association employees to conduct field audits
8.25 of an employing unit to ensure compliance with the provisions of
8.26 this chapter; and
8.27 (iii) recover overpayments, if not repaid to the
8.28 association, by suspending or reducing the payment of a
8.29 retirement annuity, refund, disability benefit, survivor
8.30 benefit, or optional annuity under this chapter until the
8.31 overpayment, plus interest, has been recovered.
8.32 Sec. 5. Minnesota Statutes 2002, section 354A.021,
8.33 subdivision 7, is amended to read:
8.34 Subd. 7. ACTUARIAL CONSULTANT. The board of trustees or
8.35 directors of each teachers retirement fund association may
8.36 contract for the services of an approved actuary and fix the
9.1 reasonable compensation for those services. Any approved
9.2 actuary retained by the board shall function as the actuarial
9.3 advisor to the board and may perform actuarial valuations and
9.4 experience studies to supplement those performed by the actuary
9.5 retained by the Legislative Commission on Pensions and
9.6 Retirement under section 6. Any supplemental actuarial
9.7 valuations or experience studies shall be filed with the
9.8 executive director of the Legislative Commission on Pensions and
9.9 Retirement.
9.10 Sec. 6. 356.214 ACTUARIAL VALUATION PREPARATION; JOINT
9.11 RETENTION OF CONSULTING ACTUARY.
9.12 Subdivision 1. JOINT RETENTION. The Minnesota State
9.13 Retirement System, the Public Employees Retirement Association,
9.14 and the Teachers Retirement Association jointly, on behalf of
9.15 the state, its employees, and its taxpayers, shall contract with
9.16 an established actuarial consulting firm to conduct annual
9.17 actuarial valuations for the retirement plans named in paragraph
9.18 (b). The contract must include provisions for performing cost
9.19 analyses of proposals for changes in benefit and funding
9.20 policies.
9.21 (b) The contract for actuarial valuation must include the
9.22 following retirement plans:
9.23 (1) the teachers retirement plan, Teachers Retirement
9.24 Association;
9.25 (2) the general state employees retirement plan, Minnesota
9.26 State Retirement System;
9.27 (3) the correctional employees retirement plan, Minnesota
9.28 State Retirement System;
9.29 (4) the State Patrol retirement plan, Minnesota State
9.30 Retirement System;
9.31 (5) the judges retirement plan, Minnesota State Retirement
9.32 System;
9.33 (6) the Minneapolis employees retirement plan, Minneapolis
9.34 Employees Retirement Fund;
9.35 (7) the public employees retirement plan, Public Employees
9.36 Retirement Association;
10.1 (8) the public employees police and fire plan, Public
10.2 Employees Retirement Association;
10.3 (9) the Duluth teachers retirement plan, Duluth Teachers
10.4 Retirement Fund Association;
10.5 (10) the Minneapolis teachers retirement plan, Minneapolis
10.6 Teachers Retirement Fund Association;
10.7 (11) the St. Paul teachers retirement plan, St. Paul
10.8 Teachers Retirement Fund Association;
10.9 (12) the legislators retirement plan, Minnesota State
10.10 Retirement System;
10.11 (13) the elective state officers retirement plan, Minnesota
10.12 State Retirement System; and
10.13 (14) local government correctional service retirement plan,
10.14 Public Employees Retirement Association.
10.15 (c) The contract must specify completion of annual
10.16 actuarial valuation calculations on a fiscal year basis with
10.17 their contents as specified in section 356.215, and the
10.18 standards for actuarial work adopted by the Legislative
10.19 Commission on Pensions and Retirement.
10.20 The contract must specify completion of annual experience
10.21 data collection and processing and a quadrennial published
10.22 experience study for the plans listed in paragraph (b), clauses
10.23 (1), (2), and (7), as provided for in the standards for
10.24 actuarial work adopted by the commission. The experience data
10.25 collection, processing, and analysis must evaluate the following:
10.26 (1) individual salary progression;
10.27 (2) rate of return on investments based on current asset
10.28 value;
10.29 (3) payroll growth;
10.30 (4) mortality;
10.31 (5) retirement age;
10.32 (6) withdrawal; and
10.33 (7) disablement.
10.34 (d) The actuary retained by the joint retirement systems
10.35 shall annually prepare a report to the legislature, including
10.36 the commentary on the actuarial valuation calculations for the
11.1 plans named in paragraph (b) and summarizing the results of the
11.2 actuarial valuation calculations. The actuary shall include
11.3 with the report the actuary's recommendations concerning the
11.4 appropriateness of the support rates to achieve proper funding
11.5 of the retirement funds by the required funding dates. The
11.6 actuary shall, as part of the quadrennial published experience
11.7 study, include recommendations to the legislature on the
11.8 appropriateness of the actuarial valuation assumptions required
11.9 for evaluation in the study.
11.10 (e) If the actuarial gain and loss analysis in the
11.11 actuarial valuation calculations indicates a persistent pattern
11.12 of sizable gains or losses, as directed by the joint retirement
11.13 systems, the actuary shall prepare a special experience study
11.14 for a plan listed in paragraph (b), clause (3), (4), (5), (6),
11.15 (8), (9), (10), (11), (12), (13), or (14), in the manner
11.16 provided for in the standards for actuarial work adopted by the
11.17 commission.
11.18 (f) The term of the contract between the joint retirement
11.19 systems and the actuary retained is four years. The contract is
11.20 subject to competitive bidding procedures.
11.21 Subd. 2. ALLOCATION OF ACTUARIAL COST. (a) The joint
11.22 retirement systems shall assess each retirement plan specified
11.23 in subdivision 1, paragraph (b), its appropriate portion of the
11.24 compensation paid to the actuary retained by the joint
11.25 retirement systems for the actuarial valuation calculations,
11.26 quadrennial projection valuations, and quadrennial experience
11.27 studies. The total assessment is 100 percent of the amount of
11.28 contract compensation for the actuarial consulting firm for
11.29 actuarial valuation calculations, including any public employees
11.30 police and fire plan consolidation accounts of the Public
11.31 Employees Retirement Association established after March 1,
11.32 1999, annual experience data collection and processing, and
11.33 quadrennial experience studies and quadrennial projection
11.34 valuations.
11.35 The portion of the total assessment payable by each
11.36 retirement system or pension plan must be determined based on
12.1 each plan's proportion of the actuarial services required, as
12.2 determined by the retained actuary, to complete the actuarial
12.3 valuation calculations, annual experience data collection and
12.4 processing, and quadrennial experience studies for all plans.
12.5 (b) The assessment must be made within 30 days following
12.6 the end of the fiscal year and must be reported to the chief
12.7 administrative officers of the applicable retirement plans. The
12.8 amount of the assessment is appropriated from the retirement
12.9 fund applicable to the retirement plan.
12.10 Sec. 7. Minnesota Statutes 2002, section 356.215,
12.11 subdivision 2, is amended to read:
12.12 Subd. 2. REQUIREMENTS. (a) It is the policy of the
12.13 legislature that it is necessary and appropriate to determine
12.14 annually the financial status of tax supported retirement and
12.15 pension plans for public employees. To achieve this goal:
12.16 (1) the Legislative Commission on Pensions and Retirement
12.17 shall have prepared by the actuary retained by the commission
12.18 under section 6 shall prepare annual actuarial valuations of the
12.19 retirement plans enumerated in section 3.85 6, subdivision 11 1,
12.20 paragraph (b), and quadrennial experience studies of the
12.21 retirement plans enumerated in section 3.85 6, subdivision 11 1,
12.22 paragraph (b), clauses (1), (2), and (7); and
12.23 (2) the commissioner of finance may have prepared by the
12.24 actuary retained by the commission, two years after each set of
12.25 quadrennial experience studies, quadrennial projection
12.26 valuations of at least one of the retirement plans enumerated in
12.27 section 3.85 6, subdivision 11 1, paragraph (b), for which the
12.28 commissioner determines that the analysis may be beneficial.
12.29 (b) The governing or managing board or administrative
12.30 officials of each public pension and retirement fund or plan
12.31 enumerated in section 356.20, subdivision 2, clauses (9), (10),
12.32 and (12), shall have prepared by an approved actuary annual
12.33 actuarial valuations of their respective funds as provided in
12.34 this section. This requirement also applies to any fund or plan
12.35 that is the successor to any organization enumerated in section
12.36 356.20, subdivision 2, or to the governing or managing board or
13.1 administrative officials of any newly formed retirement fund,
13.2 plan, or association operating under the control or supervision
13.3 of any public employee group, governmental unit, or institution
13.4 receiving a portion of its support through legislative
13.5 appropriations, and any local police or fire fund to which
13.6 section 356.216 applies.
13.7 Sec. 8. Minnesota Statutes 2002, section 356.215,
13.8 subdivision 18, is amended to read:
13.9 Subd. 18. ESTABLISHMENT OF ACTUARIAL ASSUMPTIONS. (a)
13.10 The actuarial assumptions used for the preparation of actuarial
13.11 valuations under this section that are other than those set
13.12 forth in this section may be changed only with the approval of
13.13 the Legislative Commission on Pensions and Retirement.
13.14 (b) A change in the applicable actuarial assumptions may be
13.15 proposed by the governing board of the applicable pension fund
13.16 or relief association, by the actuary retained by the
13.17 Legislative Commission on Pensions and Retirement joint
13.18 retirement systems under section 6, by the actuarial advisor to
13.19 a pension fund governed by chapter 352, 353, 354, or 354A, or by
13.20 the actuary retained by a local police or firefighters relief
13.21 association governed by sections 69.77 or 69.771 to 69.776, if
13.22 one is retained.
13.23 Sec. 9. Minnesota Statutes 2002, section 422A.06,
13.24 subdivision 2, is amended to read:
13.25 Subd. 2. ACTUARIAL VALUATION REQUIRED. As of July 1 of
13.26 each year, an actuarial valuation of the retirement fund shall
13.27 be prepared by the commission-retained actuary retained by the
13.28 joint retirement systems under section 6 and filed in
13.29 conformance with the provisions and requirements of sections
13.30 356.215 to 356.23. Experience studies shall be prepared at
13.31 those times required by statute, required by the standards for
13.32 actuarial work adopted by the Legislative Commission on Pensions
13.33 and Retirement or ordered by the board.
13.34 The board may contract for the services of an approved
13.35 actuary and fix the reasonable compensation for those services.
13.36 Any approved actuary retained by the board shall function as the
14.1 actuarial advisor to the board and may perform actuarial
14.2 valuations and experience studies to supplement those performed
14.3 by the actuary retained by the Legislative Commission on
14.4 Pensions and Retirement joint retirement systems under section 6.
14.5 Any supplemental actuarial valuations or experience studies
14.6 shall be filed with the executive director of the Legislative
14.7 Commission on Pensions and Retirement.
14.8 Sec. 10. REPEALER.
14.9 Minnesota Statutes 2002, sections 3.85, subdivisions 11 and
14.10 12; and 356.217 are repealed.
14.11 Sec. 11. EFFECTIVE DATE.
14.12 Sections 1 to 10 are effective on the day following final
14.13 enactment.