HF 40

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

A bill for an act
relating to retirement; limiting certain
postretirement adjustments for the Minnesota
postretirement investment fund; amending Minnesota
Statutes 2004, section 11A.18, subdivision 9.

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

Section 1.

Minnesota Statutes 2004, section 11A.18,
subdivision 9, is amended to read:

Subd. 9.

Calculation of postretirement adjustment.

(a)
Annually, following June 30, the state board shall use the
procedures in paragraphs (b), (c), and (d) to determine whether
a postretirement adjustment is payable and to determine the
amount of any postretirement adjustment.

(b) If 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
increases from June 30 of the preceding year to June 30 of the
current year, the state board shall certify the percentage
increase. The amount certified must not exceed the lesser of
the difference between the preretirement interest assumption and
postretirement interest assumption in section 356.215,
subdivision 8, paragraph (a), or 2.5 percent. For the
Minneapolis Employees Retirement Fund, the amount certified must
not exceed 3.5 percent.

(c) In addition to any percentage increase certified under
paragraph (b), the board shall use the following procedures to
determine if a postretirement adjustment is payable under this
paragraph:

(1) The state board shall determine the market value of the
fund on June 30 of that year;

(2) The amount of reserves required for the annuity or
benefit payable to an annuitant and benefit recipient of the
participating public pension plans or funds must be determined
by the commission-retained actuary as of the current June 30.
An annuitant or benefit recipient who has been receiving an
annuity or benefit for at least 12 full months as of the current
June 30 is eligible to receive a full postretirement
adjustment. An annuitant or benefit recipient who has been
receiving an annuity or benefit for at least one full month, but
less than 12 full months as of the current June 30, is eligible
to receive a partial postretirement adjustment. Each fund shall
report separately the amount of the reserves for those
annuitants and benefit recipients who are eligible to receive a
full postretirement benefit adjustment. This amount is known as
"eligible reserves." Each fund shall also report separately the
amount of the reserves for those annuitants and benefit
recipients who are not eligible to receive a postretirement
adjustment. This amount is known as "noneligible reserves."
For an annuitant or benefit recipient who is eligible to receive
a partial postretirement adjustment, each fund shall report
separately as additional "eligible reserves" an amount that
bears the same ratio to the total reserves required for the
annuitant or benefit recipient as the number of full months of
annuity or benefit receipt as of the current June 30 bears to 12
full months. The remainder of the annuitant's or benefit
recipient's reserves must be separately reported as additional
"noneligible reserves." The amount of "eligible" and
"noneligible" required reserves must be certified to the board
by the commission-retained actuary as soon as is practical
following the current June 30;

(3) The state board shall determine the percentage increase
certified under paragraph (b) multiplied by the eligible
required reserves, as adjusted for mortality gains and losses
under subdivision 11, determined under clause (2);

(4) The state board shall add the amount of reserves
required for the annuities or benefits payable to annuitants and
benefit recipients of the participating public pension plans or
funds as of the current June 30 to the amount determined under
clause (3);

(5) The state board shall subtract the amount determined
under clause (4) from the market value of the fund determined
under clause (1);

(6) The state board shall adjust the amount determined
under clause (5) by the cumulative current balance determined
pursuant to clause (8) and any negative balance carried forward
under clause (9);

(7) A positive amount resulting from the calculations in
clauses (1) to (6) is the excess market value. A negative
amount is the negative balance;

(8) The state board shall allocate one-fifth of the excess
market value or one-fifth of the negative balance to each of
five consecutive years, beginning with the fiscal year ending
the current June 30; and

(9) To calculate the postretirement adjustment under this
paragraph based on investment performance for a fiscal year, the
state board shall add together all excess market value allocated
to that year and subtract from the sum all negative balances
allocated to that year. If this calculation results in a
negative number, the entire negative balance must be carried
forward and allocated to the next year. If the resulting amount
is positive, a postretirement adjustment is payable under this
paragraph. The board shall express a positive amount as a
percentage of the total eligible required reserves certified to
the board under clause (2).

(d) The state board shall determine the amount of any
postretirement adjustment which is payable using the following
procedure:

(1) The total "eligible" required reserves as of the first
of January next following the end of the fiscal year for the
annuitants and benefit recipients eligible to receive a full or
partial postretirement adjustment as determined by clause (2)
must be certified to the state board by the commission-retained
actuary. The total "eligible" required reserves must be
determined by the commission-retained actuary on the assumption
that all annuitants and benefit recipients eligible to receive a
full or partial postretirement adjustment will be alive on the
January 1 in question; and

(2) The state board shall add the percentage certified
under paragraph (b) to any positive percentage calculated under
paragraph (c). The board shall not subtract from the percentage
certified under paragraph (b) any negative amount calculated
under paragraph (c). The sum of these percentages must be
carried to five decimal places and must be certified to each
participating public pension fund or plan as the full
postretirement adjustment percentage. new text begin The full postretirement
adjustment percentage certified to each participating public
pension plan or fund must not exceed five percent.
new text end

(e) A retirement annuity payable in the event of retirement
before becoming eligible for Social Security benefits as
provided in section 352.116, subdivision 3; 353.29, subdivision
6; or 354.35 must be treated as the sum of a period certain
retirement annuity and a life retirement annuity for the
purposes of any postretirement adjustment. The period certain
retirement annuity plus the life retirement annuity must be the
annuity amount payable until age 62 or 65, whichever applies. A
postretirement adjustment granted on the period certain
retirement annuity must terminate when the period certain
retirement annuity terminates.