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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

  

                         Laws of Minnesota 1987 

                        CHAPTER 259-H.F.No. 1026 
           An act relating to retirement; clarifying the 
          responsibilities of the actuary retained by the 
          legislative commission on pensions and retirement; 
          clarifying and revising various actuarial 
          determinations and procedures; authorizing the 
          retention of actuarial advisors by various retirement 
          funds; specifying the contents and methods for 
          supplemental and alternative actuarial valuations; 
          establishing a separate fund for the correctional 
          employees retirement fund; amending Minnesota Statutes 
          1986, sections 3.85, subdivision 12; 3A.11, 
          subdivision 1; 11A.18, subdivisions 6, 9, and 11; 
          69.77, subdivisions 2b and 2h; 69.772, subdivision 3; 
          69.773, subdivisions 2 and 4; 136.82, subdivision 2; 
          352.01, subdivision 12; 352.03, subdivision 6; 
          352.116, subdivisions 1, 3, and by adding a 
          subdivision; 352.119, subdivision 2; 352.85, 
          subdivision 6; 352.86, subdivision 4; 352B.01, by 
          adding a subdivision; 352B.02, subdivision 1; 352B.08, 
          subdivision 2; 352B.26, subdivision 3; 353.01, 
          subdivision 14; 353.03, subdivision 3a; 353.271; 
          353.29, subdivision 6; 353.30, subdivision 3; 354.05, 
          subdivision 7; 354.06, subdivision 2a; 354.07, 
          subdivision 1; 354.35; 354.42, subdivision 5; 354.44, 
          subdivision 2; 354.45; 354.48, subdivision 3; 354.532, 
          subdivisions 1 and 2; 354.55, subdivisions 11, 12, and 
          13; 354.58; 354.62, subdivision 5; 354.63, subdivision 
          2; 354A.011, subdivision 17, and by adding a 
          subdivision; 354A.021, by adding a subdivision; 
          354A.32; 354A.33; 354A.41, subdivision 2; 356.20, 
          subdivisions 2, 3, and 4; 356.215; 356.216; 356.22, 
          subdivision 2; 356.23; 356.41; 356.451, subdivision 1; 
          422A.01, subdivisions 6, 7, and 10; 422A.04, 
          subdivisions 2 and 3; 422A.06, subdivisions 2, 5, 7, 
          and 8; 422A.101; 422A.15, subdivisions 2 and 3; 
          422A.16, subdivisions 2, 3a, and 10; 422A.17; 422A.23, 
          subdivisions 6 and 7; 490.121, subdivision 20; and 
          490.124, subdivision 11; proposing coding for new law 
          in Minnesota Statutes, chapter 352; repealing 
          Minnesota Statutes 1986, section 352B.26, subdivision 
          2. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1986, section 3.85, 
subdivision 12, is amended to read: 
    Subd. 12.  [VALUATIONS AND REPORTS TO LEGISLATURE.] (a) The 
commission shall contract with an established actuarial 
consulting firm to conduct annual actuarial valuations and 
financial adequacy studies for the funds specified retirement 
plans named in clause (b).  The contract shall also include 
provisions for performing cost analyses of proposals for changes 
in benefit and funding policies.  
    (b) The plans which shall be included in The contract for 
actuarial valuation and analysis are shall include the following 
retirement plans:  
    (1) the Statewide Teachers Retirement Association;  
    (2) the General Plan, Minnesota State Retirement System;  
    (3) the Correctional Plan, Minnesota State Retirement 
System;  
    (4) the State Patrol Plan, Minnesota State Retirement 
System;  
    (5) the Judges Plan, Minnesota State Retirement System;  
    (6) the Minneapolis Employees Retirement Fund;  
    (7) the General Plan, Public Employees Retirement 
Association;  
    (8) the Police and Fire Plan, Public Employees Retirement 
Association;  
    (9) the Duluth Teachers Retirement Association;  
    (10) the Minneapolis Teachers Retirement Association;  
    (11) the St. Paul Teachers Retirement Association; and 
    (12) the Legislator's Retirement Plan, Minnesota State 
Retirement System; and 
    (13) the Elective State Officers Retirement Plan, Minnesota 
State Retirement System.  
    (c) The contract shall include the following:  
    (1) Effective for every year beginning in fiscal year 1986, 
the contract shall specify completion of standard actuarial 
valuations for the preceding fiscal year with contents as 
described in section 356.215, subdivisions 4 to 4k; and cash 
flow forecasts through the amortization target date.  For funds 
using a calendar year valuation period the first valuation shall 
be for the period ending December 31, 1985. 
    (2) Effective for every four years, plan year beginning in 
fiscal year 1988 1987, the contract shall specify preparation of 
an exhibit on the experience of the fund for inclusion in the 
annual actuarial valuation and completion of an a periodic 
experience study for the four-year period ending June 30 of the 
preceding fiscal year as provided for in the standards adopted 
by the commission.  The experience study shall evaluate the 
appropriateness of continuing to use for future valuations the 
assumptions relating to:  individual salary progression; rate of 
return on investments; payroll growth; mortality; withdrawal; 
disability; retirement; and any other experience-related factor 
that could impact the future financial condition of the 
retirement funds.  
    (d) The commission shall annually prepare a report to the 
legislature summarizing the results of the valuations and cash 
flow projections and shall include with its report 
recommendations concerning the appropriateness of the support 
rates to achieve proper funding of the retirement funds by the 
required funding dates.  It shall also, within two months of the 
completion of the quadrennial periodic experience studies, 
prepare a report to the legislature on the appropriateness of 
the valuation assumptions listed in paragraph (c), clause 
(2) required for evaluation in the periodic experience study.  
     Sec. 2.  Minnesota Statutes 1986, section 3A.11, 
subdivision 1, is amended to read: 
    Subdivision 1.  [TRANSFER OF REQUIRED RESERVES.] The 
reserves necessary to fund the retirement allowance granted 
pursuant to section 3A.02 to a former legislator upon retirement 
shall be appropriated from the general fund to the director and 
shall be transferred by the director to the Minnesota 
postretirement investment fund as of the date benefits begin 
last business day of the month in which the retirement allowance 
begins to accrue in accord with section 11A.18.  The amount of 
the transfer made hereunder shall be determined by an approved 
or determined under a procedure specified by the actuary as 
defined in section 352.01, subdivision 15 retained by the 
legislative commission on pensions and retirement, in accord 
with an the appropriate mortality table using an adopted by the 
board of directors of the Minnesota state retirement system 
based on the experience of the plan as recommended by the 
commission-retained actuary and the interest rate assumption set 
at the rate specified in section 356.215, subdivision 4d. 
    Sec. 3.  Minnesota Statutes 1986, section 11A.18, 
subdivision 6, is amended to read: 
    Subd. 6.  [PARTICIPATING PUBLIC RETIREMENT FUNDS OR PLANS; 
TRANSFER OF REQUIRED RESERVES.] (a) Any public retirement fund 
or plan authorized by law to participate in the postretirement 
investment fund shall no later than the commencement of a last 
business day of the month in which the benefit payment from the 
postretirement investment fund begins, certify and transfer to 
the state board money equal to the actuarially determined 
reserves required for those retirement annuities and benefits 
which are payable by the public retirement fund or plan and 
which are specified in law to be included in the participation 
in the fund as determined by or determined under a procedure 
specified by the actuary retained by the legislative commission 
on pensions and retirement.  
    (b) If the exact amount of the actuarially determined 
required reserves is not readily calculable as of the date of 
the commencement of a benefit payment, the initial transfer must 
be based on the best estimate by the executive director of the 
retirement fund involved and shall be made on a timely basis. 
Any necessary adjustments based on specific calculations of 
actuarially determined required reserves must be made in later 
transfers.  If a best estimate initial transfer is insufficient, 
the later transfer from the retirement fund must include 
interest on the amount of the required reserve insufficiency at 
the greater of the following rates: 
    (1) the average short-term investment return rate earned by 
the state board over the 30-day period ending with the last 
business day of the month before the month in which the later 
adjustment transfer is made; or 
    (2) the preretirement interest assumption for the 
retirement fund as specified in section 356.215, subdivision 4d, 
stated as a monthly rate. 
    Interest on the amount of a required reserve insufficiency 
payable by a retirement fund shall be compounded on a monthly 
basis.  No interest shall be payable from the postretirement 
investment fund in the event of a required reserve 
oversufficiency. 
    (c) The state board shall confirm in writing each 
certification and transfer of money made by a participating 
public retirement fund or plan.  Each participating public 
retirement fund or plan shall maintain adequate records to 
account for money transferred to or from the postretirement 
investment fund.  
    Sec. 4.  Minnesota Statutes 1986, section 11A.18, 
subdivision 9, is amended to read: 
    Subd. 9.  [CALCULATION OF POSTRETIREMENT ADJUSTMENT.] 
Annually, following June 30, the state board shall determine 
whether a postretirement adjustment shall be payable and shall 
determine the amount of any postretirement adjustment which 
shall be payable. 
    (1) The state board shall determine whether a 
postretirement adjustment shall be payable using the following 
procedure: 
    (a) The state board shall determine the amount of 
dividends, interest, accruals and realized capital gains or 
losses applicable to the most recent fiscal year ending June 30; 
    (b) The participating public pension funds or plans shall 
determine the amount of reserves required for every the annuity 
or benefit payable to an annuitant and benefit recipient of the 
participating public pension plans or funds shall be determined 
by the commission-retained actuary as of the current June 30.  
Every An annuitant or benefit recipient who has been receiving 
an annuity or benefit for at least one year as of the current 
June 30 shall be eligible to receive a postretirement 
adjustment.  Each fund shall report separately the amount of the 
reserves for those annuitants and benefit recipients who are 
eligible to receive a postretirement benefit adjustment and 
those annuitants and benefit recipients who are not eligible to 
receive a postretirement adjustment shall be reported 
separately.  The amount of the required reserves shall be 
certified to the board by the commission-retained actuary as 
soon as is practical following the current June 30; 
    (c) The state board shall determine the amount of 
investment income required to equal five percent of the total 
amount of the required reserves as of the preceding June 30 
adjusted by five percent of each transfer in or transfer out 
multiplied by the fraction of a year from the date of transfer 
to the current June 30.  This amount of required investment 
income shall be subtracted from the actual amount of investment 
income determined according to clause (1)(a), to determine the 
amount of excess investment income.  If this amount is positive, 
then a postretirement adjustment may be paid. 
    (2) The state board shall determine the amount of any 
postretirement adjustment which is payable using the following 
procedure: 
    (a) The state board shall determine the amount of excess 
investment income by the method indicated in clause (1); 
    (b) The participating public pension funds and plans shall 
certify to the state board the total required reserves as of the 
first of January next following the end of the fiscal year for 
the annuitants and benefit recipients eligible to receive the 
postretirement adjustment as determined by clause (1)(b) shall 
be certified to the state board by the commission-retained 
actuary.  The required reserves shall be determined by the 
commission-retained actuary on the assumption that all 
annuitants and benefit recipients eligible to receive the 
postretirement adjustment will be alive on the January 1 in 
question; 
    (c) If the state board determines that the book value of 
the assets of the fund is less than an amount equal to 100 
percent of the total amount of the current June 30 required 
reserves, with the book value and required reserves to be 
determined after the adjustments provided for in subdivision 11, 
then the state board shall allocate five percent of the excess 
investment income as an asset of the fund.  The excess 
investment income allocated as an asset of the fund shall not 
exceed the difference between book value and required reserves.  
The remaining amount shall be termed available for 
distribution.  The book value of assets on any given date shall 
be the net assets at cost less the excess investment income 
determined pursuant to clause (1)(c); 
    (d) The resulting total amount available for distribution 
shall be increased by 2-1/2 percent, and the result shall be 
stated as a percentage of the total amount of the required 
reserves pursuant to clause (2)(b), and if the percentage is 
equal to or greater than one percent, the amount shall be 
certified to each participating public pension fund or plan as 
the amount of the postretirement adjustment.  If the percentage 
is less than one percent, no postretirement adjustment shall be 
payable in that year and the amount otherwise available for 
distribution shall be credited to a separate reserve established 
for this purpose.  The reserve shall be invested in the same 
manner as all other assets of the fund and shall be credited 
with any investment income as specified in clause (1)(a).  
Amounts credited to the reserve shall be utilized in determining 
a postretirement adjustment in the subsequent year.  The 
amount of any postretirement adjustment certified by the state 
board as payable to the participating public pension plans or 
funds shall be carried to five decimal places and stated as a 
percentage. 
     (e) A retirement annuity payable in the event of retirement 
before becoming eligible for social security benefits as 
provided in sections 352.116, subdivision 3; 353.29, subdivision 
6; or 354.35 must be treated as the sum of a period certain 
retirement annuity and a life retirement annuity for the 
purposes of any postretirement adjustment.  The period certain 
retirement annuity plus the life retirement annuity shall be the 
annuity amount payable until age 62 or 65, whichever applies.  A 
postretirement adjustment granted on the period certain 
retirement annuity must terminate when the period certain 
retirement annuity terminates. 
    Sec. 5.  Minnesota Statutes 1986, section 11A.18, 
subdivision 11, is amended to read: 
    Subd. 11.  [ADJUSTMENT FOR MORTALITY GAINS AND LOSSES.] As 
of June 30 annually, the commission-retained actuary of each 
participating public pension fund or plan shall calculate the 
amount of required reserves representing any mortality gains and 
any mortality losses incurred by the each participating public 
pension fund or plan during the fiscal year and report the 
results of those calculations to the applicable participating 
public pension fund or plan.  The actuary shall report 
separately the amount of the reserves for annuitants and benefit 
recipients who are eligible for a postretirement benefit 
adjustment and the amount of reserves for annuitants and benefit 
recipients who are not eligible for a postretirement benefit 
adjustment.  If the net amount of required reserves represents a 
mortality gain, the participating public pension fund or plan 
shall certify that amount to the state board, which shall sell 
sufficient securities or transfer sufficient available cash to 
equal the amount of money certified.  If the amount of required 
reserves represents a mortality loss, the participating public 
pension fund or plan shall transfer to the state board an amount 
equal to the amount of the net mortality loss.  The amount of 
the transfers shall be determined before any postretirement 
benefit adjustments have been made.  All transfers resulting 
from mortality adjustments shall be completed annually by 
December 31 for the preceding June 30.  Interest shall be 
charged or credited on any transfers after December 31 based 
upon the average short-term rate earned by the postretirement 
investment fund.  All Book values of the assets of the fund for 
the purposes of subdivision 9 shall be determined only after all 
adjustments for mortality gains and losses for the fiscal year 
have been made.  
     Sec. 6.  Minnesota Statutes 1986, section 69.77, 
subdivision 2b, is amended to read: 
    Subd. 2b.  [RELIEF ASSOCIATION FINANCIAL REQUIREMENTS; 
MINIMUM MUNICIPAL OBLIGATION.] The officers of the relief 
association shall 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 subdivision.  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 subdivision 2c. 
    The financial requirements of the relief association for 
the following calendar year shall be based on the most recent 
actuarial valuation or survey of the special fund of the 
association if more than one fund is maintained by the 
association, or of the association, if only one fund is 
maintained, prepared in accordance with sections 356.215, 
subdivisions 4 to 4k and 356.216, as required pursuant to 
subdivision 2h.  In the event that If 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 actuarial accrued 
liability as reported in the most recent actuarial valuation or 
survey, the total of the amounts calculated pursuant to clauses 
(a) and, (b), and (c) shall constitute the financial 
requirements of the relief association for the following year.  
If the relief association does not have an unfunded actuarial 
accrued liability as reported in the most recent actuarial 
valuation or survey the amount calculated pursuant to clause 
clauses (a) and (b) 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 dollar amount of the 
administrative expenses of the special fund of the association 
if more than one fund is maintained by the association, or of 
the association if only one fund is maintained, for the most 
recent year, multiplied by the factor of 1.035. 
    (c) To the dollar amount of normal cost thus and expenses 
determined under clauses (a) and (b) shall be added an amount 
equal to the level annual dollar amount which is sufficient to 
amortize the unfunded actuarial 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 4d.  The amortization 
date specified in this clause 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 anticipated for the 
following calendar year 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 made 
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 and from the 
supplementary amortization state-aid program established under 
Laws 1984, chapter 564, section 48, and Laws 1985, chapter 261, 
section 17. 
     Sec. 7.  Minnesota Statutes 1986, section 69.77, 
subdivision 2h, is amended to read: 
    Subd. 2h.  [ACTUARIAL VALUATION REQUIRED.] The association 
shall procure obtain an actuarial valuation showing the 
condition of the special fund of the relief association pursuant 
to sections 356.215 and 356.216 and any applicable standards for 
actuarial work established by the legislative commission on 
pensions and retirement as of December 31 of every year.  A copy 
of the actuarial survey valuation 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 director of the legislative commission on pensions 
and retirement, and the state auditor, not later than July 1 of 
the following year. 
     Sec. 8.  Minnesota Statutes 1986, section 69.772, 
subdivision 3, is amended to read: 
    Subd. 3.  [FINANCIAL REQUIREMENTS OF THE RELIEF 
ASSOCIATION; MINIMUM OBLIGATION OF THE MUNICIPALITY.] During the 
month of July, the officers of the relief association shall 
determine the overall funding balance of the special fund for 
the current calendar year, the financial requirements of the 
special fund for the following calendar year and the minimum 
obligation of the municipality with respect to the special fund 
for the following calendar year in accordance with the 
requirements of this subdivision.  
    (1) The overall funding balance of the special fund for the 
current calendar year shall be determined in the following 
manner: 
    (a) The total accrued liability of the special fund for all 
active and deferred members of the relief association as of 
December 31 of the current year shall be calculated pursuant to 
subdivisions 2 and 2a, if applicable. 
    (b) The total present assets of the special fund projected 
to December 31 of the current year, including receipts by and 
disbursements from the special fund anticipated to occur on or 
before December 31 shall be calculated.  To the extent possible, 
for those assets for which a market value is readily 
ascertainable, the current market value as of the date of the 
calculation for those assets shall be utilized in making this 
calculation.  For any asset for which no market value is readily 
ascertainable, the cost value or the book value, whichever is 
applicable, shall be utilized in making this calculation. 
    (c) The amount of the total present assets of the special 
fund calculated pursuant to clause (b) shall be subtracted from 
the amount of the total accrued liability of the special fund 
calculated pursuant to clause (a).  If the amount of total 
present assets exceeds the amount of the total accrued 
liability, then the special fund shall be considered to have a 
surplus over full funding.  If the amount of the total present 
assets is less than the amount of the total accrued liability, 
then the special fund shall be considered to have a deficit from 
full funding.  If the amount of total present assets is equal to 
the amount of the total accrued liability, then the special fund 
shall be considered to be fully funded. 
     (2) The financial requirements of the special fund for the 
following calendar year shall be determined in the following 
manner: 
     (a) The total accrued liability of the special fund for all 
active and deferred members of the relief association as of 
December 31 of the calendar year next following the current 
calendar year shall be calculated pursuant to subdivisions 2 and 
2a, if applicable. 
     (b) The increase in the total accrued liability of the 
special fund for the following calendar year over the total 
accrued liability of the special fund for the current year shall 
be calculated. 
    (c) The amount of anticipated future administrative 
expenses of the special fund shall be calculated by multiplying 
the dollar amount of the administrative expenses of the special 
fund for the most recent year by the factor of 1.035. 
     (d) If the special fund is fully funded, the financial 
requirement of the special fund for the following calendar year 
shall be the figure which represents the increase in the total 
accrued liability of the special fund as calculated pursuant to 
subclause (b).  
    (d) (e) If the special fund has a deficit from full 
funding, the financial requirements of the special fund for the 
following calendar year shall be the financial requirements of 
the special fund calculated as though the special fund were 
fully funded pursuant to subclause (c) (d) plus an amount equal 
to one-tenth of the amount of the deficit from full funding of 
the special fund as determined pursuant to this section for the 
calendar year 1971 until that deficit from full funding is fully 
retired, and plus an amount equal to one-tenth of the increase 
in the deficit from full funding of the special fund resulting 
from an increase in the amount of the service pension 
accruing subsequent to after December 31, 1971 until each 
increase in the deficit from full funding is fully retired. 
    (e) (f) If the special fund has a surplus over full 
funding, the financial requirements of the special fund for the 
following calendar year shall be the financial requirements of 
the special fund calculated as though the special fund were 
fully funded pursuant to subclause (c) (d) reduced by an amount 
equal to one-tenth of the amount of the surplus over full 
funding of the special fund. 
    (3) The minimum obligation of the municipality with respect 
to the special fund shall be the financial requirements of the 
special fund reduced by the amount of any fire state aid payable 
pursuant to sections 69.011 to 69.051 anticipated to be received 
by the municipality for transmittal to the special fund during 
the following calendar year, an amount of interest on the assets 
of the special fund projected to the beginning of the following 
calendar year calculated at the rate of five percent per annum, 
and the amount of any anticipated contributions to the special 
fund by the members of the relief association during the 
following calendar year. 
     Sec. 9.  Minnesota Statutes 1986, section 69.773, 
subdivision 2, is amended to read: 
    Subd. 2.  [DETERMINATION OF ACTUARIAL CONDITION AND FUNDING 
COSTS.] Each A relief association to which this section applies 
shall procure obtain an actuarial valuation showing the 
condition of the special fund of the relief association as of 
December 31, 1978 and at least as of December 31 every four 
years thereafter.  The valuation shall be prepared in accordance 
with the provisions of section sections 356.215, subdivision 4d, 
and 356.216 and any applicable standards for actuarial work 
established by the legislative commission on pensions and 
retirement, except that the figure for normal cost shall be 
expressed as a level dollar amount, and the amortization 
contribution shall be the level dollar amount calculated to 
amortize any current unfunded accrued liability by at least the 
date of full funding specified in subdivision 4, clause (b).  
Each valuation shall be filed with the governing body of the 
municipality in which the relief association is located and with 
the state auditor, not later than July 1 of the year next 
following the date as of which the actuarial valuation is 
prepared.  Any relief association which is operating under a 
special law which requires that actuarial valuations be procured 
obtained at least every four years and be prepared in accordance 
with applicable actuarial standards set forth in statute may 
continue to have actuarial valuations made according to the time 
schedule set forth in the special legislation subject to the 
provisions of subdivision 3.  
     Sec. 10.  Minnesota Statutes 1986, section 69.773, 
subdivision 4, is amended to read: 
    Subd. 4.  [FINANCIAL REQUIREMENTS OF THE SPECIAL FUND.] 
Prior to August 1 of each year, the officers of the relief 
association shall determine the financial requirements of the 
special fund of the relief association in accordance with the 
requirements of this subdivision.  The financial requirements of 
the relief association shall be based on the most recent 
actuarial valuation of the special fund prepared in accordance 
with sections 356.215, subdivisions 4 to 4k, and 
356.216 subdivision 2.  If the relief association has an 
unfunded actuarial accrued liability as reported in the most 
recent actuarial valuation, the financial requirements shall be 
determined by adding the figures calculated pursuant to clauses 
(a) and, (b), and (c).  If the relief association does not have 
an unfunded actuarial accrued liability as reported in the most 
recent actuarial valuation, the financial requirements shall be 
an amount equal to the figure calculated pursuant to clause 
clauses (a): and (b).  The determination of whether or not the 
relief association has an unfunded actuarial accrued liability 
shall be based on the current market value of assets for which a 
market value is readily ascertainable and the cost or book 
value, whichever is applicable, for assets for which no market 
value is readily ascertainable. 
    (a) The normal level cost requirement for the following 
year, expressed as a dollar amount, shall be the figure for the 
normal level cost of the relief association as reported in the 
actuarial valuation. 
    (b) The amount of anticipated future administrative 
expenses of the special fund shall be calculated by multiplying 
the dollar amount of the administrative expenses of the special 
fund for the most recent year by the factor of 1.035. 
    (c) The amortization contribution requirement to retire the 
current unfunded actuarial accrued liability by the established 
date for full funding shall be the figure for the amortization 
contribution as reported in the actuarial valuation.  If there 
has not been a change in any or all of the actuarial assumptions 
used for calculating the actuarial accrued liability of the 
special fund, a change in the bylaws of the relief association 
governing the service pensions, retirement benefits or both 
payable from the special fund or a change in the actuarial cost 
method used to value all or a portion of the special fund which 
change or changes, which by themselves without inclusion of any 
other items of increase or decrease, produce a net increase in 
the unfunded actuarial accrued liability of the special fund 
since December 31, 1970, the established date for full funding 
shall be December 31, 1990.  If there has been a change in the 
actuarial assumptions used for calculating the actuarial accrued 
liability of the special fund, a change in the bylaws of the 
relief association governing the service pensions, retirement 
benefits or both payable from the special fund or a change in 
the actuarial cost method used to value all or a portion of the 
special fund which and the change or changes, which by 
themselves and without inclusion of any other items of increase 
or decrease, produce a net increase in the unfunded actuarial 
accrued liability of the special fund since December 31, 1970 
but prior to January 1, 1979, the established date for full 
funding shall be December 31, 1998, and if there has been a 
change since December 31, 1978, the established date for full 
funding shall be determined using the following procedure:  
    (i) The unfunded actuarial accrued liability of the special 
fund shall be determined in accordance with the provisions 
governing service pensions, retirement benefits and actuarial 
assumptions in effect prior to before an applicable change;  
    (ii) The level annual dollar contribution needed to 
amortize this unfunded actuarial accrued liability amount by the 
date for full funding in effect prior to the change shall be 
calculated using the interest assumption specified in section 
356.215, subdivision 4d, in effect prior to before any 
applicable change;  
    (iii) The unfunded actuarial accrued liability of the 
special fund shall be determined in accordance with any new 
provisions governing service pensions, retirement benefits and 
actuarial assumptions and the remaining provisions governing 
service pensions, retirement benefits and actuarial assumptions 
in effect prior to before an applicable change;  
    (iv) The level annual dollar contribution needed to 
amortize the difference between the unfunded actuarial accrued 
liability amount calculated pursuant to subclause (i) and the 
unfunded actuarial accrued liability amount calculated pursuant 
to subclause (iii) over a period of 20 years from starting 
December 31 of the year in which the change is effective shall 
be calculated using the interest assumption specified in section 
356.215, subdivision 4d, in effect subsequent to after any 
applicable change;  
    (v) The annual amortization contribution calculated 
pursuant to subclause (iv) shall be added to the annual 
amortization contribution calculated pursuant to subclause (ii); 
    (vi) The period in which the unfunded actuarial accrued 
liability amount determined in subclause (iii) will be amortized 
by the total annual amortization contribution computed pursuant 
to subclause (v) shall be calculated using the interest 
assumption specified in section 356.215, subdivision 4(d) 4d, in 
effect subsequent to after any applicable change, rounded to the 
nearest integral number of years, but which shall not exceed a 
period of 20 years from the end of the year in which the 
determination of the date for full funding using this procedure 
is made and which shall not be less than the period of years 
beginning in the year in which the determination of the date for 
full funding using this procedure is made and ending by the date 
for full funding in effect prior to before the change.  
    (vii) The period determined pursuant to subclause (vi) 
shall be added to the date as of which the actuarial valuation 
was prepared and the resulting date obtained shall be the new 
date for full funding.  
    Sec. 11.  Minnesota Statutes 1986, section 136.82, 
subdivision 2, is amended to read: 
    Subd. 2.  [REDEMPTION OF SHARES AS AN ANNUITY.] A person 
who has shares to the credit of the employee's share account 
record, who is 55 years of age or older and who is authorized to 
request redemption of shares pursuant to subdivision 1, 
paragraph (1) notwithstanding the age 65 requirement no longer 
employed by the state university board or the state board for 
community colleges or who is authorized to request redemption of 
shares totally and permanently disabled pursuant to subdivision 
1, paragraph (2), or who has the status of a surviving spouse of 
the a person who is authorized to request redemption of has 
shares to the credit of the employee's share account pursuant to 
subdivision 1, paragraph (3), may redeem all or part of the 
shares, and for the purpose of purchasing to purchase an annuity 
as herein provided may deposit by depositing the cash realized 
upon redemption with the executive director of the teachers 
retirement fund and receive in exchange therefor an annuity for 
life or an optional annuity as hereinafter provided.  The 
election to purchase an annuity may be made only once by any 
individual.  In the event the If an election is made prior to 
before the date on which the person is entitled to request 
redemption, the redemption shall not be made prior to the date 
upon which the person would be entitled thereto to make the 
request.  The annuity purchase rates shall be based on an 
appropriate the annuity table of mortality with interest adopted 
by the board of trustees of the teachers retirement fund for the 
fund as provided in section 354.07, subdivision 1 using the 
interest assumption specified in section 356.215, subdivision 
4d.  The amount of the annuity for life shall be an that amount 
which has a present value equal to the annuity which could be 
purchased with the cash realized on the redemption of the shares 
as of the first day of the month next following the date of the 
election to purchase an annuity.  The board of trustees of the 
teachers retirement fund shall establish an optional joint and 
survivor annuity, an optional annuity payable for a period 
certain and for life thereafter, and an optional guaranteed 
refund annuity paying the annuitant a fixed amount for life with 
the guarantee that in the event of death the balance of the cash 
realized from the redemption of shares is payable to the 
designated beneficiary.  The optional forms of annuity shall be 
actuarially equivalent to the single life annuity as defined in 
section 354.05, subdivision 7.  In establishing these optional 
forms, the board of trustees shall obtain the written 
recommendation of an approved the actuary as defined in section 
354.05, subdivision 10 retained by the legislative commission on 
pensions and retirement, and these recommendations shall be a 
part of the permanent records of the board of trustees.  
    Sec. 12.  Minnesota Statutes 1986, section 352.01, 
subdivision 12, is amended to read: 
    Subd. 12.  [ACTUARIAL EQUIVALENT.] "Actuarial equivalent" 
means the annual amount determined by calculations based on 
mortality tables, purchasable with a given amount at a stated 
age condition of one annuity or benefit having an equal 
actuarial present value as another annuity or benefit, 
determined as of a given date at a specified age with each 
actuarial present value based on the appropriate mortality table 
adopted by the board of directors based on the experience of the 
fund as recommended by the actuary retained by the legislative 
commission on pensions and retirement and using the applicable 
preretirement or postretirement interest rate assumption 
specified in section 356.215, subdivision 4d. 
    Sec. 13.  Minnesota Statutes 1986, section 352.03, 
subdivision 6, is amended to read: 
    Subd. 6.  [DUTIES AND POWERS OF EXECUTIVE DIRECTOR.] The 
management of the system is vested in the director who shall be 
the executive and administrative head of the system.  The 
director shall act as advisor to the board on all matters 
pertaining to the system, and shall also act as the secretary of 
the board.  The director shall: 
    (1) Attend all meetings of the board; 
    (2) Prepare and recommend to the board appropriate rules 
for the purpose of carrying to carry out the provisions of this 
chapter; 
    (3) Establish and maintain an adequate system of records 
and accounts following recognized accounting principles and 
controls; 
    (4) Designate an assistant director with the approval of 
the board; 
    (5) Appoint such employees, both permanent and temporary, 
as are necessary to carry out the provisions of said chapter; 
    (6) Organize the work of the system as the director deems 
necessary to fulfill the functions of the system, and define the 
duties of its employees and delegate to them any powers or 
duties, subject to the control of the director and under such 
conditions as the director may prescribe.  Appointments to 
exercise delegated power shall be by written order and shall be 
filed with the secretary of state; 
    (7) With the advice and consent of the board, contract for 
actuarial the services of an approved actuary, professional 
management services, and any other consulting services as may be 
necessary and fix the compensation therefor for those services.  
The contracts shall not be subject to the competitive bidding 
procedure prescribed by chapter 16 16B.  Any approved actuary 
retained by the executive director shall function as the 
actuarial advisor of the board and the executive director, and 
may perform actuarial valuations and experience studies to 
supplement those performed by the actuary retained by the 
legislative commission on pensions and retirement.  Any 
supplemental actuarial valuations or experience studies shall be 
filed with the executive director of the legislative commission 
on pensions and retirement.  Professional management services 
may not be contracted for more often than once in every six 
years.  Copies of all professional management survey reports 
shall be sent directly transmitted to the legislature secretary 
of the senate, the chief clerk of the house of representatives, 
and the legislative reference library as provided by section 
3.195, to the executive director of the commission and to the 
legislative auditor at the same time as reports are furnished to 
the board.  Only management firms experienced in conducting 
management surveys of federal, state or local public retirement 
systems shall be qualified to contract with the director 
hereunder; 
    (8) With the advice and consent of the board provide 
inservice training for all the employees of the system; 
    (9) Make refundments refunds of accumulated contributions 
to former state employees and to the designated beneficiary, 
surviving spouse, legal representative or next of kin of 
deceased state employees or deceased former state employees, all 
as provided in this chapter; 
    (10) Determine the amount of the annuities and disability 
benefits of employees covered by the system and authorize 
payment thereof of the annuities and benefits beginning as of 
the dates on which the annuities and benefits begin to accrue, 
all in accordance with the provisions of said this chapter; 
    (11) Pay annuities, refundments refunds, survivor benefits, 
salaries and all necessary operating expenses of the system; 
    (12) Certify funds available for investment to the state 
board of investment; 
    (13) With the advice and approval of the board request the 
state board of investment to sell securities when the director 
determines that funds are needed for the purposes of the system; 
    (14) Prepare and submit to the board and the legislature an 
annual financial report covering the operation of the system, as 
required by sections 356.215 to 356.23 section 356.20; 
    (15) Prepare and submit biennial and quarterly budgets to 
the board and with the approval of the board submit the budgets 
to the department of administration finance; and 
    (16) With the approval of the board, perform such other 
duties as may be required for the administration of the 
retirement and other provisions of this chapter and for the 
transaction of its business. 
     Sec. 14.  Minnesota Statutes 1986, section 352.116, 
subdivision 1, is amended to read: 
    Subdivision 1.  [REDUCED ANNUITY BEFORE AGE 65.] Any 
employee who retires prior to age 65 with credit for less than 
30 years of allowable service shall be paid the normal 
retirement annuity provided in section 352.115, subdivisions 2 
and 3, reduced so that the reduced annuity shall be the 
actuarial equivalent of the annuity which would be payable to 
the employee if the employee deferred receipt of the annuity 
from the day the annuity begins to accrue to age 65, provided 
however that if an.  Any employee is entitled to who retires 
prior to age 62 with credit for not less than at least 30 years 
of allowable service, shall be paid the normal retirement 
annuity shall be provided in section 352.115, subdivisions 2 and 
3, reduced so that the reduced annuity shall be the actuarial 
equivalent of the annuity which would be payable to the employee 
if the employee deferred receipt of the annuity from the day the 
annuity begins to accrue to age 62. 
     Sec. 15.  Minnesota Statutes 1986, section 352.116, 
subdivision 3, is amended to read: 
    Subd. 3.  [OPTIONAL ANNUITIES.] The board shall establish 
an optional retirement annuity which shall take the form of a 
joint and survivor annuity. The board may also in its discretion 
establish an optional annuity which shall take the form of an 
annuity payable for a period certain and for life thereafter or 
establish an optional annuity which takes the form of a joint 
and survivor annuity providing that, if after the joint and 
survivor annuity becomes payable, the person with the designated 
remainder interest in the annuity dies before the former member, 
the annuity amount must be reinstated to a normal single life 
annuity amount as of the first day of the month after the day 
the person dies.  In addition, the board may also establish an 
optional annuity that takes the form of an annuity calculated on 
the basis of the age of the retired employee at retirement and 
payable for the period before the retired employee becomes 
eligible for social security old age retirement benefits in a 
greater amount than the amount of the annuity calculated under 
subdivision 2 on the basis of the age of the retired employee at 
retirement but equal so far as possible to the social security 
old age retirement benefit and the adjusted retirement annuity 
amount payable immediately after the retired employee becomes 
eligible for social security old age retirement benefits and 
payable for the period after the retired employee becomes 
eligible for social security old age retirement benefits in an 
amount less than the amount of the annuity calculated under 
subdivisions 2 and 3.  The social security leveling option may 
be calculated based on broad average social security old age 
retirement benefits.  The optional forms shall be actuarially 
equivalent to the normal single life annuity forms provided in 
sections 352.115 and 352.116, whichever applies.  In 
establishing these optional forms the board shall obtain the 
written recommendation of an approved actuary as defined in 
section 352.01, subdivision 15, and these recommendations shall 
be a part of the permanent records of the board. 
     Sec. 16.  Minnesota Statutes 1986, section 352.116, is 
amended by adding a subdivision to read: 
     Subd. 4.  [DETERMINING ACTUARIAL EQUIVALENCY.] In 
establishing the procedure for determining the actuarial 
equivalency of early retirement annuities as required under 
subdivision 1 or in establishing actuarial equivalent optional 
retirement annuity forms as required under subdivision 3, the 
board shall obtain the written recommendation of the 
commission-retained actuary.  The recommendations shall be a 
part of the permanent records of the board. 
     Sec. 17.  Minnesota Statutes 1986, section 352.119, 
subdivision 2, is amended to read: 
    Subd. 2.  [VALUATION OF ASSETS; ADJUSTMENT OF BENEFITS.] 
(1) Effective July 1, 1969, for those employees commencing to 
receive benefits pursuant to this chapter, and acts amendatory 
thereof, The required reserves for retirement annuities or 
disability benefits under this chapter as determined in 
accordance with the interest assumption then in effect and 
appropriate mortality table adopted by the board of directors 
based on experience of the fund as recommended by the system's 
commission-retained actuary and using the interest assumption 
specified in section 356.215, subdivision 4d shall be 
transferred to the Minnesota postretirement investment fund as 
of the date benefits begin to accrue last business day of the 
month in which the retirement annuity or disability benefit 
begins.  
    (2) Annuity and benefit payments shall be adjusted in 
accordance with the provisions of section 11A.18. 
    Sec. 18.  Minnesota Statutes 1986, section 352.85, 
subdivision 6, is amended to read:  
    Subd. 6.  [ACTUARIAL VALUATION EXHIBIT.] In Each valuation 
of the Minnesota state retirement system prepared by the 
commission-retained actuary pursuant to section 356.215, shall 
include an exhibit pertaining to this special retirement program 
shall be included which shall contain for set forth the normal 
cost of the special program those actuarial valuation contents 
items specified in section 356.215, subdivisions 4 to 4k, which 
the executive director deems are necessary to adequately 
disclose the actuarial condition of the special program.  
    Sec. 19.  Minnesota Statutes 1986, section 352.86, 
subdivision 4, is amended to read:  
    Subd. 4.  [ACTUARIAL VALUATION EXHIBIT.] In Each valuation 
of the Minnesota state retirement system prepared by the 
commission-retained actuary pursuant to section 356.215, shall 
include an exhibit pertaining to this special retirement program 
shall be included which shall contain for set forth the normal 
cost of the special program those actuarial valuation content 
items specified in section 356.215, subdivisions 4 to 4k, which 
the executive director deems are necessary to adequately 
disclose the actuarial condition of the special program. 
     Sec. 20.  [352.911] [CORRECTIONAL EMPLOYEES RETIREMENT 
FUND.] 
     Subdivision 1.  [FUND CREATED.] There is created a special 
fund to be known as the correctional employees retirement fund.  
    Subd. 2.  [REVENUE SOURCES.] Employee contributions under 
section 352.92, subdivision 1, and employer contributions under 
section 352.92, subdivision 2, and other amounts, including any 
investment income on invested fund assets as authorized by law, 
shall be deposited in the fund. 
     Subd. 3.  [INVESTMENT.] The correctional employees 
retirement fund shall participate in the Minnesota 
postretirement investment fund and in that fund there shall be 
deposited the amounts provided in section 352.119.  The balance 
of any assets of the fund shall be deposited in the Minnesota 
combined investment funds as provided in section 11A.14, if 
applicable, or otherwise under section 11A.23.  
    Subd. 4.  [COLLECTION OF CONTRIBUTIONS.] The collection of 
employee and employer contributions shall be governed by the 
applicable procedures set forth in section 352.04, subdivisions 
4, 5, 6, 8, and 9.  
    Subd. 5.  [FUND DISBURSEMENT RESTRICTED.] The correctional 
employees retirement fund and its share of participation in the 
Minnesota postretirement investment fund shall be disbursed only 
for the purposes provided for in the applicable provisions in 
this chapter.  The proportional share of the expenses of the 
system and any benefits provided in sections 352.90 to 352.951, 
other than benefits payable from the Minnesota postretirement 
investment fund, shall be paid from the correctional employees 
retirement fund.  The retirement allowances, retirement 
annuities, the disability benefits, the survivorship benefits, 
and any refunds of accumulated deductions shall be paid only 
from the correctional employees retirement fund after those 
needs have been certified by the executive director and the 
amounts withdrawn from the share of participation in the 
Minnesota postretirement fund under section 11A.18.  The amounts 
necessary to make the payments from the correctional employees 
retirement fund and the participation in the Minnesota 
postretirement investment fund are annually appropriated from 
those funds for those purposes.  
    Sec. 21.  Minnesota Statutes 1986, section 352B.01, is 
amended by adding a subdivision to read:  
    Subd. 11.  [AVERAGE SALARY.] "Average monthly salary" means 
the average of the highest monthly salaries for five years of 
service as a member.  It does not include any amounts of 
severance pay or any reduced salary paid during the period the 
person is entitled to workers' compensation benefit payments for 
temporary disability.  
    Sec. 22.  Minnesota Statutes 1986, section 352B.02, 
subdivision 1, is amended to read:  
    Subdivision 1.  [FUND CREATED; MEMBERSHIP.] There is hereby 
established a state patrol retirement fund, the membership of 
which shall consist of all persons defined in section 352B.01, 
subdivision 2. 
    Subd. 1a.  [MEMBER CONTRIBUTIONS.] Each member shall pay a 
sum equal to 8.5 percent of the member's salary, which shall 
constitute the member contribution to the fund.  
    Subd. 1b.  [SALARY DEDUCTIONS.] Member contribution amounts 
shall be deducted each pay period by the department head, who 
shall cause the total amount of the deductions to be paid to the 
state treasurer for deposit in the state patrol retirement fund, 
and shall cause a detailed report of all deductions to be made 
each pay period to the executive director of the Minnesota state 
retirement system.  
    Subd. 1c.  [EMPLOYER CONTRIBUTIONS.] In addition thereto, 
there shall be paid out of money appropriated to the departments 
for this purpose, by the department heads, a sum equal to 18.9 
percent of the salary upon which deductions were made, which 
shall constitute the employer contribution to the fund.  
    Subd. 1d.  [FUND REVENUE AND EXPENSES.] These The amounts 
provided for in this section shall be credited to the state 
patrol retirement fund.  All money received shall be deposited 
by the state treasurer in the state patrol retirement fund.  Out 
of the fund shall be paid the administrative expenses of the 
retirement fund, and the benefits and annuities as hereinafter 
provided in this chapter.  Appropriate amounts shall be 
transferred to or withdrawn from the Minnesota postretirement 
investment fund as provided in section 352B.26.  
    Subd. 1e.  [AUDIT; ACTUARIAL VALUATION.] The legislative 
auditor shall audit the fund and the executive director shall 
procure an actuarial study of the fund in accordance with 
chapter 356, the cost of which shall be borne by the fund.  Any 
actuarial valuation of the fund required under section 356.215 
shall be prepared by the actuary retained by the legislative 
commission on pensions and retirement.  Any approved actuary 
retained by the executive director under section 352.03, 
subdivision 6, may perform actuarial valuations and experience 
studies to supplement those performed by the commission-retained 
actuary.  Any supplemental actuarial valuation or experience 
studies shall be filed with the executive director of the 
legislative commission on pensions and retirement.  
    Sec. 23.  Minnesota Statutes 1986, section 352B.08, 
subdivision 2, is amended to read:  
    Subd. 2.  [NORMAL RETIREMENT ANNUITY.] The annuity shall be 
paid in monthly installments.  The annuity shall be equal to 
that portion of the amount determined by multiplying the average 
monthly salary of the member multiplied by 2-1/2 percent for 
each year and pro rata for completed months of service not 
exceeding 25 years and two percent for each year and pro rata 
for completed months of service in excess of 25 years.  "Average 
monthly salary" shall mean the average of the monthly salaries 
for the five high years of service as a member.  The monthly 
salary for the period prior to July 2, 1969 shall be deemed to 
be $600.  The term "average monthly salary" shall not include 
any amounts of severance pay or any reduced salary paid during 
the period the person is entitled to benefit payments from the 
workers' compensation court of appeals for temporary disability. 
     Subd. 3.  [OPTIONAL ANNUITY FORMS.] In lieu of the single 
life annuity herein provided in subdivision 2, the member or 
former member with ten years or more of service may elect an 
optional annuity form.  The board of the Minnesota state 
retirement system shall establish a joint and survivor annuity, 
payable to a designated beneficiary for life, adjusted to the 
actuarial equivalent value of the single life annuity.  
The board shall also establish an additional optional annuity 
with an actuarial equivalent value of the single life annuity in 
the form of a joint and survivor annuity elected by a member may 
also provide which provides that the elected annuity be 
reinstated to the single life annuity herein provided in 
subdivision 2, if after drawing commencing the elected joint and 
survivor annuity, the designated beneficiary dies prior to the 
death of before the member.  This, which reinstatement shall not 
be retroactive but shall be in effect for the first full 
month subsequent to occurring after the death of the designated 
beneficiary.  This additional joint and survivor option with 
reinstatement clause shall be adjusted to the The board may also 
establish other actuarial equivalent value optional annuity 
forms.  In establishing actuarial equivalent value of optional 
annuity forms, each optional annuity form shall have the same 
present value as a regular single life annuity using the 
mortality table adopted by the board and the interest assumption 
specified in section 356.215, subdivision 4d and the board shall 
obtain the written recommendation of the commission-retained 
actuary.  These recommendations shall be a part of the permanent 
records of the board.  
    Sec. 24.  Minnesota Statutes 1986, section 352B.26, 
subdivision 3, is amended to read:  
    Subd. 3.  [VALUATION OF ASSETS; ADJUSTMENT OF BENEFITS.] 
(1) For those former members commencing to receive beginning 
receipt of annuities and qualified recipients of joint and 
survivor annuities and surviving spouse benefits, the required 
reserves shall be determined in accordance with the appropriate 
mortality table, calculated with an adopted by the board of 
directors of the Minnesota state retirement system based on the 
experience of the fund as recommended by the commission-retained 
actuary and using the interest assumption set at the interest 
rate specified in section 356.215, subdivision 4d, and.  Assets 
representing the required reserves for these annuities shall be 
transferred to the Minnesota postretirement investment fund as 
of the last business day of the month in which the retirement 
annuity begins in accordance with procedures specified in 
section 11A.18.  
    (2) Annuity payments shall be adjusted in accordance with 
the provisions of section 11A.18. 
    (3) Notwithstanding section 356.18, increases an increase 
in annuity payments pursuant to this section shall be made 
automatically unless written notice is filed by the annuitant 
with the executive director of the Minnesota state retirement 
system requesting that the increase not be made.  
    Sec. 25.  Minnesota Statutes 1986, section 353.01, 
subdivision 14, is amended to read:  
    Subd. 14.  [ACTUARIAL EQUIVALENT.] "Actuarial equivalent" 
means the annual amount determined by calculations based on 
mortality tables, purchasable with a given amount at a stated 
age condition of one annuity or benefit having an equal 
actuarial present value as another annuity or benefit, 
determined as of a given date with each actuarial present value 
based on the appropriate mortality table adopted by the board of 
trustees based on the experience of the fund as recommended by 
the actuary retained by the legislative commission on pensions 
and retirement and using the applicable preretirement or 
postretirement interest rate assumption specified in section 
356.215, subdivision 4d.  
    Sec. 26.  Minnesota Statutes 1986, section 353.03, 
subdivision 3a, is amended to read:  
    Subd. 3a.  [EXECUTIVE DIRECTOR.] (a) [APPOINTMENT.] The 
board shall appoint, with the advice and consent of the senate, 
an executive director on the basis of education, experience in 
the retirement field, and leadership ability.  The executive 
director shall have had at least five years' experience in an 
executive level management position, which has included 
responsibility for pensions, deferred compensation, or employee 
benefits.  The executive director serves at the pleasure of the 
board.  The salary of the executive director is as provided by 
section 15A.081, subdivision 1. 
    (b) [DUTIES.] The management of the association is vested 
in the executive director who shall be the executive and 
administrative head of the association.  The executive director 
shall act as adviser to the board on all matters pertaining to 
the association and shall also act as the secretary of the 
board.  The executive director shall: 
    (1) attend all meetings of the board; 
    (2) prepare and recommend to the board appropriate rules 
for the purpose of carrying to carry out the provisions of this 
chapter; 
    (3) establish and maintain an adequate system of records 
and accounts following recognized accounting principles and 
controls; 
    (4) designate an assistant director, with the approval of 
the board, who shall serve in the unclassified service and whose 
salary is set in accordance with section 43A.18, subdivision 3, 
appoint a confidential secretary in the unclassified service, 
and appoint employees to carry out this chapter, who are subject 
to chapters 43A and 179A in the same manner as are executive 
branch employees; 
    (5) organize the work of the association as the director 
deems necessary to fulfill the functions of the association, and 
define the duties of its employees and delegate to them any 
powers or duties, subject to the control of, and under such 
conditions as, the executive director may prescribe; 
    (6) with the approval of the board, contract for actuarial 
the services of an approved actuary, professional management 
services, and any other consulting services as necessary to 
fulfill the purposes of this chapter.  All contracts are subject 
to chapter 16B.  The commissioner of administration shall not 
approve, and the association shall not enter into, any contract 
to provide lobbying services or legislative advocacy of any 
kind.  Any approved actuary retained by the executive director 
shall function as the actuarial advisor of the board and the 
executive director and may perform actuarial valuations and 
experience studies to supplement those performed by the actuary 
retained by the legislative commission on pensions and 
retirement.  Any supplemental actuarial valuations or experience 
studies shall be filed with the executive director of the 
legislative commission on pensions and retirement.  Copies of 
all professional management survey reports shall be sent 
directly transmitted to the legislature secretary of the senate, 
the chief clerk of the house of representatives, and the 
legislative reference library as provided by section 3.195, to 
the executive director of the commission and to the legislative 
auditor at the same time as reports are furnished to the board.  
Only management firms experienced in conducting management 
surveys of federal, state or local public retirement systems 
shall be qualified to contract with the director hereunder; 
    (7) with the approval of the board provide inservice 
training for all the employees of the association; 
    (8) make refunds of accumulated contributions to former 
members and to the designated beneficiary, surviving spouse, 
legal representative or next of kin of deceased members or 
deceased former members, all as provided in this chapter; 
    (9) determine the amount of the annuities and disability 
benefits of members covered by the association and authorize 
payment thereof of the annuities and benefits beginning as of 
the dates such on which the annuities and benefits begin to 
accrue, all in accordance with the provisions of this chapter; 
    (10) pay annuities, refunds, survivor benefits, salaries 
and all necessary operating expenses of the association; 
    (11) prepare and submit to the board and the legislature an 
annual financial report covering the operation of the 
association, as required by chapter 356 section 356.20; 
    (12) prepare and submit biennial and annual budgets to the 
board for its approval and submit the approved budgets to the 
department of finance for approval by the commissioner; and 
    (13) with the approval of the board, perform such other 
duties as may be required for the administration of the 
association and the other provisions of this chapter and for the 
transaction of its business.  
    Sec. 27.  Minnesota Statutes 1986, section 353.271, is 
amended to read:  
    353.271 [PARTICIPATION IN MINNESOTA POSTRETIREMENT 
INVESTMENT FUND.] 
    Subdivision 1.  [AUTHORIZATION.] The public employees 
retirement association, including the police and fire fund, is 
hereby authorized to participate in the Minnesota postretirement 
investment fund.  There shall be one general participation in 
the Minnesota postretirement investment fund for all purposes by 
the public employees retirement association fund and one general 
participation in the Minnesota postretirement investment fund 
for all purposes by the public employees police and fire fund. 
    Subd. 2.  [VALUATION OF ASSETS; ADJUSTMENT OF BENEFITS.] 
(1) For members retiring, The required reserves for retirement 
annuities pursuant to this chapter as determined in accordance 
with the appropriate mortality table adopted by the board of 
trustees based on the experience of the fund as recommended by 
the commission-retained actuary and using the postretirement 
interest assumption specified in section 356.215, subdivision 
4d, shall be transferred to the Minnesota postretirement 
investment fund as of the date of retirement last business day 
of the month in which the retirement annuity begins.  
    (2) Annuity payments shall be adjusted in accordance with 
the provisions of section 11A.18.  
    (3) Notwithstanding section 356.18, increases in payments 
pursuant to this section will be made automatically unless the 
intended recipient files written notice with the executive 
director of the public employees retirement association 
requesting that the increase shall not be made.  
    Sec. 28.  Minnesota Statutes 1986, section 353.29, 
subdivision 6, is amended to read:  
    Subd. 6.  [RETIREMENT BEFORE ELIGIBILITY FOR SOCIAL 
SECURITY BENEFITS.] Any member who retires before becoming 
eligible for social security retirement benefits may elect to 
receive a an optional retirement annuity from the association in 
an amount greater than the annuity computed on the basis of age 
at retirement, provided in subdivisions 2 and 3 which provides 
for different annuity amounts over different periods of 
retirement.  The election of this option optional retirement 
annuity shall be exercised by making application to the board of 
trustees.  This The optional annuity shall take the form of an 
annuity payable for the period before the annuitant becomes 
eligible for social security old age retirement benefits in a 
greater amount than the amount of the annuity calculated under 
subdivisions 2 and 3 on the basis of the age of the annuitant at 
retirement but equal insofar as possible to the social security 
old age retirement benefit and the adjusted retirement annuity 
amount payable immediately after the annuitant becomes eligible 
for social security old age retirement benefits in an amount 
less than the amount of the annuity calculated under 
subdivisions 2 and 3 on the basis of the age of the annuitant at 
retirement.  The social security leveling option may be 
calculated based on broad average social security old age 
retirement benefits.  The optional annuity shall be the 
actuarial equivalent of the normal retirement annuity computed 
on the basis of age at retirement.  This greater amount shall be 
paid until the annuitant reaches the age of 62, at which time 
the payment from the association shall be reduced.  The method 
of computing an the optional retirement annuity under this 
subdivision shall be determined established by an approved 
actuary the board of trustees.  In establishing the method of 
computing the optional retirement annuity, the board of trustees 
shall obtain the written recommendation of the 
commission-retained actuary.  The recommendations shall be a 
part of the permanent records of the board of trustees. 
    Sec. 29.  Minnesota Statutes 1986, section 353.30, 
subdivision 3, is amended to read:  
    Subd. 3.  [OPTIONAL RETIREMENT ANNUITY FORMS.] The board of 
trustees shall establish optional annuities which shall take the 
form of a joint and survivor annuity.  Such The optional annuity 
forms shall be actuarially equivalent to the forms provided in 
section 353.29 and subdivisions 1, 1a, 1b, and 1c of this 
section.  In establishing those optional forms, the board shall 
obtain the written recommendation of an approved the 
commission-retained actuary and these.  The recommendations 
shall be a part of the permanent records of board.  A member or 
former member may select an optional form of annuity in lieu of 
accepting any other form of annuity which might otherwise be 
available. 
    Sec. 30.  Minnesota Statutes 1986, section 354.05, 
subdivision 7, is amended to read:  
    Subd. 7.  [ACTUARIAL EQUIVALENT.] "Actuarial equivalent" 
means the annual amount determined by calculations based on 
mortality tables, purchasable with a given amount at a stated 
age condition of one annuity or benefit having an equal 
actuarial present value as another annuity or benefit, 
determined as of a given date with each actuarial present value 
based on the appropriate mortality table adopted by the board of 
trustees based on the experience of the fund as recommended by 
the actuary retained by the legislative commission on pensions 
and retirement and using the applicable preretirement or 
postretirement interest rate assumption specified in section 
356.215, subdivision 4d. 
    Sec. 31.  Minnesota Statutes 1986, section 354.06, 
subdivision 2a, is amended to read:  
    Subd. 2a.  [DUTIES OF EXECUTIVE DIRECTOR.] The management 
of the association is vested in the executive director who shall 
be the executive and administrative head of the association.  
The executive director shall act as advisor to the board on all 
matters pertaining to the association and shall also act as the 
secretary of the board.  The executive director shall: 
    (1) Attend all meetings of the board; 
    (2) Prepare and recommend to the board appropriate rules 
for the purpose of carrying to carry out the provisions of this 
chapter; 
    (3) Establish and maintain an adequate system of records 
and accounts following recognized accounting principles and 
controls; 
    (4) Designate an assistant executive director in the 
unclassified service and two assistant executive directors in 
the classified service with the approval of the board, and 
appoint such employees, both permanent and temporary, as are 
necessary to carry out the provisions of said chapter; 
    (5) Organize the work of the association as the director 
deems necessary to fulfill the functions of the association, and 
define the duties of its employees and delegate to them any 
powers or duties, subject to the director's control and under 
such conditions as the director may prescribe; 
    (6) With the approval of the board, contract for actuarial 
the services of an approved actuary, professional management 
services, and any other consulting services as may be necessary 
and fix the compensation therefor.  Such contracts shall not be 
subject to the competitive bidding procedure prescribed by 
chapter 16 16B.  Professional management services may not be 
contracted for more often than once in every six years.  Any 
approved actuary retained by the executive director shall 
function as the actuarial advisor of the board and the executive 
director and may perform actuarial valuations and experience 
studies to supplement those performed by the actuary retained by 
the legislative commission on pensions and retirement.  Any 
supplemental actuarial valuations or experience studies shall be 
filed with the executive director of the legislative commission 
on pensions and retirement.  Copies of all professional 
management survey reports shall be sent directly transmitted to 
the legislature secretary of the senate, the chief clerk of the 
house of representatives, and the legislative reference library 
as provided by section 3.195, to the executive director of the 
commission and to the legislative auditor at the same time as 
reports are furnished to the board.  Only management firms 
experienced in conducting management surveys of federal, state 
or local public retirement systems shall be qualified to 
contract with the director hereunder; 
    (7) With the approval of the board, provide inservice 
training for all the employees of the association; 
    (8) Make refunds of accumulated contributions to former 
members and to the designated beneficiary, surviving spouse, 
legal representative or next of kin of deceased members or 
deceased former members, all as provided in this chapter; 
    (9) Determine the amount of the annuities and disability 
benefits of members covered by the association and authorize 
payment thereof of the annuities and benefits beginning as of 
the dates such on which the annuities and benefits begin to 
accrue, all in accordance with the provisions of said this 
chapter; 
    (10) Pay annuities, refundments refunds, survivor benefits, 
salaries and all necessary operating expenses of the association;
    (11) Prepare and submit to the board and the legislature an 
annual financial report covering the operation of the 
association, as required by chapter 356 section 356.20; 
    (12) Certify funds available for investment to the state 
board of investment; 
    (13) With the advice and approval of the board, request the 
state board of investment to sell securities on determining that 
funds are needed for the purposes of the association; 
    (14) Prepare and submit biennial and annual budgets to the 
board and with the approval of the board submit such those 
budgets to the department of administration finance; and 
    (15) With the approval of the board, perform such other 
duties as may be required for the administration of the 
association and the other provisions of this chapter and for the 
transaction of its business.  
    Sec. 32.  Minnesota Statutes 1986, section 354.07, 
subdivision 1, is amended to read:  
    Subdivision 1.  [GENERAL POWERS OF THE BOARD.] The board 
shall have, and is hereby granted, has the power to frame bylaws 
for its own government and for the management of the fund not 
inconsistent with the laws of the state and to modify them 
at its pleasure; to adopt, alter, and enforce reasonable rules 
not inconsistent with the laws of the state for the 
administration and management of the fund, for the payment and 
collection of payments from members, and for the payment of 
withdrawals and benefits; to pass upon and allow or disallow all 
applications for membership in the fund and for credit for 
teaching service; to pass upon and allow or disallow all claims 
for withdrawals, pensions, or benefits payable from the fund; to 
adopt an appropriate mortality table based on experience of the 
fund as recommended by the association commission-retained 
actuary, with and using the applicable postretirement interest 
set at the rate assumption specified in section 356.215, 
subdivision 4d; to provide for the payment out of the fund 
of all necessary expenses for the administration thereof of the 
fund and of all claims for withdrawals, pensions, or benefits 
allowed. 
    Sec. 33.  Minnesota Statutes 1986, section 354.35, is 
amended to read:  
    354.35 [RETIREMENT BEFORE BECOMING ELIGIBLE FOR SOCIAL 
SECURITY.] 
    Any coordinated member who retires before becoming eligible 
for social security retirement benefits, may elect to receive an 
optional retirement benefits annuity from the association in an 
amount greater than the member's annuity computed on the basis 
of the member's age at retirement which provides for different 
annuity amounts over different periods of retirement.  The 
member shall exercise election of this option optional 
retirement annuity shall be exercised by making an application 
to the board on a form provided by the board.  This The optional 
annuity shall take the form of an annuity payable for the period 
before the member attains the age of 65 years in a greater 
amount than the amount of the annuity calculated under section 
354.44 on the basis of the age of the member at retirement but 
equal insofar as possible to the social security old age 
retirement benefit and the adjusted retirement annuity amount 
payable immediately after the annuitant becomes eligible for 
social security old age retirement benefits in an amount less 
than the amount of the annuity calculated under section 354.44 
on the basis of the age of the member at retirement.  The social 
security leveling option may be calculated based on broad 
average social security old age retirement benefits.  The 
optional annuity shall be the actuarial equivalent of the 
member's annuity computed on the basis of the member's age at 
retirement.  The greater amount shall be paid until the member 
reaches the age of 65 at which time the payment from the 
association shall be reduced.  These annuities The method of 
computing the optional retirement annuity provided in this 
section shall be computed by an approved actuary established by 
the board of trustees.  In establishing the method of computing 
the optional retirement annuity, the board of trustees shall 
obtain the written recommendation of the commission-retained 
actuary.  The recommendations shall be a part of the permanent 
records of the board of trustees.  
    Sec. 34.  Minnesota Statutes 1986, section 354.42, 
subdivision 5, is amended to read:  
    Subd. 5.  [ADDITIONAL EMPLOYER CONTRIBUTION.] For the 
purpose of amortizing To amortize the unfunded entry-age normal 
actuarial accrued liability computed under the entry age 
actuarial cost method and disclosed under the annual actuarial 
valuations prepared by the commission-retained actuary under 
section 356.215, an additional employer contribution shall be 
made in the amount of 4.48 percent of the salary of each 
member.  For the fiscal year ending June 30, 1985, the 
commissioner of finance shall increase allotments to state 
agencies having members covered by the teachers retirement 
association in an amount equal to 1.43 percent of the salaries 
of basic and coordinated plan members of the teachers' 
retirement fund.  
    This contribution shall be made in the manner provided in 
section 354.43. 
    Sec. 35.  Minnesota Statutes 1986, section 354.44, 
subdivision 2, is amended to read:  
    Subd. 2.  [COMPUTATION OF MONEY PURCHASE ANNUITY.] The 
amount of retirement annuity is an amount equal to double the 
annuity which could be purchased by the member's accumulated 
deductions plus interest thereon.  The annuity shall be 
determined by the member's age, sex, double the amount of 
accumulated deductions, double the interest earned on the 
accumulated deductions, and the appropriate mortality tables and 
interest rates.  For the purpose of determining To determine the 
amount of the annuity for a basic member, the accumulated 
deductions prior to July 1, 1957, and the accumulated deductions 
subsequent to July 1, 1957, shall be considered separately. 
    (1) For service rendered prior to July 1, 1957, the 
accumulated deductions for any member shall be carried forward 
at a fixed amount which is shown credited to the member's 
account as of that date.  That fixed amount shall also include 
any payments in lieu of salary deductions which are to be made 
in the future and are actually so made pursuant to an agreement 
executed between the member and the board as authorized by 
section 354.50 or any other authorized payments made by the 
member to the fund.  The annuity granted with respect to such 
the period shall be determined by the following as follows: 
    (a) The fixed amount of the accumulated deductions for such 
the period including the interest credited thereon on the amount 
as earned up to July 1, 1957. 
    (b) Annuity purchase rates based on the applicable 
mortality tables table established by the board and the interest 
rate assumption used by the board in effect prior to July 1, 
1957, in the case of basic members and an annuity purchase rate 
based on an appropriate annuity table of mortality with an 
interest assumption established by the board as provided in 
section 354.07, subdivision 1, and using the applicable 
postretirement interest rate assumption specified in section 
356.215, subdivision 4d in the case of coordinated members. 
    (2) For service rendered subsequent to July 1, 1957, the 
accumulated deductions for any member shall consist of the 
amounts actually credited to the member's account by reason of 
salary deductions.  The annuity granted with respect to such the 
period shall be determined by the following: 
    (a) accumulated deductions for such the period; 
    (b) interest credited on these accumulated deductions from 
July 1, 1957, to the date of retirement; 
    (c) interest credited on accumulated deductions including 
prior credited interest provided in paragraph (1) from July 1, 
1957, to the date of retirement; 
    (d) after the amount available for an annuity granted with 
respect to such the person is determined in accordance with the 
provisions of this subdivision, an additional amount equal to 20 
percent of the sum of clause (2) (a) plus interest credited to 
members account from July 1, 1957, to date of retirement is to 
be added.  This added amount is not to be doubled as provided 
for other amounts determined in this subdivision; 
    (e) annuity purchase rate based on an appropriate annuity 
table of mortality with an interest assumption established by 
the board as provided in section 354.07, subdivision 1, and 
using the applicable postretirement interest rate assumption 
specified in section 356.215, subdivision 4d. 
    Sec. 36.  Minnesota Statutes 1986, section 354.45, is 
amended to read:  
    354.45 [OPTIONAL RETIREMENT ANNUITIES; UNPAID ANNUITIES, 
DISPOSITION.] 
    Subdivision 1.  [OPTIONAL ANNUITY FORMS.] The retirement 
board shall establish optional annuities at retirement which 
shall take the form of an annuity payable for a period certain 
and for life thereafter; or as the form of a joint and survivor 
annuity.  The board shall also establish an optional annuity 
which shall take the form of a guaranteed refund annuity paying 
the annuitant a fixed amount for life with the guarantee that in 
the event of death the balance of the accumulated deductions and 
interest accrued to the date of retirement will be paid to the 
designated beneficiary.  Such Any optional annuity forms shall 
be actuarially equivalent to the normal forms provided in 
section 354.44.  In establishing these optional annuity forms, 
the board shall obtain the written recommendation of an approved 
the commission-retained actuary and these.  The recommendations 
shall be a part of the permanent records of the board.  
    Subd. 2.  [REFUND UPON DEATH OF RETIRED MEMBER.] Upon the 
death of the member after retirement where no designated 
beneficiary shall survive the member, any remaining unpaid 
guaranteed annuity payments shall be commuted at the applicable 
postretirement interest rate of interest currently being used in 
determining the amount of optional annuities specified in 
section 356.215, subdivision 4d and paid in one sum to the 
estate of the member.  Upon the death of the last designated 
beneficiary after the death of the member, the value of any 
unpaid guaranteed annuity payments shall be commuted at 
the applicable postretirement interest rate of interest 
currently being used in determining the amount of optional 
annuities specified in section 356.215, subdivision 4d and paid 
in one sum to the estate of such the designated beneficiary.  
    Sec. 37.  Minnesota Statutes 1986, section 354.48, 
subdivision 3, is amended to read:  
    Subd. 3.  [COMPUTATION OF BENEFITS.] (1) The amount of the 
disability benefit granted to members covered under section 
354.44, subdivision 2, clauses (1) and (2), is an amount equal 
to double the annuity which could be purchased by the member's 
accumulated deductions plus interest thereon on the amount 
computed as though the teacher were age 65 at the time the 
benefit begins to accrue and in accordance with the law in 
effect when the disability application is received.  Any member 
who applies for a disability benefit after June 30, 1974, and 
who failed to make an election pursuant to Minnesota Statutes 
1971, section 354.145, shall have the disability benefit 
computed under the provisions of this clause or clause (2), 
whichever is larger. 
    The benefit granted shall be determined by the following: 
    (a) the amount of the accumulated deductions; 
    (b) interest actually earned on these accumulated 
deductions to the date the benefit begins to accrue; 
    (c) interest for the years from the date the benefit begins 
to accrue to the date such the member attains age 65 at the rate 
of three percent; 
    (d) annuity purchase rates based on an appropriate annuity 
table of mortality with established by the board as provided in 
section 354.07, subdivision 1, and using the applicable 
postretirement interest of five percent rate assumption 
specified in section 356.215, subdivision 4d. 
    In addition, a supplementary monthly benefit shall be paid 
to basic members only in accordance with the following table: 
 
        Age When Benefit                Supplementary     
        Begins to Accrue                  Benefit         
        Under Age 56                         $50          
                  56                          45          
                  57                          40          
                  58                          35          
                  59                          30          
                  60                          25          
                  61                          20          
                  62                          15          
                  63                          10          
                  64                           5          
    (2) The disability benefit granted to members covered under 
section 354.44, subdivision 6 or 7 shall be computed in the same 
manner as the annuity provided in subdivision 6 or 7 of that 
section, whichever is applicable.  The disability benefit shall 
be the formula annuity without the reduction for each month the 
member is under age 65 at the time when the benefit begins to 
accrue. 
    (3) For the purposes of computing a retirement annuity when 
the member becomes eligible, the amounts paid for disability 
benefits shall not be deducted from the individual member's 
accumulated deductions.  If the disability benefits provided in 
this subdivision exceed the monthly average salary of the 
disabled member, the disability benefits shall be reduced to an 
amount equal to the disabled member's average salary. 
    Sec. 38.  Minnesota Statutes 1986, section 354.532, 
subdivision 1, is amended to read:  
    Subdivision 1.  [CALCULATION OF PRESENT VALUE.] For the 
persons entitled to purchase prior service credit under section 
354.531, there shall be paid to the applicable retirement fund 
or association an amount equal to the present value, on the date 
of payment, of the amount of the additional service pension or 
retirement annuity which would be obtained by virtue of the 
purchase of the additional service credit, using the applicable 
postretirement interest rate specified in section 356.215, 
subdivision 4d, and the applicable mortality table adopted for 
established by the board of the appropriate retirement fund or 
association under section 354.07, subdivision 1, and assuming 
continuous service until, and retirement at, the normal 
retirement age with the additional service credit purchased, for 
the appropriate retirement fund or association, or the age at 
the date of payment or of the agreement to pay, whichever is 
older, and a future salary history which includes annual salary 
increases at the rate of salary increase rate assumption 
specified in section 356.215, subdivision 4, clause (4) 4d.  The 
person requesting the purchase of prior service must establish 
in the records of the retirement fund or association proof of 
the service for which the purchase of prior service is 
requested.  The manner of the proof of service shall be in 
accordance with procedures prescribed by the board of 
trustees of the fund or association or by the executive director.
    Sec. 39.  Minnesota Statutes 1986, section 354.532, 
subdivision 2, is amended to read:  
    Subd. 2.  [PAYMENT OF PRESENT VALUE; CREDITING OF SERVICE.] 
Payment shall be made in one lump sum, unless the executive 
director of the appropriate retirement fund or association 
agrees to accept payment in installments over a period of not to 
exceed three years from the date of the agreement, with interest 
at a rate deemed appropriate by the executive director.  The 
period of allowable service shall be credited to the account of 
the person only after receipt of full payment by the executive 
director.  
    Sec. 40.  Minnesota Statutes 1986, section 354.55, 
subdivision 11, is amended to read:  
    Subd. 11.  [DEFERRED ANNUITY; AUGMENTATION.] Any person 
covered under section 354.44, subdivisions 6 and 7, who ceases 
to render teaching service may leave the person's accumulated 
deductions in the fund for the purpose of receiving a deferred 
annuity at retirement.  Eligibility for an annuity under this 
subdivision shall be governed pursuant to section 354.44, 
subdivision 1, or 354.60. 
    The amount of the deferred retirement annuity shall be 
determined by section 354.44, subdivisions 6 and 7, and 
augmented as provided herein in this subdivision.  The required 
reserves related to that portion of the annuity which had 
accrued at the time when the member ceased to render teaching 
service shall be augmented by interest compounded annually from 
the first day of the month following the month during which the 
member ceased to render teaching service to the effective date 
of retirement.  There shall be no augmentation if this period is 
less than three months or if this period commences prior to July 
1, 1971.  The rates of interest used for this purpose shall be 
five percent commencing July 1, 1971, until January 1, 1981, and 
three percent thereafter.  If a person has more than one period 
of uninterrupted service, a separate average salary determined 
under section 354.44, subdivision 6, must be used for each 
period and the required reserves related to each period shall be 
augmented by interest pursuant to this subdivision.  The sum of 
the augmented required reserves so determined shall be the basis 
for purchasing the deferred annuity.  If a person does not 
render teaching service in any one fiscal year or more 
consecutive fiscal years and then resumes teaching service, the 
formula percentages used from the date of the resumption will of 
teaching service shall be those applicable to new members.  The 
mortality table and interest assumption contained therein used 
to compute the annuity shall be determined by the law applicable 
mortality table established by the board under section 354.07, 
subdivision 1, and the interest rate assumption under section 
356.215 in effect at the time of the member's retirement when 
the member retires.  A period of uninterrupted service for the 
purposes of this subdivision shall mean means a period of 
covered teaching service during which the member has not been 
separated from active service for more than one fiscal year. 
    The provisions of this subdivision shall not apply to 
variable account accumulations as defined in section 354.05, 
subdivision 23. 
    In no case shall the annuity payable herein under this 
subdivision be less than the amount of annuity payable pursuant 
to section 354.44, subdivisions 6 and 7. 
    The requirements and provisions for retirement prior to 
before age 65 contained in section 354.44, subdivision 6, clause 
(2) shall also apply to an employee fulfilling the requirements 
with a combination of service as provided in section 354.60. 
    The augmentation provided by this subdivision shall not 
apply to any period in which a person is on an approved leave of 
absence from an employer unit covered by the provisions of this 
chapter.  
    Sec. 41.  Minnesota Statutes 1986, section 354.55, 
subdivision 12, is amended to read:  
    Subd. 12.  [PRE-1973 LAW RETIREMENTS.] When Any member who 
retires under the law in effect prior to July 1, 1973 shall have 
that portion of the member's annuity based on accumulations 
after June 30, 1957, under the provisions of Minnesota Statutes 
1971, section 354.44, subdivision 2 and all accumulations under 
the provisions of Minnesota Statutes 1971, section 354.33, 
subdivision 1 shall be calculated using the same mortality table 
established by the board under section 354.07, subdivision 1 and 
the interest rate assumption specified in section 356.215 used 
at the time of that retirement to transfer the required reserves 
to the Minnesota postretirement investment fund. 
    Sec. 42.  Minnesota Statutes 1986, section 354.55, 
subdivision 13, is amended to read:  
    Subd. 13.  [PRE-1969 LAW RETIREMENTS.] Any person who 
ceased teaching service prior to July 1, 1968, who has ten years 
or more of allowable service and left accumulated deductions in 
the fund for the purpose of receiving when eligible a retirement 
annuity, and retires shall have the annuity computed in 
accordance with the law in effect on June 30, 1969, except that 
the portion of the annuity based on accumulations after June 30, 
1957, under the provisions of Minnesota Statutes 1967, section 
354.44, subdivision 2, and all accumulations under the 
provisions of Minnesota Statutes 1967, section 354.33, 
subdivision 1, shall be calculated using the same mortality 
table established by the board under section 354.07, subdivision 
1, and the interest rate assumption used specified in section 
356.215, to transfer the required reserves to the Minnesota 
postretirement investment fund.  
    Sec. 43.  Minnesota Statutes 1986, section 354.58, is 
amended to read:  
    354.58 [SUPPLEMENTAL RETIREMENT ANNUITY.] 
    A supplemental retirement annuity shall be paid only to a 
member who retires pursuant to section 354.44, subdivision 2, 
and the options related thereto applicable optional retirement 
annuities as established in sections 354.35 and 354.45.  In 
establishing this supplemental retirement annuity, the board 
shall ascertain the member's accumulated deduction including 
interest for the period of allowable service prior to July 1, 
1957, and the member shall receive a retirement credit of 100 
percent of this amount.  The retirement credit so established 
shall be the basis for purchasing a supplemental retirement 
annuity using an annuity purchase rate based on an appropriate 
the applicable annuity table of mortality with an interest 
assumption as provided in section 354.07, subdivision 1.  This 
supplemental retirement annuity shall be doubled. 
    Sec. 44.  Minnesota Statutes 1986, section 354.62, 
subdivision 5, is amended to read:  
    Subd. 5.  [VARIABLE RETIREMENT ANNUITY.] (1) At retirement, 
the amount of the member's variable account accumulation in the 
employee variable annuity contribution account, based on the 
valuation at the previous fiscal year end plus any contributions 
made by the person since the end of the previous fiscal year, 
and an equal amount from the employer variable annuity 
contribution account shall be transferred to the variable 
annuity reserve account, and the variable retirement annuity for 
the member shall be determined by the member's age, and sex, and 
the amount transferred for the member to the variable annuity 
reserve account at the date of retirement.  The amount of the 
annuity shall be calculated on the basis of an appropriate 
applicable annuity table of mortality with established by the 
board of trustees under section 354.07, subdivision 1, using an 
interest rate assumption of eight percent, except that if the 
member elects to have the accumulation transferred to the 
Minnesota postretirement investment fund as authorized by clause 
(8), the amount of the annuity shall be calculated with using an 
the applicable postretirement interest rate assumption of five 
percent specified in section 356.215. 
    (2) Whenever If the admitted value of the annuity reserve 
account of the variable annuity division, as of June 30 of any 
year, exceeds or is less than the then present value of all 
variable annuities in force, determined in accordance with the 
rate of interest and approved actuarial tables then in effect, 
by at least two percent of the present value, the amount of each 
variable annuity payment shall be proportionately increased or 
decreased for the following year. 
    (3) The death benefit payable in the event of a member's 
death prior to retirement shall be a lump sum refund of a 
member's variable account accumulation, based on the valuation 
at the previous fiscal year end plus any contributions made by 
the person since the end of the previous fiscal year, to the 
surviving spouse, or if there is no surviving spouse to the 
designated beneficiary.  Except that If a member has made an 
election in accordance with section 354.46, then the surviving 
spouse shall receive a joint and survivor annuity as described 
in section 354.44 and computed as provided in clause (1) in lieu 
of a lump sum refund of a member's variable account 
accumulation.  If a lump sum refund of a member's variable 
account accumulation is taken, an amount equal to the lump sum 
refund made in this clause shall be transferred from the 
employer contribution account to the variable annuity turnover 
account. 
    (4) Except as provided in section 354.44, subdivision 7, 
any person who ceases to be a member by reason of termination of 
teaching service, shall be entitled to a lump sum refundment 
refund of the member's variable account accumulations, based on 
the valuation at the previous fiscal year end plus any 
contributions made by the person since the end of the previous 
fiscal year.  Application for a refundment refund may be made no 
sooner than 30 days after termination of teaching service if the 
applicant has not again become a teacher.  Repayment of 
a refundment refund upon resumption of teaching is not permitted 
under this section.  An amount equal to the refundment refund to 
the member shall be transferred from the employer contribution 
account to the variable annuity turnover account. 
    (5) If a member is determined to be totally and permanently 
disabled as provided in sections 354.05, subdivision 14; and 
354.48, the member shall be entitled to the annuity provided in 
this subdivision. 
    (6) Those members eligible for retirement as provided in 
section 354.44, subdivision 1 shall, upon application for the 
that annuity provided therein, be entitled to the annuity 
provided in this subdivision.  The annuity elected in accordance 
with sections 354.35, 354.44, and 354.45 shall be the annuity 
applicable to this subdivision. 
    (7) Notwithstanding section 356.18, increases an increase 
in annuity payments pursuant to this section shall be made 
automatically unless written notice is filed by the annuitant 
with the executive director of the teachers retirement 
association board requesting that the increase not be made. 
    (8) At retirement, a member may elect to have the amount of 
the member's variable annuity accumulation in the employee 
variable annuity contribution account and an equal amount from 
the employer variable annuity contribution account transferred 
to the Minnesota postretirement investment fund as provided in 
section 354.63, subdivision 2, clause (2).  This election may 
also be made by a surviving spouse who receives an annuity under 
clause (3).  The election shall be made on a form provided by 
the executive secretary director. 
    Sec. 45.  Minnesota Statutes 1986, section 354.63, 
subdivision 2, is amended to read:  
    Subd. 2.  [VALUATION OF ASSETS; ADJUSTMENT OF BENEFITS.] (1)
Effective July 1, 1973 for those members retiring pursuant to 
this chapter, The required reserves for retirement annuities as 
determined in accordance with these sections this chapter shall 
be transferred to the Minnesota postretirement investment fund 
as of the date of retirement last business day of the month in 
which the retirement annuity begins.  An The required reserves 
shall be determined in accordance with the appropriate annuity 
table of mortality with an interest assumption adopted by the 
board of trustees as provided in section 354.07, subdivision 1, 
will be used to determine the amount to be transferred based on 
the experience of the fund as recommended by the 
commission-retained actuary and using the interest assumption 
specified in section 356.215, subdivision 4d.  
    (2) Annuity payments shall be adjusted in accordance with 
the provisions of section 11A.18.  For the purpose of In making 
these adjustments, members who retire effective July 1 shall be 
considered to have retired effective the preceding June 30.  
This section is applicable for applies to persons who retired 
effective July 1, 1982 or later.  
    (3) Notwithstanding section 356.18, increases an increase 
in annuity payments pursuant to this section will be made 
automatically unless written notice is filed by the annuitant 
with the executive director of the teachers retirement 
association board requesting that the increase shall not be made.
    Sec. 46.  Minnesota Statutes 1986, section 354A.011, is 
amended by adding a subdivision to read: 
    Subd. 3a.  [ACTUARIAL EQUIVALENT.] "Actuarial equivalent" 
means the condition of one annuity or benefit having an equal 
actuarial present value as another annuity or benefit, 
determined as of a given date with each actuarial present value 
based on the appropriate mortality table adopted by the 
appropriate board of trustees based on the experience of that 
retirement fund association as recommended by the actuary 
retained by the legislative commission on pensions and 
retirement and using the applicable preretirement or 
postretirement interest rate assumption specified in section 
356.215, subdivision 4d. 
    Sec. 47.  Minnesota Statutes 1986, section 354A.011, 
subdivision 17, is amended to read:  
    Subd. 17.  [OPTIONAL SURVIVORS ANNUITY.] "Optional 
survivors annuity" means the payments made by the teachers 
retirement fund association to a survivor of a former member 
pursuant to an actuarial equivalent optional annuity 
form established by the applicable board of trustees under 
section 354A.32 and selected by the member at or before 
retirement.  
    Sec. 48.  Minnesota Statutes 1986, section 354A.021, is 
amended by adding a subdivision to read: 
    Subd. 7.  [ACTUARIAL CONSULTANT.] The board of trustees or 
directors of each teachers retirement fund association may 
contract for the services of an approved actuary and fix the 
reasonable compensation for those services.  Any approved 
actuary retained by the board shall function as the actuarial 
advisor to the board and may perform actuarial valuations and 
experience studies to supplement those performed by the actuary 
retained by the legislative commission on pensions and 
retirement.  Any supplemental actuarial valuations or experience 
studies shall be filed with the executive director of the 
legislative commission on pensions and retirement. 
    Sec. 49.  Minnesota Statutes 1986, section 354A.32, is 
amended to read:  
    354A.32 [OPTIONAL RETIREMENT ANNUITIES.] 
    Subdivision 1.  [OPTIONAL FORMS GENERALLY.] The boards of 
the Minneapolis and the St. Paul teachers retirement fund 
associations shall each establish for the coordinated program 
and the board of the Duluth teachers retirement fund association 
shall establish for the new law coordinated program an optional 
retirement annuity which shall take the form of a joint and 
survivor annuity.  Each board may also in its discretion 
establish an optional annuity which shall take the form of an 
annuity payable for a period certain and for life thereafter.  
Each board shall also establish an optional retirement annuity 
which shall take the form of a guarantee that in the event of 
death the balance of the accumulated deductions shall be paid to 
a designated beneficiary.  All Optional annuity forms shall be 
the actuarial equivalent of the normal forms provided in section 
354A.31.  In establishing these optional annuity forms, the 
board shall obtain the written recommendation of an approved the 
commission-retained actuary and.  The recommendation shall be a 
part of the permanent records of the board. 
    Subd. 2.  [SPECIAL OPTIONAL ANNUITY PROVISIONS.] In the 
event of the death of the designated beneficiary of a retired 
member who had elected an optional annuity in the form of a 
joint and survivor annuity under subdivision 1, the retired 
member shall thereafter receive the unreduced amount of the 
earned benefit computed pursuant to 354A.31.  The effect of this 
provision shall be reflected in calculating the actuarial 
equivalent joint and survivor annuity under subdivision 1.  
     Sec. 50.  Minnesota Statutes 1986, section 354A.33, is 
amended to read:  
    354A.33 [SOCIAL SECURITY LEVELING ADJUSTMENT OPTION.] 
    Any coordinated member who retires prior to the time the 
member becomes eligible for social security old age retirement 
benefits shall be entitled to elect to receive a social security 
leveling adjustment optional annuity from the teachers 
retirement fund association.  The social security leveling 
adjustment optional annuity shall be established by the board of 
the teachers retirement fund association.  It shall take the 
form of an annuity payable for the period prior to the member's 
becoming eligible for social security old age retirement 
benefits in an amount greater than the amount of the member's 
annuity calculated pursuant to section 354A.31 on the basis of 
the age of the member at retirement but equal insofar as 
possible to the social security old age retirement benefit and 
the adjusted retirement annuity amounts payable immediately 
subsequent to becoming eligible for social security old age 
retirement benefits in an amount less than the amount of the 
member's annuity calculated pursuant to section 354A.31 on the 
basis of the age of the member at retirement.  The optional form 
shall be the actuarial equivalent to the normal forms provided 
in section 354A.31.  In establishing the optional form, the 
board shall obtain the written recommendation of an approved the 
commission-retained actuary and the recommendation shall be a 
part of the permanent records of the board. 
    Sec. 51.  Minnesota Statutes 1986, section 354A.41, 
subdivision 2, is amended to read:  
    Subd. 2.  [ACTUARIAL VALUATIONS.] Whenever In any actuarial 
valuation of the Minneapolis teachers retirement fund 
association or, the St. Paul teachers retirement fund 
association shall make an actuarial valuation as required by 
section 356.215 after July 1, 1979, there shall be included in 
the report of the actuarial valuation a finding of the condition 
of the fund showing separately the basic and coordinated 
programs and whenever, or the Duluth teachers retirement fund 
association shall make an actuarial valuation as required 
by under section 356.215 after July 1, 1981 prepared by the 
commission-retained actuary or supplemental actuarial valuation 
prepared by an approved actuary retained by the teachers 
retirement fund association, there shall be included in the 
report of the actuarial valuation a finding of the condition of 
the fund showing separately the basic and coordinated programs 
or the old law coordinated and new law coordinated programs, as 
appropriate.  The finding shall include the level normal cost, 
accrued liability, assets, unfunded accrued liability, 
contribution required to meet the interest at the assumed rate 
on the unfunded accrued liability, and the contribution required 
to amortize the unfunded accrued liability by the date specified 
in section 356.215, subdivision 4g, and the applicable employee 
and employer contribution rates for each program. 
    Sec. 52.  Minnesota Statutes 1986, section 356.20, 
subdivision 2, is amended to read:  
    Subd. 2.  [COVERED PUBLIC PENSION FUNDS.] (1) State 
employees retirement fund. 
    (2) Public employees retirement fund. 
    (3) Teachers retirement fund. 
    (4) State patrol retirement fund. 
    (5) Minneapolis teachers retirement fund association. 
    (6) St. Paul teachers retirement fund association. 
    (7) Duluth teachers retirement fund association. 
    (8) Minneapolis employees retirement fund. 
    (9) University of Minnesota faculty retirement plan. 
    (10) University of Minnesota faculty supplemental 
retirement plan. 
    (11) Judges retirement fund. 
    (12) Any police or firefighters' relief association 
enumerated in section 69.77, subdivision 1a or 69.771, 
subdivision 1. 
    (13) Public employees police and fire fund.  
    (14) Minnesota state retirement system correctional 
officers retirement plan fund.  
    Sec. 53.  Minnesota Statutes 1986, section 356.20, 
subdivision 3, is amended to read:  
    Subd. 3.  [FILING REQUIREMENT.] Each The financial report 
is a public record.  A copy thereof of the report or a synopsis 
of the report containing the information required by this 
section shall be distributed 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 each the report shall be delivered not later 
than six months after the close of each fiscal year 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 by the legislative commission on pensions and 
retirement, if applicable, whichever is later.  
    Sec. 54.  Minnesota Statutes 1986, section 356.20, 
subdivision 4, is amended to read:  
    Subd. 4.  [CONTENTS OF FINANCIAL REPORT.] Each The 
financial report required by this section shall include: 
    (1) An exhibit prepared based on the actuarial valuation 
prepared by the commission-retained actuary according to 
applicable actuarial standards requirements enumerated in 
section 356.215, and specified in standards adopted by the 
legislative commission on pensions and retirement by an approved 
actuary as defined in section 356.215, subdivision 6 showing.  
The exhibit shall show the accrued assets of the fund, the 
accrued liabilities, including accrued reserves, and the accrued 
unfunded actuarial accrued liability of the fund.  The exhibit 
shall contain the certificate of an approved the actuary 
certifying retained by the legislative commission on pensions 
and retirement 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 Normal Cost (Level Normal Cost) actuarial cost method and 
any applicable standards adopted by the legislative commission 
on pensions and retirement. 
    (a) Assets shown in the exhibit shall include the following 
items of actual assets: 
    Cash in office 
    Deposits in banks 
    Accounts receivable: 
    Accrued members' contributions 
    Accrued employer contributions 
    Other 
    Accrued interest on investments 
    Dividends on stocks, declared but not yet received 
    Investment in bonds at cost 
    Investment in stocks at cost 
    Investment in real estate 
    Equipment at cost, less depreciation 
    Other 
    Total assets ........................ . 
    (b) The exhibit shall include a statement of the actuarial 
value of current assets as specified in section 356.215, 
subdivision 4, including: 
    Cash and, cash equivalents, and short-term securities 
    Fixed income investments 
    Equity investments 
    Real estate investments 
      Equity in the Minnesota postretirement investment fund 
    Other 
    (c) The exhibit shall include a statement of the 
unfunded actuarial accrued liability of the fund which shall 
include the following measures of unfunded actuarial accrued 
liability, using the actuarial value of current assets as 
specified in section 356.215, subdivision 4 1: 
    (i) unfunded actuarial accrued liability, which shall be 
determined by subtracting the current assets and the present 
value of future normal costs from the total current and expected 
future benefit obligations; and 
    (ii) current unfunded actuarial liability, which is the 
total current benefit obligations less the total current assets; 
and 
    (iii) current and future unfunded actuarial liability, 
which is the total current and expected future benefit 
obligations less the total current and expected future assets. 
    If the assets of the fund exceed the actuarial liabilities, 
the excess shall be listed as a surplus and indicated in the 
exhibit following the itemization of benefit obligations. 
    (d) The exhibit shall include a footnote showing 
accumulated member contributions without interest. 
    (e) Current liabilities shown in the exhibit shall include 
the following items: 
    Current: 
    Accounts payable 
    Retirement annuity payments 
      Disability benefit payments 
    Survivor benefit payments 
    Refund to members 
    Accrued expenses 
    Suspense items 
    Total current liabilities ........................ . 
    (f) The exhibit shall include a schedule which shall be 
listed as the "current and expected future benefit 
obligations."  The schedule shall contain the following 
information on the benefit obligations: 
    1.  Current benefit obligations:, which shall be the 
actuarial value of benefit obligations on account of service 
rendered to date, separately identified as follows 
     (a) For annuitants 
         Retirement annuities 
         Disability annuities benefits
         Surviving spouses' annuities spouse and child benefits
         Surviving children's annuities 
     (b) For former members without vested rights 
     (c) For deferred annuitants' benefits, including 
          any augmentation 
     (d) For active employees 
         Retirement benefits annuities
         Disability benefits 
         Refund liability due to death or 
          withdrawal 
         Survivors' benefits 
     Total current benefits obligations 
    2.  Expected future benefit obligations:, which shall be 
the actuarial value of benefit obligations on account of future 
service for active employees 
    3.  Total current and expected future benefit obligations 
    4.  In addition to the foregoing, if there are additional 
benefits not appropriately covered by the foregoing three items 
of benefit obligations, they shall be listed separately. 
    (2) An income statement prepared on an accrual basis 
showing all income and all deductions from income for the fiscal 
year.  The statement shall show separate items for employee 
contributions, employer regular contributions, employer 
additional contributions if provided by law, investment income, 
profit on the sale of investments, and other income, if any. 
    (3) A statement of deductions from income, which shall 
include separate items for benefit payments, the payment of 
retirement benefits annuities, disability benefits, surviving 
spouse benefits, surviving children's benefits, refunds to 
members terminating employment, refunds due to death of members 
and due to death of annuitants, the increase in total reserves 
required, general administrative expense incurred, loss on sale 
of investments, and any other deductions. 
    (4) A statement showing appropriate statistics as to 
concerning the membership and beneficiaries of the fund, with 
indications of changes in the statistical data which may result 
from the current year's operation. 
    (5) Any additional statements or exhibits which will enable 
the management of the fund to portray a true interpretation of 
the fund's financial condition, except that the term "surplus" 
or the term "excess of assets" shall not be used except as 
otherwise specifically provided for in this section, nor shall 
any representation of assets and liabilities other than as 
provided for in this section be included in the additional 
statements or exhibits. 
    (6) A more detailed or subdivided itemization of any of the 
items required by this section, if the management of the fund so 
desires. 
    Sec. 55.  Minnesota Statutes 1986, section 356.215, is 
amended to read:  
    356.215 [ACTUARIAL VALUATIONS AND EXPERIENCE STUDIES.] 
    Subdivision 1.  [DEFINITIONS.] For the purposes of sections 
3.85 and 356.20 to 356.23, each of the following terms 
hereinafter defined shall have the meanings meaning given: 
    (1) "Actuarial valuation" means a calculation set of 
calculations prepared by an approved actuary to determine the 
normal cost and the accrued actuarial liabilities of a benefit 
plan, according to a stated actuarial cost method and based upon 
stated assumptions as including, but not limited to rates of 
interest, mortality, salary increase, disability, withdrawal, 
and retirement and a determination of to determine the payment 
necessary to amortize over a stated period any unfunded 
accrued actuarial liability disclosed as a result of the 
actuarial valuation and the resulting actuarial balance sheet of 
the benefit plan, and a determination of the payment necessary 
to prevent any increase in any disclosed unfunded accrued 
liability. 
    (2) "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.  
     (3) "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 this actuarial present value which is 
allocated to the valuation year to be the normal cost and the 
portion of this 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. 
    (4) "Experience study" means a report which furnishes 
provides experience data and an actuarial analysis which 
substantiate the actuarial assumptions on which valuations are 
based. 
    (5) "Expected future statutory supplemental contributions" 
means the sum of future employee and employer contributions at 
the rates specified in statute when the valuation is completed, 
reduced by the present value of future normal costs. 
    (6) "Current assets" means the value of all assets at cost, 
which includes realized capital gains or losses, plus one-third 
of any unrealized capital gains or losses. 
    (7) "Unfunded actuarial accrued liability" means total 
current and expected future benefit obligations less the sum of 
current assets and the present value of future normal costs. 
    Subd. 2.  [REQUIREMENTS.] 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.  In order To achieve this 
goal, the legislative commission on pensions and retirement 
shall have prepared annual actuarial valuations and periodic 
experience studies of the public pension and retirement plans 
enumerated in section 3.85, subdivision 12, clause (b), and the 
governing or managing board or administrative officials of each 
public pension and retirement fund or plan enumerated in section 
356.20, subdivision 2, clauses (9), (10), and (12) shall cause 
to be made have prepared annual actuarial valuations and 
quadrennial periodic experience studies of their respective 
funds as herein provided in this section.  This requirement 
shall also apply to any fund which may be a 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 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 fund coming within the provisions of section 356.216. 
    Subd. 3.  [REPORTS.] The actuarial valuations required 
annually shall be made as of the beginning of each fiscal year.  
Two copies of each the valuation shall be delivered to the 
executive director of the legislative commission on pensions and 
retirement, to the commissioner of finance and to the 
legislative reference library, not later than the first day of 
the sixth month occurring after the end of the previous fiscal 
year.  Every fourth year occurring after 1975, Two copies of an 
any experience study covering four fiscal years prepared 
periodically as provided for in the standards adopted by the 
commission shall be filed with the executive director of the 
legislative commission on pensions and retirement, with the 
commissioner of finance, and to with the legislative reference 
library, not later than the first day of the sixth eleventh 
month occurring after the end of the last fiscal year of the 
period which the experience study covers.  For actuarial 
valuations and experience studies prepared at the direction of 
the legislative commission on pensions and retirement, two 
copies of the document shall be delivered to the governing or 
managing board or administrative officials of the applicable 
public pension and retirement fund or plan. 
    Subd. 4.  [ACTUARIAL VALUATIONS; CONTENTS.] The actuarial 
valuations valuation shall be made in conformity with the 
requirements of the definition contained in subdivision 1 and 
standards adopted by the legislative commission on pensions and 
retirement.  Each The actuarial valuation shall measure all 
aspects of the benefit plan of the fund in accordance with 
changes in benefit plans, if any, and salaries as will or can 
reasonably be anticipated to be in force during the ensuing 
fiscal year.  Each The actuarial valuation shall be prepared in 
accordance with the entry age normal actuarial cost (level 
normal cost) method. 
    Each The actuarial valuation required under this section 
shall include the information required in subdivisions 4a to 4k. 
    Subd. 4a.  [NORMAL COST.] For each fund providing any 
benefits under a defined benefit formula plan, the actuarial 
valuation shall contain an exhibit indicating the level normal 
cost of the benefits provided by the laws governing the fund as 
of the date of the valuation must be, calculated in accordance 
with the entry age normal actuarial cost (level normal cost) 
method.  The normal cost shall be expressed as a level 
percentage of the future payroll of the active participants of 
the fund as of the date of the valuation. 
    Subd. 4b.  [ACCRUED LIABILITY.] For each fund providing any 
benefits under a defined benefit plan, the actuarial valuation 
shall contain an exhibit indicating the accrued liabilities of 
the fund, which shall be equal to the present value of all 
benefits minus the present value of future normal costs must be, 
calculated in accordance with the entry age normal actuarial 
cost method. 
    Subd. 4c.  [DEFINED CONTRIBUTION ACCUMULATIONS.] For each 
fund providing benefits under the money purchase or defined 
contribution method plan, the actuarial valuation shall contain 
an exhibit indicating the member contributions accumulated at 
interest, as apportioned to members accounts, to the date of the 
valuation must be calculated.  These accumulations shall be 
separately tabulated in such a manner as to reflect which 
properly reflects any differences in money purchase or defined 
contribution annuity rates which may apply. 
    Subd. 4d.  [INTEREST AND SALARY ASSUMPTIONS.] For funds 
governed by chapters 3A, 352, 352B, 352C, 353, 354 (except other 
than the variable annuity fund, which is governed by section 
354.62), and 490, the actuarial valuation shall use a 
preretirement interest assumption of eight percent, a 
postretirement interest assumption of five percent, and an 
assumption that in each future year the salary on which a 
retirement or other benefit is based is 1.065 multiplied by the 
salary for the preceding year must be used.  For funds governed 
by chapter 354A, the actuarial valuation shall use preretirement 
and postretirement assumptions of eight percent and an 
assumption that in each future year the salary on which a 
retirement or other benefit is based is 1.065 multiplied by the 
salary for the preceding year, but the actuarial valuation shall 
reflect the payment of postretirement adjustments to retirees 
shall be based on the methods specified in the bylaws of the 
fund as approved by the legislature.  For all other funds, the 
actuarial valuation shall use a preretirement interest 
assumption of five percent, a postretirement interest assumption 
of five percent, and an assumption that in each future year the 
salary on which a retirement or other benefit is based is 1.035 
multiplied by the salary for the preceding year must be used. 
    For funds governed by chapters 3A, 352C, and 490, the 
actuarial valuation shall use a preretirement interest 
assumption of eight percent, a postretirement interest 
assumption of five percent, and an assumption that in each 
future year in which the salary amount payable is not 
determinable from section 3.099, 15A.081, subdivision 6, or 
15A.083, subdivision 1, whichever is applicable, or from 
applicable compensation council recommendations under section 
15A.082, the salary on which a retirement or other benefit is 
based is 1.065 multiplied by the known or computed salary for 
the preceding year, whichever is applicable. 
    Subd. 4e.  [OTHER ASSUMPTIONS.] Other The actuarial 
valuation shall use assumptions as to concerning mortality, 
disability, retirement, withdrawal, entry age and retirement age 
, and any other relevant demographic or economic factor, which 
shall be set at levels consistent with those determined in the 
most recent experience study completed pursuant to subdivision 
5, may be utilized.  These other The actuarial valuation shall 
contain an exhibit indicating any actuarial assumptions must be 
set forth used in preparing the valuation report. 
    Subd. 4f.  [ACTUARIAL BALANCE SHEET.] The actuarial 
valuation shall contain an actuarial balance sheet must show, 
which shall indicate current and expected future benefit 
obligations, current and expected future assets, unfunded 
actuarial accrued liability, current unfunded actuarial 
liability, and current and future unfunded actuarial liability.  
Specifically, the balance sheet for all funds, except local 
police and, salaried firefighter, and specified volunteer 
firefighter funds, shall be include organized in the following 
manner:  
  Current assets 
    Cash and, cash equivalents,
     and short-term securities               $...
    Fixed income investments                  ...  
    Equity investments                        ...  
    Real estate investments                   ... 
    Equity in the Minnesota postretirement
     investment fund                          ...
    Other                                     ... 
Total current assets                                      $...
  Expected future assets  
    Present value of expected future 
     statutory supplemental contributions     ... 
    Present value of future normal costs      ... 
Total expected future assets                              $...
Total current and expected future assets                  $...
  Current benefit obligations  
    Actuarial present value of credited
         projected benefit obligations
          on account of service rendered to date: 
      For annuitants 
        Retirement annuities                 $...  
        Disability annuities benefits         ...
        Surviving spouses' annuities 
         spouse and child benefits            ...  
        Surviving children's annuities        ...  
      For former members without 
       vested rights                          ... 
      For deferred annuitants' benefits,
       including any augmentation             ... 
      For active employees 
        Retirement benefits                   ...  
        Disability benefits                   ...  
        Refund liability due to
         death or withdrawal                  ...  
        Survivors' benefits                   ...  
Total current benefit obligations                         $... 
  Expected future benefit obligations 
    Actuarial value of benefit obligations 
     on account of future service for 
     active employees                                     $... 
Total current and expected future benefit
 obligations                                              $... 
  Current unfunded actuarial liability
   (Total current benefit obligations less 
   total current assets):                                 $... 
  Current and future unfunded actuarial
liability 
   (Total current and expected future benefit 
   obligations less total current and 
   expected future assets):                               $... 
    For the purpose of this subdivision, the terms 
    (a) "expected future statutory supplemental contributions" 
means the sum of future employee and employer contributions at 
the rates specified in statute at the time the valuation is 
completed reduced by the present value of future normal costs; 
and 
    (b) "current assets" means the value of all assets at cost, 
which includes realized capital gains or losses, plus one-third 
of any unrealized capital gains or losses. 
    (c) "unfunded accrued liability" means total current and 
expected future benefit obligations less the sum of current 
assets and the present value of future normal costs. 
    In addition to the above that itemization of benefit 
obligations, separate items shall be shown for additional 
benefits, if any, which may not be appropriately included in the 
list shown above that itemization.  
    Subd. 4g.  [AMORTIZATION CONTRIBUTIONS.] In addition to the 
exhibit indicating the level normal cost, the actuarial 
valuation shall contain an exhibit indicating the additional 
annual contribution which would be required to retire amortize 
the unfunded actuarial accrued liability must be calculated.  
For funds governed by chapters 3A, 352, 352B, 352C, 353, 354, 
354A, and 490, the additional contribution shall be calculated 
on a level percent percentage of covered payroll basis by the 
established date for full funding which is in effect at the time 
of when the valuation is prepared.  The level percent additional 
contribution shall be calculated assuming annual payroll growth 
of 6.5 percent.  For all other funds, the additional annual 
contribution shall be calculated on a level annual dollar amount 
basis. 
    If, for any fund other than the Minneapolis employees 
retirement fund, after the first actuarial valuation date 
occurring after June 1, 1979, there has not 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, which change or changes by 
themselves without inclusion of any other items of increase or 
decrease produce a net increase in the unfunded actuarial 
accrued liability of the fund, the established date for full 
funding for the first actuarial valuation made after June 1, 
1979 and each successive actuarial valuation shall be the first 
actuarial valuation date which occurs after June 1, 2009.  
    If, for any fund or plan other than the Minneapolis 
employees retirement fund, after the first actuarial valuation 
date occurring after June 1, 1979, 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, which and the change or changes, 
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 shall be determined using the following 
procedure:  
    (i) the unfunded actuarial accrued liability of the fund 
shall be determined in accordance with the plan provisions 
governing annuities and retirement benefits and the actuarial 
assumptions in effect prior to before an applicable change;  
    (ii) the level annual dollar contribution or level 
percentage, whichever is applicable, which is needed to amortize 
the unfunded actuarial accrued liability amount determined 
pursuant to subclause (i) by the established date for full 
funding in effect prior to the change shall be calculated using 
the interest assumption specified in clause (4) in effect prior 
to before the change; 
    (iii) the unfunded actuarial accrued liability of the fund 
shall 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 prior to before the change;  
    (iv) the level annual dollar contribution or level 
percentage, whichever is applicable, which is needed to amortize 
the difference between the unfunded actuarial accrued liability 
amount calculated pursuant to subclause (i) and the unfunded 
actuarial accrued liability amount calculated pursuant to 
subclause (iii) over a period of 30 years from the end of the 
plan year in which the applicable change is effective shall be 
calculated using the applicable interest assumption specified in 
clause (4) subdivision 4d in effect subsequent to after any 
applicable change;  
    (v) the level annual dollar or level percentage 
amortization contribution pursuant to subclause (iv) shall be 
added to the level annual dollar amortization contribution or 
level percentage calculated pursuant to subclause (ii);  
    (vi) the period in which the unfunded actuarial accrued 
liability amount determined in subclause (iii) will be amortized 
by the total level annual dollar or level percentage 
amortization contribution computed pursuant to subclause (v) 
shall be calculated using the interest assumption specified 
in clause (4) subdivision 4d in effect subsequent to after any 
applicable change, rounded to the nearest integral number of 
years, but which shall not exceed a period of 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 which shall not 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 prior to before the change; and 
    (vii) the period determined pursuant to subclause (vi) 
shall be added to the date as of which the actuarial valuation 
was prepared and the date obtained shall be the new established 
date for full funding.  
    For the Minneapolis employees retirement fund, the 
established date for full funding shall be June 30, 2017. 
    Subd. 4h.  [ACTUARIAL GAINS AND LOSSES.] The actuarial 
valuation shall contain an exhibit consisting of an analysis by 
the actuary explaining the net increase or decrease in the 
unfunded actuarial accrued liability since the last valuation 
must be provided.  The explanation shall subdivide the net 
increase or decrease in the unfunded actuarial accrued liability 
into at least the following parts: 
    (a) increases or decreases in the unfunded actuarial 
accrued liability because of changes in benefits; 
    (b) increases and decreases in the unfunded actuarial 
accrued liability because of each change, if any, in actuarial 
assumptions; 
    (c) increases or decreases in the unfunded actuarial 
accrued liability separately by source attributable to actuarial 
gains or losses resulting from any deviations of actual 
investment earnings, actual postretirement mortality rates, and 
actual salary increase rates, actual disability rates, actual 
withdrawal rates and actual retirement rates from the 
assumptions on which the valuations are based and the remainder 
of the increase or decrease not attributable to any separate 
source; 
    (d) increases or decreases in unfunded actuarial accrued 
liability because of other reasons, including the effect of the 
any amortization contribution required under clause (7); and 
    (e) increases or decreases in unfunded actuarial accrued 
liability because of changes in eligibility requirements or 
groups included in the membership of the fund. 
    Subd. 4i.  [MEMBERSHIP TABULATION.] The actuarial valuation 
shall contain an exhibit consisting of a tabulation of active 
membership and annuitants in the fund must be provided.  If the 
membership of a fund is under more than one general benefit 
program, a separate tabulation shall be made for each general 
benefit program.  The tabulations shall be submitted in contain 
the following form information: 

                                                      Annual
(a) Active members                           Number   Payroll
    As of last valuation date
              new entrants
          Total 
    Separations from active service
    Refund of contributions
    Separation with deferred annuity
    Separation with neither refund
         nor deferred annuity
    Disability
    Death
    Retirement with service annuity
    Total separations
    As of current valuation date                      Annual
                                                      Annuity
(b) Annuitants                               Number   Benefit
    As of last valuation date
    New entrants
    Total
    Terminations
    Deaths
    Other
    Total terminations
    As of current valuation date
    The tabulation required under subclause (b) shall be made 
separately for each of the following classes of annuitants: 
         (a) Service retirement annuitants  
         (b) Disabled annuitants Disability benefit recipients
         (c) Surviving spouse annuitants benefit recipients
         (d) Surviving children annuitants child benefit
             recipients
         (e) Deferred annuitants 
    Subd. 4j.  [ADMINISTRATIVE EXPENSES.] The actuarial 
valuation shall contain an exhibit indicating a statement of the 
administrative expenses must be provided expressed both in 
dollars and also as a percentage of covered payroll. 
    Subd. 4k.  [PLAN SUMMARY.] The actuarial valuation shall 
contain an exhibit indicating a summary of the principal 
provisions of the plan upon which the valuation is based must be 
included. 
    Subd. 5.  [EXPERIENCE STUDY; CONTENTS.] Each experience 
study shall contain an actuarial analysis which substantiates of 
the experience of the fund or association and a comparison of 
the experience with the actuarial assumptions on which the most 
recent actuarial valuation of the retirement fund or relief 
association was based, and shall also contain: 
    (1) A statement of the average entry ages at which 
employment commences; 
    (a) For all those currently active members at the date of 
the experience study. 
    (b) Separately as to new entrants for each of the last five 
fiscal years. 
    (2) a statement of the average ages at which service 
retirements have taken place; 
    (a) For all service retirement annuitants living at the 
date of the experience study. 
    (b) Separately as to new retirements for each of the last 
five fiscal years. 
    Subd. 6.  [APPROVED ACTUARIES.] Each actuarial valuation or 
experience study shall be made and any actuarial consulting 
services for a retirement fund or plan shall be provided by an 
approved actuary.  An approved actuary is an actuary who has not 
less than 15 years of service to major public employee pension 
or retirement funds, or who is a fellow in the society of 
actuaries, or any firm retaining such an actuary on its staff.  
Each The actuarial valuation or experience study shall state 
include a certification that it has been completed prepared in 
accordance with the provisions of sections 356.20 to 356.23 and 
the standards for actuarial work adopted by the legislative 
commission on pensions and retirement.  
    Subd. 7.  [ESTABLISHMENT OF ACTUARIAL ASSUMPTIONS.] 
Actuarial assumptions used for actuarial valuations under this 
section that are other than those set forth in this section may 
be changed only with the approval of the legislative commission 
on pensions and retirement.  A change in the applicable 
actuarial assumptions may be proposed by the governing board of 
the applicable pension fund or relief association, by the 
actuary retained by the legislative commission on pensions and 
retirement, by the actuarial advisor retained by a pension fund 
governed by chapter 352, 353, 354, or 354A, or by the actuary 
retained by a local police or firefighters relief association 
governed by sections 69.77 or 69.771 to 69.776. 
    Sec. 56.  Minnesota Statutes 1986, section 356.216, is 
amended to read:  
    356.216 [CONTENTS OF ACTUARIAL VALUATIONS FOR LOCAL POLICE 
AND FIRE FUNDS.] 
    The provisions of section 356.215 governing the contents of 
actuarial valuations shall apply to any local police or fire 
pension fund or relief association required to make an actuarial 
report under this section except as follows: 
    (1) in calculating normal cost and other requirements, if 
required to be expressed as a level percentage of covered 
payroll, the salaries used in computing covered payroll shall be 
the maximum rate of salary from which retirement and 
survivorship credits and amounts of benefits are determined and 
from which any member contributions are calculated and deducted; 
    (2) in lieu of the amortization date specified in section 
356.215, subdivision 4g, the appropriate amortization target 
date specified in section 69.77, subdivision 2b, or 69.773, 
subdivision 4, clause (b), shall be used in calculating the any 
required amortization contribution; 
    (3) in addition to the tabulation of active members and 
annuitants provided for in section 356.215, subdivision 4i, the 
member contributions for active members for the calendar year 
and the prospective annual retirement annuities under the 
benefit plan for active members shall be reported;  
    (4) actuarial valuations required pursuant to section 
69.773, subdivision 2 shall be made at least every four years 
and actuarial valuations required pursuant to section 69.77 
shall be made annually; and 
    (5) the actuarial balance sheet showing accrued 
assets valued at market value if the actuarial valuation is 
required to be prepared at least every four years or valued as 
current assets under section 356.215, subdivision 1, clause (5), 
if the actuarial valuation is required to be prepared annually, 
actuarial accrued liabilities, and the deficit from full funding 
of liabilities (unfunded actuarial accrued liability) shall 
include the following required reserves: 
    (a) For active members 
      1.  Retirement benefits 
      2.  Disability benefits 
      3.  Refund liability due to death or withdrawal 
      4.  Survivors' benefits 
     (b) For deferred annuitants' benefits 
     (c) For former members without vested rights 
     (d) For annuitants 
      1.  Retirement annuities 
      2.  Disability annuities 
      3.  Surviving spouses' annuities 
      4.  Surviving children's annuities 
    (6) actuarial valuations shall be due not later than the 
first day of the seventh month after the end of the fiscal year 
which the valuation covers. 
    In addition to the above those required reserves, separate 
items shall be shown for additional benefits, if any, which may 
not be appropriately included in the reserves listed above.  
    (6) actuarial valuations shall be due by the first day of 
the seventh month after the end of the fiscal year which the 
actuarial valuation covers. 
    Sec. 57.  Minnesota Statutes 1986, section 356.22, 
subdivision 2, is amended to read: 
    Subd. 2.  [ACCELERATED AMORTIZATION.] No provision in 
sections 356.20 to 356.23 shall be construed to preclude any 
public pension and retirement fund herein enumerated in section 
356.20, subdivision 2 from requesting, or the legislature from 
providing for, the amortization of any deficit unfunded 
actuarial accrued liability in a shorter period of time than by 
the established date for full funding as determined pursuant to 
section 356.215, subdivision 4g.  
    Sec. 58.  Minnesota Statutes 1986, section 356.23, is 
amended to read: 
    356.23 [SUPPLEMENTAL VALUATIONS; ALTERNATIVE REPORTS AND 
VALUATIONS.] 
    Subdivision 1.  [SUPPLEMENTAL ACTUARIAL VALUATIONS.] Any 
supplemental actuarial valuations prepared on behalf of any 
governing or managing board of any pension and retirement fund 
enumerated in section 356.20, subdivision 2, by an approved 
actuary, shall be prepared in accordance with the applicable 
provisions of sections 356.20 to 356.23 and the standards 
adopted by the legislative commission on pensions and 
retirement.  Any pension and retirement fund which prepares an 
alternative actuarial valuation under subdivision 2 shall also 
have a supplemental actuarial valuation prepared.  
    Subd. 2.  [ALTERNATIVE REPORTS AND VALUATIONS.] In addition 
to the financial reports and actuarial valuations required by 
sections 356.20 to 356.23, the governing or managing board 
of the funds any fund concerned may submit alternative reports 
and valuations for distribution to the legislature or, any of 
its commissions or committees, or the legislative commission on 
pensions and retirement on a different basis or on different 
assumptions than are specified in sections 356.20 to 356.23; 
provided.  The assumptions and basis of such any alternative 
reports and valuations are shall be clearly set forth therein 
stated in the document.  
     Sec. 59.  Minnesota Statutes 1986, section 356.41, is 
amended to read: 
    356.41 [BENEFIT ADJUSTMENTS FOR CERTAIN DISABILITY AND 
SURVIVOR BENEFITS.] 
    Disability benefits and survivor benefits payable to a 
disabilitant or, if not otherwise included in the participation 
in the Minnesota postretirement investment fund, and survivor 
benefits payable to a survivor now or hereafter receiving 
benefits from any public pension fund which participates in the 
Minnesota postretirement investment fund shall be adjusted in 
the same manner, at the same times and in the same amounts as 
are benefits payable from the Minnesota postretirement 
investment fund to retirees eligible benefit recipients of that 
public pension fund.  If a disability benefit is not included in 
the participation in the Minnesota postretirement investment 
fund, the disability benefit is recomputed as a retirement 
annuity and the recipient would have been eligible for an 
adjustment pursuant to this section if the disability benefit 
was not recomputed, the recipient will continue to be eligible 
for the adjustment pursuant to this section after the 
recomputation.  For the survivor of a deceased annuitant who 
receives a survivor benefit calculated pursuant to a prior law 
rather than the second portion of a joint and survivor annuity, 
any period of receipt of a retirement annuity by the annuitant 
shall be utilized in determining the period of receipt for 
eligibility to receive an adjustment pursuant to this section.  
No recipient shall, however, be entitled to more than one 
adjustment pursuant to this section or section 11A.18 applicable 
to one benefit at one time by reason of this section. 
    Sec. 60.  Minnesota Statutes 1986, section 356.451, 
subdivision 1, is amended to read: 
    Subdivision 1.  [RESERVE ACCOUNT FOR PROVISIONAL MEMBERS; 
AUTHORIZATION.] Notwithstanding any provisions to the contrary 
of the laws governing the funds enumerated in subdivision 2, any 
person who is employed in subsidized on-the-job training, work 
experience or public service employment as an enrollee under the 
federal Comprehensive Employment and Training Act, who does not 
have as of the later of March 30, 1978 or the date of employment 
sufficient service credit in the retirement fund to meet the 
minimum vesting requirements for a deferred annuity, who 
otherwise meets all of the applicable eligibility requirements 
of the fund and who is designated as such by the city council of 
the city of Minneapolis or the board of education of special 
school district No. 1, whichever is applicable, shall be 
considered a provisional member of the fund.  There shall be 
established a subsidiary reserve account for provisional members 
which shall be managed by the board of trustees of the fund as a 
separate account and which shall not be considered as an asset 
or a liability of the fund.  To this account shall be credited 
all employee and required employer contributions made by or on 
account of provisional members.  A separate record for each 
provisional member shall be maintained showing the length of 
service completed, the accrued employee and required employer 
contributions made by or on account of each provisional member, 
and the actual rate of interest earned on the assets of the 
account.  The assets of the separate account shall be invested 
in the same manner as and subject to the same limitations which 
as are applicable to the general assets of the retirement fund. 
The board of trustees shall remit back to the prime sponsor of 
the federal Comprehensive Employment and Training Act program 
periodically as required by the applicable federal regulation an 
amount equal to the total required employer contributions made 
on account of provisional members who terminate or who are 
terminated from subsidized on-the-job training, work experience 
or public service employment without obtaining unsubsidized 
employment with an employer who employs members who regularly 
have retirement coverage provided by that retirement fund or by 
a retirement fund enumerated in section 356.30, subdivision 3, 
or without obtaining sufficient service credit to become 
entitled to a deferred retirement annuity had they been regular 
members of that retirement fund during the period of their 
provisional membership, plus interest at the rate or rates 
actually earned and in addition any amounts which exceed the 
funds required to cover current provisional members as projected 
by the board of trustees.  Any provisional member who terminates 
or is terminated from subsidized on-the-job training, work 
experience or public service employment without obtaining 
unsubsidized employment with an employer who employs members who 
regularly have retirement coverage provided by that retirement 
fund or by a retirement fund enumerated in section 356.30, 
subdivision 3, or without obtaining sufficient service to become 
entitled to a deferred retirement annuity had the provisional 
member been a regular member of the retirement fund during the 
period of provisional membership shall be entitled upon making 
valid written application to a refund of all employee 
contributions credited to the member in the subsidiary reserve 
account for provisional members, plus interest at the average 
actual rate of interest earned on the assets of the account, but 
not to exceed the rate of 3-1/2 percent per annum compounded 
annually from the date of commencement of provisional 
membership, computed to the first day of the month in which the 
refund is processed, and based on fiscal year balances.  If the 
provisional member obtains unsubsidized employment with an 
employer who employs members who regularly have retirement 
coverage provided by that retirement fund or by a retirement 
fund enumerated in section 356.30, subdivision 3, or obtains 
sufficient service to become entitled to a deferred retirement 
annuity had the period of provisional membership been as a 
regular member, the board of trustees shall transfer the total 
employee and required employer contributions and any interest 
attributable to those contributions to the regular retirement 
fund and shall credit the period of service as a provisional 
member as allowable or formula service.  Unless the provisional 
member becomes a regular member of the same that retirement fund 
or a retirement fund enumerated in section 356.30, subdivision 
3, within the time period allowed under the applicable federal 
regulations following the person's termination of provisional 
status, no period of provisional membership shall be considered 
allowable service for purposes of the combined service annuity 
pursuant to section 356.30 or any service in more than one 
retirement fund provision.  For any former provisional member 
who becomes a regular member of a retirement fund enumerated in 
section 356.30, subdivision 3, the board of trustees shall 
require written certification of the fact of unsubsidized 
employment from the subsequent employer and of the fact of 
regular fund membership from the subsequent retirement fund.  If 
any provisional member obtains service in an amount sufficient 
to entitle the provisional member to a disability benefit or the 
provisional member's survivor to a survivor's benefit had the 
provisional member been a regular member for that period of 
service, then the provisional member or the provisional member's 
survivor shall be entitled to a benefit when otherwise qualified 
notwithstanding the fact that the person was a provisional 
member.  Upon the commencement of such the benefit, an amount 
equal to the contributions and interest credited to the 
provisional member shall be transferred from the reserve account 
for provisional members to the regular fund.  In any actuarial 
valuation made by the fund pursuant to this chapter, the results 
of the subsidiary reserve account for provisional members shall 
be contained in a separate calculation or tabulation.  The 
separate calculation or tabulation shall use the actuarial 
assumptions used by the fund which are appropriate to the 
experience of the subsidiary reserve account for provisional 
members, and shall include the items contained in section 
356.215, subdivisions 4, 4a, 4b, 4f, and 4k. 
    Sec. 61.  Minnesota Statutes 1986, section 422A.01, 
subdivision 6, is amended to read: 
    Subd. 6.  [PRESENT VALUE.] "Present worth" or "present 
value" means that the present amount of money if increased at an 
assumed rate of the applicable postretirement or preretirement 
interest rate assumption specified in section 356.215, 
subdivision 4d and based on the mortality table adopted by the 
board of trustees based on the experience of the fund as 
recommended by the actuary retained by the legislative 
commission on pensions and retirement will at the time of 
retirement equal the cost actuarial accrued liability of the 
annuity already earned. 
    Sec. 62.  Minnesota Statutes 1986, section 422A.01, 
subdivision 7, is amended to read: 
    Subd. 7.  [ACTUARIAL EQUIVALENT.] "Actuarial equivalent" 
means two or more settlements, annuities, or benefits that have 
the same condition of one annuity or benefit having an equal 
present worth or present value as another annuity or benefit. 
    Sec. 63.  Minnesota Statutes 1986, section 422A.01, 
subdivision 10, is amended to read: 
    Subd. 10.  [UNFUNDED ACTUARIAL ACCRUED LIABILITY.] 
"Actuarial deficit" or "actuarial surplus" of an allowance or of 
allowances "Unfunded actuarial accrued liability" means the 
difference between the actuarial accrued liabilities liability 
to date of the allowance or allowances and the corresponding 
assets valued under section 356.215, subdivision 1, clause (6). 
    Sec. 64.  Minnesota Statutes 1986, section 422A.04, 
subdivision 2, is amended to read: 
    Subd. 2.  [ACTUARIAL DATA.] The board shall keep in 
convenient form such any data as shall be necessary for the 
preparation of the annual actuarial valuation of the various 
funds and accounts fund created by sections 422A.01 to 422A.25 
this chapter.  The board actuarial valuations of the fund shall 
be governed by the provisions of chapter 356.  
    Sec. 65.  Minnesota Statutes 1986, section 422A.04, 
subdivision 3, is amended to read: 
    Subd. 3.  [EXPERIENCE DATA AND MORTALITY TABLES.] The board 
shall prepare and keep all any needful tables, records and 
accounts required for carrying out the provisions of sections 
422A.01 to 422A.25, including data showing the mortality and 
disability experience of the officers and employees of the 
service and the date of withdrawal from such service, and any 
other information that may serve as a guide for future actuarial 
valuations and adjustments of in the plan actuarial assumptions 
for the retirement of officers and employees fund.  Mortality 
tables shall be adopted and may be modified from time to time by 
the board based on the experience of the fund as recommended by 
the actuary retained by the legislative commission on pensions 
and retirement as a basis of calculation for retirement 
allowances, which tables may be modified from time to time with 
any recommendation by the actuary retained as a part of the 
permanent records of the board.  
    Sec. 66.  Minnesota Statutes 1986, section 422A.06, 
subdivision 2, is amended to read: 
    Subd. 2.  [ACTUARIAL VALUATIONS REQUIRED.] At the end As of 
July 1 of each class year, an actuarial valuation of the 
retirement fund shall be prepared by the commission-retained 
actuary and filed in conformance with the provisions and 
requirements of sections 356.215 to 356.23.  Experience studies 
shall be prepared at such those times as required by statute, 
required by the standards for actuarial work adopted by the 
legislative commission on pensions and retirement or ordered by 
the board. 
     The board may contract for the services of an approved 
actuary and fix the reasonable compensation for those services.  
Any approved actuary retained by the board shall function as the 
actuarial advisor to the board and may perform actuarial 
valuations and experience studies to supplement those performed 
by the actuary retained by the legislative commission on 
pensions and retirement.  Any supplemental actuarial valuations 
or experience studies shall be filed with the executive director 
of the legislative commission on pensions and retirement.  
    Sec. 67.  Minnesota Statutes 1986, section 422A.06, 
subdivision 5, is amended to read: 
    Subd. 5.  [TRANSFER OF RESERVES TO RETIREMENT BENEFIT FUND; 
ADJUSTMENTS OF ANNUITIES AND BENEFITS.] (a) For those members 
retiring pursuant to this chapter, Assets equal to the required 
reserves for retirement annuities as determined in accordance 
with a the appropriate mortality table appropriate to the 
retirement fund with an adopted by the board of trustees based 
on the experience of the fund as recommended by the 
commission-retained actuary and using the postretirement 
interest assumption set at the rate specified in section 
356.215, subdivision 4d, shall be transferred to the disability 
benefit fund as provided in subdivision 7, or the retirement 
benefit fund, except for any amounts payable from the survivor 
benefit fund, as of date of retirement. 
    (b) Annuity payments shall be adjusted in accordance with 
the provisions of this chapter, except that no minimum 
retirement payments therein described in this chapter shall 
include any amounts payable from the survivors' benefit fund or 
disability benefit fund and supplemented benefits specifically 
financed by statute. 
    (c) Notwithstanding the provisions of section 356.18, 
increases in annuity payments pursuant to this section shall be 
made automatically unless written notice on a form prescribed by 
the board is filed with the retirement board requesting that the 
increase not be made. 
    (d) Any additional annuity which began to accrue on July 1, 
1973 or which began to accrue on January 1, 1974, pursuant to 
Laws 1973, chapter 770, section 1, shall be considered as part 
of the base amount to be used in determining any postretirement 
adjustments payable pursuant to the provisions of subdivision 8. 
    Sec. 68.  Minnesota Statutes 1986, section 422A.06, 
subdivision 7, is amended to read: 
    Subd. 7.  [DISABILITY BENEFIT FUND.] (a) The disability 
benefit fund shall consist of amounts held for payment of 
disability allowances which become effective after December 31, 
1973. required reserves for all disability allowances which 
become effective after such date assets equal to the present 
value of such allowances December 31, 1973, shall be transferred 
from the deposit accumulation fund to the disability benefit 
fund.  A proportionate share of income from investments shall be 
allocated to this fund.  There shall be paid from this fund the 
disability allowances which become effective after December 31, 
1973. 
    (b) In the event of termination of any such disability 
allowance for any reason other than the death of the recipient, 
the present value of such balance of the required reserves for 
the disability allowance as of the date of termination shall be 
transferred from the disability benefit fund to the deposit 
accumulation fund. 
    (c) At the end of each fiscal year an, as part of the 
annual actuarial valuation, a determination shall be made of the 
required reserves for all disability allowances being paid from 
the disability benefit fund.  Any excess of assets over 
actuarial required reserves in the disability benefit fund shall 
be transferred to the deposit accumulation fund.  Any excess of 
actuarial reserves over assets in the disability benefit fund 
shall be funded by a transfer of such excess the appropriate 
amount of assets from the deposit accumulation fund. 
    Sec. 69.  Minnesota Statutes 1986, section 422A.06, 
subdivision 8, is amended to read: 
    Subd. 8.  [RETIREMENT BENEFIT FUND.] The retirement benefit 
fund shall consist of amounts held for payment of retirement 
allowances for members retired pursuant to sections 422A.01 to 
422A.25.  For members retiring after the established date for 
the transfer of assets and liabilities specified in section 
422A.06, subdivision 3, this chapter.  Assets equal to the 
required reserves for retirement allowances pursuant to law this 
chapter determined in accordance with the appropriate mortality 
table adopted by the board of trustees based on the experience 
of the fund as recommended by the commission-retained actuary 
shall be transferred from the deposit accumulation fund to the 
retirement benefit fund as of the last business day of the month 
in which the retirement allowance begins.  All The income from 
investments of these assets shall be allocated to this fund.  
There shall be paid from this fund all the retirement annuities 
authorized by law.  A required reserve calculation for the 
retirement benefit fund must be made by the actuary retained by 
the legislative commission on pensions and retirement and must 
be certified to the retirement board by the commission-retained 
actuary.  The retirement benefit fund shall be governed by the 
applicable laws governing the accounting and audit procedures, 
investment, actuarial requirements, calculation and payment of 
postretirement benefit adjustments, discharge of any deficiency 
in the assets of the fund when compared to the actuarially 
determined required reserves, and other applicable operations 
and procedures regarding the Minnesota postretirement investment 
fund established pursuant to section 11A.18, and any legal or 
administrative interpretations of those laws of the state board 
of investment, the legal advisor to the board of investment and 
the executive director of the state board of investment.  If a 
deferred yield adjustment account is established for the 
Minnesota postretirement investment fund under section 11A.18, 
subdivision 5, the retirement board shall also establish and 
maintain a deferred yield adjustment account within this fund.  
    Annually, following the calculation of any postretirement 
adjustment payable from the retirement benefit fund, the board 
of trustees shall submit a report to the executive director of 
the legislative commission on pensions and retirement and to the 
commissioner of finance indicating the amount of any 
postretirement adjustment and the underlying calculations on 
which that postretirement adjustment amount is based, including 
the amount of dividends, the amount of interest, and the amount 
of net realized capital gains or losses utilized in the 
calculations.  
    Sec. 70.  Minnesota Statutes 1986, section 422A.101, is 
amended to read: 
    422A.101 [PREPARATION OF FINANCIAL REQUIREMENTS OF FUND;  
EMPLOYER CONTRIBUTIONS.] 
    Subdivision 1.  [FINANCIAL REQUIREMENTS OF FUND.] Prior to 
August 31 annually, the retirement board, in consultation with 
the commission-retained actuary, shall prepare an itemized 
statement of the financial requirements of the fund for the 
succeeding fiscal year.  A copy of the statement shall be 
submitted to the city council, the board of estimate and 
taxation of the city, the managing board or chief administrative 
officer of each city owned public utility, improvement project 
or municipal activity supported in whole or in part by revenues 
other than real estate taxes, public corporation, or unit of 
metropolitan government employing members of the fund, the board 
of special school district No. 1, and the state commissioner of 
finance prior to September 15 annually.  The statement shall be 
itemized and shall include the following:  
    (1) an estimate of the administrative expenses of the fund 
for the following year, less any amount which the retirement 
board may charge against the interest income account of the fund 
as the cost of handling the investment securities of the 
fund which shall be determined by multiplying the figure for 
administrative expenses as reported in the most recent actuarial 
valuation prepared by the commission-retained actuary by the 
factor of 1.035;  
    (2) an estimate of the normal cost of the fund expressed as 
a dollar amount, which shall be determined by applying the 
normal cost of the fund as reported in the most recent actuarial 
valuation prepared by the commission-retained actuary and 
expressed as a percentage of covered payroll to the estimated 
total covered payroll of all employees covered by the fund for 
the following year;  
    (3) an estimate of the contribution required to amortize on 
a level annual dollar basis the unfunded actuarial accrued 
liability of the fund by the year June 30, 2017, using an 
interest rate of five percent compounded annually as reported in 
the most recent actuarial valuation, prepared by the 
commission-retained actuary expressed as a dollar amount.  In 
determining the amount of the unfunded actuarial accrued 
liability of the fund, all assets other than the assets of the 
retirement benefit fund shall be valued as current assets as 
defined under section 356.215, subdivision 1, clause (5), and 
the assets of the retirement benefit fund shall be valued equal 
to the actuarially determined required reserves for benefits 
payable from that fund; 
    (4) the amount of any deficiency in the actual amount of 
any employer contribution provided for in this section when 
compared to the required contribution amount certified for the 
previous year, plus interest on the amount at the rate of six 
percent per annum.  
    Subd. 1a.  [CITY CONTRIBUTIONS.] Prior to August 31 of each 
year, the retirement board shall prepare an itemized statement 
of the financial requirements of the fund payable by the city 
for the succeeding fiscal year, and a copy of the statement 
shall be submitted to the board of estimate and taxation and to 
the city council by September 15.  The financial requirements of 
the fund payable by the city shall be calculated as follows: 
     (a) a regular employer contribution of an amount equal to 
the percentage rounded to the nearest two decimal places of the 
salaries and wages of all employees covered by the retirement 
fund which equals the difference between the level normal cost 
plus administrative cost as reported in the annual actuarial 
valuation prepared by the commission-retained actuary and the 
employee contributions provided for in section 422A.10 less any 
amounts contributed toward the payment of the balance of the 
normal cost not paid by employee contributions by any city owned 
public utility, improvement project, other municipal activities 
supported in whole or in part by revenues other than real estate 
taxes, any public corporation, any employing unit of 
metropolitan government, or by special school district number 1 
pursuant to subdivision 2; 
    (b) an additional employer contribution of an amount equal 
to the percent specified in section 353.27, subdivision 3a, 
clause (a), multiplied by the salaries and wages of all 
employees covered by the retirement fund less any amounts 
contributed toward amortization of the unfunded actuarial 
accrued liability by the year June 30, 2017, attributable to 
their respective covered employees by any city owned public 
utility, improvement project, other municipal activities 
supported in whole or in part by revenues other than real estate 
taxes, any public corporation, any employing unit of 
metropolitan government, or by Special School District No. 1 
pursuant to subdivision 2; and 
    (c) a proportional share of an additional employer 
amortization contribution of an amount equal to $3,900,000 
annually until the year June 30, 2017, based upon the share of 
the fund's unfunded actuarial accrued liability attributed to 
the city as disclosed in the annual actuarial valuation prepared 
by the commission-retained actuary.  
    The city council shall, in addition to all other taxes 
levied by the city, annually levy a tax equal to the amount of 
the financial requirements of the fund which are payable by the 
city.  The tax, when levied, shall be extended upon the county 
lists and shall be collected and enforced in the same manner as 
other taxes levied by the city.  If the city does not levy a tax 
sufficient to meet the requirements of this subdivision, the 
retirement board shall submit the tax levy statement directly to 
the county auditor, who shall levy the tax.  The tax, when 
levied, shall be extended upon the county lists and shall be 
collected and paid into the city treasury to the credit of the 
retirement fund.  Any amount to the credit of the retirement 
fund shall constitute a special fund and shall be used only for 
the payment of obligations authorized pursuant to this chapter.  
    Subd. 2.  [CONTRIBUTIONS BY OR FOR CITY-OWNED PUBLIC 
UTILITIES, IMPROVEMENTS, OR MUNICIPAL ACTIVITIES.] Contributions 
by or for any city-owned public utility, improvement project and 
other municipal activities supported in whole or in part by 
revenues other than real estate taxes, any public corporation, 
any employing unit of metropolitan government, special school 
district No. 1 or Hennepin county, on account of any employee 
covered by the fund shall be calculated as follows: 
    (a) a regular employer contribution of an amount equal to 
the percentage rounded to the nearest two decimal places of the 
salaries and wages of all employees of the employing unit 
covered by the retirement fund which equals the difference 
between the level normal cost plus administrative cost reported 
in the annual actuarial valuation prepared by the 
commission-retained actuary and the employee contributions 
provided for in section 422A.10; 
    (b) an additional employer contribution of an amount equal 
to the percent specified in section 353.27, subdivision 3a, 
clause (a), multiplied by the salaries and wages of all 
employees of the employing unit covered by the retirement fund; 
    (c) a proportional share of an additional employer 
amortization contribution of an amount equal to $3,900,000 
annually until the year June 30, 2017, based upon the share of 
the fund's unfunded actuarial accrued liability attributed to 
the employer as disclosed in the annual actuarial 
valuation prepared by the commission-retained actuary. 
    The city council or any board or commission may, by proper 
action, provide for the inclusion of the cost of the retirement 
contributions for employees of any city-owned public utility or 
for persons employed in any improvement project or other 
municipal activity supported in whole or in part by revenues 
other than taxes who are covered by the retirement fund in the 
cost of operating the utility, improvement project or municipal 
activity.  The cost of retirement contributions for these 
employees shall be determined by the retirement board and the 
respective governing bodies having jurisdiction over the 
financing of these operating costs.  
    The cost of the employer contributions on behalf of 
employees of special school district No. 1 who are covered by 
the retirement fund shall be the obligation of the school 
district.  The retirement board shall prepare an itemized 
statement of the financial requirements of the fund payable by 
the school district, which shall be submitted prior to September 
15.  Contributions by the school district shall be made at times 
designated by the retirement board.  The school district may 
levy for its contribution to the retirement fund only to the 
extent permitted pursuant to section 275.125, subdivision 6a.  
    The cost of the employer contributions on behalf of 
elective officers or other employees of Hennepin county who are 
covered by the retirement fund pursuant to section 422A.09, 
subdivision 3, clause (2), 422A.22, subdivision 2, or 488A.115, 
or Laws 1973, chapter 380, section 3, Laws 1975, chapter 402, 
section 2, or any other applicable law shall be the obligation 
of Hennepin county.  The retirement board shall prepare an 
itemized statement of the financial requirements of the fund 
payable by Hennepin county, which shall be submitted prior to 
September 15.  Contributions by Hennepin county shall be made at 
times designated by the retirement board.  Hennepin county may 
levy for its contribution to the retirement fund.  
    Subd. 2a.  [CONTRIBUTIONS BY METROPOLITAN AIRPORT 
COMMISSION AND METROPOLITAN WASTE CONTROL COMMISSION.] The 
metropolitan airport commission and the waste control commission 
shall pay to the Minneapolis employees retirement fund annually 
in installments as specified in subdivision 3 the share of the 
additional support rate required for full amortization of the 
unfunded actuarial accrued liabilities by the year June 30, 
2017, that is attributable to airport commission or waste 
control commission employees who are members of the fund.  The 
amount of the payment is shall be determined by utilizing the 
most recent actuarial valuation, as calculated prepared by the 
actuary for retained by the legislative commission on pensions 
and retirement. 
    Subd. 3.  [STATE CONTRIBUTIONS.] The state shall pay to the 
Minneapolis employees retirement fund annually an amount equal 
to the financial requirements of the Minneapolis employees 
retirement fund reported by the actuary in the actuarial 
valuation of the fund prepared by the commission-retained 
actuary pursuant to section 356.215 for the most recent year but 
based on a target date for full amortization of the 
unfunded actuarial accrued liabilities by the year June 30, 
2017, less the amount of employee contributions required 
pursuant to section 422A.10, and the amount of employer 
contributions required pursuant to subdivisions 1a, 2, and 2a.  
Payments shall be made in four equal installments, occurring on 
March 15, July 15, September 15, and November 15 annually. 
    Sec. 71.  Minnesota Statutes 1986, section 422A.15, 
subdivision 2, is amended to read: 
    Subd. 2.  [WITHDRAWAL OF VOLUNTARY CONTRIBUTIONS.] 
Voluntary additions to the employee's deposits made by the 
employee under the provisions of section 422A.10 may be 
withdrawn by the retiring employee or, with the approval of the 
retirement board, applied to the purchase of an additional 
annuity computed and determined under a procedure specified by 
the actuary in accordance with retained by the legislative 
commission on pensions and retirement utilizing the same 
assumptions used by the fund appropriate mortality table 
established by the board of trustees based on the experience of 
the fund as recommended by the commission-retained actuary and 
using the applicable postretirement interest rate assumption 
specified in section 356.215, subdivision 4d.  
    Sec. 72.  Minnesota Statutes 1986, section 422A.15, 
subdivision 3, is amended to read: 
    Subd. 3. [OPTIONAL DEFINED CONTRIBUTION ANNUITY.] In lieu 
of the formula pension and annuity, each a person who was a 
contributing member on the effective date of this act April 28, 
1973, who is eligible to retire and who ceases to be employed 
and who qualifies for retirement shall have the option of 
electing to receive what shall be a retirement allowance known 
as "the $2 bill and annuity".  
    If a member of the contributing class makes the election 
herein provided for in this section, the member shall receive a 
minimum pension of $2 per month for each year of service.  The 
pension shall be the actuarial equivalent of the accumulated 
amounts of such the annual installments as may be now or 
hereafter fixed and designated by law throughout the period of 
service of the retiring employee, not to exceed 25 years, 
accumulated to the date of retirement at six percent compound 
interest, and such extra credit to be furnished provided by the 
city as will produce such the minimum pension of $2 per month 
for each year of service.  The pension shall be in addition to 
the annuity.  The annuity shall be in the actuarial equivalent 
of the net accumulated contributions for to the credit of the 
retiring employee, calculated at the date of retirement.  For 
the purposes of sections 422A.01 to 422A.25 this chapter, the 
"service allowance" for members of the contributing class shall 
consist of an "annuity" and a "pension".  
    The pension provided for herein shall be the actuarial 
equivalent of the accumulated annual installments of $2 per 
month for each year of service.  The sum of $2 shall be computed 
under the as a single life plan annuity, and subject to 
the same option selections provided for in section 422A.17.  The 
pension and annuity provided for herein in this subdivision 
shall be first paid from the contributing member's own 
contributions and normal earned credits, plus interest, 
until such those credits are exhausted.  
    The retirement allowance provided under this subdivision or 
any optional annuity form of the retirement allowance shall be 
computed and determined under a procedure specified by the 
commission-retained actuary utilizing the appropriate mortality 
table established by the board of trustees based on the 
experience of the fund as recommended by the actuary retained by 
the legislative commission on pensions and retirement and using 
the applicable postretirement interest rate assumption specified 
in section 356.215, subdivision 4d. 
    Sec. 73.  Minnesota Statutes 1986, section 422A.16, 
subdivision 2, is amended to read: 
    Subd. 2.  [DEFERRED DEFINED CONTRIBUTION ANNUITY.] A person 
who is a member of the contributing class on the effective date 
of this act April 28, 1973, and who makes the election herein 
provided for in this subdivision and in subdivision 1 provided 
for, may, upon attaining the age of 55 years, but before 
attaining the age of 65 years, or someone acting in the member's 
behalf, may make application to receive such the retirement 
allowance as is provided for in section 422A.15, subdivision 
3, or an optional retirement allowance in the manner provided 
for by section 422A.17.  Such The retirement allowance shall be 
the actuarial equivalent of the city's contribution and the 
member's deposit, as they were on the date the separation 
becomes permanent, plus interest, as provided for in section 
422A.12. 
    The retirement allowance provided under this subdivision or 
any optional annuity form of the retirement allowance shall be 
computed and determined under a procedure specified by the 
commission-retained actuary utilizing the appropriate mortality 
table established by the board of trustees based on the 
experience of the fund as recommended by the commission-retained 
actuary and using the applicable postretirement interest rate 
assumption specified in section 356.215, subdivision 4d. 
    Sec. 74.  Minnesota Statutes 1986, section 422A.16, 
subdivision 3a, is amended to read: 
    Subd. 3a.  [DEATH WHILE DEFERRED SURVIVOR BENEFIT.] If a 
contributing member person who has become permanently separated 
from the service of the city after 20 or more years of service 
as a contributing member, has at the time of separation allowed 
the member's contributions to the fund to remain on deposit, and 
has filed a written request with the board on prescribed forms, 
dies prior to before the effective date of retirement as 
determined by the board, the board shall pay a monthly allowance 
for life to the surviving spouse of the employee, in lieu of the 
city credit referred to in section 422A.23.  The monthly 
allowance herein provided for in this subdivision shall be the 
actuarial equivalent of a single life service allowance 
specified in section 422A.15, subdivision 1, which would have 
been payable to the employee person on the date of death, 
notwithstanding the age requirement stated therein in section 
422A.15, subdivision 1.  For purposes of this subdivision, the 
amount of any excess contributions or voluntary additions by the 
member person shall not be included in determining the monthly 
allowance. 
    The surviving spouse allowance under this subdivision shall 
be computed and determined under a procedure specified by the 
commission-retained actuary utilizing the appropriate mortality 
table established by the board of trustees based on the 
experience of the fund as recommended by the commission-retained 
actuary and using the applicable postretirement interest rate 
assumption specified in section 356.215, subdivision 4d. 
    Sec. 75.  Minnesota Statutes 1986, section 422A.16, 
subdivision 10, is amended to read: 
    Subd. 10.  [DEFERRED ALLOWANCE AUGMENTATION.] All Deferred 
allowances granted under this section shall be calculated as of 
the date of separation and shall be increased by the 
interest assumption rate provided for in chapter 356 of five 
percent per year until January 1, 1981, and thereafter by the 
interest rate of three percent per year, compounded annually. 
    Sec. 76.  Minnesota Statutes 1986, section 422A.17, is 
amended to read: 
    422A.17 [RETIREMENT ALLOWANCE; OPTIONS.] 
    At the time of retirement, any employee who is eligible to 
receive a service allowance may elect to receive benefits in a 
retirement allowance payable throughout life or may on 
retirement elect to receive the actuarial equivalent at that 
time of annuity, pension, or retirement allowance in a lesser 
annuity, or a lesser pension, or a lesser retirement allowance, 
payable throughout life, with the provisions that: 
    Option I.  If the beneficiary benefit recipient dies before 
receiving in payments an amount equal to the present value of 
the beneficiary's benefit recipient's annuity, pension, or 
retirement allowance, as it was at of the time date of the 
beneficiary's benefit recipient's retirement, the balance shall 
be paid to the beneficiary's benefit recipient's legal 
representatives or to such person, having an insurable interest 
in the beneficiary's benefit recipient's life, as the 
beneficiary benefit recipient shall nominate by written 
designation duly acknowledged and filed with the retirement 
board at the time as of the date of retirement, or 
    Option II.  Upon the death of the beneficiary benefit 
recipient, the beneficiary's benefit recipient's annuity, 
pension, or retirement allowance shall be continued throughout 
the life of and paid to such the person, having an insurable 
interest in the beneficiary's benefit recipient's life, as the 
beneficiary benefit recipient shall nominate by written 
designation duly acknowledged and filed with the retirement 
board at as of the time date of retirement, or 
    Option III.  Upon death of the beneficiary benefit 
recipient, one-half of the beneficiary's benefit recipient's 
annuity, pension, or retirement allowance shall be continued 
throughout the life of and paid to such the person, having an 
insurable interest in the beneficiary's benefit recipient's 
life, as the beneficiary benefit recipient shall nominate by 
written designation duly acknowledged and filed with the 
retirement board at as of the time date of retirement, or 
    Option IV.  Other benefits optional retirement allowance 
forms shall be paid to the beneficiary benefit recipient or 
such other person or persons as the beneficiary benefit 
recipient shall nominate nominates, provided such other benefits 
shall be certified by the executive director of the retirement 
board to be that the optional annuity is of equivalent actuarial 
value to the applicable single life annuity calculated under 
section 422A.15 and is approved by the retirement board.  
    Any optional retirement allowance shall be computed and 
determined under a procedure specified by the 
commission-retained actuary utilizing the appropriate mortality 
table established by the board of trustees based on the 
experience of the fund as recommended by the commission-retained 
actuary and using the applicable postretirement interest rate 
assumption specified in section 356.215, subdivision 4d. 
    In adopting optional annuity forms, the board of trustees 
shall obtain the written recommendation of the 
commission-retained actuary.  The recommendations shall be a 
part of the permanent records of the board of trustees. 
    Sec. 77.  Minnesota Statutes 1986, section 422A.23, 
subdivision 6, is amended to read: 
    Subd. 6.  [SURVIVOR BENEFIT EMPLOYEE CONTRIBUTION.] The 
retirement board shall create a reserve account for survivor's 
benefits from which shall be paid on an actuarial basis all such 
survivor benefits due and payable.  The board shall cause an At 
the end of each fiscal year, as part of the annual actuarial 
valuation of the fund prepared by the commission-retained 
actuary, a determination of the normal cost of the benefits 
payable from the survivor's benefit account to shall be made by 
the board's actuary, and the board shall reduce or increase 
the employee contribution rate of one fourth of one percent if 
and when it is actuarially determined based on the annual 
actuarial valuation that such the member contribution rate is in 
excess of or is less than the amount necessary to pay for 50 
percent of the calculated normal cost of the survivor benefits 
herein provided in this section. 
    Sec. 78.  Minnesota Statutes 1986, section 422A.23, 
subdivision 7, is amended to read: 
    Subd. 7.  [ACTIVE MEMBER SURVIVOR COVERAGE.] If the 
contributing member dies after having been in the service of the 
city 20 or more years, and before the effective date of 
retirement, as determined by the retirement board, such the 
board shall pay a monthly allowance for life to the designated 
beneficiary of such the employee.  The monthly allowance herein 
provided for shall be the actuarial equivalent of a single life 
service allowance specified in section 422A.15, subdivision 1, 
which would have been payable to the employee on the date of 
death, notwithstanding the age requirement stated therein in 
section 422A.15, subdivision 1.  For purposes of this section, 
the amount of any excess contributions or voluntary additions by 
the member shall not be included in the calculations in 
determining the monthly allowance. 
    The survivor allowance under this subdivision shall be 
computed and determined under a procedure specified by the 
commission-retained actuary utilizing the appropriate mortality 
table established by the board of trustees based on the 
experience of the fund as recommended by the commission-retained 
actuary and using the applicable postretirement interest rate 
assumption specified in section 356.215, subdivision 4d. 
    Sec. 79.  Minnesota Statutes 1986, section 490.121, 
subdivision 20, is amended to read: 
    Subd. 20.  [ACTUARIAL EQUIVALENT.] "Actuarial equivalent" 
means the annual amount determined by calculations based on 
mortality tables, purchasable with a given amount at a stated 
age condition of one annuity or benefit having an equal 
actuarial present value as another annuity or benefit, 
determined as of a given date with each actuarial present value 
based on the appropriate mortality table adopted by the board of 
trustees based on the experience of the fund as recommended by 
the commission-retained actuary and using the applicable 
preretirement or postretirement interest rate assumption 
specified in section 356.215, subdivision 4d. 
    Sec. 80.  Minnesota Statutes 1986, section 490.124, 
subdivision 11, is amended to read: 
    Subd. 11.  [OPTIONAL ANNUITIES.] There shall be no survivor 
or death benefits in connection with the death of a judge who 
retires after December 31, 1973, except as otherwise provided 
herein in sections 490.121 to 490.132.  Within 30 days prior to 
such before retirement, except as provided in subdivision 10, a 
judge may elect to receive, in lieu of the normal retirement 
annuity, an optional annuities retirement annuity which shall 
take the form of either an annuity payable for a period certain 
and for life thereafter or a joint and survivor annuity.  Such 
The optional annuities retirement annuity shall be actuarially 
equivalent to an a single life annuity for life, with no term 
certain, and shall be established by the governing body board of 
directors of the Minnesota state retirement system upon.  In 
establishing these optional retirement annuity forms, the board 
shall obtain the written recommendation of an approved the 
actuary retained by the legislative commission on pensions and 
retirement.  The recommendations shall be a part of the 
permanent records of the board. 
    Sec. 81.  [TRANSITIONAL PROVISION.] 
     In establishing the correctional employees retirement fund 
under section 20, the board of directors of the Minnesota state 
retirement system shall allocate the assets currently held by 
the state employees retirement fund between that fund and the 
newly created fund.  The assets shall be allocated based on the 
actuarial valuations of the state employees retirement plan and 
the correctional employees retirement plan prepared by the 
actuary retained by the legislative commission on pensions and 
retirement as of July 1, 1986, and adjusted for the actual 
receipts of contributions and investment income and actual 
disbursements of benefits, refunds, and administrative expenses 
attributable to the correctional employees retirement plan 
occurring between July 1, 1987, and the date on which the 
correctional employees retirement fund is established. 
     Sec. 82.  [TEMPORARY PROVISION.] 
    The provisions of sections 11, 12, 14 to 16, 23, 25, 28 to 
30, 33, 35 to 38, 40, 44, 46, 47, 49, 61, 62, 65, 69, 71 to 74, 
and 78 to 80 may not be construed to require any immediate 
change in current actuarial assumptions, optional annuity forms, 
optional annuity factors, and early retirement reduction factors 
and shall only apply to any changes in these items after the 
effective date of this section and may not be construed to 
require any change without a significant deviation from actual 
experience. 
    Sec. 83.  [REPEALER.] 
    Minnesota Statutes 1986, section 352B.26, subdivision 2, is 
repealed. 
    Sec. 84.  [EFFECTIVE DATE.] 
    Sections 1 to 19 and 21 to 83 are effective on the day 
following final enactment.  Section 20 is effective as soon as 
is practicable following final enactment. 
    Approved May 27, 1987