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Minnesota Legislature

Office of the Revisor of Statutes

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

  

                         Laws of Minnesota 1992 

                        CHAPTER 539-S.F.No. 1917 
           An act relating to the state board of investment; 
          management of funds under board control; authorizing 
          certain investments by the board; amending Minnesota 
          Statutes 1990, sections 11A.14, subdivision 2; 11A.16, 
          subdivision 5; 11A.17, subdivisions 1, 4, 9, 14, and 
          by adding a subdivision; 11A.18, subdivision 11; 
          116P.11; 352D.04, subdivision 1; 352D.09, subdivision 
          7; and 354B.05, subdivision 3; Minnesota Statutes 1991 
          Supplement, sections 11A.24, subdivision 4; 353D.05, 
          subdivisions 2 and 3; and 354B.07, subdivision 2.  
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1990, section 11A.14, 
subdivision 2, is amended to read: 
    Subd. 2.  [ASSETS.] The assets of the combined investment 
funds shall consist of the money certified to and received by 
the state board from participating retirement plans and funds 
which shall be used to purchase investment shares in the 
appropriate investment accounts.  Each participating fund shall 
own an undivided participation in all the assets of the 
particular accounts of the combined funds in which it 
participates.  As of any date, the total claim of a 
participating fund on the assets in each account shall be equal 
to the ratio of units owned by a fund in each account to the 
total issued units then outstanding.  
    Sec. 2.  Minnesota Statutes 1990, section 11A.16, 
subdivision 5, is amended to read: 
    Subd. 5.  [CALCULATION OF INCOME.] As of the end of each 
fiscal year, the state board shall calculate the investment 
income earned by the permanent school fund.  The investment 
income earned by the fund shall equal the amount of interest on 
debt securities and dividends on equity securities.  Gains and 
losses arising from the sale of securities shall be apportioned 
as follows:  
    (a) If the sale of securities results in a net gain during 
a fiscal year, the gain shall be apportioned in equal 
installments over the next ten fiscal years to offset net losses 
in those years.  If any portion of an installment is not needed 
to recover subsequent losses identified in paragraph (b) it 
shall be added to the principal of the fund.  
    (b) If the sale of securities results in a net loss during 
a fiscal year, the net loss shall be recovered first from the 
gains in paragraph (a) apportioned to that fiscal year.  If 
these gains are insufficient, any remaining net loss shall be 
recovered from interest and dividend income in equal 
installments over a period equal to (a) the average period prior 
to maturity remaining on the debt securities which were sold if 
the sale of debt securities resulted in the loss, or (b) over a 
period of five years if the sale of equity securities resulted 
in the loss unless there is a net gain in the sale of securities 
sufficient to eliminate the amount of the loss prior to the end 
of the period.  In any fiscal year in which gains on the sale of 
securities exceed the losses on the sales of securities, the 
excess shall be added to the principal of the fund the following 
ten fiscal years.  
    Sec. 3.  Minnesota Statutes 1990, section 11A.17, 
subdivision 1, is amended to read: 
    Subdivision 1.  [PURPOSE.] The purpose of the supplemental 
investment fund is to provide an investment vehicle for the 
assets of various public retirement plans and funds.  The fund 
consists of six investment accounts:  an income share account, a 
growth share account, a money market account, a guaranteed 
return fixed interest account, a bond market account, and a 
common stock index account.  The supplemental investment fund is 
a continuation of the supplemental retirement fund in existence 
on January 1, 1980. 
    Sec. 4.  Minnesota Statutes 1990, section 11A.17, 
subdivision 4, is amended to read: 
    Subd. 4.  [INVESTMENT.] The assets of the supplemental 
investment fund must be invested by the state board subject to 
section 11A.24; provided, however, that: 
    (1) the bond market account and the money market account 
must be invested entirely in debt obligations; 
    (2) the growth share account and the common stock index 
account may be invested entirely in corporate stocks; and 
    (3) the guaranteed return fixed interest account may be 
invested entirely in guaranteed investment contracts and debt 
obligations. 
    Sec. 5.  Minnesota Statutes 1990, section 11A.17, 
subdivision 9, is amended to read: 
    Subd. 9.  [VALUATION OF INVESTMENT SHARES.] The value of 
investment shares in the income share account, the growth share 
account, the bond market account, and the common stock index 
account must be determined by dividing the total market value of 
the securities constituting the respective account by the total 
number of shares then outstanding in the investment account.  
The value of investment shares in the money market account and 
the guaranteed return fixed interest account is $1 a share.  
Terms as to withdrawal schedules will be agreed upon by the 
public retirement fund and the state board. 
    Sec. 6.  Minnesota Statutes 1990, section 11A.17, is 
amended by adding a subdivision to read: 
    Subd. 10a.  [DISTRIBUTION OF EARNINGS.] Once each month the 
state board shall deduct from the investment earnings of each 
account an amount equal to one-twelfth of an annual charge equal 
to one-tenth of one percent of the assets in each account.  
Unless otherwise directed by the participating plan or fund, the 
state board shall distribute the deductions to participating 
plans or funds to pay administrative expenses.  Any deductions 
not distributed must be used to purchase additional units in the 
accounts. 
    Sec. 7.  Minnesota Statutes 1990, section 11A.17, 
subdivision 14, is amended to read: 
    Subd. 14.  [PROCEDURES FOR DISTRIBUTION OF INCOME FOR MONEY 
MARKET ACCOUNT, AND GUARANTEED RETURN FIXED INTEREST ACCOUNT.] 
At the end of each fiscal year, and at other times that the 
state board might determine appropriate month, the state board 
shall determine the earnings of the money market account and the 
guaranteed return fixed interest account and deduct from the 
earnings an amount equal to one-twelfth of an annual charge 
equal to one-tenth of one percent of the assets in each 
account.  The Unless otherwise directed by the participating 
plan or fund, the state board shall distribute the deductions to 
participating plans or funds to pay administrative expenses.  
Any earnings not deducted and distributed must be used to 
purchase additional shares in the respective accounts on behalf 
of each participating public retirement plan or fund. 
    Sec. 8.  Minnesota Statutes 1990, 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 shall 
calculate the amount of required reserves representing any 
mortality gains and any mortality losses incurred by 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 preretirement interest assumption for the 
participating plan or fund as specified in section 356.215, 
subdivision 4d, stated as a monthly rate.  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. 9.  Minnesota Statutes 1991 Supplement, section 
11A.24, subdivision 4, is amended to read: 
    Subd. 4.  [OTHER OBLIGATIONS.] (a) The state board may 
invest funds in bankers acceptances, certificates of deposit, 
deposit notes, commercial paper, mortgage participation 
certificates and pools, repurchase agreements and reverse 
repurchase agreements, guaranteed investment contracts, savings 
accounts, and guaranty fund certificates, surplus notes, or 
debentures of domestic mutual insurance companies if they 
conform to the following provisions: 
    (1) bankers acceptances and deposit notes of United States 
banks are limited to those issued by banks rated in the highest 
four quality categories by a nationally recognized rating 
agency; 
    (2) certificates of deposit are limited to those issued by 
United States banks and savings institutions that are rated in 
the highest four quality categories by a nationally recognized 
rating agency or whose certificates of deposit are fully insured 
by federal agencies; 
    (3) commercial paper is limited to those issued by United 
States corporations or their Canadian subsidiaries and rated in 
the highest two quality categories by a nationally recognized 
rating agency; 
    (4) mortgage participation or pass through certificates 
evidencing interests in pools of first mortgages or trust deeds 
on improved real estate located in the United States where the 
loan to value ratio for each loan as calculated in accordance 
with section 61A.28, subdivision 3, does not exceed 80 percent 
for fully amortizable residential properties and in all other 
respects meets the requirements of section 61A.28, subdivision 
3; 
    (5) collateral for repurchase agreements and reverse 
repurchase agreements is limited to letters of credit and 
securities authorized in this section; 
    (6) guaranteed investment contracts are limited to those 
issued by insurance companies or banks rated in the top four 
quality categories by a nationally recognized rating agency or 
to alternative guaranteed investment contracts where the 
underlying assets comply with the requirements of this section; 
and 
    (7) savings accounts are limited to those fully insured by 
federal agencies. 
    (b) Sections 16A.58 and 16B.06 do not apply to 
certifications certificates of deposit and collateralization 
agreements executed by the state board under paragraph (a), 
clause (2). 
    (c) In addition to investments authorized by paragraph (a), 
clause (4), the state board may purchase from the Minnesota 
housing finance agency all or any part of a pool of residential 
mortgages, not in default, that has previously been financed by 
the issuance of bonds or notes of the agency.  The state board 
may also enter into a commitment with the agency, at the time of 
any issue of bonds or notes, to purchase at a specified future 
date, not exceeding 12 years from the date of the issue, the 
amount of mortgage loans then outstanding and not in default 
that have been made or purchased from the proceeds of the bonds 
or notes.  The state board may charge reasonable fees for any 
such commitment and may agree to purchase the mortgage loans at 
a price sufficient to produce a yield to the state board 
comparable, in its judgment, to the yield available on similar 
mortgage loans at the date of the bonds or notes.  The state 
board may also enter into agreements with the agency for the 
investment of any portion of the funds of the agency.  The 
agreement must cover the period of the investment, withdrawal 
privileges, and any guaranteed rate of return. 
    Sec. 10.  Minnesota Statutes 1990, section 116P.11, is 
amended to read: 
    116P.11 [AVAILABILITY OF FUNDS FOR DISBURSEMENT.] 
    (a) The amount biennially available from the trust fund for 
the budget plan developed by the commission consists of the 
interest earnings generated from the trust fund.  Interest 
earnings generated from the trust fund shall equal the amount of 
interest on debt securities and dividends on equity securities.  
Gains and losses arising from the sale of securities shall be 
apportioned as follows:  
    (1) if the sale of securities results in a net gain during 
a fiscal year, the gain shall be apportioned in equal 
installments over the next ten fiscal years to offset net losses 
in those years.  If any portion of an installment is not needed 
to recover subsequent losses identified in paragraph (b), it 
shall be added to the principal of the fund; and 
    (2) if the sale of securities results in a net loss during 
a fiscal year, the net loss shall be recovered from the gains in 
paragraph (a) apportioned to that fiscal year.  If such gains 
are insufficient, any remaining net loss shall be recovered from 
interest and dividend income in equal installments over the 
following five fiscal years.  
    (b) For funding projects through fiscal year 1997, the 
following additional amounts are available from the trust fund 
for the budget plans developed by the commission:  
    (1) for the 1991-1993 biennium, up to 25 percent of the 
revenue deposited in the trust fund in fiscal years 1990 and 
1991; 
    (2) for the 1993-1995 biennium, up to 20 percent of the 
revenue deposited in the trust fund in fiscal year 1992 and up 
to 15 percent of the revenue deposited in the fund in fiscal 
year 1993; and 
    (3) for the 1995-1997 biennium, up to ten percent of the 
revenue deposited in the fund in fiscal year 1994 and up to five 
percent of the revenue deposited in the fund in fiscal year 1995.
    (c) Any appropriated funds not encumbered in the biennium 
in which they are appropriated cancel and must be credited to 
the principal of the trust fund. 
    Sec. 11.  Minnesota Statutes 1990, section 352D.04, 
subdivision 1, is amended to read: 
    Subdivision 1.  (a) An employee exercising an option to 
participate in the retirement program provided by this chapter 
may elect to purchase shares in one or a combination of the 
income share account, the growth share account, the money market 
account, the bond market account, the guaranteed return fixed 
interest account, or the common stock index account established 
in section 11A.17.  The employee may elect to participate in one 
or more of the investment accounts in the fund by specifying, on 
a form provided by the executive director, the percentage of the 
employee's contributions provided in subdivision 2 to be used to 
purchase shares in each of the accounts. 
    (b) Twice in any calendar year, a participant may indicate 
in writing on forms provided by the Minnesota state retirement 
system a choice of options for subsequent purchases of shares.  
Until a different written indication is made by the participant, 
the executive director shall purchase shares in the supplemental 
fund as selected by the participant.  If no initial option is 
chosen, 100 percent income shares must be purchased for a 
participant.  A change in choice of investment option is 
effective no later than the first pay date first occurring after 
30 days following the receipt of the request for a change. 
    (c) One month before the start of a new guaranteed 
investment contract, a participant or former participant may 
elect to transfer all or a portion of the participant's shares 
previously purchased in the income share, growth share, common 
stock index, bond market, or money market accounts to the new 
guaranteed investment contract in the guaranteed return fixed 
interest account. Upon expiration of a guaranteed investment 
contract, the participant's shares attributable to that contract 
must be transferred to a new guaranteed investment contract 
unless the executive director is otherwise directed by the 
participant.  Shares in the guaranteed return fixed interest 
account may not be withdrawn from the fund or transferred to 
another account until the guaranteed investment contract has 
expired, unless the participant qualifies for withdrawal under 
section 352D.05 or for benefit payments under sections 352D.06 
to 352D.075. 
    (d) Twice in any calendar year a participant or former 
participant may also change the investment options selected for 
all or a portion of the participant's shares previously 
purchased in accounts other than the guaranteed return fixed 
interest account.  Changes in investment options for the 
participant's shares must be effected as soon as cash flow to an 
account practically permits, but not later than six months after 
the requested change. 
    Sec. 12.  Minnesota Statutes 1990, section 352D.09, 
subdivision 7, is amended to read: 
    Subd. 7.  Up to one-tenth of one percent of salary shall be 
deducted from the employee contributions and up to one-tenth of 
one percent of salary from the employer contributions authorized 
by section 352D.04, subdivision 2, to pay the administrative 
expenses of the unclassified program. 
    Sec. 13.  Minnesota Statutes 1991 Supplement, section 
353D.05, subdivision 2, is amended to read: 
    Subd. 2.  [INVESTMENT OPTIONS.] (a) A participant may elect 
to purchase shares in the income share account, the growth share 
account, the money market account, the bond market account, 
the guaranteed return fixed interest account, or the common 
stock index account established by section 11A.17, or a 
combination of those accounts.  The participant may elect to 
purchase shares in a combination of those accounts by specifying 
the percentage of the total contributions and ambulance service 
personnel incentive allocation to be used to purchase shares in 
each of the accounts. 
    (b) A participant may indicate in writing a choice of 
options for subsequent purchases of shares.  After a choice is 
made, until the participant makes a different written 
indication, the executive director of the association shall 
purchase shares in the supplemental investment fund or funds 
specified by the participant.  If no initial option is indicated 
by a participant or the specifications made by the participant 
exceed 100 percent to be invested in more than one account, the 
executive director shall invest all contributions made by or on 
behalf of a participant in the income share account.  If the 
specifications are less than 100 percent, the executive director 
shall invest the remaining percentage in the income share 
account.  A choice of investment options is effective no later 
than the first pay date occurring more than 30 days after 
receipt of the written choice of options. 
    (c) One month before the start of a new guaranteed 
investment contract, a participant may elect to transfer all or 
a portion of the participant's shares previously purchased in 
the income share, growth share, common stock index, bond market, 
or money market accounts to the new guaranteed investment 
contract in the guaranteed return fixed interest account.  Upon 
expiration of a guaranteed investment contract, the 
participant's shares attributable to that contract must be 
transferred to a new guaranteed investment contract unless the 
executive director is otherwise directed by the participant.  
Shares in the guaranteed return fixed interest account may not 
be withdrawn from the fund or transferred to another account 
until the guaranteed investment contract has expired, unless the 
participant qualifies for a benefit payment under section 
353D.07. 
    (d) A participant or former participant may also change the 
investment options selected for all or a portion of the 
individual's previously purchased shares in accounts other than 
the guaranteed return account.  A change under this paragraph is 
effective as soon as cash flow to an account permits, but not 
later than six months from the requested change. 
    Sec. 14.  Minnesota Statutes 1991 Supplement, section 
353D.05, subdivision 3, is amended to read: 
    Subd. 3.  [ADMINISTRATIVE EXPENSES.] The public employees 
retirement association may deduct an amount to defray the 
expenses of the association in administering the plan.  The 
amount must be set annually by The executive director of the 
association, but not to exceed two percent of the total amount 
of the employing unit contributions to the plan and the 
ambulance service personnel incentive allocation received by the 
plan shall annually set an amount to recover the costs of the 
association in administering the public employees defined 
contribution plan.  If the amount recovered under section 11A.17 
does not meet the annual costs of administering the defined 
contribution plan, the executive director may assess an 
additional amount up to two percent of the employer and employee 
contributions. 
    Sec. 15.  Minnesota Statutes 1990, section 354B.05, 
subdivision 3, is amended to read: 
    Subd. 3.  [SELECTION OF FINANCIAL INSTITUTIONS.] The 
supplemental investment fund administered by the state board of 
investment is one of the investment options for the plan.  The 
state university board and the community college board shall 
select no more than two other financial institutions to provide 
annuity contracts or custodial accounts.  Each board may at its 
discretion change a selection of an institution.  Investment 
programs offered by the institutions must meet the requirements 
of section 401(a) or 403(b) of the Internal Revenue Code of 
1986, as amended.  In making their selections, the boards shall 
consider these criteria: 
    (1) the experience and ability of the financial institution 
to provide retirement and death benefits suited to the needs of 
the covered employees; 
    (2) the relationship of the benefits to their cost; and 
    (3) the financial strength and stability of the institution.
    The chancellor of the state university system and the 
chancellor of the state community college system shall redeem 
all shares in the accounts of the Minnesota supplemental 
investment fund held on behalf of personnel in the supplemental 
plan who elect an investment option other than the supplemental 
investment fund, except that shares in the guaranteed return 
fixed interest account must not be redeemed until the expiration 
dates for the guaranteed investment contracts.  The chancellors 
shall transfer the cash realized to the financial institutions 
selected by the state university board and the community college 
board under section 354B.05.  
    Sec. 16.  Minnesota Statutes 1991 Supplement, section 
354B.07, subdivision 2, is amended to read: 
    Subd. 2.  [REDEMPTIONS.] The chancellor of the state 
university system and the chancellor of the state community 
college system shall redeem all shares in the accounts of the 
Minnesota supplemental investment fund held on behalf of 
personnel in the supplemental plan who elect an investment 
option other than the supplemental investment fund, except that 
shares in the guaranteed return fixed interest account may not 
be redeemed until the expiration dates for the guaranteed 
investment contracts.  The chancellors shall transfer the cash 
realized to the financial institutions selected by the state 
university board and the community college board under section 
354B.05. 
    Sec. 17.  [EFFECTIVE DATE.] 
    Sections 1 to 16 are effective July 1, 1992. 
    Presented to the governor April 17, 1992 
    Signed by the governor April 27, 1992, 1:57 p.m.