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SF 4438

as introduced - 91st Legislature (2019 - 2020) Posted on 05/28/2020 10:01am

KEY: stricken = removed, old language.
underscored = added, new language.

Current Version - as introduced

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A bill for an act
relating to retirement; volunteer firefighter relief associations; authorizing relief
associations to convert from a defined benefit plan to a defined contribution plan;
amending Minnesota Statutes 2018, section 424B.01, by adding subdivisions;
proposing coding for new law in Minnesota Statutes, chapter 424B.

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

Section 1.

Minnesota Statutes 2018, section 424B.01, is amended by adding a subdivision
to read:


new text begin Subd. 3a. new text end

new text begin Conversion effective date. new text end

new text begin "Conversion effective date" means the date the
assets of the defined benefit plan have been allocated to accounts under the defined
contribution plan.
new text end

Sec. 2.

Minnesota Statutes 2018, section 424B.01, is amended by adding a subdivision to
read:


new text begin Subd. 3b. new text end

new text begin Defined benefit plan. new text end

new text begin "Defined benefit plan" means a retirement plan that
provides a retirement benefit that is a lump sum, the amount of which is determined by
multiplying the applicable lump-sum service pension amount under section 424A.02,
subdivision 3, paragraph (d), by years of service, or a monthly pension, the amount of which
is determined by multiplying the applicable monthly pension amount under section 424A.02,
subdivision 3, paragraph (c), by years of service. A defined benefit plan may provide both
a lump-sum benefit and a monthly pension.
new text end

Sec. 3.

Minnesota Statutes 2018, section 424B.01, is amended by adding a subdivision to
read:


new text begin Subd. 3c. new text end

new text begin Defined benefit relief association. new text end

new text begin "Defined benefit relief association" means
a relief association that has established and administers a retirement plan that is a defined
benefit plan.
new text end

Sec. 4.

Minnesota Statutes 2018, section 424B.01, is amended by adding a subdivision to
read:


new text begin Subd. 3d. new text end

new text begin Defined contribution plan. new text end

new text begin "Defined contribution plan" means a retirement
plan that provides a retirement benefit based on the member's individual account balance.
new text end

Sec. 5.

Minnesota Statutes 2018, section 424B.01, is amended by adding a subdivision to
read:


new text begin Subd. 3e. new text end

new text begin Defined contribution relief association. new text end

new text begin "Defined contribution relief
association" means a relief association that has established and administers a retirement
plan that is a defined contribution plan.
new text end

Sec. 6.

Minnesota Statutes 2018, section 424B.01, is amended by adding a subdivision to
read:


new text begin Subd. 3f. new text end

new text begin Firefighting corporation. new text end

new text begin "Firefighting corporation" means an independent
nonprofit firefighting corporation that is organized under chapter 317A and that operates
primarily for firefighting purposes.
new text end

Sec. 7.

Minnesota Statutes 2018, section 424B.01, is amended by adding a subdivision to
read:


new text begin Subd. 3g. new text end

new text begin Member. new text end

new text begin (a) "Member" means a person who:
new text end

new text begin (1) is a member of a fire department or independent nonprofit firefighting corporation;
new text end

new text begin (2) has been credited with at least one year of service toward a retirement benefit under
the retirement plan of a relief association that is affiliated with the fire department or
independent nonprofit firefighting corporation; and
new text end

new text begin (3) has not received a distribution of the person's benefit from the retirement plan or, if
the retirement plan provides a benefit that is a monthly pension, has not begun to receive
the monthly pension.
new text end

new text begin (b) A member may be an active firefighter, an inactive firefighter, or a former firefighter
who has a benefit under the retirement plan but has not become eligible to receive the benefit.
new text end

Sec. 8.

Minnesota Statutes 2018, section 424B.01, is amended by adding a subdivision to
read:


new text begin Subd. 4a. new text end

new text begin Relief association. new text end

new text begin (a) "Relief association" or "volunteer firefighter relief
association" means a nonprofit corporation incorporated under or governed by chapter 317A
that receives and manages public money to provide retirement benefits for individuals
providing the governmental services of firefighting and emergency first response, is subject
to chapter 424A, and is affiliated with:
new text end

new text begin (1) a fire department established by municipal ordinance;
new text end

new text begin (2) an independent nonprofit firefighting corporation incorporated under chapter 317A;
or
new text end

new text begin (3) a fire department operated as or by a joint powers entity.
new text end

new text begin (b) Relief association or volunteer firefighters relief association does not mean the
voluntary statewide volunteer firefighter retirement plan governed by chapter 353G.
new text end

Sec. 9.

Minnesota Statutes 2018, section 424B.01, is amended by adding a subdivision to
read:


new text begin Subd. 5a. new text end

new text begin Retirement benefit. new text end

new text begin "Retirement benefit" means the benefit to which a member
is entitled under a retirement plan.
new text end

Sec. 10.

Minnesota Statutes 2018, section 424B.01, is amended by adding a subdivision
to read:


new text begin Subd. 5b. new text end

new text begin Retirement plan. new text end

new text begin "Retirement plan" means the defined benefit plan or defined
contribution plan established and administered by a relief association.
new text end

Sec. 11.

Minnesota Statutes 2018, section 424B.01, is amended by adding a subdivision
to read:


new text begin Subd. 7. new text end

new text begin Surplus. new text end

new text begin "Surplus" means the amount by which the assets in a defined benefit
plan exceed accrued liabilities.
new text end

Sec. 12.

new text begin [424B.13] CONVERSION OF RELIEF ASSOCIATION DEFINED BENEFIT
PLAN TO DEFINED CONTRIBUTION PLAN.
new text end

new text begin Subdivision 1. new text end

new text begin Authority to initiate conversion. new text end

new text begin (a) The board of trustees of a defined
benefit relief association may convert the defined benefit plan to a defined contribution plan
in accordance with this section.
new text end

new text begin (b) A conversion consists of:
new text end

new text begin (1) termination of the defined benefit plan;
new text end

new text begin (2) establishment of a defined contribution plan; and
new text end

new text begin (3) transfer and allocation of the assets of the defined benefit plan to accounts under the
defined contribution plan.
new text end

new text begin (c) The termination of the defined benefit plan does not dissolve the relief association,
which is an ongoing nonprofit corporation under chapter 317A, unless dissolved under
chapter 317A and section 424B.20.
new text end

new text begin Subd. 2. new text end

new text begin Board of trustees. new text end

new text begin To initiate and complete a conversion, the board of trustees
of a relief association must:
new text end

new text begin (1) approve resolutions that:
new text end

new text begin (i) state that the defined benefit plan is being converted to a defined contribution plan;
new text end

new text begin (ii) designate a conversion effective date;
new text end

new text begin (iii) fully, 100 percent, vest all members as of the conversion effective date in each
member's lump-sum benefit or monthly pension;
new text end

new text begin (iv) if the relief association has a surplus as of the end of the relief association's most
recent fiscal year before the conversion effective date, at the option of the board of trustees,
conditionally increase the lump-sum benefit or monthly pension amount under the defined
benefit plan, as provided under subdivision 4;
new text end

new text begin (v) determine the method for allocating a surplus;
new text end

new text begin (vi) adopt a defined contribution plan and approve a plan document that complies with
section 424A.016 and states the terms and conditions for eligibility, vesting, allocation of
contributions, distribution of retirement benefits, and any ancillary benefits; and
new text end

new text begin (vii) authorize any bylaws amendments needed to incorporate items (i) to (vi) into the
bylaws;
new text end

new text begin (2) obtain the consent of the municipality or firefighting corporation if required by
subdivision 3;
new text end

new text begin (3) determine the present value of each member's accrued benefit as of the conversion
effective date as required by subdivision 5;
new text end

new text begin (4) if there is a surplus, allocate the surplus under a method that complies with subdivision
6;
new text end

new text begin (5) if there is not a surplus, take the actions required under subdivision 7;
new text end

new text begin (6) provide the notices required under subdivisions 8 and 9; and
new text end

new text begin (7) implement the conversion, including the requirements under subdivision 10.
new text end

new text begin Subd. 3. new text end

new text begin Consent of municipality or firefighting corporation. new text end

new text begin The consent of the
municipality or firefighting corporation to a relief association's conversion of its defined
benefit plan to a defined contribution plan is required as provided under subdivision 7 only
if the relief association does not have a surplus as of the end of the relief association's most
recent fiscal year before the conversion effective date.
new text end

new text begin Subd. 4. new text end

new text begin Benefit increase. new text end

new text begin (a) If the relief association has a surplus as of the end of the
relief association's most recent fiscal year before the conversion effective date, the board
of trustees of the relief association may approve a resolution that increases the lump-sum
benefit or monthly pension amount under the defined benefit plan and amends the relief
association bylaws without the consent of the affiliated municipality or firefighting
corporation, notwithstanding section 424A.02, subdivision 10. The resulting lump-sum
benefit or monthly pension amount is not limited to the maximum lump-sum benefit or
monthly pension amounts under section 424A.02, subdivision 3.
new text end

new text begin (b) The benefit increase must not cause the liabilities of the retirement plan to exceed
the value of the assets, after taking into account full vesting as required under subdivision
2 and any administrative expenses arising from the conversion.
new text end

new text begin (c) The board of trustees shall specify whether the benefit increase will apply only to
members active as of the conversion effective date or whether the benefit increase will apply
to all members, including members who are not active as of the conversion effective date,
notwithstanding section 424A.015, subdivision 6.
new text end

new text begin (d) The board of trustees' resolution approving an increase in the benefit level must be
considered conditional on there being sufficient assets to fund the increase and must state
that if, as of the date benefits are transferred to the defined contribution plan, there are not
sufficient assets to cover all benefit liabilities at the new higher benefit level, the benefit
level will be reduced until assets equal or are greater than liabilities. The resolution must
state that the new lower benefit level will be considered approved by the board of trustees
without further action by the board.
new text end

new text begin Subd. 5. new text end

new text begin Determination of value of pension benefits. new text end

new text begin The board of trustees shall
determine the present value of each member's accrued benefit, taking into account the full
vesting requirement under subdivision 2 and any increase in the lump-sum benefit or monthly
pension amount approved under subdivision 4:
new text end

new text begin (1) using the method set forth in section 424A.092, subdivision 2, for determining a
plan's funded status by calculating the value of each firefighter's accrued benefit; or
new text end

new text begin (2) as determined by an actuary retained by the relief association, who meets the definition
of approved actuary under section 356.215, subdivision 1, paragraph (c).
new text end

new text begin Subd. 6. new text end

new text begin Allocation of surplus. new text end

new text begin (a) If, as of the conversion effective date, the defined
benefit plan has a surplus, the board of trustees shall allocate the surplus as follows:
new text end

new text begin (1) per capita method: each member's account will receive the same dollar amount;
new text end

new text begin (2) service-based method: each member's account will receive a share of the surplus
based on the ratio of the member's years of service to the total years of service for all
members; or
new text end

new text begin (3) member and municipality sharing method:
new text end

new text begin (i) first, the municipality will receive a share of the surplus based on the ratio of the
municipal contributions made to the defined benefit relief association over a specified period
of years to the total of fire state aid paid and municipal contributions made to the defined
benefit relief association over the same period; and
new text end

new text begin (ii) second, any remaining surplus will be allocated to accounts of members using the
per capita or service-based method.
new text end

new text begin (b) If the board of trustees elects the method under paragraph (a), clause (3), the board
of trustees may impose conditions on the use of the surplus as follows:
new text end

new text begin (1) all or a specified portion of the surplus must be contributed back to the defined
contribution relief association over a specified number of future years for allocation to the
accounts of members eligible for an allocation;
new text end

new text begin (2) all or a specified portion of the surplus must be used by the municipality for the
purposes described in section 424A.08, paragraph (a) or (b); or
new text end

new text begin (3) all or a specified portion of the surplus must be used by the municipality to provide
health insurance or other welfare benefits for the members.
new text end

new text begin (c) The board of trustees shall specify whether the surplus will be allocated only to
members who are active firefighters as of the conversion effective date or whether the
surplus will be allocated to all members, including members who are not active firefighters
as of the conversion effective date.
new text end

new text begin Subd. 7. new text end

new text begin Conversion without surplus. new text end

new text begin If the relief association does not have a surplus
as of the end of the relief association's most recent fiscal year before the conversion effective
date, the board of trustees shall:
new text end

new text begin (1) obtain the consent of the municipality or firefighting corporation to the conversion
and bylaws amendments under subdivision 2; and
new text end

new text begin (2) either:
new text end

new text begin (i) include with the resolutions of the board of trustees under subdivision 2 a resolution
amending the relief association bylaws to decrease the lump-sum or monthly pension benefit
level as necessary to reduce benefit liabilities until plan assets are sufficient to fund all
benefit liabilities, taking into account full vesting under subdivision 2 and the payment of
administrative expenses arising from the conversion; or
new text end

new text begin (ii) enter into an agreement with the municipality or firefighting corporation, as applicable,
that requires the municipality or firefighting corporation to make a contribution in an amount
sufficient to cover all benefit liabilities at the current benefit level, taking into account full
vesting under subdivision 2 and the payment of administrative expenses arising from the
conversion.
new text end

new text begin Subd. 8. new text end

new text begin Notice to members. new text end

new text begin The board of trustees of the relief association shall provide
notice to all members at least 90 days before the conversion effective date. The notice shall
include:
new text end

new text begin (1) an explanation that the plan is converting from a defined benefit plan to a defined
contribution plan and provide definitions for those terms, the reasons for the conversion,
the conversion effective date, and the procedure to be followed, including fully vesting all
members;
new text end

new text begin (2) a summary of the terms of the newly adopted defined contribution plan;
new text end

new text begin (3) information about any increase in the benefit level and whether the increase applies
to all members or only active firefighters;
new text end

new text begin (4) a section tailored to each member that provides an estimate of the present value of
the member's fully vested accrued benefit and the calculation that resulted in that value;
new text end

new text begin (5) an estimate of any anticipated surplus and an explanation of the disposition of the
surplus, including, as applicable, a description of the method allocating the surplus among
members' accounts and whether the municipality or firefighting corporation will receive
any of the surplus and any conditions on its use; and
new text end

new text begin (6) contact information for one or more members of the board of trustees who will answer
questions and provide a copy of the new defined contribution plan document or a summary,
if requested, or directions to a website for viewing and printing the plan document or
summary.
new text end

new text begin Subd. 9. new text end

new text begin Notice to municipality and state auditor. new text end

new text begin The relief association shall provide
notice to the municipality or firefighting corporation affiliated with the relief association
and the state auditor at the same time as the notice required under subdivision 8. The notice
must include the information required under subdivision 8, except that the individualized
information will be provided as a spreadsheet listing the name of each firefighter and the
corresponding accrued benefit amount.
new text end

new text begin Subd. 10. new text end

new text begin Implementation. new text end

new text begin (a) A record-keeping account shall be established for each
member under the defined contribution plan to which is recorded the value of the firefighter's
fully vested accrued benefit as determined as of the conversion effective date and any
allocation of surplus.
new text end

new text begin (b) In no event may the value of a member's account in the defined contribution plan be
less as of the day following the conversion effective date than the present value of the
member's accrued benefit as of the day before the conversion effective date.
new text end

Sec. 13. new text beginEFFECTIVE DATE.
new text end

new text begin Sections 1 to 12 are effective the day following final enactment.
new text end