HF 2453

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

A bill for an act
relating to retirement; modifying relief association
financial requirements; amending provisions relating
to the Minneapolis Police Relief Association; amending
Minnesota Statutes 2004, sections 69.77, subdivision
4; 356.216; 423B.01, subdivision 12; 423B.09,
subdivision 1, by adding a subdivision; 423B.10,
subdivision 1; 423B.15, subdivision 3; proposing
coding for new law in Minnesota Statutes, chapter 423B.

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

Section 1.

Minnesota Statutes 2004, section 69.77,
subdivision 4, is amended to read:

Subd. 4.

Relief association financial requirements;
minimum municipal obligation.

(a) The officers of the relief
association shall determine the financial requirements of the
relief association and minimum obligation of the municipality
for the following calendar year in accordance with the
requirements of this subdivision. The financial requirements of
the relief association and the minimum obligation of the
municipality must be determined on or before the submission date
established by the municipality under subdivision 5.

(b) The financial requirements of the relief association
for the following calendar year must be based on the most recent
actuarial valuation or survey of the special fund of the
association if more than one fund is maintained by the
association, or of the association, if only one fund is
maintained, prepared in accordance with sections 356.215,
subdivisions 4 to 15, and 356.216, as required under subdivision
10. If an actuarial estimate is prepared by the actuary of the
relief association as part of obtaining a modification of the
benefit plan of the relief association and the modification is
implemented, the actuarial estimate must be used in calculating
the subsequent financial requirements of the relief association.

(c) If the relief association has an unfunded actuarial
accrued liability as reported in the most recent actuarial
valuation or survey, the total of the amounts calculated under
clauses (1), (2), and (3), constitute the financial requirements
of the relief association for the following year. If the relief
association does not have an unfunded actuarial accrued
liability as reported in the most recent actuarial valuation or
survey, the amount calculated under clauses (1) and (2)
constitute the financial requirements of the relief association
for the following year. The financial requirement elements are:

(1) the normal level cost requirement for the following
year, expressed as a dollar amount, which must be determined by
applying the normal level cost of the relief association as
reported in the actuarial valuation or survey and expressed as a
percentage of covered payroll to the estimated covered payroll
of the active membership of the relief association, including
any projected change in the active membership, for the following
year;

(2) for the Bloomington Fire Department Relief Association,
the Fairmont Police Relief Association, and the Virginia Fire
Department Relief Association, to the dollar amount of normal
cost determined under clause (1) must be added an amount equal
to the dollar amount of the administrative expenses of the
special fund of the association if more than one fund is
maintained by the association, or of the association if only one
fund is maintained, for the most recent year, multiplied by the
factor of 1.035. The administrative expenses are those
authorized under section 69.80. No amount of administrative
expenses under this clause are to be included in the financial
requirements of the Minneapolis Firefighters Relief Association
or the Minneapolis Police Relief Association; and

(3) to the dollar amount of normal cost and expenses
determined under clauses (1) and (2) must be added an amount
equal to the level annual dollar amount which is sufficient to
amortize the unfunded actuarial accrued liability by December
31, 2010, new text begin for the Bloomington Fire Department Relief
Association, the Fairmont Police Relief Association, the
Minneapolis Firefighters Relief Association, and the Virginia
Fire Department Relief Association, and by December 31, 2020,
for the Minneapolis Police Relief Association, new text end as determined
from the actuarial valuation or survey of the fund, using an
interest assumption set at the applicable rate specified in
section 356.215, subdivision 8. The amortization date specified
in this clause applies to all local police or salaried
firefighters' relief associations and that date supersedes any
amortization date specified in any applicable special law.

(d) The minimum obligation of the municipality is an amount
equal to the financial requirements of the relief association
reduced by the estimated amount of member contributions from
covered salary anticipated for the following calendar year and
the estimated amounts anticipated for the following calendar
year from the applicable state aid program established under
sections 69.011 to 69.051 receivable by the relief association
after any allocation made under section 69.031, subdivision 5,
paragraph (b), clause (2), or 423A.01, subdivision 2, clause
(6), from the local police and salaried firefighters' relief
association amortization aid program established under section
423A.02, subdivision 1, from the supplementary amortization
state-aid program established under section 423A.02, subdivision
1a, and from the additional amortization state aid under section
423A.02, subdivision 1b.

Sec. 2.

Minnesota Statutes 2004, section 356.216, is
amended to read:

356.216 CONTENTS OF ACTUARIAL VALUATIONS FOR LOCAL POLICE
AND FIRE FUNDS.

(a) The provisions of section 356.215 that govern the
contents of actuarial valuations must apply to any local police
or fire pension fund or relief association required to make an
actuarial report under this section, except as follows:

(1) in calculating normal cost and other requirements, if
required to be expressed as a level percentage of covered
payroll, the salaries used in computing covered payroll must be
the maximum rate of salary on which retirement and survivorship
credits and amounts of benefits are determined and from which
any member contributions are calculated and deducted;

(2) in lieu of the amortization date specified in section
356.215, subdivision 11, the appropriate amortization target
date specified in section 69.77, subdivision 4, or 69.773,
subdivision 4, clause (c), must be used in calculating any
required amortization contribution new text begin except that the amortization
date for the Minneapolis Police Relief Association is December
31, 2020 new text end ;

(3) in addition to the tabulation of active members and
annuitants provided for in section 356.215, subdivision 13, the
member contributions for active members for the calendar year
and the prospective annual retirement annuities under the
benefit plan for active members must be reported;

(4) actuarial valuations required under section 69.773,
subdivision 2, must be made at least every four years and
actuarial valuations required under section 69.77 shall be made
annually;

(5) the actuarial balance sheet showing accrued assets
valued at market value if the actuarial valuation is required to
be prepared at least every four years or valued as current
assets under section 356.215, subdivision 1, clause (6), or
paragraph (b), whichever applies, if the actuarial valuation is
required to be prepared annually, actuarial accrued liabilities,
and the unfunded actuarial accrued liability must include the
following required reserves:

(i) For active members
1. Retirement benefits
2. Disability benefits
3. Refund liability due to death or withdrawal
4. Survivors' benefits
(ii) For deferred annuitants' benefits
(iii) For former members without vested rights
(iv) For annuitants
1. Retirement annuities
2. Disability annuities
3. Surviving spouses' annuities
4. Surviving children's annuities

In addition to those required reserves, separate items must
be shown for additional benefits, if any, which may not be
appropriately included in the reserves listed above; and

(6) actuarial valuations are due by the first day of the
seventh month after the end of the fiscal year which the
actuarial valuation covers.

(b) For the Minneapolis Firefighters Relief Association or
the Minneapolis Police Relief Association, the following
provisions additionally apply:

(1) in calculating the actuarial balance sheet, unfunded
actuarial accrued liability, and amortization contribution of
the relief association, "current assets" means the value of all
assets at cost, including realized capital gains and losses,
plus or minus, whichever applies, the average value of total
unrealized capital gains or losses for the most recent
three-year period ending with the end of the plan year
immediately preceding the actuarial valuation report
transmission date; and

(2) in calculating the applicable portions of the actuarial
valuation, an annual preretirement interest assumption of six
percent, an annual postretirement interest assumption of six
percent, and an annual salary increase assumption of four
percent must be used.

Sec. 3.

Minnesota Statutes 2004, section 423B.01,
subdivision 12, is amended to read:

Subd. 12.

Excess investment income.

"Excess investment
income" means the amount, if any, by which the average time
weighted total rate of return earned by the fund in the most
recent prior deleted text begin five deleted text end new text begin two new text end fiscal years has exceeded the actual
average percentage increase in the current monthly salary of a
first grade patrol officer in the most recent prior deleted text begin five deleted text end new text begin two
new text end fiscal years plus two percent, and must be expressed as a dollar
amount. The amount may not exceed one percent of the total
assets of the fund, except when the actuarial value of assets of
the fund according to the most recent annual actuarial valuation
prepared in accordance with sections 356.215 and 356.216 is
greater than 102 percent of its actuarial accrued liabilities,
in which case the amount must not exceed 1-1/2 percent of the
total assets of the fund, and does not exist unless the yearly
average percentage increase of the time weighted total rate of
return of the fund for the previous deleted text begin five deleted text end new text begin two new text end years exceeds by
two percent the yearly average percentage increase in monthly
salary of a first grade patrol officer during the previous deleted text begin five
deleted text end new text begin two new text end calendar years.

Sec. 4.

Minnesota Statutes 2004, section 423B.09,
subdivision 1, is amended to read:

Subdivision 1.

Minneapolis police; persons entitled to
receive pensions.

The association shall grant pensions payable
from the police pension fund in monthly installments to persons
entitled to pensions in the manner and for the following
purposes.

(a) deleted text begin When the actuarial value of assets of the fund
according to the most recent annual actuarial valuation
performed in accordance with sections 356.215 and 356.216 is
less than 90 percent of the actuarial accrued liabilities, an
active member or a deferred pensioner who has performed duty as
a member of the police department of the city for five years or
more, upon written application after retiring from duty and
reaching at least age 50, is entitled to be paid monthly for
life a service pension equal to eight units. For full years of
service beyond five years, the service pension increases by 1.6
units for each full year, to a maximum of 40 units. When the
actuarial value of assets of the fund according to the most
recent annual actuarial valuation prepared in accordance with
sections 356.215 and 356.216 is greater than 90 percent of
actuarial accrued liabilities, deleted text end Active members, deferred members,
and service pensioners are entitled to a service pension
according to the following schedule:

5 years 8.0 units
6 years 9.6 units
7 years 11.2 units
8 years 12.8 units
9 years 14.4 units
10 years 16.0 units
11 years 17.6 units
12 years 19.2 units
13 years 20.8 units
14 years 22.4 units
15 years 24.0 units
16 years 25.6 units
17 years 27.2 units
18 years 28.8 units
19 years 30.4 units
20 years deleted text begin 34.0 deleted text end new text begin 35.0 new text end units
21 years deleted text begin 35.6 deleted text end new text begin 36.6 new text end units
22 years deleted text begin 37.2 deleted text end new text begin 38.2 new text end units
23 years deleted text begin 38.8 deleted text end new text begin 39.8 new text end units
24 years deleted text begin 40.4 deleted text end new text begin 41.4 new text end units
25 years deleted text begin 42.0 deleted text end new text begin 43.0 new text end units

Fractional years of service may not be used in computing
pensions.

(b) An active member who after five years' service but less
than 20 years' service with the police department of the city,
becomes superannuated so as to be permanently unable to perform
the person's assigned duties, is entitled to be paid monthly for
life a superannuation pension equal to four units for five years
of service and an additional two units for each full year of
service over five years and less than 20 years.

(c) An active member who is not eligible for a service
pension and who, while a member of the police department of the
city, becomes diseased or sustains an injury while in the
service that permanently unfits the member for the performance
of police duties is entitled to be paid monthly for life a
pension equal to 34 units while so disabled.

Sec. 5.

Minnesota Statutes 2004, section 423B.09, is
amended by adding a subdivision to read:

new text begin Subd. 7. new text end

new text begin Additional unit. new text end

new text begin The additional unit provided
to members by subdivision 1 must also be provided to members who
selected a joint annuity option under subdivision 6 and must be
in an amount that is actuarially equivalent to the service
pension and the automatic survivor coverage for that additional
unit.
new text end

Sec. 6.

Minnesota Statutes 2004, section 423B.10,
subdivision 1, is amended to read:

Subdivision 1.

Entitlement; benefit amount.

(a) The
surviving spouse of a deceased service pensioner, disability
pensioner, deferred pensioner, superannuation pensioner, or
active member, who was the legally married spouse of the
decedent, residing with the decedent, and who was married while
or before the time the decedent was on the payroll of the police
department, and who, if the deceased member was a service or
deferred pensioner, was legally married to the member for a
period of at least one year before retirement from the police
department, is entitled to a surviving spouse benefit. The
surviving spouse benefit is equal to deleted text begin 22 deleted text end new text begin 23 new text end units per month if
the person is the surviving spouse of a deceased active member
or disabilitant. The surviving spouse benefit is equal to six
units per month, plus an additional one unit for each year of
service to the credit of the decedent in excess of five years,
to a maximum of deleted text begin 22 deleted text end new text begin 23 new text end units per month, if the person is the
surviving spouse of a deceased service pensioner, deferred
pensioner, or superannuation pensioner. The surviving spouse
benefit is payable for the life of the surviving spouse.

(b) A surviving child of a deceased service pensioner,
disability pensioner, deferred pensioner, superannuation
pensioner, or active member, who was living while the decedent
was an active member of the police department or was born within
nine months after the decedent terminated active service in the
police department, is entitled to a surviving child benefit.
The surviving child benefit is equal to eight units per month if
the person is the surviving child of a deceased active member or
disabilitant. The surviving child benefit is equal to two units
per month, plus an additional four-tenths of one unit per month
for each year of service to the credit of the decedent in excess
of five years, to a maximum of eight units, if the person is the
surviving child of a deceased service pensioner, deferred
pensioner, or superannuation pensioner. The surviving child
benefit is payable until the person attains age 18, or, if in
full-time attendance during the normal school year, in a school
approved by the board of directors, until the person receives a
bachelor's degree or attains the age of 22 years, whichever
occurs first. In the event of the death of both parents leaving
a surviving child or children entitled to a surviving child
benefit as determined in this paragraph, the surviving child is,
or the surviving children are, entitled to a surviving child
benefit in such sums as determined by the board of directors to
be necessary for the care and education of such surviving child
or children, but not to exceed the family maximum benefit per
month, to the children of any one family.

(c) The surviving spouse and surviving child benefits are
subject to a family maximum benefit. The family maximum benefit
is 41 units per month.

(d) A surviving spouse who is otherwise not qualified may
receive a benefit if the surviving spouse was married to the
decedent for a period of five years and was residing with the
decedent at the time of death. The surviving spouse benefit is
the same as that provided in paragraph (a), except that if the
surviving spouse is younger than the decedent, the surviving
spouse benefit must be actuarially equivalent to a surviving
spouse benefit that would have been paid to the member's spouse
had the member been married to a person of the same age or a
greater age than the member's age before retirement.

Sec. 7.

Minnesota Statutes 2004, section 423B.15,
subdivision 3, is amended to read:

Subd. 3.

Amount of annual postretirement payment.

The
amount determined under subdivision 2 must be applied in
accordance with this subdivision. When the actuarial value of
assets of the fund according to the most recent annual actuarial
valuation prepared in accordance with sections 356.215 and
356.216 is less than 102 percent of its total actuarial
liabilities, the relief association shall apply the first
one-half of excess investment income to the payment of an annual
postretirement payment as specified in this subdivision and the
second one-half of excess investment income up to one-half of
one percent of the assets of the fund must be applied to reduce
the state amortization state aid or supplementary amortization
state aid payments otherwise due to the relief association under
section 423A.02 for the current calendar year. When the
actuarial value of assets of the fund according to the most
recent annual actuarial valuation prepared in accordance with
sections 356.215 and 356.216 is less than 102 percent funded and
other conditions are met, the relief association shall pay an
annual postretirement payment to all eligible members in an
amount not to exceed one-half of one percent of the assets of
the fund. When the actuarial value of assets of the fund
according to the most recent annual actuarial valuation prepared
in accordance with sections 356.215 and 356.216 is greater than
102 percent of its actuarial accrued liabilities, the relief
association shall pay an annual postretirement payment to all
eligible members in an amount not to exceed 1-1/2 percent of the
assets of the fund. Payment of the annual postretirement
payment must be in a lump sum amount on June 1 following the
determination date in any year. Payment of the annual
postretirement payment may be made only if the average time
weighted total rate of return for the most recent prior deleted text begin five deleted text end new text begin two
new text end years exceeds by two percent the actual average percentage
increase in the current monthly salary of a top grade patrol
officer in the most recent prior deleted text begin five deleted text end new text begin two new text end fiscal years. The
total amount of all payments to members may not exceed the
amount determined under this subdivision. Payment to each
eligible member must be calculated by dividing the total number
of pension units to which eligible members are entitled into the
excess investment income available for distribution to members,
and then multiplying that result by the number of units to which
each eligible member is entitled to determine each eligible
member's annual postretirement payment. When the actuarial
value of assets of the fund according to the most recent annual
actuarial valuation prepared in accordance with sections 356.215
and 356.216 is less than 102 percent of its actuarial accrued
liabilities, payment to each eligible member may not exceed an
amount equal to the total monthly benefit that the eligible
member was entitled to in the prior year under the terms of the
benefit plan of the relief association or each eligible member's
proportionate share of the excess investment income, whichever
is less. When the actuarial value of assets of the fund
according to the most recent annual actuarial valuation prepared
in accordance with sections 356.215 and 356.216 is greater than
102 percent of its actuarial accrued liabilities, payment to
each eligible member must not exceed the member's proportionate
share of 1-1/2 percent of the assets of the fund.

A person who received a pension or benefit for the entire
12 months before the determination date is eligible for a full
annual postretirement payment. A person who received a pension
or benefit for less than 12 months before the determination date
is eligible for a prorated annual postretirement payment.

Sec. 8.

new text begin [423B.23] GUARANTEED PENSION PROVISION.
new text end

new text begin Once a pension benefit is properly paid in accordance with
this law to any member, the dollar amount of that pension
benefit shall not be reduced.
new text end

Sec. 9. new text begin LOCAL APPROVAL; NONSEVERABILITY.
new text end

new text begin Sections 1 to 8 are not severable and are effective on the
day after the date of the approval by the city council of the
city of Minneapolis and the timely completion by the chief
clerical officer of the city of Minneapolis of compliance with
Minnesota Statutes, section 645.021, subdivisions 2 and 3.
new text end