HF 3249

as introduced - 94th Legislature (2025 - 2026) Posted on 04/25/2025 10:05am

A bill for an act
relating to retirement; modifying the method for amortizing unfunded liabilities;
adding a definition for standards for actuarial work; making conforming changes;
amending Minnesota Statutes 2024, section 356.215, subdivisions 1, 4, 8, 11, 17.

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

Section 1.

Minnesota Statutes 2024, 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 an 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:

(1) a person who is regularly engaged in the business of providing actuarial services and
who is a fellow in the Society of Actuaries; or

(2) a firm that retains a person described in clause (1) on its staff.

(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 424A.093, 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) "Actuarial value of assets" means the market value of all assets as of the preceding
June 30, reduced by:

(1) 20 percent of the difference between the actual net change in the market value of
total 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 total assets over that
fiscal year period if the assets had earned a rate of return on assets equal to the annual
percentage investment return assumption used in the actuarial valuation for the July 1 that
occurred four years earlier;

(2) 40 percent of the difference between the actual net change in the market value of
total 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 total assets over that
fiscal year period if the assets had earned a rate of return on assets equal to the annual
percentage investment return assumption used in the actuarial valuation for the July 1 that
occurred three years earlier;

(3) 60 percent of the difference between the actual net change in the market value of
total 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 total assets over that
fiscal year period if the assets had earned a rate of return on assets equal to the annual
percentage investment return assumption used in the actuarial valuation for the July 1 that
occurred two years earlier; and

(4) 80 percent of the difference between the actual net change in the market value of
total assets between the most recent June 30 and the June 30 that occurred one year earlier
and the computed increase in the market value of total assets over that fiscal year period if
the assets had earned a rate of return on assets equal to the annual percentage investment
return 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 the actuarial value of 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

new text begin (h) "Standards for actuarial work" means the standards adopted under section 3.85,
subdivision 10.
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. 2.

Minnesota Statutes 2024, section 356.215, subdivision 4, is amended to read:

Subd. 4.

Actuarial valuation; contents.

(a) The actuarial valuation must be made in
conformity with the requirements of the definition contained in subdivision 1 and the deleted text begin most
recent deleted text end standards for actuarial work deleted text begin adopted by the Legislative Commission on Pensions
and Retirement deleted text end .

(b) The actuarial valuation must measure all aspects of the benefit plan of the fund in
accordance with changes in benefit plans, if any, and salaries reasonably anticipated to be
in force during the ensuing fiscal year. The actuarial valuation must be prepared in accordance
with the entry age actuarial cost method. The actuarial valuation required under this section
must include the information required in subdivisions 5 to 15.

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 2024, section 356.215, subdivision 8, is amended to read:

Subd. 8.

Actuarial assumptions.

(a) The actuarial valuation must use the applicable
following investment return assumption:

plan	investment return assumption
general state employees retirement plan	7%
correctional state employees retirement plan	7
State Patrol retirement plan	7
legislators retirement plan, and for the constitutional officers calculation of total plan liabilities	0
judges retirement plan	7
general public employees retirement plan	7
public employees police and fire retirement plan	7
local government correctional service retirement plan	7
teachers retirement plan	7
St. Paul teachers retirement plan	7
Bloomington Fire Department Relief Association	6
local monthly benefit volunteer firefighter relief associations	5
monthly benefit retirement plans in the statewide volunteer firefighter retirement plan	6

(b) The actuarial valuation for each of the covered retirement plans listed in section
356.415, subdivision 2, and the St. Paul Teachers Retirement Fund Association must take
into account the postretirement adjustment rate or rates applicable to the plan as specified
in section 354A.29, subdivision 7, or 356.415, whichever applies.

(c) The actuarial valuation must use the applicable salary increase and payroll growth
assumptions found in the appendix to the standards for actuarial work deleted text begin adopted by the
Legislative Commission on Pensions and Retirement pursuant to section 3.85, subdivision
10 deleted text end . The appendix must be updated whenever new assumptions have been approved or
deemed approved under subdivision 18.

(d) The assumptions set forth in the appendix to the standards for actuarial work continue
to apply, unless a different salary assumption or a different payroll increase assumption:

(1) has been proposed by the governing board of the applicable retirement plan;

(2) is accompanied by the concurring recommendation of the actuary retained under
section 356.214, subdivision 1, if applicable, or by the approved actuary preparing the most
recent actuarial valuation report if section 356.214 does not apply; and

(3) has been approved or deemed approved under subdivision 18.

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 2024, section 356.215, subdivision 11, is amended to read:

Subd. 11.

Amortization contributions.

(a) deleted text begin In addition to the exhibit indicating the level
normal cost, deleted text end The actuarial valuation of deleted text begin the retirement deleted text end new text begin each pension new text end plan new text begin listed in subdivision
8, paragraph (a), other than the legislators retirement plan and relief association plans, new text end must
contain an exhibit deleted text begin for financial reporting purposes deleted text end indicating the additional annual
contribution sufficient to amortize new text begin on a level percent of payroll basis new text end the unfunded actuarial
accrued liability deleted text begin and must contain an exhibit indicating the additional contribution sufficient
to amortize the unfunded actuarial accrued liability. For the retirement plans listed in
subdivision 8, paragraph (a), but excluding the legislators retirement plan, the Bloomington
Fire Department Relief Association, and the local monthly benefit volunteer firefighter
relief associations, the additional contribution must be calculated on a level percentage of
covered payroll basis by the established date for full funding in effect when the valuation
is prepared, assuming annual payroll growth at the applicable percentage rate set forth in
the appendix described in subdivision 8, paragraph (c). For the legislators retirement plan,
the additional annual contribution must be calculated on a level annual dollar amount basis. deleted text end new text begin
resulting from any of the following changes, over the period specified for that change:
new text end

new text begin (1) experience gain or loss: 15 years;
new text end

new text begin (2) assumption or method change: 20 years;
new text end

new text begin (3) benefit change for active members: 15 years;
new text end

new text begin (4) long-term benefit change for inactive members: 15 years;
new text end

new text begin (5) short-term benefit change for inactive members: the number of years during which
the benefit change will be in effect; and
new text end

new text begin (6) an annual contribution that is more or less than the actuarially determined contribution:
15 years.
new text end

new text begin (b) The amortization periods specified in paragraph (a) apply unless the standards for
actuarial work state otherwise and except that:
new text end

new text begin (1) the pension plan's unfunded actuarial accrued liability as of July 1, 2024, must be
amortized over a period that ends June 30, 2048; and
new text end

new text begin (2) for the legislators retirement plan, the additional annual contribution sufficient to
amortize the unfunded actuarial accrued liability must be calculated on a level dollar basis
with an amortization period of one year.
new text end

deleted text begin (b) This paragraph applies only if the calculation under this paragraph for a retirement
plan results in an established date for full funding that is earlier than the established date
for full funding applicable to the retirement plan under paragraph (c). For any retirement
plan, if there has been a change in any or all of the actuarial assumptions used for calculating
the actuarial accrued liability of the fund, a change in the benefit plan governing annuities
and benefits payable from the fund, a change in the actuarial cost method used in calculating
the actuarial accrued liability of all or a portion of the fund, or a combination of the three,
and the change or changes, by itself or by themselves and without inclusion of any other
items of increase or decrease, produce a net increase in the unfunded actuarial accrued
liability in the fund, the established date for full funding must be determined using the
following procedure:
deleted text end

deleted text begin (i) the unfunded actuarial accrued liability of the fund must be determined in accordance
with the plan provisions governing annuities and retirement benefits and the actuarial
assumptions in effect before an applicable change;
deleted text end

deleted text begin (ii) the level annual dollar contribution or level percentage, whichever is applicable,
needed to amortize the unfunded actuarial accrued liability amount determined under item
(i) by the established date for full funding in effect before the change must be calculated
using the investment return assumption specified in subdivision 8 in effect before the change;
deleted text end

deleted text begin (iii) the unfunded actuarial accrued liability of the fund must be determined in accordance
with any new plan provisions governing annuities and benefits payable from the fund and
any new actuarial assumptions and the remaining plan provisions governing annuities and
benefits payable from the fund and actuarial assumptions in effect before the change;
deleted text end

deleted text begin (iv) the level annual dollar contribution or level percentage, whichever is applicable,
needed to amortize the difference between the unfunded actuarial accrued liability amount
calculated under item (i) and the unfunded actuarial accrued liability amount calculated
under item (iii) over a period of 30 years from the end of the plan year in which the applicable
change is effective must be calculated using the applicable investment return assumption
specified in subdivision 8 in effect after any applicable change;
deleted text end

deleted text begin (v) the level annual dollar or level percentage amortization contribution under item (iv)
must be added to the level annual dollar amortization contribution or level percentage
calculated under item (ii);
deleted text end

deleted text begin (vi) the period in which the unfunded actuarial accrued liability amount determined in
item (iii) is amortized by the total level annual dollar or level percentage amortization
contribution computed under item (v) must be calculated using the investment return
assumption specified in subdivision 8 in effect after any applicable change, rounded to the
nearest integral number of years, but not to exceed 30 years from the end of the plan year
in which the determination of the established date for full funding using the procedure set
forth in this clause is made and not to be less than the period of years beginning in the plan
year in which the determination of the established date for full funding using the procedure
set forth in this clause is made and ending by the date for full funding in effect before the
change; and
deleted text end

deleted text begin (vii) the period determined under item (vi) must be added to the date as of which the
actuarial valuation was prepared and the date obtained is the new established date for full
funding.
deleted text end

deleted text begin (c) The established date for full funding is the date provided for each of the following
plans:
deleted text end

deleted text begin (i) for the general employees retirement plan of the Public Employees Retirement
Association, the established date for full funding is June 30, 2048;
deleted text end

deleted text begin (ii) for the Teachers Retirement Association, the established date for full funding is June
30, 2048;
deleted text end

deleted text begin (iii) for the correctional state employees retirement plan and the State Patrol retirement
plan of the Minnesota State Retirement System, the established date for full funding is June
30, 2048;
deleted text end

deleted text begin (iv) for the judges retirement plan, the established date for full funding is June 30, 2048;
deleted text end

deleted text begin (v) for the local government correctional service retirement plan and the public employees
police and fire retirement plan, the established date for full funding is June 30, 2048;
deleted text end

deleted text begin (vi) for the St. Paul Teachers Retirement Fund Association, the established date for full
funding is June 30, 2048; and
deleted text end

deleted text begin (vii) for the general state employees retirement plan of the Minnesota State Retirement
System, the established date for full funding is June 30, 2048.
deleted text end

deleted text begin (d) For the retirement plans for which the annual actuarial valuation indicates an excess
of valuation assets over the actuarial accrued liability, the valuation assets in excess of the
actuarial accrued liability must be recognized as a reduction in the current contribution
requirements by an amount equal to the amortization of the excess expressed as a level
percentage of pay over a 30-year period beginning anew with each annual actuarial valuation
of the plan.
deleted text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective beginning with the July 1, 2025, actuarial
valuations.
new text end

Sec. 5.

Minnesota Statutes 2024, section 356.215, subdivision 17, is amended to read:

Subd. 17.

Actuarial services by approved actuaries.

(a) The actuarial valuation or
quadrennial experience study must be made and any actuarial consulting services for a
retirement fund or plan must be provided by an approved actuary. The actuarial valuation
or quadrennial experience study must include a signed written declaration that it has been
prepared according to sections 356.20 to 356.23 and according to the deleted text begin most recent deleted text end standards
for actuarial work deleted text begin adopted by the Legislative Commission on Pensions and Retirement deleted text end .

(b) Actuarial valuations or experience studies prepared by an approved actuary retained
by a retirement fund or plan must be submitted to the Legislative Commission on Pensions
and Retirement within ten days of the submission of the document to the retirement fund
or plan.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end