Minnesota Session Laws - 1986, Regular Session

  

                         Laws of Minnesota 1986 

                        CHAPTER 356-H.F.No. 1926 
           An act relating to state investments; establishing 
          various accounts within the supplemental investment 
          fund; providing for the administration of the accounts 
          and for the investment and valuation of shares within 
          each account; amending Minnesota Statutes 1984, 
          sections 11A.17, subdivisions 1, 4, 9, and by adding a 
          subdivision; 69.77, subdivision 2; 69.775; 352.96, 
          subdivision 4; 352D.04, subdivision 1; Minnesota 
          Statutes 1985 Supplement, section 11A.17, subdivision 
          13; and Laws 1969, chapter 950, section 3, as amended. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1984, section 11A.17, 
subdivision 1, is amended to read: 
    Subdivision 1.  [ESTABLISHMENT.] There is hereby 
established a supplemental investment fund for the purpose of 
providing an investment vehicle for the assets of various public 
retirement plans and funds.  This fund shall consist of four 
seven investment accounts:  an income share account, a growth 
share account, a fixed-return account, and a bond account, a 
money market account, a guaranteed return account, a bond market 
account, and a common stock index account.  The supplemental 
investment fund shall be a continuation of the supplemental 
retirement fund in existence on January 1, 1980. 
    Sec. 2.  Minnesota Statutes 1984, section 11A.17, 
subdivision 4, is amended to read: 
    Subd. 4.  [INVESTMENT.] The assets of the supplemental 
investment fund shall be invested by the state board subject to 
the provisions of section 11A.24; provided, however, that: 
    (1) the fixed-return bond market account and the bond 
account shall be invested entirely in debt obligations and, the 
growth share account and the common stock index account may be 
invested entirely in corporate stocks; 
    (2) the guaranteed return account may be invested entirely 
in guaranteed investment contracts; and 
    (3) the money market account shall be invested entirely in 
debt obligations maturing within three years. 
    Sec. 3.  Minnesota Statutes 1984, section 11A.17, 
subdivision 9, is amended to read: 
    Subd. 9.  [VALUATION OF INVESTMENT SHARES.] The value of 
investment shares in the income share investment account or in, 
the growth share investment account, the bond market account, 
and the common stock index account shall be determined by 
dividing the total market value of the securities constituting 
the respective account by the total number of shares then 
outstanding in the investment account.  Whenever the value of 
investment shares of an investment account has exceeded $10 per 
share for a period of six consecutive months, each investment 
share in the investment account may be split at the direction of 
the board on a two new shares for one prior share basis The 
value of investment shares in the money market account and the 
guaranteed return account shall be $1 per share.  The value of 
investment shares in the fixed-return investment account and the 
bond account shall be $5 per share; provided, however, if the 
account shares are redeemed by a public retirement fund where 
the shares are not attributable to the individual account of any 
person prior to the expiration of the multi-year period set by 
the board for the payment of the applicable assumed rate, the 
value of the investment shares shall be at market value.  Terms 
as to withdrawal schedules will be agreed upon by the public 
retirement fund and the state board.  Notwithstanding the 
provisions of section 11A.12, the investment income earned by 
the fixed-return investment account shall be used to purchase 
additional shares on behalf of each participating public 
retirement plan or fund. 
    Sec. 4.  Minnesota Statutes 1985 Supplement, section 
11A.17, subdivision 13, is amended to read: 
    Subd. 13.  [RATE OF INTEREST FOR FIXED RETURN ACCOUNT AND 
BOND ACCOUNT.] At the beginning of each fiscal year, and as 
often as the state board determines appropriate, the state board 
shall set an assumed interest rate for money invested in the 
fixed return account.  The state board may determine the period 
over which the established rate is to apply to funds so invested.
At the end of the period, the state board may determine the rate 
for money invested in the fixed return account based on the 
average yield for the period.  Any earnings accrued to the fixed 
return account above the rate earlier indicated may be used to 
purchase additional shares on behalf of each participating 
public retirement plan or fund after necessary reserves are 
established.  At the end of each fiscal year, the state board 
shall determine a rate of interest to be applied to all 
contributions made to the bond account for that fiscal year.  At 
the end of each fiscal year the state board may determine for 
the bond account the period over which the established rate is 
to apply to funds so invested depending on the average yield and 
maturity of the securities purchased. 
    Sec. 5.  Minnesota Statutes 1984, section 11A.17, is 
amended by adding a subdivision to read: 
     Subd. 14.  [PROCEDURES FOR DISTRIBUTION OF INCOME FOR MONEY 
MARKET ACCOUNT, BOND ACCOUNT, AND GUARANTEED RETURN ACCOUNT.] At 
the end of each fiscal year, and as often as the state board 
shall in addition determine appropriate, the state board shall 
determine the earnings of the money market account, the 
guaranteed return account, and the bond account.  
Notwithstanding the provisions of section 11A.12, the earnings 
shall be used to purchase additional shares in the respective 
accounts on behalf of each participating public retirement plan 
or fund. 
    Sec. 6.  Minnesota Statutes 1984, section 69.77, 
subdivision 2, is amended to read: 
    Subd. 2.  The penalty provided for in subdivision 1 shall 
not apply to a relief association enumerated in subdivision 1a 
if the following requirements are met: 
     (1) Each member of the relief association pays into the 
special fund of the association during a year of covered 
service, a contribution for retirement coverage including 
survivorship benefits of not less than eight percent of the 
maximum rate of salary upon which retirement coverage is 
credited and service pension and retirement benefit amounts are 
determined.  The member contributions shall be made by payroll 
deduction from the salary of the member by the municipality, and 
shall be transmitted by the municipality to the relief 
association as soon as practical.  The relief association shall 
deposit the member contribution to the credit of the special 
fund of the relief association.  The member contribution 
requirement specified in this clause shall not apply to any 
members who are volunteer firefighters. 
      (2) The officers of the relief association determine the 
financial requirements of the relief association and minimum 
obligation of the municipality for the following calendar year 
in accordance with the requirements of this clause.  The 
financial requirements of the relief association and the minimum 
obligation of the municipality shall be determined on or before 
the submission date established by the municipality pursuant to 
clause (3). 
      The financial requirements of the relief association for 
the following calendar year shall be based on the most recent 
actuarial valuation or survey prepared in accordance with 
sections 356.215, subdivision 4 and 356.216, as required 
pursuant to clause (8).  In the event that an actuarial estimate 
is prepared by the actuary of the relief association as part of 
obtaining a modification of the benefit plan of the relief 
association and the modification is implemented, the actuarial 
estimate shall be used in calculating the financial requirements 
of the relief association. 
      If the relief association has an unfunded accrued liability 
as reported in the most recent actuarial valuation or survey, 
the total of the amounts calculated pursuant to clauses (a) and 
(b) shall constitute the financial requirements of the relief 
association for the following year.  If the relief association 
does not have an unfunded accrued liability as reported in the 
most recent actuarial valuation or survey the amount calculated 
pursuant to subclause (a) shall constitute the financial 
requirements of the relief association for the following year. 
      (a) The normal level cost requirement for the following 
year, expressed as a dollar amount, which shall be determined by 
applying the normal level cost of the relief association as 
reported in the actuarial valuation or survey and expressed as a 
percentage of covered payroll to the estimated covered payroll 
of the active membership of the relief association, including 
any projected increase in the active membership, for the 
following year. 
       (b) To the dollar amount of normal cost thus determined 
shall be added an amount equal to the level annual dollar amount 
which is sufficient to amortize the unfunded accrued liability 
by December 31, 2010, as determined from the actuarial valuation 
or survey of the fund, using an interest assumption set at the 
rate specified in section 356.215, subdivision 4, clause (4).  
The amortization date specified in this subclause shall apply to 
all local police or salaried firefighters relief associations 
and shall supersede any amortization date specified in any 
applicable special law. 
       The minimum obligation of the municipality shall be an 
amount equal to the financial requirements of the relief 
association reduced by the estimated amount of member 
contributions from covered salary anticipated for the following 
calendar year and the estimated amounts from the applicable 
state aid program established pursuant to sections 69.011 to 
69.051 anticipated as receivable by the relief association after 
any allocation pursuant to section 69.031, subdivision 5, clause 
(2), subclause (c) or 423A.01, subdivision 2, clause (6), and 
from the local police and salaried firefighters' relief 
association amortization aid program established pursuant to 
section 423A.02 anticipated for the following calendar year. 
       (3) The officers of the relief association shall submit 
determination of the financial requirements of the relief 
association and of the minimum obligation of the municipality to 
the governing body on or before the date established by the 
municipality which shall not be earlier than August 1 and shall 
not be later than September 1 of each year.  The governing body 
of the municipality shall ascertain whether or not the 
determinations were prepared in accordance with law. 
       (4) The municipality shall provide for and shall pay each 
year at least the amount of the minimum obligation of the 
municipality to the relief association.  If there is any 
deficiency in the municipal payment to meet the minimum 
obligation of the municipality as of the end of any calendar 
year, the amount of the deficiency shall be added to the minimum 
obligation of the municipality for the following year calculated 
pursuant to clause (2) and shall include interest at the rate of 
six percent per annum compounded from the date that the 
municipality was required to make payment pursuant to this 
clause until the date that the municipality actually makes the 
required payment. 
       (5) The municipality shall provide in the annual municipal 
budget for at least the minimum obligation of the municipality 
calculated pursuant to clause (2).  The municipality may levy 
taxes for the payment of the minimum obligation of the 
municipality without any limitation as to rate or amount and 
irrespective of limitations imposed by other provisions of law 
upon the rate or amount of taxation when the balance of the 
special fund or any fund of the relief association has attained 
a specified minimum asset level.  In addition, any taxes levied 
pursuant to this section shall not cause the amount or rate of 
other taxes levied in that year or to be levied in a subsequent 
year by the municipality which are subject to a limitation as to 
rate or amount to be reduced.  If the municipality does not 
include the full amount of the minimum obligation of the 
municipality in the levy that the municipality certified to the 
county auditor in any year, the officers of the relief 
association shall certify the amount of any deficiency to the 
county auditor.  Upon verifying the existence of any deficiency 
in the levy certified by the municipality, the county auditor 
shall spread a levy over the taxable property of the 
municipality in the amount of the deficiency certified to by the 
officers of the relief association. 
     (6) Any sums of money paid by the municipality to the 
relief association in excess of the minimum obligation of the 
municipality in any year shall be used to amortize any unfunded 
liabilities of the relief association. 
     (7) The funds of the association shall be invested in 
securities which are proper investments pursuant to section 
11A.24, except that up to $10,000 may be invested in the stock 
of any one corporation in any account of such small size that 
the five percent stock limitation specified in section 11A.24, 
subdivision 5 would necessitate a lesser investment.  
Notwithstanding the foregoing, up to 75 percent of the market 
value of the assets of the fund 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 by section 11A.24, subdivisions 2 to 
5.  The association may also invest funds in Minnesota situs 
nonfarm real estate ownership interests or loans secured by 
mortgages or deeds of trust, provided that the amount of all 
investments in real property shall not exceed ten percent of the 
market value of the association's fund.  Securities held by the 
association before July 1, 1971, which do not meet the 
requirements of this paragraph may be retained after that date 
if they were proper investments for the association on April 28, 
1969.  The governing board of the association may select and 
appoint investment agencies to act for and in its behalf or may 
certify funds for investment by the state board under the 
provisions of section 11A.17, provided that there be no limit to 
the amount which may be invested in the income share account, in 
the bond account, or in the fixed-return account, and that up to 
20 percent of that portion of the assets of the association 
invested in the Minnesota supplemental investment fund may be 
invested in the growth share account. 
    (8) The association shall procure an actuarial valuation 
showing the condition of the special fund of the relief 
association pursuant to sections 356.215 and 356.216 as of 
December 31 of every year.  A copy of the actuarial survey shall 
be filed with the director of the legislative reference library, 
the governing body of the municipality in which the association 
is organized, the executive secretary of the legislative 
commission on pensions and retirement, and the commissioner of 
commerce, not later than June 1 of the following year. 
    Sec. 7.  Minnesota Statutes 1984, section 69.775, is 
amended to read: 
    69.775 [INVESTMENTS.] 
    The special fund assets of the relief associations governed 
by sections 69.771 to 69.776 shall be invested in securities 
which are proper investments pursuant to section 11A.24, except 
that up to five percent of the special fund assets, or a minimum 
of $10,000, may be invested in the stock of any one 
corporation.  Notwithstanding the foregoing, up to 75 percent of 
the market value of the assets of the fund 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 by section 11A.24, subdivisions 2 to 
5.  Securities held by the associations before January 1, 1972, 
which do not meet the requirements of this section may be 
retained after that date if they were proper investments for the 
association on May 14, 1971.  The governing board of the 
association may select and appoint investment agencies to act 
for and in its behalf or may certify funds for investment by the 
state board under the provisions of section 11A.17, provided 
that there be no limit to the amount which may be invested in 
the income share account, in the bond account, or in the 
fixed-return account, and that up to 20 percent of that portion 
of the assets of the association invested in the Minnesota 
supplemental investment fund may be invested in the growth share 
account. 
    Sec. 8.  Minnesota Statutes 1984, section 352.96, 
subdivision 4, is amended to read: 
    Subd. 4.  [EXECUTIVE DIRECTOR TO ESTABLISH RULES.] The 
executive director of the Minnesota state retirement system 
shall establish rules and procedures to carry out the provisions 
of this section including allocation of administrative costs 
against the assets accumulated under this section.  Funds to pay 
such costs are hereby appropriated from the fund or account in 
which the assets accumulated under this section are placed.  The 
rules established by the executive director shall conform to 
federal and state tax laws, regulations and rulings, and are not 
subject to the administrative procedure act.  Rules adopted 
after July 1, 1977, relating to the options provided under 
subdivision 2, clauses (b) and (c), must be approved by the 
state board of investment.  A state employee shall not be 
permitted to make payments under a plan until the plan or 
applicable component thereof has been approved as to its 
tax-deferred status by the internal revenue service. 
    Sec. 9.  Minnesota Statutes 1984, section 352D.04, 
subdivision 1, is amended to read: 
    Subdivision 1.  An employee exercising his option to 
participate in the retirement program provided by this chapter 
may elect to purchase shares in one or a combination of the 
income share account, the growth share account or the 
fixed-return account of the supplemental retirement fund in 
accordance with one of the following options:, the money market 
account, the bond market account, or the common stock index 
account established in section 11A.17.  The employee may elect 
to participate in one or more of the investment accounts in the 
fund by specifying, on a form provided by the executive 
director, the percentage of the employee's contributions 
provided in subdivision 2 to be used to purchase shares in each 
of the accounts. 
    (1) 100 percent invested in the income share account; 
    (2) 75 percent invested in the income share account and 25 
percent invested in the growth share account; 
    (3) 50 percent invested in the income share account and 50 
percent invested in the growth share account; 
    (4) 100 percent invested in the fixed-return account; or 
    (5) 75 percent invested in the fixed-return account and 25 
percent invested in the growth share account.  
    Prior to December 31 of each Twice in any calendar year, 
each participant may indicate in writing on forms provided by 
the Minnesota state retirement system his choice of options for 
subsequent purchases of shares.  Thereafter until a different 
written indication is made by such participant the executive 
director shall purchase shares in the supplemental fund as 
selected by the participant.  If no initial option is chosen, 
100 percent income shares shall be purchased for a participant. 
    A change in choice of investment option shall be effective 
no later than the first pay date first occurring after 30 days 
following the receipt of the request for a change. 
    Twice in any calendar year a participant or former 
participant may also change the investment options selected for 
all or a portion of the participant's shares previously 
purchased.  However, if a partial transfer is made a minimum of 
$1,000 must be transferred and a minimum balance of $1,000 must 
remain in the previously selected investment option.  A change 
is restricted to a transfer from one or more accounts to a 
single account.  Changes in investment options for the 
participant's shares shall be effected as soon as cash flow to 
an account practically permits but not later than six months 
after the requested change. 
    Sec. 10.  Laws 1969, chapter 950, section 3, as amended by 
Laws 1975, chapter 153, section 1, and Laws 1982, chapter 450, 
section 3, is amended to read: 
     Sec. 3.  [PURCHASE OF SHARES IN MINNESOTA SUPPLEMENTAL 
INVESTMENT FUND.] At the time a person becomes eligible for 
coverage and elects to obtain coverage by the Hennepin county 
supplemental retirement program and prior to July 1 of each 
subsequent year, a participant in the Hennepin county 
supplemental retirement program shall indicate in writing on a 
form provided by the county of Hennepin the account of the 
Minnesota supplemental investment fund in which the participant 
wishes salary deductions and county matching contributions 
attributable to salary deductions to be invested for that fiscal 
year.  For that fiscal year the county of Hennepin shall 
purchase with the salary deductions and county matching funds 
attributable to the salary deductions shares in the appropriate 
account of the Minnesota supplemental investment fund in 
accordance with the indicated preferences of the participant.  
However, the county of Hennepin has the authority to determine 
which accounts of the Minnesota supplemental investment fund 
will be available for participant investment.  The shares 
purchased shall stand in the name of the county of Hennepin.  A 
record shall be kept by the county of Hennepin indicating the 
number of shares in each account of the Minnesota supplemental 
investment fund purchased with the salary deductions and county 
matching funds attributable to the salary deductions of each 
participant.  The record shall be known as the "participant's 
share account record".  The participant's share account record 
shall show, in addition to the number of shares therein, any 
cash balance of salary deductions or county matching funds 
attributable to those deductions which stand uninvested in 
shares.  At the option of the county of Hennepin, and subject to 
any terms and conditions established and communicated in writing 
by the county to a participant, the participant may designate no 
more often than once each fiscal year that salary deductions and 
county matching contributions attributable to the salary 
deductions from prior fiscal years, together with any interest 
earned, be reinvested in another account of the Minnesota 
supplemental investment fund made available by the county of 
Hennepin. 
    Sec. 11.  [EFFECTIVE DATES.] 
     Sections 1 to 9 are effective July 1, 1986.  Section 10 is 
effective the day after compliance with Minnesota Statutes, 
section 645.021, subdivision 3, by the governing body of 
Hennepin county. 
    Approved March 19, 1986