HF 2264

as introduced - 84th Legislature (2005 - 2006) Posted on 12/15/2009 12:00am

A bill for an act
relating to retirement; Minneapolis Teachers
Retirement Fund Association; requiring the investment
of state aid to the retirement fund by the State Board
of Investment; revising the administrative expense
surcharge; requiring additional funding by members and
recipients in the event of investment
underperformance; amending Minnesota Statutes 2004,
sections 354A.08; 354A.12, subdivisions 3a, 3b, 3d, by
adding a subdivision; 354A.28, subdivision 9;
proposing coding for new law in Minnesota Statutes,
chapter 354A.

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

Section 1.

Minnesota Statutes 2004, section 354A.08, is
amended to read:

354A.08 AUTHORIZED INVESTMENTS.

new text begin (a) new text end A teachers retirement fund association may receive,
hold, and dispose of real estate or personal property acquired
by it, whether the acquisition was by purchase, or any other
lawful means, as provided in this chapter or in the
association's articles of incorporation. In addition to other
authorized real estate investments, an association may also
invest funds in Minnesota situs nonfarm real estate ownership
interests or loans secured by mortgages or deeds of trust.

new text begin (b) All or a portion of the assets of a first class city
teacher retirement fund association may be invested in the
Minnesota supplemental investment fund under section 11A.17.
new text end

Sec. 2.

Minnesota Statutes 2004, section 354A.12, is
amended by adding a subdivision to read:

new text begin Subd. 2c. new text end

new text begin Reimbursement of certain investment
underperformance. new text end

new text begin (a) If the report of the state auditor under
section 356.219 indicates that the Minneapolis Teachers
Retirement Fund Association has underperformed the State Board
of Investment basic retirement plans in its investment of the
Minneapolis teachers retirement fund assets, on the first of the
month next following the release of that report, the Board of
Trustees of the Minneapolis Teachers Retirement Fund Association
shall redeem the amount of the underperformance by imposing a
charge on active members, retired members, and other benefit
recipients.
new text end

new text begin (b) The additional charge on active members must continue
for one year and must be a percentage of covered pay. The
charge must be set by the board to represent the active member
asset portion of the underperformance as determined by the board.
new text end

new text begin (c) The additional charge on retired members must continue
for one year and must be a deduction from the annuity or
benefit. The charge must be set by the board to represent the
retired member asset portion of the underperformance as
determined by the board.
new text end

new text begin (d) The total additional charges under paragraphs (b) and
(c) must equal the total amount of the investment
underperformance. If an active member retires during the course
of the year during which the additional charge is in force, the
member shall pay or have deducted the appropriate charge for the
appropriate portion of the year.
new text end

new text begin (e) If the total amount of the underperformance is not
recovered under paragraph (d), the balance of the
underperformance must be added to any underperformance amount in
the next year of underperformance, plus annual compound interest
at the rate of 8.5 percent from the date of the applicable
report of the state auditor to July 1 of the year in which the
balance is to be collected.
new text end

Sec. 3.

Minnesota Statutes 2004, section 354A.12,
subdivision 3a, is amended to read:

Subd. 3a.

Special direct state aid to first class city
teachers retirement fund associations.

(a) deleted text begin In fiscal year 1998,
the state shall pay $4,827,000 to the St. Paul Teachers
Retirement Fund Association, $17,954,000 to the Minneapolis
Teachers Retirement Fund Association, and $486,000 to the Duluth
Teachers Retirement Fund Association. deleted text end In each deleted text begin subsequent deleted text end fiscal
year, deleted text begin these payments deleted text end new text begin the state shall pay new text end to the first class city
teachers retirement fund associations deleted text begin must be $2,827,000
deleted text end new text begin $2,967,000 new text end for new text begin the new text end St. Paul deleted text begin , $12,954,000 deleted text end new text begin Teachers Retirement
Fund Association and $13,300,000 new text end for new text begin the new text end Minneapolis deleted text begin , and
$486,000 for Duluth deleted text end new text begin Teachers Retirement Fund Association new text end .

(b) The direct state aids under this subdivision are
payable October 1 annually. The commissioner of finance shall
pay the direct state aid. The amount required under this
subdivision is appropriated annually from the general fund to
the commissioner of finance.

new text begin (c) The direct state aid for the Minneapolis Teachers
Retirement Fund Association is governed by section 354A.121.
new text end

Sec. 4.

Minnesota Statutes 2004, section 354A.12,
subdivision 3b, is amended to read:

Subd. 3b.

Special direct state matching aid to the
minneapolis teachers retirement fund association.

(a) Special
School District No. 1 may make an additional employer
contribution to the Minneapolis Teachers Retirement Fund
Association. The city of Minneapolis may make a contribution to
the Minneapolis Teachers Retirement Fund Association. This
contribution may be made by a levy of the board of estimate and
taxation of the city of Minneapolis and the levy, if made, is
classified as that of a special taxing district for purposes of
sections 275.065 and 276.04, and for all other property tax
purposes.

(b) For every $1,000 contributed in equal proportion by
Special School District No. 1 and by the city of Minneapolis to
the Minneapolis teachers retirement fund association under
paragraph (a), the state shall pay to the Minneapolis Teachers
Retirement Fund Association $1,000, but not to exceed $2,500,000
in total in fiscal year 1994. The superintendent of Special
School District No. 1, the mayor of the city of Minneapolis, and
the executive director of the Minneapolis Teachers Retirement
Fund Association shall jointly certify to the commissioner of
finance the total amount that has been contributed by Special
School District No. 1 and by the city of Minneapolis to the
Minneapolis Teachers Retirement Fund Association. Any
certification to the commissioner of education must be made
quarterly. If the total certifications for a fiscal year exceed
the maximum annual direct state matching aid amount in any
quarter, the amount of direct state matching aid payable to the
Minneapolis Teachers Retirement Fund Association must be limited
to the balance of the maximum annual direct state matching aid
amount available. The amount required under this paragraph,
subject to the maximum direct state matching aid amount, is
appropriated annually to the commissioner of finance. new text begin The state
matching aid is governed by section 354A.121.
new text end

(c) The commissioner of finance may prescribe the form of
the certifications required under paragraph (b).

Sec. 5.

Minnesota Statutes 2004, section 354A.12,
subdivision 3d, is amended to read:

Subd. 3d.

new text begin minneapolis teachers retirement fund
association and st. paul teachers retirement fund new text end supplemental
administrative expense assessment.

(a) The active and retired
membership of the Minneapolis Teachers Retirement Fund
Association and of the St. Paul Teachers Retirement Fund
Association is responsible for defraying supplemental
administrative expenses other than investment expenses of the
respective teacher retirement fund association.

(b) Investment expenses of the teachers retirement fund
association are those expenses incurred by or on behalf of the
retirement fund in connection with the investment of the assets
of the retirement fund other than investment security
transaction costs. Other administrative expenses are all
expenses incurred by or on behalf of the retirement fund for all
other retirement fund functions other than the investment of
retirement fund assets. Investment and other administrative
expenses must be accounted for using generally accepted
accounting principles and in a manner consistent with the
comprehensive annual financial report of the teachers retirement
fund association for the immediately previous fiscal year under
section 356.20.

(c) Supplemental administrative expenses other than
investment expenses of a first class city teacher retirement
fund association are those expenses for the fiscal year that:

(1) exceed, for the St. Paul Teachers Retirement Fund
Association $443,745, or for the Minneapolis Teacher Retirement
Fund Association deleted text begin $671,513 deleted text end new text begin $428,381 new text end , plus, in each case, an
additional amount derived by applying the percentage increase in
the Consumer Price Index for Urban Wage Earners and Clerical
Workers All Items Index published by the Bureau of Labor
Statistics of the United States Department of Labor since July
1, deleted text begin 2001 deleted text end new text begin 2005 new text end , to the applicable dollar amount; and

(2) new text begin for the St. Paul Teachers Retirement Fund Association
only, new text end exceed the amount computed by applying the most recent
percentage of pay administrative expense amount, other than
investment expenses, for the teachers retirement association
governed by chapter 354 to the covered payroll of the respective
teachers retirement fund association for the fiscal year.

(d) The board of trustees of each first class city teachers
retirement fund association shall allocate the total dollar
amount of supplemental administrative expenses other than
investment expenses determined under paragraph (c) deleted text begin , clause (2),
deleted text end among the various active and retired membership groups of the
teachers retirement fund association and shall assess the
various membership groups their respective share of the
supplemental administrative expenses other than investment
expenses, in amounts determined by the board of trustees. The
supplemental administrative expense assessments must be paid by
the membership group in a manner determined by the board of
trustees of the respective teachers retirement association.
Supplemental administrative expenses payable by the active
members of the pension plan must be picked up by the employer in
accordance with section 356.62.

(e) With respect to the St. Paul Teachers Retirement Fund
Association, the supplemental administrative expense assessment
must be fully disclosed to the various active and retired
membership groups of the teachers retirement fund association.
The chief administrative officer of the St. Paul Teachers
Retirement Fund Association shall prepare a supplemental
administrative expense assessment disclosure notice, which must
include the following:

(1) the total amount of administrative expenses of the St.
Paul Teachers Retirement Fund Association, the amount of the
investment expenses of the St. Paul Teachers Retirement Fund
Association, and the net remaining amount of administrative
expenses of the St. Paul Teachers Retirement Fund Association;

(2) the amount of administrative expenses for the St. Paul
Teachers Retirement Fund Association that would be equivalent to
the teachers retirement association noninvestment administrative
expense level described in paragraph (c);

(3) the total amount of supplemental administrative
expenses required for assessment calculated under paragraph (c);

(4) the portion of the total amount of the supplemental
administrative expense assessment allocated to each membership
group and the rationale for that allocation;

(5) the manner of collecting the supplemental
administrative expense assessment from each membership group,
the number of assessment payments required during the year, and
the amount of each payment or the procedure used to determine
each payment; and

(6) any other information that the chief administrative
officer determines is necessary to fairly portray the manner in
which the supplemental administrative expense assessment was
determined and allocated.

(f) The disclosure notice must be provided annually in the
annual report of the association.

(g) The supplemental administrative expense assessments
must be deposited in the applicable teachers retirement fund
upon receipt.

(h) Any omitted active membership group assessments that
remain undeducted and unpaid to the teachers retirement fund
association for 90 days must be paid by the respective school
district. The school district may recover any omitted active
membership group assessment amounts that it has previously
paid. The teachers retirement fund association shall deduct any
omitted retired membership group assessment amounts from the
benefits next payable after the discovery of the omitted amounts.

Sec. 6.

new text begin [354A.121] INVESTMENT PROCEDURES FOR STATE AID TO
MINNEAPOLIS TEACHERS RETIREMENT PLAN.
new text end

new text begin (a) Notwithstanding any provision of law to the contrary,
special direct state aid to the Minneapolis Teachers Retirement
Fund Association under section 354A.12, subdivision 3a or 3b,
and amortization or supplementary amortization state aid
reallocated to the Minneapolis Teachers Retirement Fund
Association, must be transferred and invested as provided in
this section.
new text end

new text begin (b) State aid for the Minneapolis Teachers Retirement Fund
Association referenced in paragraph (a) must be transferred to
the executive director of the State Board of Investment for
investment in the Minnesota supplemental investment fund. The
Minneapolis Teachers Retirement Fund Association state aid
amounts and any investment return obtained on those amounts must
be invested in the income share account unless the executive
director of the State Board of Investment, after appropriate
consultation with the Board of Trustees of the Minneapolis
Teachers Retirement Fund Association, determines that the amount
should be invested in a different account. The executive
director of the State Board of Investment, after appropriate
consultation with the board, may transfer amounts between
accounts in the Minnesota supplemental investment fund.
new text end

new text begin (c) If the assets of the Minneapolis teachers retirement
fund other than the assets to the credit of the Minneapolis
teachers retirement fund in the Minnesota supplemental
investment fund are insufficient to pay retirement annuities and
benefits that are due and payable or the reasonable and
necessary administrative expenses of the retirement plan that
are due and payable, the executive director of the State Board
of Investment shall transfer the required amount to meet that
insufficiency to the chief administrative officer of the
Minneapolis Teachers Retirement Fund Association.
new text end

new text begin (d) For purposes of annual actuarial valuations and annual
financial reports, the shares in the Minnesota supplemental
investment fund owned by the Minneapolis teachers retirement
fund must be considered an asset of the Minneapolis teachers
retirement fund.
new text end

Sec. 7.

Minnesota Statutes 2004, section 354A.28,
subdivision 9, is amended to read:

Subd. 9.

Additional increase.

(a) In addition to the
postretirement increases granted under subdivision 8, new text begin paragraph
(b), new text end an additional percentage increase deleted text begin must be computed and paid
deleted text end new text begin is payable new text end under this subdivision.

(b) The board of trustees shall determine the number of
deleted text begin annuities deleted text end new text begin annuitants new text end or benefit recipients who have been
receiving an annuity or benefit for at least 12 months as of the
current June 30 new text begin in total, for the coordinated program, and for
the basic program new text end . These recipients are entitled to receive the
deleted text begin surplus investment earnings deleted text end additional postretirement increase.

(c) deleted text begin Annually, on June 30, the board of trustees of the
teachers retirement fund association shall determine the amount
of reserves in the annuity reserve fund as specified in
subdivision 6.
deleted text end

deleted text begin (d) deleted text end Annually, on June 30, the board of trustees of the
Minneapolis Teachers Retirement Fund Association shall determine
the deleted text begin five-year annualized rate of return attributable to the
assets in the annuity reserve fund under the formula or formulas
specified in section 11A.04, clause (11) deleted text end new text begin percentage increase
granted to eligible retirees of the Teachers Retirement
Association on the prior January 1, under section 11A.18,
subdivision 9, paragraph (c) new text end .

deleted text begin (e) The board of trustees shall determine the amount of
excess five-year annualized rate of return over the
preretirement interest assumption as specified in section
356.215.
deleted text end

deleted text begin (f) deleted text end new text begin (d) new text end The additional increase deleted text begin must be determined by
multiplying the quantity one minus the rate of contribution
deficiency, as specified in the most recent actuarial report of
the actuary retained by the legislative commission on pensions
and retirement, times the rate of return excess as determined in
paragraph (e) deleted text end new text begin for annuitants or benefit recipients of the
coordinated program is the percentage rate determined under
paragraph (c) and, if the Minneapolis Teachers Retirement Fund
Association has a funding ratio of at least 100 percent, the
additional increase for annuitants or benefit recipients of the
basic program is the percentage rate determined under paragraph
(c) new text end .

deleted text begin (g) deleted text end new text begin (e) new text end The additional increase is payable to all eligible
annuitants or benefit recipients on January 1 following the June
30 determination date under paragraphs (c) and (d).

Sec. 8. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 7 are effective on July 1, 2005.
new text end