Minnesota Session Laws - 1992, Regular Session

  

                         Laws of Minnesota 1992 

                        CHAPTER 530-H.F.No. 1960 
           An act relating to retirement; changing the formula 
          governing calculation of postretirement adjustments 
          for certain public pension plans; requiring certain 
          investment performance and postretirement adjustment 
          reporting; providing state reimbursement for 
          supplemental retirement benefits paid to volunteer 
          firefighters; appropriating money; amending Minnesota 
          Statutes 1990, section 11A.18, subdivision 9. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1990, section 11A.18, 
subdivision 9, is amended to read: 
    Subd. 9.  [CALCULATION OF POSTRETIREMENT ADJUSTMENT.] (a) 
Annually, following June 30, the state board shall use the 
procedures in paragraphs (b), (c), and (d) to determine whether 
a postretirement adjustment is payable and shall to determine 
the amount of any postretirement adjustment that is payable. 
    (1) The state board shall determine whether a 
postretirement adjustment is payable using the following 
procedure: 
    (b) If the Consumer Price Index for urban wage earners and 
clerical workers all items index published by the Bureau of 
Labor Statistics of the United States Department of Labor 
increases from June 30 of the preceding year to June 30 of the 
current year, the state board shall certify the percentage 
increase.  The amount certified may not exceed the lesser of the 
difference between the preretirement interest assumption and 
postretirement interest assumption in section 356.215, 
subdivision 4d, paragraph (a), or 3.5 percent. 
    (c) In addition to any percentage increase certified under 
paragraph (b), the board shall use the following procedures to 
determine if a postretirement adjustment is payable under this 
paragraph: 
    (a) (1) 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 market 
value of the fund on June 30 of that year; 
    (b) (2) The amount of reserves required for 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.  
An annuitant or benefit recipient who has been receiving an 
annuity or benefit for at least 12 full months as of the current 
June 30 is eligible to receive a full postretirement 
adjustment.  An annuitant or benefit recipient who has been 
receiving an annuity or benefit for at least one full month, but 
less than 12 full months as of the current June 30, is eligible 
to receive a partial postretirement adjustment.  Each fund shall 
report separately the amount of the reserves for those 
annuitants and benefit recipients who are eligible to receive a 
full postretirement benefit adjustment.  This amount is known as 
"eligible reserves."  Each fund shall also report separately the 
amount of the reserves for those annuitants and benefit 
recipients who are not eligible to receive a postretirement 
adjustment.  This amount is known as "noneligible reserves."  
For an annuitant or benefit recipient who is eligible to receive 
a partial postretirement adjustment, each fund shall report 
separately as additional "eligible reserves" an amount that 
bears the same ratio to the total reserves required for the 
annuitant or benefit recipient as the number of full months of 
annuity or benefit receipt as of the current June 30 bears to 12 
full months.  The remainder of the annuitant's or benefit 
recipient's reserves shall be separately reported as additional 
"noneligible reserves."  The amount of "eligible" and 
"noneligible" required reserves shall be certified to the board 
by the commission-retained actuary as soon as is practical 
following the current June 30; 
    (c) (3) 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. percentage 
increase certified under paragraph (b) multiplied by the 
eligible required reserves, as adjusted for mortality gains and 
losses under subdivision 11, determined under clause (2); 
    (4) The state board shall add the amount of eligible and 
ineligible required reserves determined under clause (2) to the 
amount determined under clause (3); 
    (5) The state board shall subtract the amount determined 
under clause (4) from the market value of the fund determined 
under clause (1); 
    (6) The state board shall adjust the amount determined 
under clause (5) by the cumulative current balance determined 
pursuant to clause (8) and any negative balance carried forward 
under clause (9); 
    (7) A positive amount resulting from the calculations in 
clauses (1) to (6) is the excess market value.  A negative 
amount is the negative balance; 
    (8) The state board shall allocate one-fifth of the excess 
market value or one-fifth of the negative balance to each of 
five consecutive years, beginning with the fiscal year ending 
the current June 30; and 
    (9) To calculate the postretirement adjustment under this 
paragraph based on investment performance for a fiscal year, the 
state board shall add together all excess market value allocated 
to that year and subtract from the sum all negative balances 
allocated to that year.  If this calculation results in a 
negative number, the entire negative balance must be carried 
forward and allocated to the next year.  If the resulting amount 
is positive, a postretirement adjustment is payable under this 
paragraph.  The board shall express a positive amount as a 
percentage of the total eligible required reserves certified to 
the board under clause (2).  
    (2) (d) 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) (1) The total "eligible" 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 a full 
or partial postretirement adjustment as determined by 
clause (1)(b) (2) shall be certified to the state board by the 
commission-retained actuary.  The total "eligible" required 
reserves shall be determined by the commission-retained actuary 
on the assumption that all annuitants and benefit recipients 
eligible to receive a full or partial postretirement adjustment 
will be alive on the January 1 in question; and 
    (c) If the state board determines that the book value of 
the assets of the fund is less than an amount equal to 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, 
    (2) The state board shall add the percentage certified 
under paragraph (b) to any positive percentage calculated under 
paragraph (c).  The board shall not subtract from the percentage 
certified under paragraph (b) any negative amount calculated 
under paragraph (c).  The amount sum of these percentages shall 
be carried to five decimal places and shall be certified to each 
participating public pension fund or plan as the full 
postretirement adjustment amount percentage.  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 full 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 section 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. 2.  [TRANSITION ADJUSTMENT.] 
    (a) In certifying postretirement adjustment percentages 
under Minnesota Statutes, section 11A.18, subdivision 9, 
paragraph (b), the state board of investment shall add to the 
increase in the Consumer Price Index the percentage amounts 
listed below only for the years indicated. 
 Date adjustment payable         Percentage amount added
    January 1, 1994                   1.00 percent
    January 1, 1995                    .75 percent
    January 1, 1996                    .50 percent
    January 1, 1997                    .25 percent
The percentage amounts added under this section are not subject 
to the limits in Minnesota Statutes, section 11A.18, subdivision 
9, paragraph (b).  The percentage amounts added under this 
section must be included in the percentage increase used under 
Minnesota Statutes, section 11A.18, subdivision 9, paragraph 
(c), clause (3), to determine the amount of excess market value 
or negative balance. 
      (b) The state board of investment shall not add the 
transition adjustment to the Consumer Price Index based 
adjustment if the investment return based adjustment without the 
transition adjustment factored in is equal to or greater than 
the transition adjustment. 
     (c) If a transition adjustment is added to the Consumer 
Price Index based adjustment, an investment return based 
adjustment may not be paid. 
     (d) The transition adjustment is paragraph (a).  The 
Consumer Price Index based adjustment is the adjustment under 
section 11A.18, subdivision 9, paragraph (b).  The investment 
return based adjustment is the adjustment under section 11A.18, 
subdivision 9, paragraph (c). 
    Sec. 3.  [11A.041] [REPORT ON POSTRETIREMENT INVESTMENT 
FUND INVESTMENT PERFORMANCE AND ADJUSTMENT CALCULATION.] 
    The state board of investment shall annually report to the 
legislative commission on pensions and retirement, the house of 
representatives governmental operations committee, and the 
senate governmental operations committee on the investment 
performance investment activities, and postretirement adjustment 
calculations of the Minnesota postretirement investment fund 
established under Minnesota Statutes, section 11A.18.  The 
annual report must be filed before January 1.  The contents of 
the report must include the reporting requirements specified by 
the legislative commission on pensions and retirement as part of 
the standards adopted by the commission under Minnesota 
Statutes, section 3.85, subdivision 10.  The report also may 
include any additional information that the state board of 
investment determines is appropriate. 
    Sec. 4.  [APPROPRIATION.] 
    $395,000 is appropriated to the commissioner of revenue for 
state reimbursement of supplemental retirement benefits paid to 
volunteer firefighters under Minnesota Statutes, section 
424A.10.  The reimbursement for 1992 must be paid from the same 
sources as the 1990 and 1991 reimbursements were paid. 
    Sec. 5.  [EFFECTIVE DATE.] 
    Sections 1 and 2 are effective July 1, 1992, and first 
apply to calculations for postretirement adjustments payable 
January 1, 1994, based on excess market value as of June 30, 
1993, and increases in the Consumer Price Index between June 30, 
1992, and June 30, 1993.  The calculations made to determine the 
amount of a postretirement adjustment to be paid beginning 
January 1, 1993, and the payment of this adjustment, must be 
based on the law in effect on the day before the effective date 
of sections 1 and 2.  Section 4 is effective the day following 
final enactment. 
    Presented to the governor April 17, 1992 
    Signed by the governor April 29, 1992, 8:00 a.m.