| TO: | Members of the Legislative Commission on Pensions and Retirement |
| FROM: | Susan Lenczewski, Executive Director |
| DATE: | March 6, 2018 |
| RE: | LCPR18-012 (Rosen): Change in authorized investments for the Hennepin County Supplemental Retirement Program |
| RE: | Attachment: LCPR staff document: "Background Information on the Hennepin County Supplemental Retirement Program" |
The Hennepin County Supplemental Retirement Program (SRP) is a defined contribution plan established in 1969 for employees of Hennepin County. The SRP was closed to new members as of April 14, 1982, and currently has about 200 active members. The plan is administered by the Minnesota State Retirement System (MSRS).
The terms of the plan are set forth in Minnesota Statutes, Sections 383B.46 through 383B.52. The plan is also referred to as the 1% Supplemental Retirement Plan because, if an eligible employee elected to participate in the plan, 1% of pay is deducted from the employee's paycheck and deposited under the SRP in an account in the employee's name. The same amount is contributed by Hennepin County to the employee's account.
Currently, under Minnesota Statutes, Sections 383B.47 and 383B.48, SRP participants direct the investment of their accounts in the State Board of Investment's supplemental investment fund. The SRP is restricted to investment only in the supplemental investment fund. The other public defined contribution plans, such as the MSRS Unclassified Plan and the Public Employees Defined Contribution Plan, are invested in the supplemental investment fund, but are also permitted to invest in mutual funds and the other options listed in Minnesota Statutes, Section 356.645.
The proposed legislation (currently in the form of bill draft LCPR18-012) will permit SRP accounts to be invested in the same types of investments as are available to the participants in the other public defined contribution plans.
The State Board of Investment (SBI) has identified the statutes that must be amended to permit this change in the investments available to participants in the SRP. The proposed legislation amends Minnesota Statutes, Section 356.645, and Sections 383B.47 through 383B.50.
SBI approved the proposed amendments at its meeting on March 1, 2018. We understand that SBI's executive director and legal counsel will work closely with representatives of Hennepin County and MSRS to provide for a smooth transition, in the event of a change to different investment options, which will be allowed by the proposed legislation, if enacted. The transition process will be administered by MSRS and will include participant notification and education.
Section 1: This section amends Minnesota Statutes, Section 356.645, which governs the types of investments that may be made available to participants in directing the investment of their accounts in defined contribution plans for public employees. Currently, this statute applies to the Minnesota Deferred Compensation Plan, the Health Care Savings Plan, and the Unclassified Plan, all of which are administered by MSRS, and the PERA Defined Contribution Plan. The bill adds a reference to the statute that established the SRP so that this plan will have the same investment options as the other defined contribution plans.
Section 2: This section amends Minnesota Statutes Section 383B.47, which governs the investment of assets in the SRP. The amendment replaces a reference to the Minnesota supplemental investment fund with a reference to the statute amended in Section 1, summarized above, thereby allowing the SRP accounts to be invested in mutual funds and the other investments made available to other public defined contribution plans.
Sections 3-5: These sections amend Minnesota Statutes, Sections 383B.48, 383B.49, and 383B.50 by deleting references to the Minnesota supplemental investment fund and otherwise revising the language of these statutes to reflect the changes made in Sections 1 and 2, summarized above.
Section 6: This section makes the amendments effective immediately following final enactment.