Minnesota Legislature
Office of the Revisor of Statutes
Minnesota Session Laws - 1994, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 604-S.F.No. 2316
An act relating to public finance; providing for
management of funds under the control of the state
board of investment; limiting the investment authority
of various local pension plans to the pre-1994
investment authority of the state board of investment;
changing certain debt service fund investment
authority; amending Minnesota Statutes 1992, sections
11A.17, subdivisions 1, 4, 9, 10a, and 14; 11A.18,
subdivision 9; 11A.24, subdivisions 3, 5, and 6;
353D.05, subdivision 2; 354B.07, subdivision 2;
356A.06, subdivision 7; and 422A.05, subdivision 2c;
Minnesota Statutes 1993 Supplement, sections 11A.24,
subdivisions 1 and 4; 69.77, subdivision 2g; 69.775;
352D.04, subdivision 1; 352D.09, subdivision 8;
354B.05, subdivision 3; and 475.66, subdivision 3.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
ARTICLE 1
STATE BOARD OF INVESTMENT PROVISIONS
Section 1. Minnesota Statutes 1992, 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 seven investment accounts: an income share
account, a growth share account, an international share account,
a money market account, a 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. 2. Minnesota Statutes 1992, 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 international share account may be invested
entirely in international stocks; and
(4) the fixed interest account may be invested in
guaranteed investment contracts and debt obligations.
Sec. 3. Minnesota Statutes 1992, 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 international 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 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. 4. Minnesota Statutes 1992, section 11A.17,
subdivision 10a, is amended 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 40/100 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. 5. Minnesota Statutes 1992, section 11A.17,
subdivision 14, is amended to read:
Subd. 14. [PROCEDURES FOR DISTRIBUTION OF INCOME FOR MONEY
MARKET ACCOUNT, AND FIXED INTEREST ACCOUNT.] At the end of each
month, the state board shall determine the earnings of the money
market account and the fixed interest account and deduct from
the earnings an amount equal to one-twelfth of an annual charge
equal to one-tenth 40/100 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 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. 6. Minnesota Statutes 1992, 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 to determine the
amount of any postretirement adjustment.
(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:
(1) The state board shall determine the market value of the
fund on June 30 of that year;
(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;
(3) The state board shall determine the 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) required for the annuities or benefits payable to annuitants
and benefit recipients of the participating public pension plans
or funds as of the current June 30 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).
(d) The state board shall determine the amount of any
postretirement adjustment which is payable using the following
procedure:
(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 (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
(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 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 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. 7. Minnesota Statutes 1993 Supplement, 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 regulated by a
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 6.
Sec. 8. Minnesota Statutes 1992, section 11A.24,
subdivision 3, is amended to read:
Subd. 3. [CORPORATE OBLIGATIONS.] (a) The state board may
invest funds in bonds, notes, debentures, transportation
equipment obligations, or any other longer term evidences of
indebtedness issued or guaranteed by a corporation organized
under the laws of the United States or any state thereof, or the
Dominion of Canada or any province thereof if they conform to
the following provisions provided that:
(a) (1) the principal and interest of obligations of
corporations incorporated or organized under the laws of the
Dominion of Canada or any province thereof shall be payable in
United States dollars; and
(b) (2) obligations shall be rated among the top four
quality categories by a nationally recognized rating agency.
(b) The state board may invest in unrated corporate
obligations or in corporate obligations that are not rated among
the top four quality categories as provided in paragraph (a),
clause (2), provided that:
(1) the aggregate value of these obligations may not exceed
five percent of the market or book value, whichever is less, of
the fund for which the state board is investing;
(2) the state board's participation is limited to 50
percent of a single offering subject to this paragraph; and
(3) the state board's participation is limited to 25
percent of an issuer's obligations subject to this paragraph.
Sec. 9. Minnesota Statutes 1993 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 securities and asset backed securities,
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 top four quality categories by a nationally
recognized rating agency 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
securities shall be rated in the top four quality categories by
a nationally recognized rating agency;
(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; and
(8) asset backed securities shall be rated in the top four
quality categories by a nationally recognized rating agency.
(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. 10. Minnesota Statutes 1992, section 11A.24,
subdivision 5, is amended to read:
Subd. 5. [CORPORATE STOCKS.] The state board may invest
funds in stocks or convertible issues of any corporation
organized under the laws of the United States or the states
thereof, the Dominion of Canada or its provinces, or any
corporation listed on the New York Stock Exchange or the
American Stock Exchange, if they conform to the following
provisions:
(a) The aggregate value of corporate stock investments, as
adjusted for realized profits and losses, shall not exceed 85
percent of the market or book value, whichever is less, of a
fund, less the aggregate value of investments according to
subdivision 6;
(b) Investments shall not exceed five percent of the total
outstanding shares of any one corporation, except that the state
board may hold up to 20 percent of the shares of a real estate
investment trust.
Sec. 11. Minnesota Statutes 1992, section 11A.24,
subdivision 6, is amended to read:
Subd. 6. [OTHER INVESTMENTS.] (a) In addition to the
investments authorized in subdivisions 1 to 5, and subject to
the provisions in paragraph (b), the state board may invest
funds in:
(1) venture capital investment businesses through
participation in limited partnerships and corporations;
(2) real estate ownership interests or loans secured by
mortgages or deeds of trust or shares of real estate investment
trusts through investment in limited partnerships, bank
sponsored collective funds, trusts, mortgage participation
agreements, and insurance company commingled accounts, including
separate accounts;
(3) regional and mutual funds through bank sponsored
collective funds and open-end investment companies registered
under the Federal Investment Company Act of 1940;
(4) resource investments through limited partnerships,
private placements and corporations; and
(5) international securities.
(b) The investments authorized in paragraph (a) must
conform to the following provisions:
(1) the aggregate value of all investments made according
to paragraph (a), clauses (1) to (4), may not exceed 35 percent
of the market value of the fund for which the state board is
investing;
(2) there must be at least four unrelated owners of the
investment other than the state board for investments made under
paragraph (a), clause (1), (2), (3), or (4);
(3) state board participation in an investment vehicle is
limited to 20 percent thereof for investments made under
paragraph (a), clause (1), (2), (3), or (4); and
(4) state board participation in a limited partnership does
not include a general partnership interest or other interest
involving general liability. The state board may not engage in
any activity as a limited partner which creates general
liability.
Sec. 12. Minnesota Statutes 1993 Supplement, 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
international share account, the money market account, the bond
market account, the 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) 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 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 fixed interest account attributable to any
guaranteed investment contract as of July 1, 1994, 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) 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, subject to the provisions of paragraph (c) concerning the
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. 13. Minnesota Statutes 1993 Supplement, section
352D.09, subdivision 8, is amended to read:
Subd. 8. [ADMINISTRATIVE CHARGE DEDUCTIONS.] Any
administrative charges deducted under subdivision 7 that were in
excess of the administrative expenses between July 1, 1973, and
June 30, 1992, together with any investment gains or losses
based on fiscal year balances, must be recovered from the state
employees retirement plan and held in the unclassified plan to
pay future administrative expenses. Any deductions to pay
administrative expenses under section 11A.17, subdivision 10a,
on contributions and investment returns attributable to
contributions made before July 1, 1992, must be credited back to
the participants in the unclassified plan. Any deductions to
pay administrative expenses under section 11A.17, subdivision
10a, that exceed an amount equal to 1/12 of an annual charge
equal to one-tenth of one percent of the assets in each account
will be credited back to the participants.
Sec. 14. Minnesota Statutes 1992, 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 international share account, the money market
account, the bond market account, the 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 to be used to purchase
shares in each of the accounts.
(b) A participant or a former participant may indicate in
writing a choice of options for subsequent purchases of shares.
After a choice is made, until the participant or former
participant makes a different written indication, the executive
director of the association shall purchase shares in the
supplemental investment account or accounts specified by the
participant. If no initial option is indicated by a participant
or the specifications made by the participant exceeds 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 the first
of the month following the date of receipt of the signed written
choice of options.
(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 or
former 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
fixed interest account. Upon expiration of a guaranteed
investment contract, the participant's or former 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 fixed
interest account attributable to any guaranteed investment
contract as of July 1, 1994, 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,
subject to the provisions of paragraph (c) concerning
the guaranteed return fixed interest account. A change under
this paragraph is effective the first of the month following the
date of receipt of a signed written choice of options.
(e) The change or selection of an investment option or the
transfer of all or a portion of the deceased or former
participant's shares in the income share, growth share, common
stock index, bond market, international share, money market, or
guaranteed investment fixed interest accounts must not be made
following death of the participant or former participant.
Sec. 15. Minnesota Statutes 1993 Supplement, 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 board of investment may select two other financial
institutions to provide annuity products. In making their
selections, the board shall consider at least 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 state board of investment must periodically review at
least every three years each financial institution selected by
the state board of investment. The state board of investment
may retain consulting services to assist in the periodic review,
may establish a budget for its costs in the periodic review
process, and may charge a proportional share of those costs to
each financial institution selected by the state board of
investment. All contracts must be approved by the state board
of investment before execution by the state university board and
the community college board. The state board of investment
shall also establish policies and procedures under section
11A.04, clause (2), to carry out this subdivision.
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 fixed interest
account attributable to any guaranteed investment contract as of
July 1, 1994, 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 1992, 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 fixed interest account attributable to any
guaranteed investment contract as of July 1, 1994, 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. [REQUIREMENT FOR PROVISION OF CERTAIN
INFORMATION.]
The executive director of the state board of investment
shall report to the legislative commission on pensions and
retirement during fiscal year 1995 on any investments that it
made under Minnesota Statutes, section 11A.24, subdivision 3,
paragraph (b). The report must be made in conjunction with the
regular annual report of the state board of investment.
Sec. 18. [EFFECTIVE DATE.]
Section 6 is effective June 30, 1994. The remaining
sections are effective July 1, 1994.
ARTICLE 2
LIMIT ON INVESTMENT AUTHORITY FOR OTHER PUBLIC
FUNDS
Section 1. Minnesota Statutes 1993 Supplement, section
69.77, subdivision 2g, is amended to read:
Subd. 2g. [LOCAL POLICE AND PAID FIRE RELIEF ASSOCIATION
INVESTMENT AUTHORITY.] 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 under section 356A.06, subdivision
7. 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 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. 2. Minnesota Statutes 1993 Supplement, 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
under section 356A.06, subdivision 7. 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
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. 3. Minnesota Statutes 1992, section 356A.06,
subdivision 7, is amended to read:
Subd. 7. [EXPANDED LIST OF AUTHORIZED INVESTMENT
SECURITIES.] (a) [AUTHORITY.] Except to the extent otherwise
authorized by law or bylaws, a covered pension plan not
described by subdivision 6, paragraph (a), may invest its assets
only in accordance with section 11A.24 this subdivision.
(b) [SECURITIES GENERALLY.] The covered pension plan has
the authority to purchase, sell, lend, or exchange the
securities specified in paragraphs (c) to (g), including puts
and call options and future contracts traded on a contract
market regulated by a 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 paragraphs (c) to (g).
(c) [GOVERNMENT OBLIGATIONS.] The covered pension plan may
invest funds in governmental bonds, notes, bills, mortgages, and
other evidences of indebtedness provided the issue is backed by
the full faith and credit of the issuer or the issue is rated
among the top four quality rating categories by a nationally
recognized rating agency. The obligations in which funds may be
invested under this paragraph include guaranteed or insured
issues of (1) the United States, its agencies, its
instrumentalities, or organizations created and regulated by an
act of Congress; (2) Canada and its provinces, provided the
principal and interest is payable in United States dollars; (3)
the states and their municipalities, political subdivisions,
agencies or instrumentalities; (4) the International Bank for
Reconstruction and Development, the Inter-American Development
Bank, the Asian Development Bank, the African Development Bank,
or any other United States Government sponsored organization of
which the United States is a member, provided the principal and
interest is payable in United States dollars.
(d) [CORPORATE OBLIGATIONS.] The covered pension plan may
invest funds in bonds, notes, debentures, transportation
equipment obligations, or any other longer term evidences of
indebtedness issued or guaranteed by a corporation organized
under the laws of the United States or any state thereof, or the
Dominion of Canada or any province thereof if they conform to
the following provisions:
(1) the principal and interest of obligations of
corporations incorporated or organized under the laws of the
Dominion of Canada or any province thereof must be payable in
United States dollars; and
(2) obligations must be rated among the top four quality
categories by a nationally recognized rating agency.
(e) [OTHER OBLIGATIONS.] (1) The covered pension plan 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:
(i) 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;
(ii) certificates of deposit are limited to those issued by
(A) 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; or (B) credit unions in
amounts up to the limit of insurance coverage provided by the
National Credit Union Administration;
(iii) 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;
(iv) 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;
(v) collateral for repurchase agreements and reverse
repurchase agreements is limited to letters of credit and
securities authorized in this section;
(vi) 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
subdivision; and
(vii) savings accounts are limited to those fully insured
by federal agencies.
(2) Sections 16A.58 and 16B.06 do not apply to certificates
of deposit and collateralization agreements executed by the
covered pension plan under clause (1), item (ii).
(3) In addition to investments authorized by clause (1),
item (iv), the covered pension plan 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
covered pension plan 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 covered pension plan 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 covered pension plan comparable, in its judgment,
to the yield available on similar mortgage loans at the date of
the bonds or notes. The covered pension plan 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.
(f) [CORPORATE STOCKS.] The covered pension plan may invest
funds in stocks or convertible issues of any corporation
organized under the laws of the United States or the states
thereof, the Dominion of Canada or its provinces, or any
corporation listed on the New York Stock Exchange or the
American Stock Exchange, if they conform to the following
provisions:
(1) The aggregate value of corporate stock investments, as
adjusted for realized profits and losses, must not exceed 85
percent of the market or book value, whichever is less, of a
fund, less the aggregate value of investments according to
subdivision 6;
(2) Investments must not exceed five percent of the total
outstanding shares of any one corporation.
(g) [OTHER INVESTMENTS.] (1) In addition to the investments
authorized in paragraphs (b) to (f), and subject to the
provisions in clause (2), the covered pension plan may invest
funds in:
(i) venture capital investment businesses through
participation in limited partnerships and corporations;
(ii) real estate ownership interests or loans secured by
mortgages or deeds of trust through investment in limited
partnerships, bank sponsored collective funds, trusts, and
insurance company commingled accounts, including separate
accounts;
(iii) regional and mutual funds through bank sponsored
collective funds and open-end investment companies registered
under the Federal Investment Company Act of 1940;
(iv) resource investments through limited partnerships,
private placements and corporations; and
(v) international securities.
(2) The investments authorized in clause (1) must conform
to the following provisions:
(i) the aggregate value of all investments made according
to clause (1) may not exceed 35 percent of the market value of
the fund for which the covered pension plan is investing;
(ii) there must be at least four unrelated owners of the
investment other than the state board for investments made under
clause (1), item (i), (ii), (iii), or (iv);
(iii) covered pension plan participation in an investment
vehicle is limited to 20 percent thereof for investments made
under clause (1), item (i), (ii), (iii), or (iv); and
(iv) covered pension plan participation in a limited
partnership does not include a general partnership interest or
other interest involving general liability. The covered pension
plan may not engage in any activity as a limited partner which
creates general liability.
Sec. 4. Minnesota Statutes 1992, section 422A.05,
subdivision 2c, is amended to read:
Subd. 2c. [MINNEAPOLIS EMPLOYEES RETIREMENT FUND
INVESTMENT AUTHORITY.] (a) For investments made on or after July
1, 1991, the board shall invest funds only in investments
authorized by section 11A.24 356A.06, subdivision 7.
(b) However, in addition to real estate investments
authorized by section 11A.24 under paragraph (a), the board may
also make loans to purchasers of Minnesota situs nonfarm
residential real estate that is owned by the Minneapolis
employees retirement fund. The loans must be secured by
mortgages or deeds of trust.
(b) (c) For investments made before July 1, 1991, the board
may, but is not required to, comply with section 11A.24
paragraph (a). However, with respect to these investments, the
board shall act in accordance with subdivision 2a and chapter
356A.
Sec. 5. Minnesota Statutes 1993 Supplement, section
475.66, subdivision 3, is amended to read:
Subd. 3. Subject to the provisions of any resolutions or
other instruments securing obligations payable from a debt
service fund, any balance in the fund may be invested
(a) in governmental bonds, notes, bills, mortgages, and
other securities, which are direct obligations or are guaranteed
or insured issues of the United States, its agencies, its
instrumentalities, or organizations created by an act of
Congress, excluding mortgage-backed securities that are defined
as high risk pursuant to subdivision 5, or in certificates of
deposit secured by letters of credit issued by federal home loan
banks,
(b) in shares of an investment company (1) registered under
the Federal Investment Company Act of 1940, whose shares are
registered under the Federal Securities Act of 1933, and (2)
whose only investments are in (i) securities described in the
preceding clause, except that the exclusion of mortgage-backed
securities defined as high risk pursuant to subdivision 5 do
does not apply to shares mortgage-backed securities in the
portfolio of an investment company, (ii) general obligation
tax-exempt securities rated A or better by a national bond
rating service, and (iii) repurchase agreements or reverse
repurchase agreements fully collateralized by those securities,
if the repurchase agreements or reverse repurchase agreements
are entered into only with those primary reporting dealers that
report to the Federal Reserve Bank of New York and with the 100
largest United States commercial banks,
(c) in any security which is (1) a general obligation of
the state of Minnesota or any of its municipalities, or (2) a
general obligation of another state or local government with
taxing powers which is rated A or better by a national bond
rating service, or (3) a general obligation of the Minnesota
housing finance agency, or (4) a general obligation of a housing
finance agency of any state if it includes a moral obligation of
the state, or (5) a general or revenue obligation of any agency
or authority of the state of Minnesota other than a general
obligation of the Minnesota housing finance agency. Investments
under clauses (3) and (4) must be in obligations that are rated
A or better by a national bond rating service and investments
under clause (5) must be in obligations that are rated AA or
better by a national bond rating service,
(d) in bankers acceptances of United States banks eligible
for purchase by the Federal Reserve System,
(e) in commercial paper issued by United States
corporations or their Canadian subsidiaries that is of the
highest quality and matures in 270 days or less, or
(f) in guaranteed investment contracts issued or guaranteed
by United States commercial banks or domestic branches of
foreign banks or United States insurance companies or their
Canadian or United States subsidiaries; provided that the
investment contracts rank on a parity with the senior unsecured
debt obligations of the issuer or guarantor and, (1) in the case
of long-term investment contracts, either (i) the long-term
senior unsecured debt of the issuer or guarantor is rated, or
obligations backed by letters of credit of the issuer or
guarantor if forming the primary basis of a rating of such
obligations would be rated, in the highest or next highest
rating category of Standard & Poor's Corporation, Moody's
Investors Service, Inc., or a similar nationally recognized
rating agency, or (ii) if the issuer is a bank with headquarters
in Minnesota, the long-term senior unsecured debt of the issuer
is rated, or obligations backed by letters of credit of the
issuer if forming the primary basis of a rating of such
obligations would be rated in one of the three highest rating
categories of Standard & Poor's Corporation, Moody's Investors
Service, Inc., or similar nationally recognized rating agency,
or (2) in the case of short-term investment contracts, the
short-term unsecured debt of the issuer or guarantor is rated,
or obligations backed by letters of credit of the issuer or
guarantor if forming the primary basis of a rating of such
obligations would be rated, in the highest two rating categories
of Standard and Poor's Corporation, Moody's Investors Service,
Inc., or similar nationally recognized rating agency.
The fund may also be used to purchase any obligation,
whether general or special, of an issue which is payable from
the fund, at such price, which may include a premium, as shall
be agreed to by the holder, or may be used to redeem any
obligation of such an issue prior to maturity in accordance with
its terms. The securities representing any such investment may
be sold or hypothecated by the municipality at any time, but the
money so received remains a part of the fund until used for the
purpose for which the fund was created.
Sec. 6. [EFFECTIVE DATE.]
Sections 1 to 5 are effective July 1, 1994.
Presented to the governor May 5, 1994
Signed by the governor May 6, 1994, 4:47 p.m.
Official Publication of the State of Minnesota
Revisor of Statutes