SF 2239

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

A bill for an act
relating to retirement; Minneapolis Teachers
Retirement Fund Association and expanded list plans;
clarifying mutual fund authority; revising investment
authority to exclude below-investment grade bonds;
amending Minnesota Statutes 2004, sections 354A.28,
subdivision 5; 356A.06, subdivision 7.

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

Section 1.

Minnesota Statutes 2004, section 354A.28,
subdivision 5, is amended to read:

Subd. 5.

Investment.

The assets of the annuity reserve
fund must be invested, reinvested, and retained deleted text begin in the
discretion of deleted text end new text begin by new text end the board of trustees of the Minneapolis
Teachers Retirement Fund Association in authorized investments
under section deleted text begin 11A.24 deleted text end new text begin 356A.06, subdivision 7 new text end .

Sec. 2.

Minnesota Statutes 2004, section 356A.06,
subdivision 7, is amended to read:

Subd. 7.

Expanded list of authorized investment
securities.

(a) [AUTHORITY.] Except to the extent otherwise
authorized by law deleted text begin or bylaws deleted text end , a covered pension plan not
described by subdivision 6, paragraph (a), deleted text begin may deleted text end new text begin shall new text end invest its
assets only in accordance with this subdivision.

(b) [SECURITIES GENERALLY.] The covered pension plan has
the authority to purchase, sell, lend, or exchange the
securities specified in paragraphs (c) to deleted text begin (g) deleted text end new text begin (h) 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 as units in commingled trusts that own
the securities described in paragraphs (c) to deleted text begin (g) deleted text end new text begin (h) new text end .

(c) [GOVERNMENT OBLIGATIONS.] The covered pension plan may
invest funds in governmental bonds, notes, bills, mortgages, and
other evidences of indebtedness provided 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 include guaranteed or insured
issues of (1) the United States, its agencies, its
instrumentalities, or organizations created and regulated by an
act of Congress; (2) Canada and its provinces, provided the
principal and interest is payable in United States dollars; (3)
the states and their municipalities, political subdivisions,
agencies, or instrumentalities; (4) the International Bank for
Reconstruction and Development, the Inter-American Development
Bank, the Asian Development Bank, the African Development Bank,
or any other United States government sponsored organization of
which the United States is a member, provided the principal and
interest is payable in United States dollars.

(d) [CORPORATE OBLIGATIONS.] The covered pension plan may
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 state thereof, or the
Dominion of Canada or any province thereof if they conform to
the following provisions:

(1) the principal and interest of obligations of
corporations incorporated or organized under the laws of the
Dominion of Canada or any province thereof must be payable in
United States dollars; and

(2) obligations must be rated among the top four quality
categories by a nationally recognized rating agency.

(e) [OTHER OBLIGATIONS.] (1) The covered pension plan may
invest funds in 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 provisions:

(i) bankers acceptances and deposit notes of United States
banks are limited to those issued by banks rated in the highest
four quality categories by a nationally recognized rating
agency;

(ii) certificates of deposit are limited to those issued by
(A) United States banks and savings institutions that are rated
in the highest four quality categories by a nationally
recognized rating agency or whose certificates of deposit are
fully insured by federal agencies; or (B) credit unions in
amounts up to the limit of insurance coverage provided by the
National Credit Union Administration;

(iii) commercial paper is limited to those issued by United
States corporations or their Canadian subsidiaries and rated in
the highest two quality categories by a nationally recognized
rating agency;

(iv) mortgage 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
3;

(v) collateral for repurchase agreements and reverse
repurchase agreements is limited to letters of credit and
securities authorized in this section;

(vi) guaranteed investment contracts are 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
subdivision;

(vii) savings accounts are limited to those fully insured
by federal agencies; and

(viii) asset backed securities must be rated in the top
four quality categories by a nationally recognized rating agency.

(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), the covered pension plan may 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.

(f) [CORPORATE STOCKS.] The covered pension plan may
invest funds in stocks or convertible issues of any corporation
organized under the laws of the United States or the states
thereof, the Dominion of Canada or its provinces, or any
corporation listed on the New York Stock Exchange or the
American Stock Exchange, if they conform to the following
provisions:

(1) the aggregate value of corporate stock investments, as
adjusted for realized profits and losses, new text begin plus the aggregate
value of investments under paragraph (h), new text end must not exceed 85
percent of the market or book value, whichever is less, of a
fund deleted text begin , less the aggregate value of investments according to
subdivision 6 deleted text end ; new text begin and
new text end

(2) investments must not exceed five percent of the total
outstanding shares of any one corporation.

(g) [COMINGLED OR MUTUAL INVESTMENTS.] new text begin 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, if the investments of the index
or mutual fund comply with paragraphs (c) to (f), and paragraph
(h), clause (1)(iv).
new 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 (f) deleted text end new text begin (g) new text end , and subject
to the provisions in clause (2), the covered pension plan may
invest funds in:

(i) venture capital investment businesses through
participation in limited partnerships and corporations;

(ii) real estate ownership interests or loans secured by
mortgages or deeds of trust through investment in limited
partnerships, bank sponsored collective funds, trusts, and
insurance company commingled accounts, including separate
accounts;

(iii) deleted text begin regional and mutual funds through bank sponsored
collective funds and open-end investment companies registered
under the Federal Investment Company Act of 1940;
deleted text end

deleted text begin (iv) deleted text end resource investments through limited partnerships,
private placements, and corporations; deleted text begin and
deleted text end

deleted text begin (v) deleted text end new text begin (iv) new text end international securities new text begin ; and
new text end

new text begin (v) high yield bonds or emerging market debt; up to no more
than five percent of total fund assets new text end .

(2) The investments authorized in clause (1) must conform
to the following provisions:

(i) the aggregate value of all investments made according
to clause (1) may not exceed 35 percent of the market value of
the fund for which the covered pension plan is investing;

(ii) there must be at least four unrelated owners of the
investment other than the deleted text begin state board deleted text end new text begin covered pension plan new text end 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) covered pension plan 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 ; and

(iv) covered pension plan participation in a limited
partnership does not include a general partnership interest or
other interest involving general liability. The covered pension
plan may not engage in any activity as a limited partner which
creates general liability.

Sec. 3. new text begin TRANSITION PROVISION.
new text end

new text begin A covered pension plan with investments that on the day
prior to the effective date of this section do not comply with
section 2 shall divest of any assets not in compliance before
January 1, 2008.
new text end

Sec. 4. new text begin EFFECTIVE DATE.
new text end

new text begin Sections 1 to 3 are effective the day following final
enactment.
new text end