HF 2391

as introduced - 87th Legislature (2011 - 2012) Posted on 02/23/2012 03:03pm

A bill for an act
relating to retirement; volunteer firefighter relief associations; implementing the
recommendations of the 2011-2012 state auditor volunteer fire working group;
amending Minnesota Statutes 2010, sections 356.219, subdivision 8; 356A.01,
subdivision 19; 356A.06, subdivision 6; 424A.016, subdivision 6; 424A.02,
subdivisions 1, 7, 9.

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

Section 1.

Minnesota Statutes 2010, section 356.219, subdivision 8, is amended to read:

Subd. 8.

Timing of reports.

(a) For salaried firefighter relief associations, police
relief associations, and volunteer firefighter relief associations, the information required
under this section must be submitted by the due date for reports required under section
69.051, subdivision 1 or 1a, as applicable. If a relief association satisfies the definition of
a fully invested plan under subdivision 1, paragraph (b), for the calendar year covered
by the report required under section 69.051, subdivision 1 or 1a, as applicable, the chief
administrative officer of the covered pension plan shall certify that compliance on a form
prescribed by the state auditor. The state auditor shall transmit annually to the State Board
of Investment a list or lists of covered pension plans which submitted certifications in
order to facilitate reporting by the State Board of Investment under paragraph (c).

(b) For the deleted text begin Minneapolis Teachers Retirement Fund Association, the deleted text end St. Paul
Teachers Retirement Fund Association, the Duluth Teachers Retirement Fund Association,
the deleted text begin Minneapolis Employees Retirement Fund, the deleted text end University of Minnesota faculty
supplemental retirement plan, and the applicable administrators for the University of
Minnesota faculty retirement plan and the individual retirement account plans under
chapters 354B and 354D, the information required under this section must be submitted to
the state auditor by June 1 of each year.

(c) The State Board of Investment, on behalf of pension funds specified in
subdivision 1, paragraph (c), must report information required under this section by
September 1 of each year.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2010, section 356A.01, subdivision 19, is amended to read:

Subd. 19.

Pension fund.

"Pension fund" means the assets amassed and held in a
pension plan, other than the general fund, as reserves for present and future payment of
benefits and administrative expenses. new text begin For a retirement plan governed by section 69.77 or
by chapter 424A, the term means the relief association special fund.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2010, section 356A.06, subdivision 6, is amended to read:

Subd. 6.

Limited list of authorized investment securities.

(a) Except to the
extent otherwise authorized by law, a covered pension plan may invest its assets only in
investment securities authorized by this subdivision if the plan does not:

(1) have new text begin pension fund new text end assets with a book value in excess of $1,000,000;

(2) use the services of an investment advisor registered with the Securities and
Exchange Commission in accordance with the Investment Advisers Act of 1940, or
registered as an investment advisor in accordance with sections 80A.58, and 80A.60, for
the investment of at least 60 percent of its new text begin pension fund new text end assets, calculated on book value;

(3) use the services of the State Board of Investment for the investment of at least 60
percent of its new text begin pension fund new text end assets, calculated on book value; or

(4) use a combination of the services of an investment advisor meeting the
requirements of clause (2) and the services of the State Board of Investment for the
investment of at least 75 percent of its new text begin pension fund new text end assets, calculated on book value.

(b) Investment securities authorized for a pension plan covered by this subdivision
are:

(1) certificates of deposit issued, to the extent of available insurance or
collateralization, by a financial institution that is a member of the Federal Deposit
Insurance Corporation or the Federal Savings and Loan Insurance Corporation, is insured
by the National Credit Union Administration, or is authorized to do business in this state
and has deposited with the chief administrative officer of the plan a sufficient amount of
marketable securities as collateral in accordance with section 118A.03;

(2) savings accounts, to the extent of available insurance, with a financial institution
that is a member of the Federal Deposit Insurance Corporation or the Federal Savings
and Loan Insurance Corporation;

(3) governmental obligations, including bonds, notes, bills, or other fixed
obligations, issued by the United States, an agency or instrumentality of the United States,
an organization established and regulated by an act of Congress or by a state, state agency
or instrumentality, municipality, or other governmental or political subdivision that:

(i) for the obligation in question, issues an obligation that equals or exceeds the
stated investment yield of debt securities not exempt from federal income taxation and of
comparable quality;

(ii) for an obligation that is a revenue bond, has been completely self-supporting
for the last five years; and

(iii) for an obligation other than a revenue bond, has issued an obligation backed by
the full faith and credit of the applicable taxing jurisdiction and has not been in default on
the payment of principal or interest on the obligation in question or any other nonrevenue
bond obligation during the preceding ten years;

(4) corporate obligations, including bonds, notes, debentures, or other regularly
issued and readily marketable evidences of indebtedness issued by a corporation organized
under the laws of any state that during the preceding five years has had on average
annual net pretax earnings at least 50 percent greater than the annual interest charges
and principal payments on the total issued debt of the corporation during that period
and that, for the obligation in question, has issued an obligation rated in one of the top
three quality categories by Moody's Investors Service, Incorporated, or Standard and
Poor's Corporation; and

(5) shares in an open-end investment company registered under the federal
Investment Company Act of 1940, if the portfolio investments of the company are limited
to investments that meet the requirements of clauses (1) to (4).

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 4.

Minnesota Statutes 2010, section 424A.016, subdivision 6, is amended to read:

Subd. 6.

Deferred service pensions.

(a) A member of a relief association is entitled
to a deferred service pension if the member:

(1) has completed the lesser of the minimum period of active service with the fire
department specified in the bylaws or 20 years of active service with the fire department;

(2) has completed at least five years of active membership in the relief association;
and

(3) separates from active service and membership deleted text begin before reaching age 50 or the
minimum age for retirement and commencement of a service pension specified in the
bylaws governing the relief association if that age is greater than age 50 deleted text end . new text begin The requirement
that a member separate from active service and membership is waived for persons who
have discontinued their volunteer firefighter duties and who are employed on a full-time
basis under section 424A.015, subdivision 1.
new text end

(b) The deferred service pension is payable when the former member reaches
new text begin at least new text end age 50, or new text begin at least new text end the minimum age specified in the bylaws governing the relief
association if that age is greater than age 50, and when the former member makes a valid
written application.

(c) A defined contribution relief association may, if its governing bylaws so provide,
credit interest or additional investment performance on the deferred lump-sum service
pension during the period of deferral. If provided for in the bylaws, the interest must be
paid:

(1) at the investment performance rate actually earned on that portion of the assets
if the deferred benefit amount is invested by the relief association in a separate account
established and maintained by the relief association deleted text begin or deleted text end new text begin ;
new text end

new text begin (2) at the investment performance rate actually earned on that portion of the assets new text end
if the deferred benefit amount is invested in a separate investment vehicle held by the
relief association; or

deleted text begin (2) deleted text end new text begin (3) at new text end the investment return on the assets of the special fund of the defined
contribution volunteer firefighter relief association in proportion to the share of the assets
of the special fund to the credit of each individual deferred member account through
the new text begin accounting new text end date on which the investment return is recognized by and credited to the
special fund.

(d) new text begin Unless the bylaws of a relief association that has elected to pay interest or
additional investment performance on deferred lump-sum service pensions under
paragraph (c) specifies a different interest or additional investment performance method,
including the interest or additional investment performance period starting date and ending
date, the interest or additional investment performance on a deferred service pension
is creditable as follows:
new text end

new text begin (1) for a relief association that has elected to pay interest or additional investment
performance under paragraph (c), clause (1) or (3), beginning on the date that the
member separates from active service and membership and ending on the accounting
date immediately before the deferred member commences receipt of the deferred service
pension; or
new text end

new text begin (2) for a relief association that has elected to pay interest or additional investment
performance under paragraph (c), clause (2), beginning on the date that the member
separates from active service and membership and ending on the date that the separate
investment vehicle is valued immediately before the date on which the deferred member
commences receipt of the deferred service pension.
new text end

new text begin (e) new text end The deferred service pension is governed by and must be calculated under
the general statute, special law, relief association articles of incorporation, and relief
association bylaw provisions applicable on the date on which the member separated from
active service with the fire department and active membership in the relief association.

new text begin EFFECTIVE DATE. new text end

new text begin (a) This section is effective January 1, 2013.
new text end

new text begin (b) This section applies only to persons becoming deferred service pensioners after
January 1, 2013.
new text end

Sec. 5.

Minnesota Statutes 2010, section 424A.02, subdivision 1, is amended to read:

Subdivision 1.

Authorization.

(a) A defined benefit relief association, when its
articles of incorporation or bylaws so provide, may pay out of the assets of its special
fund a defined benefit service pension to each of its members who: (1) separates from
active service with the fire department; (2) reaches age 50; (3) completes at least five
years of active service as an active member of the municipal fire department to which the
relief association is associated; (4) completes at least five years of active membership
with the relief association before separation from active service; and (5) complies with
any additional conditions as to age, service, and membership that are prescribed by the
bylaws of the relief association. A service pension computed under this section may be
prorated monthly for fractional years of service as the bylaws or articles of incorporation
of the relief association so provide. The bylaws or articles of incorporation may define
a "month," but the definition must require a calendar month to have at least 16 days of
active service. If the bylaws or articles of incorporation do not define a "month," a
"month" is a completed calendar month of active service measured from the member's
date of entry to the same date in the subsequent month. The service pension earned by a
volunteer firefighter under this chapter and the articles of incorporation and bylaws of the
volunteer firefighters' relief association may be paid whether or not the municipality or
nonprofit firefighting corporation to which the relief association is associated qualifies for
the receipt of fire state aid under chapter 69.

(b) In the case of a member who has completed at least five years of active service as
an active member of the fire department to which the relief association is associated on
the date that the relief association is established and incorporated, the requirement that
the member complete at least five years of active membership with the relief association
before separation from active service may be waived by the board of trustees of the relief
association if the member completes at least five years of inactive membership with the
relief association before the date of the payment of the service pension. During the
period of inactive membership, the member is not entitled to receive disability benefit
coverage, is not entitled to receive additional service credit towards computation of a
service pension, and is considered to have the status of a person entitled to a deferred
service pension under subdivision 7.

(c) No municipality or nonprofit firefighting corporation may delegate the power to
take final action in setting a service pension or ancillary benefit amount or level to the
board of trustees of the relief association or to approve in advance a service pension or
ancillary benefit amount or level equal to the maximum amount or level that this chapter
would allow rather than a specific dollar amount or level.

deleted text begin (d) No relief association as defined in section 424A.001, subdivision 4, may pay a
defined benefit service pension or disability benefit to a former member of the relief
association if that person has not separated from active service with the fire department to
which the relief association is directly associated, unless:
deleted text end

deleted text begin (1) the person is employed subsequent to retirement by the municipality or the
independent nonprofit firefighting corporation, whichever applies, to perform duties within
the municipal fire department or corporation on a full-time basis;
deleted text end

deleted text begin (2) the governing body of the municipality or of the corporation has filed its
determination with the board of trustees of the relief association that the person's
experience with and service to the fire department in that person's full-time capacity
would be difficult to replace; and
deleted text end

deleted text begin (3) the bylaws of the relief association were amended to provide for the payment of
a service pension or disability benefit for such full-time employees.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 6.

Minnesota Statutes 2010, section 424A.02, subdivision 7, is amended to read:

Subd. 7.

Deferred service pensions.

(a) A member of a defined benefit relief
association is entitled to a deferred service pension if the member:

(1) has completed the lesser of either the minimum period of active service with
the fire department specified in the bylaws or 20 years of active service with the fire
department;

(2) has completed at least five years of active membership in the relief association;
and

(3) separates from active service and membership deleted text begin before reaching age 50 or the
minimum age for retirement and commencement of a service pension specified in the
bylaws governing the relief association if that age is greater than age 50 deleted text end . new text begin The requirement
that a member separate from active service and membership is waived for persons who
have discontinued their volunteer firefighter duties and who are employed on a full-time
basis under section 424A.015, subdivision 1.
new text end

(b) The deferred service pension is payable when the former member reaches
new text begin at least new text end age 50, or new text begin at least new text end the minimum age specified in the bylaws governing the relief
association if that age is greater than age 50, and when the former member makes a valid
written application.

(c) A defined benefit relief association that provides a lump-sum service pension
governed by subdivision 3 may, when its governing bylaws so provide, pay interest on the
deferred lump-sum service pension during the period of deferral. If provided for in the
bylaws, interest must be paid in one of the following manners:

(1) at the investment performance rate actually earned on that portion of the assets
if the deferred benefit amount is invested by the relief association in a separate account
established and maintained by the relief association deleted text begin or deleted text end new text begin ;
new text end

new text begin (2) at the investment performance rate actually earned on that portion of the assets new text end if
the deferred benefit amount is invested in a separate investment vehicle held by the relief
association; or

deleted text begin (2) deleted text end new text begin (3) new text end at an interest rate of up to five percent, compounded annually, as set by the
board of directors and approved as provided in subdivision 10.

(d) Interest under paragraph (c), clause deleted text begin (2) deleted text end new text begin (3) new text end , is payable following the date on
which the municipality has approved the deferred service pension interest rate established
by the board of trustees.

(e) new text begin Unless the bylaws of a relief association that has elected to pay interest or
additional investment performance on deferred lump-sum service pensions under
paragraph (c) specifies a different interest or additional investment performance method,
including the interest or additional investment performance period starting date and ending
date, the interest or additional investment performance on a deferred service pension
is creditable as follows:
new text end

new text begin (1) for a relief association that has elected to pay interest or additional investment
performance under paragraph (c), clause (1) or (3), beginning on the date that the
member separates from active service and membership and ending on the accounting
date immediately before the deferred member commences receipt of the deferred service
pension; or
new text end

new text begin (2) for a relief association that has elected to pay interest or additional investment
performance under paragraph (c), clause (2), beginning on the date that the member
separates from active service and membership and ending on the date that the separate
investment vehicle is valued immediately before the date on which the deferred member
commences receipt of the deferred service pension.
new text end

new text begin (f) new text end For a deferred service pension that is transferred to a separate account established
and maintained by the relief association or separate investment vehicle held by the relief
association, the deferred member bears the full investment risk subsequent to transfer and
in calculating the accrued liability of the volunteer firefighters relief association that pays
a lump-sum service pension, the accrued liability for deferred service pensions is equal
to the separate relief association account balance or the fair market value of the separate
investment vehicle held by the relief association.

deleted text begin (f) deleted text end new text begin (g) new text end The deferred service pension is governed by and must be calculated under
the general statute, special law, relief association articles of incorporation, and relief
association bylaw provisions applicable on the date on which the member separated from
active service with the fire department and active membership in the relief association.

new text begin EFFECTIVE DATE. new text end

new text begin (a) This section is effective January 1, 2013.
new text end

new text begin (b) This section applies only to persons becoming deferred service pensioners after
January 1, 2013.
new text end

Sec. 7.

Minnesota Statutes 2010, section 424A.02, subdivision 9, is amended to read:

Subd. 9.

Limitation on ancillary benefits.

A defined benefit relief association,
including any volunteer firefighters relief association governed by section 69.77 or any
volunteer firefighters division of a relief association governed by chapter 424, may only
pay ancillary benefits which would constitute an authorized disbursement as specified in
section 424A.05 subject to the following requirements or limitations:

(1) with respect to a defined benefit relief association in which governing bylaws
provide new text begin solely new text end for a lump-sum service pension to a retiring member, new text begin or provide a retiring
member the choice of either a lump-sum service pension or a monthly service pension
and the lump-sum service pension was chosen, new text end no ancillary benefit may be paid to any
former member or paid to any person on behalf of any former member after the former
member (i) terminates active service with the fire department and active membership
in the relief association; and (ii) commences receipt of a service pension as authorized
under this section; and

(2) with respect to any defined benefit relief association, no ancillary benefit paid or
payable to any member, to any former member, or to any person on behalf of any member
or former member, may exceed in amount the total earned service pension of the member
or former member. The total earned service pension must be calculated by multiplying
the service pension amount specified in the bylaws of the relief association at the time of
death or disability, whichever applies, by the years of service credited to the member or
former member. The years of service must be determined as of (i) the date the member or
former member became entitled to the ancillary benefit; or (ii) the date the member or
former member died entitling a survivor or the estate of the member or former member to
an ancillary benefit. The ancillary benefit must be calculated without regard to whether the
member had attained the minimum amount of service and membership credit specified in
the governing bylaws. For active members, the amount of a permanent disability benefit
or a survivor benefit must be equal to the member's total earned service pension except
that the bylaws of a defined benefit relief association may provide for the payment of a
survivor benefit in an amount not to exceed five times the yearly service pension amount
specified in the bylaws on behalf of any member who dies before having performed five
years of active service in the fire department with which the relief association is affiliated.

(3)(i) If a lump sum survivor or death benefit is payable under the articles of
incorporation or bylaws, the benefit must be paid:

(A) as a survivor benefit to the surviving spouse of the deceased firefighter;

(B) as a survivor benefit to the surviving children of the deceased firefighter if
no surviving spouse;

(C) as a survivor benefit to a designated beneficiary of the deceased firefighter if no
surviving spouse or surviving children; or

(D) as a death benefit to the estate of the deceased active or deferred firefighter if no
surviving children and no beneficiary designated.

(ii) If there are no surviving children, the surviving spouse may waive, in writing,
wholly or partially, the spouse's entitlement to a survivor benefit.

(4)(i) If a monthly benefit survivor or death benefit is payable under the articles of
incorporation or bylaws, the benefit must be paid:

(A) as a survivor benefit to the surviving spouse of the deceased firefighter;

(B) as a survivor benefit to the surviving children of the deceased firefighter if
no surviving spouse;

(C) as a survivor benefit to a designated beneficiary of the deceased firefighter if no
surviving spouse or surviving children; or

(D) as a death benefit to the estate of the deceased active or deferred firefighter if no
surviving spouse, no surviving children, and no beneficiary designated.

(ii) If there are no surviving children, the surviving spouse may waive, in writing,
wholly or partially, the spouse's entitlement to a survivor benefit.

(iii) For purposes of this clause, if the relief association bylaws authorize a monthly
survivor benefit payable to a designated beneficiary, the relief association bylaws may
limit the total survivor benefit amount payable.

(5) For purposes of this section, for a monthly benefit volunteer fire relief association
or for a combination lump-sum and monthly benefit volunteer fire relief association where
a monthly benefit service pension has been elected by or a monthly benefit is payable with
respect to a firefighter, a designated beneficiary must be a natural person. For purposes
of this section, for a lump-sum volunteer fire relief association or for a combination
lump-sum and monthly benefit volunteer fire relief association where a lump-sum service
pension has been elected by or a lump-sum benefit is payable with respect to a firefighter,
a trust created under chapter 501B may be a designated beneficiary. If a trust is payable to
the surviving children organized under chapter 501B as authorized by this section and
there is no surviving spouse, the survivor benefit may be paid to the trust, notwithstanding
a requirement of this section to the contrary.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective January 1, 2013.
new text end