Minnesota Legislature
SF 927
as introduced - 87th Legislature (2011 - 2012) Posted on 03/27/2012 02:37pm
Current Version - as introduced
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A bill for an act
relating to retirement; all Minnesota public pension plans; revising investment
authority provisions; amending Minnesota Statutes 2010, sections 11A.24; 69.77,
subdivision 9; 69.775; 354A.08; 356A.06, subdivisions 6, 7.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2010, section 11A.24, is amended to read:
11A.24 AUTHORIZED INVESTMENTS.
Subdivision 1.
Securities generally.
new text begin (a) new text end The state board deleted text begin shall have the authoritydeleted text end new text begin is
authorized new text end to purchase, sell, lend deleted text begin ordeleted text end new text begin and new text end exchange the deleted text begin followingdeleted text end securities new text begin specified in this
section, new text end for funds or accounts specifically made subject to this sectionnew text begin ,new text end including puts and
call options and future contracts traded on a contract market regulated by a governmental
agency or by a financial institution regulated by a governmental agency. These securities
may be owned new text begin directly or through shares in exchange-traded or mutual funds, or new text end as units
in commingled trusts deleted text begin that own the securities described in subdivisions 2 to 6deleted text end new text begin , subject to
any limitations as specified in this sectionnew text end .
new text begin (b)new text end Any agreement to lend securities must be concurrently collateralized with cash
or securities with a market value of not less than 100 percent of the market value of the
loaned securities at the time of the agreement. Any agreement for put and call options
and futures contracts may only be entered into with a fully offsetting amount of cash or
securities. Only securities authorized by this section, excluding those under subdivision 6,
paragraph (a), clauses (1) to deleted text begin (4)deleted text end new text begin (3)new text end , may be accepted as collateral or offsetting securities.
Subd. 2.
Government obligations.
The state board deleted text begin maydeleted text end new text begin is authorized to new text end invest
funds in governmental bonds, notes, bills, mortgages, and other evidences of indebtedness
deleted text begin provideddeleted text end new text begin if new text end the issue is backed by the full faith and credit of the issuer or new text begin if new text end the issue
is rated among the top four quality rating categories by a nationally recognized rating
agency. The obligations in which the board may invest under this subdivision deleted text begin includedeleted text end new text begin are
new text end guaranteed or insured issues of deleted text begin (a)deleted text end new text begin :
new text end
new text begin (1)new text end the United States, its agencies, its instrumentalities, or organizations created
and regulated by an act of Congress; deleted text begin (b)
deleted text end
new text begin (2) the Dominion ofnew text end Canada deleted text begin anddeleted text end new text begin or any of new text end its provinces, provided the principal and
interest deleted text begin isdeleted text end new text begin are new text end payable in United States dollars; deleted text begin (c)
deleted text end
new text begin (3) any ofnew text end the states deleted text begin anddeleted text end new text begin or any of new text end their municipalities, political subdivisions,
agencies or instrumentalities; deleted text begin (d) the International Bank for Reconstruction and
Development, the Inter-American Development Bank, the Asian Development Bank, the
African Development Bank, ordeleted text end new text begin and
new text end
new text begin (4)new text end any deleted text begin otherdeleted text end United States government sponsored organization of which the United
States is a member, deleted text begin provideddeleted text end new text begin if new text end the principal and interest deleted text begin isdeleted text end new text begin are new text end payable in United States
dollars.
Subd. 3.
Corporate obligations.
(a) The state board deleted text begin maydeleted text end new text begin is authorized to new text end invest
funds in bonds, notes, debentures, transportation equipment obligations, deleted text begin ordeleted text end new text begin and new text end any other
longer term evidences of indebtedness issued or guaranteed by a corporation organized
under the laws of the United States or any state deleted text begin thereofdeleted text end new text begin of the United Statesnew text end , or the
Dominion of Canada or any new text begin Canadian new text end province deleted text begin thereof provided thatdeleted text end new text begin ifnew text end :
(1) the principal and interest of obligations of corporations incorporated or organized
under the laws of the Dominion of Canada or any new text begin Canadian new text end province deleted text begin thereof shall bedeleted text end
new text begin are new text end payable in United States dollars; and
(2) new text begin the new text end obligations deleted text begin shall bedeleted text end new text begin are new text end rated among the top four quality categories by a
nationally recognized rating agency.
(b) The state board may invest in unrated corporate obligations or in corporate
obligations that are not rated among the top four quality categories as provided in
paragraph (a), clause (2), deleted text begin provided thatdeleted text end new text begin ifnew text end :
(1) the aggregate value of these obligations deleted text begin maydeleted text end new text begin does new text end not exceed five percent of the
market deleted text begin or bookdeleted text end valuedeleted text begin , whichever is less,deleted text end of the fund for which the state board is investing;
(2) the state board's participation is limited to 50 percent of a single offering subject
to this paragraph; and
(3) the state board's participation is limited to 25 percent of an issuer's obligations
subject to this paragraph.
Subd. 4.
Other obligations.
(a) The state board deleted text begin maydeleted text end new text begin is authorized to new text end invest funds in
deleted text begin bankers acceptances, certificates of deposit, deposit notes, commercial paper, mortgage
securities and asset backed securities, repurchase agreements and reverse repurchase
agreements, guaranteed investment contracts, savings accounts, and guaranty fund
certificates, surplus notes, or debentures of domestic mutual insurance companies if they
conform to the following provisionsdeleted text end :
(1) bankers acceptances and deposit notes deleted text begin of United States banks are limited to thosedeleted text end
new text begin if new text end issued by deleted text begin banksdeleted text end new text begin a United States bank that is new text end rated in the highest four quality categories
by a nationally recognized rating agency;
(2) certificates of deposit deleted text begin are limited to thosedeleted text end new text begin if new text end issued by deleted text begin (i)deleted text end new text begin a new text end United States deleted text begin banks
and savings institutions that aredeleted text end new text begin bank or savings institution that is new text end rated in the top four
quality categories by a nationally recognized rating agency or whose certificates of deposit
are fully insured by federal agenciesdeleted text begin ;deleted text end new text begin ,new text end or deleted text begin (ii)deleted text end new text begin certificates of deposits issued by a new text end credit
deleted text begin unionsdeleted text end new text begin union new text end in deleted text begin amounts up todeleted text end new text begin an amount within new text end the limit of new text begin the new text end insurance coverage
provided by the National Credit Union Administration;
(3) commercial paper deleted text begin is limited to thosedeleted text end new text begin if new text end issued by new text begin a new text end United States deleted text begin corporationsdeleted text end
new text begin corporation new text end or deleted text begin theirdeleted text end new text begin its new text end Canadian deleted text begin subsidiariesdeleted text end new text begin subsidiary new text end and new text begin if new text end rated in the highest two
quality categories by a nationally recognized rating agency;
(4) mortgage securities deleted text begin shall bedeleted text end new text begin and asset-backed securities if new text end rated in the top four
quality categories by a nationally recognized rating agency;
(5) deleted text begin collateral fordeleted text end repurchase agreements and reverse repurchase agreements deleted text begin is
limited todeleted text end new text begin if collateralized with new text end letters of credit deleted text begin anddeleted text end new text begin or new text end securities authorized in this section;
(6) guaranteed investment contracts deleted text begin are limited to thosedeleted text end new text begin if new text end issued by new text begin an new text end insurance
deleted text begin companiesdeleted text end new text begin company new text end or deleted text begin banksdeleted text end new text begin a bank that is new text end rated in the top four quality categories by a
nationally recognized rating agency or deleted text begin todeleted text end alternative guaranteed investment contracts
deleted text begin wheredeleted text end new text begin if new text end the underlying assets comply with the requirements of this section;
(7) savings accounts deleted text begin are limited to thosedeleted text end new text begin if new text end fully insured by new text begin a new text end federal deleted text begin agenciesdeleted text end new text begin
agencynew text end ; and
(8) deleted text begin asset backed securities shall be rated in the top four quality categories by a
nationally recognized rating agencydeleted text end new text begin guaranty fund certificates, surplus notes, or debentures
if issued by a domestic mutual insurance companynew text end .
(b) Sections 16A.58, 16C.03, subdivision 4, and 16C.05 do not apply to certificates
of deposit and collateralization agreements executed by the state board under paragraph
(a), clause (2).
(c) In addition to investments authorized by paragraph (a), clause (4), the state board
deleted text begin maydeleted text end new text begin is authorized to new text end purchase from the Minnesota Housing Finance Agency all or any
part of a pool of residential mortgages, not in default, that has previously been financed
by the issuance of bonds or notes of the agency. The state board may also enter into a
commitment with the agency, at the time of any issue of bonds or notes, to purchase at
a specified future date, not exceeding 12 years from the date of the issue, the amount of
mortgage loans then outstanding and not in default that have been made or purchased from
the proceeds of the bonds or notes. The state board may charge reasonable fees for any
such commitment and may agree to purchase the mortgage loans at a price sufficient to
produce a yield to the state board comparable, in its judgment, to the yield available on
similar mortgage loans at the date of the bonds or notes. The state board may also enter
into agreements with the agency for the investment of any portion of the funds of the
agency. The agreement must cover the period of the investment, withdrawal privileges,
and any guaranteed rate of return.
Subd. 5.
Corporate stocks.
The state board deleted text begin maydeleted text end new text begin is authorized to new text end invest funds in
stocks or convertible issues of any corporation organized under the laws of the United
States or deleted text begin thedeleted text end new text begin any of its new text end states deleted text begin thereofdeleted text end , the Dominion of Canada or new text begin any of new text end its provinces, or
any corporation listed on an exchange new text begin that is new text end regulated by an agency of the United States
or new text begin of the new text end Canadian national governmentdeleted text begin , if they conform to the following provisions:deleted text end new text begin .
new text end
deleted text begin
(a) The aggregate value of corporate stock investments, as adjusted for realized
profits and losses, shall not exceed 85 percent of the market or book value, whichever is
less, of a fund, less the aggregate value of investments according to subdivision 6;
deleted text end
deleted text begin (b) Investments shalldeleted text end new text begin An investment in any corporation must new text end not exceed five percent
of the total outstanding shares of deleted text begin any onedeleted text end new text begin that new text end corporation, except that the state board may
hold up to 20 percent of the shares of a real estate investment trust and up to 20 percent
of the shares of a closed-end mutual fund.
new text begin Subd. 5a. new text end
new text begin Asset mix limitations. new text end
new text begin
The aggregate value of investments under
subdivision 5, plus the aggregate value of all investments under subdivision 6, must not
exceed 85 percent of the market value of a fund.
new text end
Subd. 6.
Other investments.
(a) In addition to the investments authorized in
subdivisions 1 to 5, and subject to the provisions in paragraph (b), the state board deleted text begin maydeleted text end
new text begin is authorized to new text end invest funds in:
(1) deleted text begin venture capitaldeleted text end new text begin equity and debt new text end investment businesses through participation in
limited partnerships, trusts, private placements, limited liability corporations, limited
liability companies, limited liability partnerships, and corporations;
(2) real estate ownership interests or loans secured by mortgages or deeds of trust or
shares of real estate investment trusts through investment in limited partnerships, deleted text begin bank
sponsoreddeleted text end new text begin bank-sponsorednew text end collective funds, trusts, mortgage participation agreements,
and insurance company commingled accounts, including separate accounts;
deleted text begin
(3) regional and mutual funds through bank sponsored collective funds and open-end
investment companies registered under the Federal Investment Company Act of 1940, and
closed-end mutual funds listed on an exchange regulated by a governmental agency;
deleted text end
deleted text begin (4)deleted text end new text begin (3) new text end resource investments through limited partnerships, trusts, private placements,
limited liability corporations, limited liability companies, limited liability partnerships,
and corporations; and
deleted text begin (5)deleted text end new text begin (4) new text end international securities.
(b) The investments authorized in paragraph (a) must conform to the following
provisions:
(1) the aggregate value of all investments made deleted text begin according todeleted text end new text begin under new text end paragraph (a),
clauses (1) to deleted text begin (4)deleted text end new text begin (3)new text end , may not exceed 35 percent of the market value of the fund for
which the state board is investing;
(2) there must be at least four unrelated owners of the investment other than the state
board for investments made under paragraph (a), clause (1), (2), new text begin or new text end (3)deleted text begin , or (4)deleted text end ;
(3) state board participation in an investment vehicle is limited to 20 percent thereof
for investments made under paragraph (a), clause (1), (2), new text begin or new text end (3)deleted text begin , or (4)deleted text end ; and
(4) state board participation in a limited partnership does not include a general
partnership interest or other interest involving general liability. The state board may not
engage in any activity as a limited partner which creates general liability.
(c) All financial, business, or proprietary data collected, created, received, or
maintained by the state board in connection with investments authorized by paragraph (a),
clause (1), (2), or deleted text begin (4)deleted text end new text begin (3)new text end , are nonpublic data under section 13.02, subdivision 9. As used
in this paragraph, "financial, business, or proprietary data" means data, as determined by
the responsible authority for the state board, that is of a financial, business, or proprietary
nature, the release of which could cause competitive harm to the state board, the legal
entity in which the state board has invested or has considered an investment, the managing
entity of an investment, or a portfolio company in which the legal entity holds an interest.
As used in this section, "business data" is data described in section 13.591, subdivision 1.
Regardless of whether they could be considered financial, business, or proprietary data, the
following data received, prepared, used, or retained by the state board in connection with
investments authorized by paragraph (a), clause (1), (2), or deleted text begin (4)deleted text end new text begin (3)new text end , are public at all times:
(1) the name and industry group classification of the legal entity in which the state
board has invested or in which the state board has considered an investment;
(2) the state board commitment amount, if any;
(3) the funded amount of the state board's commitment to date, if any;
(4) the market value of the investment by the state board;
(5) the state board's internal rate of return for the investment, including expenditures
and receipts used in the calculation of the investment's internal rate of return; and
(6) the age of the investment in years.
Subd. 7.
Appropriation.
There is annually appropriated to the state board, from
the assets of the funds for which the state board invests deleted text begin pursuantdeleted text end new text begin relating new text end to new text begin authorized
investments under new text end subdivision 6, deleted text begin clausedeleted text end new text begin paragraph new text end (a), sums sufficient to pay the costs for
the management of these deleted text begin fundsdeleted text end new text begin assets new text end by private management firms.
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 69.77, subdivision 9, is amended to read:
Subd. 9.
Local police and paid fire relief association investment authority.
(a) The deleted text begin fundsdeleted text end new text begin special fund new text end of the association must be invested in securities that are
authorized investments under section 356A.06, subdivision 6 or 7, whichever applies.deleted text begin
Notwithstanding any provision of section 356A.06, subdivision 6 or 7 to the contrary, the
special fund of the relief association may be additionally invested in:
deleted text end
deleted text begin
(1) open-end investment companies registered under the federal Investment
Company Act of 1940, if the portfolio investments of the investment companies comply
with the type of securities authorized for investment under section 356A.06, subdivision 7,
up to 75 percent of the market value of the assets of the fund; and
deleted text end
deleted text begin
(2) domestic government and corporate debt obligations that are not rated in the top
four quality categories by a nationally recognized rating agency, and comparable unrated
securities if the percentage of these assets does not exceed five percent of the total assets
of the special fund or 15 percent of the special fund's nonequity assets, whichever is less,
the special fund's participation is limited to 50 percent of a single offering of the debt
obligations, and the special fund's participation is limited to 25 percent of an issuer's debt
obligations that are not rated in the top four quality categories. Securities held by the
association before June 2, 1989, that do not meet the requirements of this subdivision may
be retained after that date if they were proper investments for the association on that date.
deleted text end
(b)deleted text begin The governing board of the association may select and appoint investment
agencies to act for and in its behalf or may certify special fund assets for investment by the
State Board of Investment under section 11A.17. The governing board of the association
may certify general fund assets of the relief association for investment by the State Board
of Investment in fixed income pools or in a separately managed account at the discretion
of the State Board of Investment as provided in section 11A.14.deleted text end The governing board of
the association may select and appoint a qualified private firm to measure management
performance and return on investment, and the firm deleted text begin shalldeleted text end new text begin must new text end use the formula or formulas
developed by the state board under section 11A.04, clause (11).
new text begin
(c) The governing board of the association may certify general fund assets of the
relief association for investment by the State Board of Investment in fixed income pools
or in a separately managed account at the discretion of the State Board of Investment
as provided in section 11A.14.
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 69.775, is amended to read:
69.775 INVESTMENTS.
(a) The special fund assets of a relief association governed by sections 69.771 to
69.776 must be invested in securities that are authorized investments under section
356A.06, subdivision 6 or 7new text begin , whichever appliesnew text end .
deleted text begin
(b) Notwithstanding the foregoing, up to 75 percent of the market value of the assets
of the special fund, not including any money market mutual funds, may be invested in
open-end investment companies registered under the federal Investment Company Act of
1940, if the portfolio investments of the investment companies comply with the type of
securities authorized for investment under section 356A.06, subdivision 7.
deleted text end
deleted text begin
(c) Securities held by the associations before June 2, 1989, that do not meet the
requirements of this section may be retained after that date if they were proper investments
for the association on that date.
deleted text end
deleted text begin
(d) The governing board of the association may select and appoint investment
agencies to act for and in its behalf or may certify special fund assets for investment by the
State Board of Investment under section 11A.17.
deleted text end
deleted text begin
(e) The governing board of the association may certify general fund assets of the
relief association for investment by the State Board of Investment in fixed income pools
or in a separately managed account at the discretion of the State Board of Investment
as provided in section 11A.14.
deleted text end
deleted text begin (f)deleted text end new text begin (b) new text end The governing board of the association may select and appoint a qualified
private firm to measure management performance and return on investment, and the
firm deleted text begin shalldeleted text end new text begin must new text end use the formula or formulas developed by the state board under section
11A.04, clause (11).
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 354A.08, is amended to read:
354A.08 AUTHORIZED INVESTMENTS.
deleted text begin (a)deleted text end In addition to investments authorized under section 356A.06, subdivision 7, a
teachers retirement fund association may receive, hold, and dispose ofdeleted text begin :
deleted text end
deleted text begin (1)deleted text end real estate or personal property acquired by it, whether the acquisition was by
purchasedeleted text begin ,deleted text end or any other lawful means, as provided in this chapter or in the association's
articles of incorporationdeleted text begin ; anddeleted text end new text begin .
new text end
deleted text begin
(2) domestic government and corporate debt obligations that are not rated in the top
four quality categories by a nationally recognized rating agency, and comparable unrated
securities if the percentage of these assets does not exceed five percent of the total assets
of the pension plan or 15 percent of the pension plan's nonequity assets, whichever is less,
if the pension plan's participation is limited to 50 percent of a single offering of the debt
obligations, and if the pension plan's participation is limited to 25 percent of an issuer's
debt obligations that are not rated in the top four quality categories.
deleted text end
deleted text begin
(b) 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. The board may also certify assets for investment by the
State Board of Investment as provided under section 11A.17.
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. 5.
Minnesota Statutes 2010, section 356A.06, subdivision 6, is amended to read:
Subd. 6.
Limited list of authorized investment securities.
(a) deleted text begin Except to the
extent otherwise authorized by law,deleted text end new text begin Authority. new text end new text begin This subdivision specifies the investment
authority for a limited list plan. A limited list plan isnew text end a covered pension plan deleted text begin may invest its
assets only in investment securities authorized by this subdivision if the plandeleted text end new text begin that new text end does not:
(1) have assets with a deleted text begin bookdeleted text end new text begin market new text end 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 assets, calculated on deleted text begin bookdeleted text end new text begin market new text end value;
(3) use the services of the State Board of Investment for the investment of at least 60
percent of its assets, calculated on deleted text begin bookdeleted text end new text begin market new text end 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 assets, calculated on deleted text begin bookdeleted text end new text begin market new text end value.
(b) Investment new text begin agency appointment authority. new text end deleted text begin securities authorized fordeleted text end new text begin The
governing board of new text end a new text begin covered new text end pension plan deleted text begin covered by this subdivision are:deleted text end new text begin may select
and appoint investment agencies to act for or on its behalf.
new text end
new text begin
(c) Savings accounts; similar vehicles. A limited list plan is authorized to invest in:
new text end
(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, new text begin that new text end is
insured by the National Credit Union Administration, or new text begin that new text end 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) new text begin guaranteed investment contracts, limited to those issued by insurance companies
or banks rated in the top four quality categories by a nationally-recognized rating agency
or to alternative guaranteed investment contracts where the underlying assets comply
with the requirements of this paragraph; and
new text end
new text begin (3) new text end savings accounts, deleted text begin 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;deleted text end new text begin limited to those fully insured by federal agencies.
new text end
deleted text begin (3)deleted text end new text begin (d) new text begin Government-backed obligations. new text end A limited list plan is authorized to invest
in new text end governmental obligationsnew text begin as further specified in this paragraphnew text end , including bonds, notes,
bills, deleted text begin 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 thatdeleted text end new text begin mortgages, and other evidences of indebtedness, if the issue is backed
by the full faith and credit of the issuer or if the issue is rated among the top four quality
rating categories by a nationally-recognized rating agency. The obligations in which plans
are authorized to invest under this paragraph are guaranteed or insured issues ofnew text end :
deleted text begin
(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;
deleted text end
deleted text begin
(ii) for an obligation that is a revenue bond, has been completely self-supporting
for the last five years; and
deleted text end
deleted text begin
(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;
deleted text end
new text begin
(1) the United States, one of its agencies, one of its instrumentalities, or an
organization created and regulated by an act of Congress;
new text end
new text begin
(2) the Dominion of Canada or one of its provinces if the principal and interest are
payable in United States dollars;
new text end
new text begin
(3) a state or one of its municipalities, political subdivisions, agencies, or
instrumentalities; or
new text end
new text begin
(4) any United States government-sponsored organization of which the United States
is a member if the principal and interest are payable in United States dollars.
new text end
deleted text begin (4)deleted text end new text begin (e) new text begin Corporate obligations. new text end A limited list plan is authorized to invest in new text end corporate
obligations, including bonds, notes, debentures, deleted text begin 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
deleted text end
deleted text begin
(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).
deleted text end
new text begin
transportation equipment
obligations, or any other longer-term evidences of indebtedness issued or guaranteed by
a corporation organized under the laws of the United States or any of its states, or the
Dominion of Canada or any of its provinces if:
new text end
new text begin
(1) the principal and interest are payable in United States dollars; and
new text end
new text begin
(2) the obligations are rated among the top four quality categories by a
nationally-recognized rating agency.
new text end
new text begin
(f) Mutual fund authority, limited list authorized assets. Securities authorized
under paragraphs (c) to (e) may be owned directly or through shares in exchange-traded
funds, or through open-end mutual funds, or as units of commingled trusts.
new text end
new text begin
(g) Extended mutual fund authority. Notwithstanding restrictions in other
paragraphs of this subdivision, a limited list plan is authorized to invest the assets of
the special fund in exchange-traded funds and open-end mutual funds, if their portfolio
investments comply with the type of securities authorized for investment under section
356A.06, subdivision 7, paragraphs (c) to (g). Investments under this paragraph must not
exceed 75 percent of the assets of the special fund, not including any money market
investments through mutual or exchange-traded funds.
new text end
new text begin
(h) Supplemental fund authority. The governing body of a limited list plan may
certify special fund assets to the State Board of Investment for investment under section
11A.17.
new text end
new text begin
(i) Assets mix restrictions. A limited list plan must conform to the asset mix
limitations specified in section 356A.06, subdivision 7.
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. 6.
Minnesota Statutes 2010, section 356A.06, subdivision 7, is amended to read:
Subd. 7.
Expanded list of authorized investment securities.
(a) Authority.
deleted text begin Except to the extent otherwise authorized by law,deleted text end A covered pension plan not described by
subdivision 6, paragraph (a), new text begin is an expanded list plan and new text end shall invest its assets deleted text begin only in
accordance withdeleted text end new text begin as specified in new text end this subdivision.new text begin The governing board of an expanded list
plan may select and appoint investment agencies to act for or on its behalf.
new text end
(b) Securities generallynew text begin ; investment formsnew text end . deleted text begin The covered pensiondeleted text end new text begin An expanded list
new text end plan deleted text begin has the authoritydeleted text end new text begin is authorized new text end to purchase, sell, lend, deleted text begin ordeleted text end new text begin and new text end exchange the new text begin investment
new text end securities deleted text begin specified in paragraphs (c) to (i)deleted text end new text begin authorized under this subdivisionnew text end , including
puts and call options and future contracts traded on a contract market regulated by a
governmental agency or by a financial institution regulated by a governmental agency.
These securities may be owned new text begin directly or through shares in exchange-traded or mutual
funds, or new text end as units in commingled trustsdeleted text begin that own the securities described in paragraphs (c)
to (i), including real estate investment trusts and insurance company commingled accounts,
including separate accountsdeleted text end new text begin , subject to any limitations specified in this subdivisionnew text end .
(c) Government obligations. deleted text begin The covered pensiondeleted text end new text begin An expanded list new text end plan deleted text begin maydeleted text end
new text begin is authorized to new text end invest funds in governmental bonds, notes, bills, mortgages, and other
evidences of indebtedness if the issue is backed by the full faith and credit of the issuer or
the issue is rated among the top four quality rating categories by a nationally recognized
rating agency. The obligations in which funds may be invested under this paragraph
deleted text begin includedeleted text end new text begin are new text end guaranteed or insured issues ofnew text begin :new text end
(1) the United States, new text begin one of new text end its agencies, new text begin one of new text end its instrumentalities, or deleted text begin organizationsdeleted text end
new text begin an organization new text end created and regulated by an act of Congress;
(2) new text begin the Dominion of new text end Canada deleted text begin anddeleted text end new text begin or one of new text end its provincesdeleted text begin , provideddeleted text end new text begin if new text end the principal
and interest deleted text begin isdeleted text end new text begin are new text end payable in United States dollars;
(3) deleted text begin the states and theirdeleted text end new text begin a state or one of its new text end municipalities, political subdivisions,
agencies, or instrumentalities; new text begin and
new text end
(4) deleted text begin the International Bank for Reconstruction and Development, the Inter-American
Development Bank, the Asian Development Bank, the African Development Bank, or
any otherdeleted text end new text begin a new text end United States deleted text begin government sponsoreddeleted text end new text begin government-sponsorednew text end organization of
which the United States is a memberdeleted text begin , provideddeleted text end new text begin if new text end the principal and interest deleted text begin isdeleted text end new text begin are new text end payable
in United States dollars.
(d) new text begin Investment-grade new text end corporate obligations. deleted text begin The covered pensiondeleted text end new text begin An expanded
list new text end plan deleted text begin maydeleted text end new text begin is authorized to new text end invest funds in bonds, notes, debentures, transportation
equipment obligations, or any other longer term evidences of indebtedness issued or
guaranteed by a corporation organized under the laws of the United States or any deleted text begin state
thereofdeleted text end new text begin of its statesnew text end , or the Dominion of Canada or any deleted text begin province thereofdeleted text end new text begin of its provinces new text end ifdeleted text begin
they conform to the following provisionsdeleted text end :
(1) the principal and interest deleted text begin of obligations of corporations incorporated or organized
under the laws of the Dominion of Canada or any province thereof must bedeleted text end new text begin are new text end payable in
United States dollars; and
(2) new text begin the new text end obligations deleted text begin must bedeleted text end new text begin are new text end rated among the top four quality categories by a
nationally recognized rating agency.
new text begin
(e) Below-investment-grade corporate obligations. An expanded list plan is
authorized to invest in unrated corporate obligations or in corporate obligations that are
not rated among the top four quality categories if:
new text end
new text begin
(1) the aggregate value of these obligations does not exceed five percent of the
covered pension plan's market value;
new text end
new text begin
(2) the covered pension plan's participation is limited to 50 percent of a single
offering subject to this paragraph; and
new text end
new text begin
(3) the covered pension plan's participation is limited to 25 percent of an issuer's
obligations subject to this paragraph.
new text end
deleted text begin (e)deleted text end new text begin (f) new text end Other obligations. (1) deleted text begin The covered pensiondeleted text end new text begin An expanded list new text end plan deleted text begin maydeleted text end new text begin is
authorized to new text end invest funds indeleted text begin bankers acceptances, certificates of deposit, deposit notes,
commercial paper, mortgage participation certificates and pools, asset backed securities,
repurchase agreements and reverse repurchase agreements, guaranteed investment
contracts, savings accounts, and guaranty fund certificates, surplus notes, or debentures of
domestic mutual insurance companies if they conform to the following provisionsdeleted text end :
(i) bankers acceptances and deposit notes deleted text begin of United States banks are limited to thosedeleted text end
new text begin if new text end issued by deleted text begin banksdeleted text end new text begin a United States bank that is new text end rated in the highest four quality categories
by a nationally recognized rating agency;
(ii) certificates of deposit deleted text begin are limited to thosedeleted text end new text begin if new text end issued by deleted text begin (A)deleted text end new text begin a new text end United States
deleted text begin banks anddeleted text end new text begin bank or new text end savings deleted text begin institutions that aredeleted text end new text begin institution new text end rated in the highest four quality
categories by a nationally recognized rating agency or whose certificates of deposit are
fully insured by federal agenciesdeleted text begin ;deleted text end new text begin ,new text end or deleted text begin (B)deleted text end new text begin if issued by a new text end credit deleted text begin unionsdeleted text end new text begin union new text end in deleted text begin amounts
up todeleted text end new text begin an amount within new text end the limit of new text begin the new text end insurance coverage provided by the National
Credit Union Administration;
(iii) commercial paper deleted text begin is limited to thosedeleted text end new text begin if new text end issued by new text begin a new text end United States deleted text begin corporationsdeleted text end
new text begin corporation new text end or deleted text begin theirdeleted text end new text begin its new text end Canadian deleted text begin subsidiariesdeleted text end new text begin subsidiary new text end and new text begin if new text end rated in the highest two
quality categories by a nationally recognized rating agency;
(iv) mortgage deleted text begin participation or pass through certificates evidencing interests in pools
of first mortgages or trust deeds on improved real estate located in the United States where
the loan to value ratio for each loan as calculated in accordance with section 61A.28,
subdivision 3, does not exceed 80 percent for fully amortizable residential properties and
in all other respects meets the requirements of section 61A.28, subdivision 3deleted text end new text begin securities
and asset-backed securities if rated in the top four quality categories by a nationally
recognized rating agencynew text end ;
(v) deleted text begin collateral fordeleted text end repurchase agreements and reverse repurchase agreements deleted text begin is
limited todeleted text end new text begin if collateralized with new text end letters of credit deleted text begin anddeleted text end new text begin or new text end securities authorized in this section;
(vi) guaranteed investment contracts deleted text begin are limited to thosedeleted text end new text begin if new text end issued by new text begin an new text end insurance
deleted text begin companiesdeleted text end new text begin company new text end or deleted text begin banksdeleted text end new text begin a bank that is new text end rated in the top four quality categories by a
nationally recognized rating agency or deleted text begin todeleted text end alternative guaranteed investment contracts
deleted text begin wheredeleted text end new text begin if new text end the underlying assets comply with the requirements of this subdivision;
(vii) savings accounts deleted text begin are limited to thosedeleted text end new text begin if new text end fully insured by new text begin a new text end federal deleted text begin agenciesdeleted text end new text begin
agencynew text end ; and
(viii) deleted text begin asset backed securities must be rated in the top four quality categories by a
nationally recognized rating agencydeleted text end new text begin guaranty fund certificates, surplus notes, or debentures
if issued by a domestic mutual insurance companynew text end .
(2) Sections 16A.58, 16C.03, subdivision 4, and 16C.05 do not apply to certificates
of deposit and collateralization agreements executed by the covered pension plan under
clause (1), item (ii).
(3) In addition to investments authorized by clause (1), item (iv), deleted text begin the covered pensiondeleted text end
new text begin an expanded list new text end plan deleted text begin maydeleted text end new text begin is authorized to new text end purchase from the Minnesota Housing Finance
Agency all or any part of a pool of residential mortgages, not in default, that has previously
been financed by the issuance of bonds or notes of the agency. The covered pension plan
may also enter into a commitment with the agency, at the time of any issue of bonds or
notes, to purchase at a specified future date, not exceeding 12 years from the date of the
issue, the amount of mortgage loans then outstanding and not in default that have been
made or purchased from the proceeds of the bonds or notes. The covered pension plan may
charge reasonable fees for any such commitment and may agree to purchase the mortgage
loans at a price sufficient to produce a yield to the covered pension plan comparable, in
its judgment, to the yield available on similar mortgage loans at the date of the bonds or
notes. The covered pension plan may also enter into agreements with the agency for the
investment of any portion of the funds of the agency. The agreement must cover the period
of the investment, withdrawal privileges, and any guaranteed rate of return.
deleted text begin (f)deleted text end new text begin (g) new text end Corporate stocks. deleted text begin The covered pensiondeleted text end new text begin An expanded list new text end plan deleted text begin maydeleted text end new text begin is
authorized to new text end invest deleted text begin fundsdeleted text end in stocks or convertible issues of any corporation organized
under the laws of the United States or deleted text begin thedeleted text end new text begin any of its new text end states deleted text begin thereofdeleted text end , any corporation
organized under the laws of the Dominion of Canada or new text begin any of new text end its provinces, or any
corporation listed on an exchange new text begin that is new text end regulated by an agency of the United States or of
the Canadian national governmentdeleted text begin , if they conform to the following provisions:deleted text end new text begin .
new text end
deleted text begin
(1) the aggregate value of investments under this paragraph, plus paragraphs (g) and
(k), plus equity investments under paragraphs (h), (i), and (j), as adjusted for realized
gains and losses, must not exceed 85 percent of the market or book value, whichever is
less, of a fund; and
deleted text end
deleted text begin (2) investmentsdeleted text end new text begin An investment in any corporation new text end must not exceed five percent of
the total outstanding shares of deleted text begin any onedeleted text end new text begin that new text end corporationnew text begin , except that an expanded list plan
may hold up to 20 percent of the shares of a real estate investment trust and up to 20
percent of the shares of a closed mutual fundnew text end .
deleted text begin
(g) Developed market foreign stocks investments. In addition to investments
authorized under paragraph (f), the covered pension fund may invest in foreign stock sold
on an exchange in any developed market country that is included in the Europe, Australia,
and Far East Index.
deleted text end
deleted text begin
(h) Commingled or mutual investments. The covered pension plan may invest
in index funds or mutual funds, including index mutual funds, through bank-sponsored
collective funds and shares of open-end investment companies registered under the
Federal Investment Company Act of 1940, to the extent that these funds comply with
paragraphs (c) to (j).
deleted text end
deleted text begin
(i) Real estate investment trust; related investments. The covered pension plan
may invest in real estate investment trusts secured by mortgages or deeds of trust and
sold on an exchange, and insurance company commingled accounts, including separate
accounts, of a debt or equity nature.
deleted text end
deleted text begin
(j) Exchange traded funds. The covered pension plan may invest funds in exchange
traded funds, subject to the maximums, the requirements, and the limitations set forth in
paragraphs (c) to (i), as applicable.
deleted text end
deleted text begin (k)deleted text end new text begin (h) new text end Other investments. (1) In addition to the investments authorized in
paragraphs (b) to deleted text begin (j)deleted text end new text begin (g)new text end , and subject to the provisions in clause (2), deleted text begin the covered pensiondeleted text end
new text begin an expanded list new text end plan deleted text begin maydeleted text end new text begin is authorized to new text end invest funds in:
(i) deleted text begin venture capitaldeleted text end new text begin equity and debt new text end investment businesses through participation in
limited partnershipsnew text begin , trusts, private placements, limited liability corporations, limited
liability companies, limited liability partnerships, new text end and corporations;
(ii) real estate ownership interests or loans secured by mortgages or deeds of trust new text begin or
shares of real estate investment trusts, new text end through investment in limited partnerships deleted text begin or bank
sponsoreddeleted text end new text begin , bank-sponsorednew text end collective fundsnew text begin , trusts, mortgage participation agreements,
and insurance company commingled accounts, including separate accountsnew text end ;
deleted text begin
(iii) regional and mutual funds through bank sponsored collective funds and
open-end investment companies registered under the Federal Investment Company Act of
1940 to the extent that a fund or a portion of a fund does not qualify under paragraph (h);
deleted text end
deleted text begin (iv)deleted text end new text begin (iii) new text end resource investments through limited partnerships, new text begin trusts, new text end private
placements, new text begin limited liability corporations, limited liability companies, limited liability
partnerships, new text end and corporations; and
deleted text begin (v)deleted text end new text begin (iv) new text end international deleted text begin debt securities and emerging market equitydeleted text end securities.
(2) The investments authorized in clause (1) must conform to the following
provisions:
(i) the aggregate value of all investments made deleted text begin according todeleted text end new text begin under new text end clause (1),
deleted text begin including allocated amounts of index and mutual fundsdeleted text end new text begin items (i), (ii), and (iii)new text end , may not
exceed deleted text begin 20deleted text end new text begin 35 new text end percent of the market value of the fund for which the deleted text begin covered pensiondeleted text end
new text begin expanded list new text end plan is investing;
(ii) there must be at least four unrelated owners of the investment other than the
deleted text begin covered pensiondeleted text end new text begin expanded list new text end plan for investments made under clause (1), item (i), (ii),
new text begin or new text end (iii)deleted text begin , or (iv)deleted text end ;
(iii) deleted text begin covered pension plandeleted text end new text begin the expanded list plan's new text end participation in an investment
vehicle is limited to 20 percent thereof for investments made under clause (1), item (i),
(ii), new text begin or new text end (iii)deleted text begin , or (iv)deleted text end ;deleted text begin and
deleted text end
(iv) deleted text begin covered pension plandeleted text end new text begin the expanded list plan's new text end participation in a limited
partnership does not include a general partnership interest or other interest involving
general liability. The deleted text begin covered pensiondeleted text end new text begin expanded list new text end plan may not engage in any activity
as a limited partner which creates general liabilitydeleted text begin .deleted text end new text begin ; and
new text end
new text begin
(v) for volunteer firefighter relief associations, emerging market equity and
international debt investments must not exceed 15 percent of the association's special
fund market value.
new text end
new text begin
(i)
new text end
new text begin
Supplemental plan investments.
new text end
new text begin
The governing body of an expanded list plan
may certify assets to the State Board of Investment for investment under section 11A.17.
new text end
new text begin
(j)
new text end
new text begin
Asset mix limitations.
new text end
new text begin
The aggregate value of an expanded list plan's
investments under paragraphs (g) and (h) and equity investments under paragraph (i),
regardless of the form in which these investments are held, must not exceed 85 percent of
the covered plan's market value.
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. 7. new text begin INVESTMENT AUTHORITY TRANSITION PROVISION.
new text end
new text begin
If any investment by the State Board of Investment or any covered pension plan fund
was an authorized investment under law in effect immediately before the effective date
of applicable sections of this act, but is not authorized by this act, the applicable assets
must be liquidated before June 30, 2013.
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