1.1                          A bill for an act 
  1.2             relating to retirement; Minneapolis Teachers 
  1.3             Retirement Fund Association; requiring the investment 
  1.4             of state aid to the retirement fund by the State Board 
  1.5             of Investment; revising the administrative expense 
  1.6             surcharge; requiring additional funding by members and 
  1.7             recipients in the event of investment 
  1.8             underperformance; revising the investment-related 
  1.9             postretirement adjustment mechanism to account for the 
  1.10            funding problems of the retirement fund; amending 
  1.11            Minnesota Statutes 2002, sections 354A.12, 
  1.12            subdivisions 3a, 3d, by adding a subdivision; 354A.28, 
  1.13            subdivisions 8, 9; Minnesota Statutes 2003 Supplement, 
  1.14            section 354A.12, subdivision 3b; proposing coding for 
  1.15            new law in Minnesota Statutes, chapter 354A. 
  1.16  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.17     Section 1.  Minnesota Statutes 2002, section 354A.12, is 
  1.18  amended by adding a subdivision to read: 
  1.19     Subd. 2c.  [REIMBURSEMENT OF CERTAIN INVESTMENT 
  1.20  UNDERPERFORMANCE.] (a) If the report of the state auditor under 
  1.21  section 356.219 indicates that the Minneapolis Teachers 
  1.22  Retirement Fund Association has underperformed the State Board 
  1.23  of Investment basic retirement plans in its investment of the 
  1.24  Minneapolis teachers retirement fund assets, on the first of the 
  1.25  month next following the release of that report, the board of 
  1.26  trustees of the Minneapolis Teachers Retirement Fund Association 
  1.27  shall redeem the amount of the underperformance by imposing a 
  1.28  charge on active members, retired members, and other benefit 
  1.29  recipients. 
  1.30     (b) The additional charge on active members must continue 
  2.1   for one year and must be a percentage of covered pay.  The 
  2.2   charge must be set by the board to represent the active member 
  2.3   asset portion of the underperformance as determined by the board.
  2.4      (c) The additional charge on retired members must continue 
  2.5   for one year and must be a deduction from the annuity or 
  2.6   benefit.  The charge must be set by the board to represent the 
  2.7   retired member asset portion of the underperformance as 
  2.8   determined by the board. 
  2.9      (d) The total additional charges under paragraphs (b) and 
  2.10  (c) must equal the total amount of the investment 
  2.11  underperformance.  If an active member retires during the course 
  2.12  of the year during which the additional charge is in force, the 
  2.13  member shall pay or have deducted the appropriate charge for the 
  2.14  appropriate portion of the year. 
  2.15     (e) If the total amount of the underperformance is not 
  2.16  recovered under paragraph (d), the balance of the 
  2.17  underperformance must be added to any underperformance amount in 
  2.18  the next year of underperformance, plus annual compound interest 
  2.19  at the rate of 8.5 percent from the date of the applicable 
  2.20  report of the state auditor to July 1 of the year in which the 
  2.21  balance is to be collected. 
  2.22     Sec. 2.  Minnesota Statutes 2002, section 354A.12, 
  2.23  subdivision 3a, is amended to read: 
  2.24     Subd. 3a.  [SPECIAL DIRECT STATE AID TO FIRST CLASS CITY 
  2.25  TEACHERS RETIREMENT FUND ASSOCIATIONS.] (a) In fiscal year 1998, 
  2.26  the state shall pay $4,827,000 to the St. Paul Teachers 
  2.27  Retirement Fund Association, $17,954,000 to the Minneapolis 
  2.28  Teachers Retirement Fund Association, and $486,000 to the Duluth 
  2.29  Teachers Retirement Fund Association.  In each subsequent fiscal 
  2.30  year, these payments the state shall pay to the first class city 
  2.31  teachers retirement fund associations must be $2,827,000 
  2.32  $2,967,000 for the St. Paul, $12,954,000 Teachers Retirement 
  2.33  Fund Association and $13,300,000 for the Minneapolis, and 
  2.34  $486,000 for Duluth Teachers Retirement Fund Association. 
  2.35     (b) The direct state aids under this subdivision are 
  2.36  payable October 1 annually.  The commissioner of finance shall 
  3.1   pay the direct state aid.  The amount required under this 
  3.2   subdivision is appropriated annually from the general fund to 
  3.3   the commissioner of finance. 
  3.4      (c) The direct state aid for the Minneapolis Teachers 
  3.5   Retirement Fund Association is governed by section 354A.121. 
  3.6      Sec. 3.  Minnesota Statutes 2003 Supplement, section 
  3.7   354A.12, subdivision 3b, is amended to read: 
  3.8      Subd. 3b.  [SPECIAL DIRECT STATE MATCHING AID TO THE 
  3.9   MINNEAPOLIS TEACHERS RETIREMENT FUND ASSOCIATION.] (a) Special 
  3.10  School District No. 1 may make an additional employer 
  3.11  contribution to the Minneapolis Teachers Retirement Fund 
  3.12  Association.  The city of Minneapolis may make a contribution to 
  3.13  the Minneapolis Teachers Retirement Fund Association.  This 
  3.14  contribution may be made by a levy of the board of estimate and 
  3.15  taxation of the city of Minneapolis and the levy, if made, is 
  3.16  classified as that of a special taxing district for purposes of 
  3.17  sections 275.065 and 276.04, and for all other property tax 
  3.18  purposes. 
  3.19     (b) For every $1,000 contributed in equal proportion by 
  3.20  Special School District No. 1 and by the city of Minneapolis to 
  3.21  the Minneapolis teachers retirement fund association under 
  3.22  paragraph (a), the state shall pay to the Minneapolis Teachers 
  3.23  Retirement Fund Association $1,000, but not to exceed $2,500,000 
  3.24  in total in fiscal year 1994.  The superintendent of Special 
  3.25  School District No. 1, the mayor of the city of Minneapolis, and 
  3.26  the executive director of the Minneapolis Teachers Retirement 
  3.27  Fund Association shall jointly certify to the commissioner of 
  3.28  finance the total amount that has been contributed by Special 
  3.29  School District No. 1 and by the city of Minneapolis to the 
  3.30  Minneapolis Teachers Retirement Fund Association.  Any 
  3.31  certification to the commissioner of education must be made 
  3.32  quarterly.  If the total certifications for a fiscal year exceed 
  3.33  the maximum annual direct state matching aid amount in any 
  3.34  quarter, the amount of direct state matching aid payable to the 
  3.35  Minneapolis Teachers Retirement Fund Association must be limited 
  3.36  to the balance of the maximum annual direct state matching aid 
  4.1   amount available.  The amount required under this paragraph, 
  4.2   subject to the maximum direct state matching aid amount, is 
  4.3   appropriated annually to the commissioner of finance.  The state 
  4.4   matching aid is governed by section 354A.121. 
  4.5      (c) The commissioner of finance may prescribe the form of 
  4.6   the certifications required under paragraph (b). 
  4.7      Sec. 4.  Minnesota Statutes 2002, section 354A.12, 
  4.8   subdivision 3d, is amended to read: 
  4.9      Subd. 3d.  [MTRFA AND SPTRFA SUPPLEMENTAL ADMINISTRATIVE 
  4.10  EXPENSE ASSESSMENT.] (a) The active and retired membership of 
  4.11  the Minneapolis Teachers Retirement Fund Association and of the 
  4.12  St. Paul Teachers Retirement Fund Association is responsible for 
  4.13  defraying supplemental administrative expenses other than 
  4.14  investment expenses of the respective teacher retirement fund 
  4.15  association. 
  4.16     (b) Investment expenses of the teachers retirement fund 
  4.17  association are those expenses incurred by or on behalf of the 
  4.18  retirement fund in connection with the investment of the assets 
  4.19  of the retirement fund other than investment security 
  4.20  transaction costs.  Other administrative expenses are all 
  4.21  expenses incurred by or on behalf of the retirement fund for all 
  4.22  other retirement fund functions other than the investment of 
  4.23  retirement fund assets.  Investment and other administrative 
  4.24  expenses must be accounted for using generally accepted 
  4.25  accounting principles and in a manner consistent with the 
  4.26  comprehensive annual financial report of the teachers retirement 
  4.27  fund association for the immediately previous fiscal year under 
  4.28  section 356.20. 
  4.29     (c) Supplemental administrative expenses other than 
  4.30  investment expenses of a first class city teacher retirement 
  4.31  fund association are those expenses for the fiscal year that: 
  4.32     (1) exceed, for the St. Paul Teachers Retirement Fund 
  4.33  Association $443,745, or for the Minneapolis Teacher Retirement 
  4.34  Fund Association $671,513 $428,381, plus, in each case, an 
  4.35  additional amount derived by applying the percentage increase in 
  4.36  the Consumer Price Index for Urban Wage Earners and Clerical 
  5.1   Workers All Items Index published by the Bureau of Labor 
  5.2   Statistics of the United States Department of Labor since July 
  5.3   1, 2001 2004, to the applicable dollar amount; and 
  5.4      (2) for the St. Paul Teachers Retirement Fund Association 
  5.5   only, exceed the amount computed by applying the most recent 
  5.6   percentage of pay administrative expense amount, other than 
  5.7   investment expenses, for the teachers retirement association 
  5.8   governed by chapter 354 to the covered payroll of the respective 
  5.9   teachers retirement fund association for the fiscal year. 
  5.10     (d) The board of trustees of each first class city teachers 
  5.11  retirement fund association shall allocate the total dollar 
  5.12  amount of supplemental administrative expenses other than 
  5.13  investment expenses determined under paragraph (c), clause (2), 
  5.14  among the various active and retired membership groups of the 
  5.15  teachers retirement fund association and shall assess the 
  5.16  various membership groups their respective share of the 
  5.17  supplemental administrative expenses other than investment 
  5.18  expenses, in amounts determined by the board of trustees.  The 
  5.19  supplemental administrative expense assessments must be paid by 
  5.20  the membership group in a manner determined by the board of 
  5.21  trustees of the respective teachers retirement association.  
  5.22  Supplemental administrative expenses payable by the active 
  5.23  members of the pension plan must be picked up by the employer in 
  5.24  accordance with section 356.62. 
  5.25     (e) With respect to the St. Paul Teachers Retirement Fund 
  5.26  Association, the supplemental administrative expense assessment 
  5.27  must be fully disclosed to the various active and retired 
  5.28  membership groups of the teachers retirement fund association.  
  5.29  The chief administrative officer of the St. Paul Teachers 
  5.30  Retirement Fund Association shall prepare a supplemental 
  5.31  administrative expense assessment disclosure notice, which must 
  5.32  include the following: 
  5.33     (1) the total amount of administrative expenses of the St. 
  5.34  Paul Teachers Retirement Fund Association, the amount of the 
  5.35  investment expenses of the St. Paul Teachers Retirement Fund 
  5.36  Association, and the net remaining amount of administrative 
  6.1   expenses of the St. Paul Teachers Retirement Fund Association; 
  6.2      (2) the amount of administrative expenses for the St. Paul 
  6.3   Teachers Retirement Fund Association that would be equivalent to 
  6.4   the teachers retirement association noninvestment administrative 
  6.5   expense level described in paragraph (c); 
  6.6      (3) the total amount of supplemental administrative 
  6.7   expenses required for assessment calculated under paragraph (c); 
  6.8      (4) the portion of the total amount of the supplemental 
  6.9   administrative expense assessment allocated to each membership 
  6.10  group and the rationale for that allocation; 
  6.11     (5) the manner of collecting the supplemental 
  6.12  administrative expense assessment from each membership group, 
  6.13  the number of assessment payments required during the year, and 
  6.14  the amount of each payment or the procedure used to determine 
  6.15  each payment; and 
  6.16     (6) any other information that the chief administrative 
  6.17  officer determines is necessary to fairly portray the manner in 
  6.18  which the supplemental administrative expense assessment was 
  6.19  determined and allocated. 
  6.20     (f) The disclosure notice must be provided annually in the 
  6.21  annual report of the association. 
  6.22     (g) The supplemental administrative expense assessments 
  6.23  must be deposited in the applicable teachers retirement fund 
  6.24  upon receipt. 
  6.25     (h) Any omitted active membership group assessments that 
  6.26  remain undeducted and unpaid to the teachers retirement fund 
  6.27  association for 90 days must be paid by the respective school 
  6.28  district.  The school district may recover any omitted active 
  6.29  membership group assessment amounts that it has previously 
  6.30  paid.  The teachers retirement fund association shall deduct any 
  6.31  omitted retired membership group assessment amounts from the 
  6.32  benefits next payable after the discovery of the omitted amounts.
  6.33     Sec. 5.  [354A.121] [INVESTMENT PROCEDURES FOR STATE AID TO 
  6.34  MINNEAPOLIS TEACHERS RETIREMENT PLAN.] 
  6.35     (a) Notwithstanding any provision of law to the contrary, 
  6.36  special direct state aid to the Minneapolis Teachers Retirement 
  7.1   Fund Association under section 354A.12, subdivision 3a or 3b, 
  7.2   and amortization or supplementary amortization state aid 
  7.3   reallocated to the Minneapolis Teachers Retirement Fund 
  7.4   Association, must be transferred and invested as provided in 
  7.5   this section. 
  7.6      (b) State aid for the Minneapolis Teachers Retirement Fund 
  7.7   Association referenced in paragraph (a) must be transferred to 
  7.8   the executive director of the State Board of Investment for 
  7.9   investment in the Minnesota supplemental investment fund.  The 
  7.10  Minneapolis Teachers Retirement Fund Association state aid 
  7.11  amounts and any investment return obtained on those amounts must 
  7.12  be invested in the income share account unless the executive 
  7.13  director of the State Board of Investment, after appropriate 
  7.14  consultation with the board of trustees of the Minneapolis 
  7.15  Teachers Retirement Fund Association, determines that the amount 
  7.16  should be invested in a different account.  The executive 
  7.17  director of the State Board of Investment, after appropriate 
  7.18  consultation with the board, may transfer amounts between 
  7.19  accounts in the Minnesota supplemental investment fund.  
  7.20     (c) If the assets of the Minneapolis teachers retirement 
  7.21  fund other than the assets to the credit of the Minneapolis 
  7.22  teachers retirement fund in the Minnesota supplemental 
  7.23  investment fund are insufficient to pay retirement annuities and 
  7.24  benefits that are due and payable or the reasonable and 
  7.25  necessary administrative expenses of the retirement plan that 
  7.26  are due and payable, the executive director of the State Board 
  7.27  of Investment shall transfer the required amount to meet that 
  7.28  insufficiency to the chief administrative officer of the 
  7.29  Minneapolis Teachers Retirement Fund Association. 
  7.30     (d) For purposes of annual actuarial valuations and annual 
  7.31  financial reports, the shares in the Minnesota supplemental 
  7.32  investment fund owned by the Minneapolis teachers retirement 
  7.33  fund must be considered an asset of the Minneapolis teachers 
  7.34  retirement fund. 
  7.35     Sec. 6.  Minnesota Statutes 2002, section 354A.28, 
  7.36  subdivision 8, is amended to read: 
  8.1      Subd. 8.  [CALCULATION OF POSTRETIREMENT ADJUSTMENTS.] (a) 
  8.2   Annually, after June 30, if the Minneapolis Teachers Retirement 
  8.3   Fund Association has a funding ratio of at least 100 percent, 
  8.4   the board of trustees of the Minneapolis Teachers Retirement 
  8.5   Fund Association shall use the procedures in this subdivision 
  8.6   and subdivision 9 to determine the amount of any postretirement 
  8.7   adjustment under subdivision 9.  
  8.8      (b) The authority to pay the automatic two percent annual 
  8.9   postretirement increase as specified in the articles and bylaws 
  8.10  continues. 
  8.11     Sec. 7.  Minnesota Statutes 2002, section 354A.28, 
  8.12  subdivision 9, is amended to read: 
  8.13     Subd. 9.  [ADDITIONAL INCREASE.] (a) In addition to the 
  8.14  postretirement increases granted under subdivision 8, paragraph 
  8.15  (b), an additional percentage increase must be computed and paid 
  8.16  is payable under this subdivision. 
  8.17     (b) The board of trustees shall determine the number of 
  8.18  annuities annuitants or benefit recipients who have been 
  8.19  receiving an annuity or benefit for at least 12 months as of the 
  8.20  current June 30 in total, for the coordinated program, and for 
  8.21  the basic program.  These recipients are entitled to receive the 
  8.22  surplus investment earnings additional postretirement increase. 
  8.23     (c) Annually, on June 30, the board of trustees of the 
  8.24  teachers retirement fund association shall determine the amount 
  8.25  of reserves in the annuity reserve fund as specified in 
  8.26  subdivision 6. 
  8.27     (d) Annually, on June 30, the board of trustees of the 
  8.28  Minneapolis Teachers Retirement Fund Association shall determine 
  8.29  the five-year annualized rate of return attributable to the 
  8.30  assets in the annuity reserve fund under the formula or formulas 
  8.31  specified in section 11A.04, clause (11) percentage increase 
  8.32  granted to eligible retirees of the Teachers Retirement 
  8.33  Association on the prior January 1, under section 11A.18, 
  8.34  subdivision 9, paragraph (c). 
  8.35     (e) The board of trustees shall determine the amount of 
  8.36  excess five-year annualized rate of return over the 
  9.1   preretirement interest assumption as specified in section 
  9.2   356.215. 
  9.3      (f) (d) The additional increase must be determined by 
  9.4   multiplying the quantity one minus the rate of contribution 
  9.5   deficiency, as specified in the most recent actuarial report of 
  9.6   the actuary retained by the legislative commission on pensions 
  9.7   and retirement, times the rate of return excess as determined in 
  9.8   paragraph (e) for annuitants or benefit recipients of the 
  9.9   coordinated program is the percentage rate determined under 
  9.10  paragraph (c) and, if the Minneapolis Teachers Retirement Fund 
  9.11  Association has a funding ratio of at least 100 percent, the 
  9.12  additional increase for annuitants or benefit recipients of the 
  9.13  basic program is the percentage rate determined under paragraph 
  9.14  (c). 
  9.15     (g) (e) The additional increase is payable to all eligible 
  9.16  annuitants or benefit recipients on January 1 following the June 
  9.17  30 determination date under paragraphs (c) and (d). 
  9.18     Sec. 8.  [EFFECTIVE DATE.] 
  9.19     Sections 1 to 7 are effective July 1, 2004.