Minnesota Session Laws - 1993, Regular Session

  
    Laws of Minnesota 1993 

                        CHAPTER 300-S.F.No. 376 
           An act relating to the state board of investment; 
          management of funds under board control; amending 
          Minnesota Statutes 1992, sections 11A.08, subdivision 
          4; 11A.14, subdivisions 1, 2, 4, and 5; 11A.24, 
          subdivisions 1 and 4; 69.77, subdivision 2g; 69.775; 
          116P.11; 352.96, subdivision 3; 356.24, subdivision 1; 
          and 424A.06, subdivision 4.  
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1992, section 11A.08, 
subdivision 4, is amended to read: 
    Subd. 4.  [TERMS; COMPENSATION; REMOVAL; VACANCIES; 
EXPIRATION.] The membership terms, compensation, removal of 
members appointed by the state board, and filling of vacancies 
of members, and expiration of the council shall be as provided 
in section 15.059 except that council members shall not receive 
a per diem.  The council is not subject to the expiration date 
provisions of section 15.059.  
    Sec. 2.  Minnesota Statutes 1992, section 11A.14, 
subdivision 1, is amended to read: 
    Subdivision 1.  [ESTABLISHMENT.] The Minnesota combined 
investment funds are established for the purpose of providing 
investment vehicles for assets of the participating public 
retirement plans and nonretirement funds.  The assets of 
participating nonretirement funds may not be commingled with the 
assets of participating public retirement plans.  The combined 
funds shall consist of the following investment accounts:  cash 
management accounts, equity accounts, fixed income accounts, and 
any other accounts determined appropriate by the state board.  
    Sec. 3.  Minnesota Statutes 1992, 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 nonretirement funds which shall be used to purchase 
investment shares in the appropriate investment accounts.  Each 
participating plan or 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 plan or fund on the assets in each account 
shall be equal to the ratio of units owned by a plan or fund in 
each account to the total issued units then outstanding.  
    Sec. 4.  Minnesota Statutes 1992, section 11A.14, 
subdivision 4, is amended to read: 
    Subd. 4.  [INVESTMENTS.] The assets of the combined 
investment funds shall be invested by the state board subject to 
the provisions of section 11A.24, except that any individual 
account may be completely invested in a single asset class or 
managed in a separate account by the state board at its 
discretion.  
    Sec. 5.  Minnesota Statutes 1992, section 11A.14, 
subdivision 5, is amended to read: 
    Subd. 5.  [PARTICIPATING PUBLIC RETIREMENT PLANS OR 
PARTICIPATION IN MINNESOTA COMBINED INVESTMENT FUNDS.] The 
following Any public retirement plans and funds shall plan or 
nonretirement fund authorized by law to have its assets managed 
by the state board may participate in the Minnesota combined 
investment funds:. 
    (1) state employees retirement fund established pursuant to 
chapter 352; 
    (2) correctional employees retirement plan established 
pursuant to chapter 352; 
    (3) state patrol retirement fund established pursuant to 
chapter 352B; 
    (4) public employees retirement fund established pursuant 
to chapter 353; 
    (5) public employees police and fire fund established 
pursuant to chapter 353; 
    (6) teachers retirement fund established pursuant to 
chapter 354; 
    (7) judges retirement fund established pursuant to chapter 
490; 
    (8) the permanent school fund established under the 
Minnesota Constitution, article XI, section 8; 
    (9) the supplemental investment fund established under 
section 11A.17; and 
    (10) any other fund required by law to participate. 
    Sec. 6.  Minnesota Statutes 1992, section 11A.24, 
subdivision 1, is amended to read: 
    Subdivision 1.  [SECURITIES GENERALLY.] The state board 
shall have the authority to purchase, sell, lend or exchange the 
following securities for funds or accounts specifically made 
subject to this section including puts and call options and 
future contracts traded on a contract market designated and 
regulated by a federal governmental agency or by a financial 
institution regulated by a governmental agency.  These 
securities may be owned as units in commingled trusts that own 
the securities described in subdivisions 2 to 5.  
    Sec. 7.  Minnesota Statutes 1992, 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 
(i) United States banks and savings institutions that are rated 
in the highest four quality categories by a nationally 
recognized rating agency, that meet the collateral requirements 
established in section 9.031, or whose certificates of deposit 
are fully insured by federal agencies; or (ii) credit unions in 
amounts up to the limit of insurance coverage provided by the 
National Credit Union Administration; 
    (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 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. 8.  Minnesota Statutes 1992, section 69.77, 
subdivision 2g, is amended to read: 
    Subd. 2g.  The funds of the association must be invested in 
securities that are authorized investments under section 
356A.06, subdivision 6 or 7.  Notwithstanding the foregoing, up 
to 75 percent of the market value of the assets of the fund may 
be invested in open-end investment companies registered under 
the federal Investment Company Act of 1940, if the portfolio 
investments of the investment companies comply with the type of 
securities authorized for investment by section 11A.24, 
subdivisions 2 to 5.  Securities held by the association before 
June 2, 1989, that do not meet the requirements of this 
subdivision may be retained after that date if they were proper 
investments for the association on that date. 
    The governing board of the association may select and 
appoint investment agencies to act for and in its behalf or may 
certify funds special fund assets for investment by the state 
board of investment under section 11A.17.  The governing board 
of the association may certify general fund assets of the relief 
association for investment by the state board of investment in 
fixed income pools or in a separately managed account at the 
discretion of the state board of investment as provided in 
section 11A.14.  The governing board of the association may 
select and appoint a qualified private firm to measure 
management performance and return on investment, and the firm 
shall use the formula or formulas developed by the state board 
under section 11A.04, clause (11). 
    Sec. 9.  Minnesota Statutes 1992, section 69.775, is 
amended to read: 
    69.775 [INVESTMENTS.] 
    The special fund assets of the relief associations governed 
by sections 69.771 to 69.776 must be invested in securities that 
are authorized investments under section 356A.06, subdivision 6 
or 7.  Notwithstanding the foregoing, up to 75 percent of the 
market value of the assets of the fund may be invested in 
open-end investment companies registered under the federal 
Investment Company Act of 1940, if the portfolio investments of 
the investment companies comply with the type of securities 
authorized for investment by section 11A.24, subdivisions 2 to 
5.  Securities held by the associations before June 2, 1989, 
that do not meet the requirements of this section may be 
retained after that date if they were proper investments for the 
association on that date.  The governing board of the 
association may select and appoint investment agencies to act 
for and in its behalf or may certify funds special fund assets 
for investment by the state board of investment under section 
11A.17.  The governing board of the association may certify 
general fund assets of the relief association for investment by 
the state board of investment in fixed income pools or in a 
separately managed account at the discretion of the state board 
of investment as provided in section 11A.14.  The governing 
board of the association may select and appoint a qualified 
private firm to measure management performance and return on 
investment, and the firm shall use the formula or formulas 
developed by the state board under section 11A.04, clause (11). 
    Sec. 10.  Minnesota Statutes 1992, 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 ten 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; 
     (3) for the 1993-1995 biennium, up to 25 percent of the 
revenue deposited in the trust fund in fiscal years 1994 and 
1995, to be expended only for capital investments in parks and 
trails; and 
     (4) for the 1995-1997 biennium, up to ten percent of the 
revenue deposited in the fund in fiscal year 1996. 
     (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 1992, section 352.96, 
subdivision 3, is amended to read: 
    Subd. 3.  [EXECUTIVE DIRECTOR TO ADMINISTER SECTION.] This 
section must be administered by the executive director of the 
system under subdivision 4.  Fiduciary activities of the 
deferred compensation plan must be undertaken in a manner 
consistent with chapter 356A.  If the state board of investment 
so elects, it may solicit bids for options under subdivision 2, 
clauses (2) and (3).  The state board of investment may retain 
consulting services to assist it in soliciting and evaluating 
bids and in the periodic review of companies offering options 
under subdivision 2, clause (3).  The periodic review must occur 
at least every two years.  The state board of investment may 
annually establish a budget for its costs in the soliciting, 
evaluating, and periodic review processes.  The state board of 
investment may charge a proportional share of all costs related 
to the periodic review to each company currently under contract 
and may charge a proportional share of all costs related to 
soliciting and evaluating bids to each company selected by the 
state board.  All contracts must be approved before execution by 
the state board of investment.  Contracts must provide that all 
options in subdivision 2 must:  be presented in an unbiased 
manner and in a manner that conforms to rules adopted by the 
executive director, be reported on a periodic basis to all 
employees participating in the deferred compensation program, 
and not be the subject of unreasonable solicitation of state 
employees to participate in the program.  The contract may not 
call for any person to jeopardize the tax-deferred status of 
money invested by state employees under this section.  All costs 
or fees in relation to the options provided under subdivision 2, 
clause (3), must be paid by the underwriting companies 
ultimately selected by the state board of investment. 
    Sec. 12.  Minnesota Statutes 1992, section 356.24, 
subdivision 1, is amended to read: 
    Subdivision 1.  [RESTRICTION; EXCEPTIONS.] (a) It is 
unlawful for a school district or other governmental subdivision 
or state agency to levy taxes for, or contribute public funds to 
a supplemental pension or deferred compensation plan that is 
established, maintained, and operated in addition to a primary 
pension program for the benefit of the governmental subdivision 
employees other than: 
     (1) to a supplemental pension plan that was established, 
maintained, and operated before May 6, 1971; 
     (2) to a plan that provides solely for group health, 
hospital, disability, or death benefits, to the individual 
retirement account plan established by sections 354B.01 to 
354B.04; 
     (3) to a plan that provides solely for severance pay under 
section 465.72 to a retiring or terminating employee; 
     (4) for employees other than personnel employed by the 
state university board or the community college board and 
covered by section 354B.07, subdivision 1, to: 
     (i) the state of Minnesota deferred compensation plan under 
section 352.96; or 
     (ii) payment of the applicable portion of the premium on a 
tax sheltered annuity contract qualified under section 403(b) of 
the federal Internal Revenue Code, purchased from a qualified 
insurance company; if provided for in a personnel policy or in 
the collective bargaining agreement of the public employer with 
the exclusive representative of public employees in an 
appropriate unit, in an amount matching employee contributions 
on a dollar for dollar basis, but not to exceed an employer 
contribution of $2,000 a year per employee; or 
     (5) for personnel employed by the state university board or 
the community college board and covered by section 354B.07, 
subdivision 1, to the supplemental retirement plan under 
sections 354B.07 to 354B.09, if provided for in a personnel 
policy or in the collective bargaining agreement of the public 
employer with the exclusive representative of the covered 
employees in an appropriate unit, in an amount matching employee 
contributions on a dollar for dollar basis, but not to exceed an 
employer contribution of $2,000 a year for each employee.  
     (b) A qualified insurance company is a company that: 
     (1) meets the definition in section 60A.02, subdivision 4; 
     (2) is licensed to engage in life insurance or annuity 
business in the state; 
     (3) is determined by the commissioner of commerce to have a 
rating within the top two rating categories by a recognized 
national rating agency or organization that regularly rates 
insurance companies; and 
     (4) is determined by the state board of investment to be 
among the ten applicant insurance companies with competitive 
options and investment returns on annuity products.  The state 
board of investment determination must be made on or before 
January 1, 1993, and must be reviewed periodically.  The state 
board of investment shall may retain actuarial services to 
assist it in this determination and in its periodic review.  The 
state board of investment shall may annually establish a budget 
for its costs in the any determination process and shall and 
periodic review processes.  The state board of investment may 
charge a proportional share of that budget all costs related to 
the periodic review to those companies currently under contract 
and may charge a proportional share of all costs related to 
soliciting and evaluating bids in a determination process to 
each insurance company selected by the state board of investment.
All contracts must be approved before execution by the state 
board of investment.  The state board of investment shall 
establish policies and procedures under section 11A.04, clause 
(2), to carry out this paragraph. 
    (c) A personnel policy for unrepresented employees or a 
collective bargaining agreement may establish limits on the 
number of vendors under paragraph (b), clause (4), that it will 
utilize and conditions under which the vendors may contact 
employees both during working hours and after working hours. 
    Sec. 13.  Minnesota Statutes 1992, section 424A.06, 
subdivision 4, is amended to read: 
    Subd. 4.  [INVESTMENT OF ASSETS OF THE GENERAL FUND.] The 
assets of the general fund may be invested in any securities 
authorized by the bylaws of the relief association and may be 
certified for investment by the state board of investment in 
fixed income pools or in a separately managed account at the 
discretion of the state board of investment as provided in 
section 11A.14. 
    Sec. 14.  [EFFECTIVE DATE.] 
    Sections 1 to 13 are effective the day following final 
enactment. 
    Presented to the governor May 17, 1993 
    Signed by the governor May 20, 1993, 3:45 p.m.