Minnesota Legislature
SF 1978
as introduced - 85th Legislature (2007 - 2008) Posted on 12/15/2009 12:00am
Current Version - as introduced
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A bill for an act
relating to retirement; accounting and actuarial reporting; implementing various
generally accepted accounting principle requirements; amending Minnesota
Statutes 2006, sections 356.20; 356.215, subdivisions 1, 2.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1.
Minnesota Statutes 2006, section 356.20, is amended to read:
356.20 PUBLIC PENSION FUND FINANCIAL REPORTING
REQUIREMENT.
Subdivision 1.
Report required.
(a) The governing or managing board or new text begin the
chief new text end administrative deleted text begin officialsdeleted text end new text begin officer new text end of deleted text begin thedeleted text end new text begin each new text end public pension and retirement deleted text begin fundsdeleted text end
new text begin plan new text end enumerated in subdivision 2 deleted text begin shalldeleted text end new text begin must new text end annually prepare and file a financial report
following the close of each fiscal year.
(b) This requirement also applies to any plan or fund which may be a successor to any
organization so enumerated or to any newly formed retirement plan, fund or association
operating under the control or supervision of any public employee group, governmental
unit, or institution receiving a portion of its support through legislative appropriations.
(c) The report must be prepared under the supervision and at the direction of the
management of each deleted text begin funddeleted text end new text begin plan new text end and must be signed by the presiding officer of the managing
board of the deleted text begin funddeleted text end new text begin plan new text end and the chief administrative deleted text begin officialdeleted text end new text begin officer new text end of the deleted text begin funddeleted text end new text begin plannew text end .
Subd. 2.
Covered public pension plans deleted text begin and fundsdeleted text end .
This section applies to the
following public pension plans:
(1) the general state employees retirement plan of the Minnesota State Retirement
System;
(2) the general employees retirement plan of the Public Employees Retirement
Association;
(3) the Teachers Retirement Association;
(4) the State Patrol retirement plan;
(5) the St. Paul Teachers Retirement Fund Association;
(6) the Duluth Teachers Retirement Fund Association;
(7) the Minneapolis Employees Retirement Fund;
(8) the University of Minnesota faculty retirement plan;
(9) the University of Minnesota faculty supplemental retirement plan;
(10) the judges retirement fund;
(11) a police or firefighter's relief association specified or described in section
69.77, subdivision 1a, or new text begin a firefighter's relief association specified in section new text end 69.771,
subdivision 1;
(12) the public employees police and fire plan of the Public Employees Retirement
Association;
(13) the correctional state employees retirement plan of the Minnesota State
Retirement System; and
(14) the local government correctional service retirement plan of the Public
Employees Retirement Association.
Subd. 3.
Filing requirement.
The financial report is a public record. A copy of the
report or a synopsis of the report containing the information required by this section must
be deleted text begin distributeddeleted text end new text begin made available new text end annually to each member of the fund and to the governing
body of each governmental subdivision of the state which makes employers contributions
thereto or in whose behalf taxes are levied for the employers' contribution. A signed copy
of the report must be delivered to the executive director of the Legislative Commission
on Pensions and Retirement and to the Legislative Reference Library not later than six
months after the close of each fiscal year or one month following the completion and
delivery to the retirement fund of the actuarial valuation report of the fund by the actuary
retained under section 356.214, if applicable, whichever is later.
Subd. 4.
Contents of financial report.
(a) The financial report required by
this section must contain financial statements and disclosures that indicate the financial
operations and position of the retirement plan and fund. The report must conform with
generally accepted governmental accounting principles, applied on a consistent basis. The
report must be audited.
new text begin (b) new text end The report must include, as part of its exhibits or its footnotes, an actuarial
disclosure item based on the actuarial valuation calculations prepared by the actuary
retained under section 356.214 or by the actuary retained by the retirement fund or
plan, whichever applies, according to applicable actuarial requirements enumerated in
section 356.215, and specified in the most recent standards for actuarial work adopted
by the Legislative Commission on Pensions and Retirement. The deleted text begin accrueddeleted text end new text begin actuarial value
of new text end assets, the new text begin actuarial new text end accrued liabilities, including accrued reserves, and the unfunded
actuarial accrued liability of the fund or plan must be disclosed. The disclosure item
must contain a declaration by the actuary retained under section 356.214 or the actuary
retained by the fund or plan, whichever applies, specifying that the required reserves
for any retirement, disability, or survivor benefits provided under a benefit formula are
computed in accordance with the entry age actuarial cost method and in accordance
with the most recent applicable standards for actuarial work adopted by the Legislative
Commission on Pensions and Retirement.
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(b) Assets of the fund or plan contained in the disclosure item must include the
following statement of the actuarial value of current assets as defined in section deleted text begin 356.215,
subdivision 1deleted text end :
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Value at cost deleted text end |
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Value at market deleted text end |
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Cash, cash equivalents, and deleted text end |
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short-term securities deleted text end |
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Accounts receivable deleted text end |
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Accrued investment income deleted text end |
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Fixed income investments deleted text end |
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Equity investments other deleted text end |
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than real estate deleted text end |
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Real estate investments deleted text end |
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Equipment deleted text end |
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Participation in the Minnesota deleted text end |
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postretirement investment deleted text end |
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fund or the retirement deleted text end |
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benefit fund deleted text end |
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Other deleted text end |
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Total assets deleted text end |
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Value at cost deleted text end |
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Value at market deleted text end |
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Actuarial value of current assets deleted text end |
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(c) The unfunded actuarial accrued liability of the fund or plan contained in the
disclosure item must include the following measures of unfunded actuarial accrued
liability, using the actuarial value of current assets:
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(1) the unfunded actuarial accrued liability, determined by subtracting the current
assets and the present value of future normal costs from the total current and expected
future benefit obligations; and
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(2) the unfunded pension benefit obligation, determined by subtracting the current
assets from the actuarial present value of credited projected benefits.
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If the current assets of the fund or plan exceed the actuarial accrued liabilities, the
excess must be disclosed and indicated as a surplus.
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(d) The pension benefit obligations schedule included in the disclosure must contain
the following information on the benefit obligations:
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(1) the pension benefit obligation, determined as the actuarial present value of
credited projected benefits on account of service rendered to date, separately identified
as follows:
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for annuitants, deleted text end |
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retirement annuities, deleted text end |
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disability benefits, deleted text end |
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surviving spouse and child benefits; deleted text end |
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for former members without vested rights; deleted text end |
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for deferred annuitants' benefits, including any augmentation; deleted text end |
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for active employees, deleted text end |
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accumulated employee contributions, including allocated investment income, deleted text end |
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employer-financed benefits vested, deleted text end |
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employer-financed benefits nonvested, deleted text end |
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total pension benefit obligation; and deleted text end |
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(2) if there are additional benefits not appropriately covered by the foregoing items
of benefit obligations, a separate identification of the obligation.
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deleted text begin (e)deleted text end new text begin (c) new text end The report must contain an itemized exhibit describing the administrative
expenses of the plan, including, but not limited to, the following items, classified on a
consistent basis from year to year, and with any further meaningful detail:
(1) personnel expenses;
(2) communication-related expenses;
(3) office building and maintenance expenses;
(4) professional services fees; and
(5) other expenses.
deleted text begin (f)deleted text end new text begin (d) new text end The report must contain an itemized exhibit describing the investment
expenses of the plan, including, but not limited to, the following items, classified on a
consistent basis from year to year, and with any further meaningful detail:
(1) internal investment-related expenses; and
(2) external investment-related expenses.
deleted text begin (g)deleted text end new text begin (e) new text end Any additional statements or exhibits or more detailed or subdivided
itemization of a disclosure item that will enable the management of the deleted text begin funddeleted text end new text begin plan new text end to
portray a true interpretation of the deleted text begin fund'sdeleted text end new text begin plan's new text end financial condition must be included in the
additional statements or exhibits.
Subd. 4a.
Financial report for police or firefighters relief association.
For any
police or firefighter's relief association referred to in subdivision 2, clause deleted text begin (12)deleted text end new text begin (11)new text end , a
financial report new text begin that is new text end duly filed and deleted text begin meetingdeleted text end new text begin meets new text end the requirements of section 69.051
deleted text begin must bedeleted text end new text begin is new text end deemed to have met the requirements of subdivision 4.
Sec. 2.
Minnesota Statutes 2006, section 356.215, subdivision 1, is amended to read:
Subdivision 1.
Definitions.
(a) For the purposes of sections 3.85 and 356.20 to
356.23, each of the terms in the following paragraphs has the meaning given.
(b) "Actuarial valuation" means a set of calculations prepared by the actuary
retained under section 356.214 if so required under section 3.85, or otherwise, by an
approved actuary, to determine the normal cost and the accrued actuarial liabilities of
a benefit plan, according to the entry age actuarial cost method and based upon stated
assumptions including, but not limited to rates of interest, mortality, salary increase,
disability, withdrawal, and retirement and to determine the payment necessary to amortize
over a stated period any unfunded accrued actuarial liability disclosed as a result of the
actuarial valuation of the benefit plan.
(c) "Approved actuary" means a person who is regularly engaged in the business
of providing actuarial services and who has at least 15 years of service to major public
employee pension or retirement funds or who is a fellow in the Society of Actuaries.
(d) "Entry age actuarial cost method" means an actuarial cost method under which
the actuarial present value of the projected benefits of each individual currently covered
by the benefit plan and included in the actuarial valuation is allocated on a level basis over
the service of the individual, if the benefit plan is governed by section 69.773, or over the
earnings of the individual, if the benefit plan is governed by any other law, between the
entry age and the assumed exit age, with the portion of the actuarial present value which is
allocated to the valuation year to be the normal cost and the portion of the actuarial present
value not provided for at the valuation date by the actuarial present value of future normal
costs to be the actuarial accrued liability, with aggregation in the calculation process to be
the sum of the calculated result for each covered individual and with recognition given to
any different benefit formulas which may apply to various periods of service.
(e) "Experience study" means a report providing experience data and an actuarial
analysis of the adequacy of the actuarial assumptions on which actuarial valuations are
based.
(f) "deleted text begin Currentdeleted text end new text begin Actuarial value of new text end assets" means:
(1) for the July 1, deleted text begin 2001deleted text end new text begin 2007new text end , actuarial valuation, the market value of deleted text begin alldeleted text end new text begin net new text end assets
new text begin available for benefits new text end as of June 30, deleted text begin 2001, reduced by:deleted text end new text begin 2007;
new text end
deleted text begin (i) 30 percent of the difference between the market value of all assets as of June 30,
1999, and the actuarial value of assets used indeleted text end
new text begin
(2) for the July 1, 2008, actuarial valuation, the market value of net assets available
for benefits as of June 30, 2008, reduced by 80 percent of the difference between the actual
net change in the market value of assets between June 30, 2007, and June 30, 2008, and
the computed increase in the market value of assets between June 30, 2007, and June 30,
2008, if the assets had increased at the percentage preretirement interest rate assumption
used in the July 1, 2007, actuarial valuation;
new text end
new text begin (3) for new text end the July 1, deleted text begin 1999deleted text end new text begin 2009new text end , actuarial valuationdeleted text begin ;deleted text end new text begin , the market value of net assets
available for benefits as of June 30, 2009, reduced by:
new text end
deleted text begin (ii)deleted text end new text begin (i) new text end 60 percent of the difference between the actual net change in the market value
of assets between June 30, deleted text begin 1999deleted text end new text begin 2007new text end , and June 30, deleted text begin 2000deleted text end new text begin 2008new text end , and the computed increase
in the market value of assets between June 30, deleted text begin 1999deleted text end new text begin 2007new text end , and June 30, deleted text begin 2000deleted text end new text begin 2008new text end , if the
assets had increased at the percentage preretirement interest rate assumption used in the
July 1, deleted text begin 1999deleted text end new text begin 2007new text end , actuarial valuation; and
deleted text begin (iii)deleted text end new text begin (ii) new text end 80 percent of the difference between the actual net change in the market
value of assets between June 30, deleted text begin 2000deleted text end new text begin 2008new text end , and June 30, deleted text begin 2001deleted text end new text begin 2009new text end , and the computed
increase in the market value of assets between June 30, deleted text begin 2000deleted text end new text begin 2008new text end , and June 30, deleted text begin 2001deleted text end new text begin
2009new text end , if the assets had increased at the percentage preretirement interest rate assumption
used in the July 1, deleted text begin 2000deleted text end new text begin 2008new text end , actuarial valuation;
deleted text begin (2)deleted text end new text begin (4) new text end for the July 1, deleted text begin 2002deleted text end new text begin 2010new text end , actuarial valuation, the market value of deleted text begin alldeleted text end new text begin net
new text end assets new text begin available for benefits new text end as of June 30, deleted text begin 2002deleted text end new text begin 2010new text end , reduced by:
deleted text begin
(i) ten percent of the difference between the market value of all assets as of June 30,
1999, and the actuarial value of assets used in the July 1, 1999, actuarial valuation;
deleted text end
deleted text begin (ii)deleted text end new text begin (i) new text end 40 percent of the difference between the actual net change in the market value
of assets between June 30, deleted text begin 1999deleted text end new text begin 2007new text end , and June 30, deleted text begin 2000deleted text end new text begin 2008new text end , and the computed increase
in the market value of assets between June 30, deleted text begin 1999deleted text end new text begin 2007new text end , and June 30, deleted text begin 2000deleted text end new text begin 2008new text end , if the
assets had increased at the percentage preretirement interest rate assumption used in
the July 1, deleted text begin 1999deleted text end new text begin 2007new text end , actuarial valuation;
deleted text begin (iii)deleted text end new text begin (ii) new text end 60 percent of the difference between the actual net change in the market
value of assets between June 30, deleted text begin 2000deleted text end new text begin 2008new text end , and June 30, deleted text begin 2001deleted text end new text begin 2009new text end , and the computed
increase in the market value of assets between June 30, deleted text begin 2000deleted text end new text begin 2008new text end , and June 30, deleted text begin 2001deleted text end new text begin
2009new text end , if the assets had increased at the percentage preretirement interest rate assumption
used in the July 1, deleted text begin 2000deleted text end new text begin 2008new text end , actuarial valuation; and
deleted text begin (iv)deleted text end new text begin (iii) new text end 80 percent of the difference between the actual net change in the market
value of assets between June 30, deleted text begin 2001deleted text end new text begin 2009new text end , and June 30, deleted text begin 2002deleted text end new text begin 2010new text end , and the computed
increase in the market value of assets between June 30, deleted text begin 2001deleted text end new text begin 2009new text end , and June 30, deleted text begin 2002deleted text end new text begin
2010new text end , if the assets had increased at the percentage preretirement interest rate assumption
used in the July 1, deleted text begin 2001deleted text end new text begin 2009new text end , actuarial valuation; or
deleted text begin (3)deleted text end new text begin (5) new text end for any actuarial valuation after July 1, deleted text begin 2002deleted text end new text begin 2010new text end , the market value of deleted text begin alldeleted text end
new text begin net new text end assets new text begin available for benefits new text end as of the preceding June 30, reduced by:
(i) 20 percent of the difference between the actual net change in the market value of
assets between the June 30 that occurred three years earlier and the June 30 that occurred
four years earlier and the computed increase in the market value of assets over that
fiscal year period if the assets had increased at the percentage preretirement interest rate
assumption used in the actuarial valuation for the July 1 that occurred four years earlier;
(ii) 40 percent of the difference between the actual net change in the market value of
assets between the June 30 that occurred two years earlier and the June 30 that occurred
three years earlier and the computed increase in the market value of assets over that
fiscal year period if the assets had increased at the percentage preretirement interest rate
assumption used in the actuarial valuation for the July 1 that occurred three years earlier;
(iii) 60 percent of the difference between the actual net change in the market value of
assets between the June 30 that occurred one year earlier and the June 30 that occurred two
years earlier and the computed increase in the market value of assets over that fiscal year
period if the assets had increased at the percentage preretirement interest rate assumption
used in the actuarial valuation for the July 1 that occurred two years earlier; and
(iv) 80 percent of the difference between the actual net change in the market value
of assets between the immediately prior June 30 and the June 30 that occurred one year
earlier and the computed increase in the market value of assets over that fiscal year period
if the assets had increased at the percentage preretirement interest rate assumption used in
the actuarial valuation for the July 1 that occurred one year earlier.
(g) "Unfunded actuarial accrued liability" means the total current and expected
future benefit obligations, reduced by the sum of new text begin the new text end current new text begin actuarial value of new text end assets and
the present value of future normal costs.
deleted text begin
(h) "Pension benefit obligation" means the actuarial present value of credited
projected benefits, determined as the actuarial present value of benefits estimated to be
payable in the future as a result of employee service attributing an equal benefit amount,
including the effect of projected salary increases and any step rate benefit accrual rate
differences, to each year of credited and expected future employee service.
deleted text end
Sec. 3.
Minnesota Statutes 2006, section 356.215, subdivision 2, is amended to read:
Subd. 2.
Requirements.
(a) It is the policy of the legislature that it is necessary
and appropriate to determine annually the financial status of tax supported retirement and
pension plans for public employees. To achieve this goal:
(1) the actuary retained under section 356.214 shall prepare annual actuarial
valuations of the retirement plans enumerated in section 356.214, subdivision 1, paragraph
(b), and quadrennial experience studies of the retirement plans enumerated in section
356.214, subdivision 1, paragraph (b), clauses (1), (2), and (7); and
(2) the commissioner of finance may have prepared by the actuary retained by the
commission, two years after each set of quadrennial experience studies, quadrennial
projection valuations of at least one of the retirement plans enumerated in section 6,
subdivision 1, paragraph (b), for which the commissioner determines that the analysis
may be beneficial.
(b) The governing or managing board or administrative officials of each public
pension and retirement deleted text begin fund ordeleted text end plan enumerated in section 356.20, subdivision 2, clauses
new text begin (8), new text end (9), deleted text begin (10),deleted text end and deleted text begin (12)deleted text end new text begin (11)new text end , shall have prepared by an approved actuary annual actuarial
valuations of their respective deleted text begin fundsdeleted text end new text begin plan new text end as provided in this section. This requirement also
applies to any deleted text begin fund ordeleted text end plan that is the successor to any organization enumerated in section
356.20, subdivision 2, or to the governing or managing board or administrative officials
of any newly formed retirement fund, plan, or association operating under the control or
supervision of any public employee group, governmental unit, or institution receiving a
portion of its support through legislative appropriations, and any local police or fire deleted text begin funddeleted text end
new text begin relief association new text end to which section 356.216 applies.
Sec. 4. new text begin EFFECTIVE DATE.
new text end
new text begin
Sections 1 to 3 are effective June 30, 2007, and apply to annual financial reports and
actuarial valuations prepared after that date.
new text end