Minnesota Legislature
Office of the Revisor of Statutes
Minnesota Session Laws - 2004, Regular Session
Key: (1) language to be deleted (2) new language
CHAPTER 223-S.F.No. 806
An act relating to retirement; various retirement
plans; modifying the responsibilities to provide
actuarial valuations and proposed legislative cost
estimates; reducing an appropriation; amending
Minnesota Statutes 2002, sections 352.03, subdivision
6; 352B.02, subdivision 1e; 353.03, subdivision 3a;
354.06, subdivision 2a; 354A.021, subdivision 7;
356.215, subdivisions 2, 18; 422A.06, subdivision 2;
proposing coding for new law in Minnesota Statutes,
chapter 356; repealing Minnesota Statutes 2002,
sections 3.85, subdivisions 11, 12; 356.217.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:
Section 1. Minnesota Statutes 2002, section 352.03,
subdivision 6, is amended to read:
Subd. 6. [DUTIES AND POWERS OF EXECUTIVE DIRECTOR.] The
management of the system is vested in the director, who is the
executive and administrative head of the system. The director
shall be advisor to the board on matters pertaining to the
system and shall also act as the secretary of the board. The
director shall:
(1) attend meetings of the board;
(2) prepare and recommend to the board appropriate rules to
carry out this chapter;
(3) establish and maintain an adequate system of records
and accounts following recognized accounting principles and
controls;
(4) designate an assistant director with the approval of
the board;
(5) appoint any employees, both permanent and temporary,
that are necessary to carry out the provisions of this chapter;
(6) organize the work of the system as the director deems
necessary to fulfill the functions of the system, and define the
duties of its employees and delegate to them any powers or
duties, subject to the control of the director and under
conditions the director may prescribe. Appointments to exercise
delegated power must be by written order and shall be filed with
the secretary of state;
(7) with the advice and consent of the board, contract for
the services of an approved actuary, professional management
services, and any other consulting services as necessary and fix
the compensation for those services. The contracts are not
subject to competitive bidding under chapter 16C. Any approved
actuary retained by the executive director shall function as the
actuarial advisor of the board and the executive director, and
may perform actuarial valuations and experience studies to
supplement those performed by the actuary retained by the
legislative commission on pensions and retirement under section
356.214. Any supplemental actuarial valuations or experience
studies shall be filed with the executive director of the
Legislative Commission on Pensions and Retirement. Professional
management services may not be contracted for more often than
once in six years. Copies of professional management survey
reports must be transmitted to the secretary of the senate, the
chief clerk of the house of representatives, and the legislative
reference library as provided by section 3.195, and to the
executive director of the commission at the time as reports are
furnished to the board. Only management firms experienced in
conducting management surveys of federal, state, or local public
retirement systems are qualified to contract with the director;
(8) with the advice and consent of the board provide
in-service training for the employees of the system;
(9) make refunds of accumulated contributions to former
state employees and to the designated beneficiary, surviving
spouse, legal representative, or next of kin of deceased state
employees or deceased former state employees, as provided in
this chapter;
(10) determine the amount of the annuities and disability
benefits of employees covered by the system and authorize
payment of the annuities and benefits beginning as of the dates
on which the annuities and benefits begin to accrue, in
accordance with the provisions of this chapter;
(11) pay annuities, refunds, survivor benefits, salaries,
and necessary operating expenses of the system;
(12) certify funds available for investment to the State
Board of Investment;
(13) with the advice and approval of the board request the
State Board of Investment to sell securities when the director
determines that funds are needed for the system;
(14) prepare and submit to the board and the legislature an
annual financial report covering the operation of the system, as
required by section 356.20;
(15) prepare and submit biennial and annual budgets to the
board and with the approval of the board submit the budgets to
the Department of Finance; and
(16) with the approval of the board, perform other duties
required to administer the retirement and other provisions of
this chapter and to do its business.
Sec. 2. Minnesota Statutes 2002, section 352B.02,
subdivision 1e, is amended to read:
Subd. 1e. [AUDIT; ACTUARIAL VALUATION.] The legislative
auditor shall audit the fund. Any actuarial valuation of the
fund required under section 356.215 shall must be prepared by
the actuary retained by the Legislative Commission on Pensions
and Retirement under section 356.214. Any approved actuary
retained by the executive director under section 352.03,
subdivision 6, may perform actuarial valuations and experience
studies to supplement those performed by the commission-retained
actuary. Any supplemental actuarial valuation or experience
studies shall be filed with the executive director of the
Legislative Commission on Pensions and Retirement.
Sec. 3. Minnesota Statutes 2002, section 353.03,
subdivision 3a, is amended to read:
Subd. 3a. [EXECUTIVE DIRECTOR.] (a) [APPOINTMENT.] The
board shall appoint, with the advice and consent of the senate,
an executive director on the basis of education, experience in
the retirement field, and leadership ability. The executive
director shall have had at least five years' experience in an
executive level management position, which has included
responsibility for pensions, deferred compensation, or employee
benefits. The executive director serves at the pleasure of the
board. The salary of the executive director is as provided by
section 15A.0815.
(b) [DUTIES.] The management of the association is vested
in the executive director who shall be the executive and
administrative head of the association. The executive director
shall act as adviser to the board on all matters pertaining to
the association and shall also act as the secretary of the
board. The executive director shall:
(1) attend all meetings of the board;
(2) prepare and recommend to the board appropriate rules to
carry out the provisions of this chapter;
(3) establish and maintain an adequate system of records
and accounts following recognized accounting principles and
controls;
(4) designate, with the approval of the board, up to two
persons who shall serve in the unclassified service and whose
salary is set in accordance with section 43A.18, subdivision 3,
appoint a confidential secretary in the unclassified service,
and appoint employees to carry out this chapter, who are subject
to chapters 43A and 179A in the same manner as are executive
branch employees;
(5) organize the work of the association as the director
deems necessary to fulfill the functions of the association, and
define the duties of its employees and delegate to them any
powers or duties, subject to the control of, and under such
conditions as, the executive director may prescribe;
(6) with the approval of the board, contract for the
services of an approved actuary, professional management
services, and any other consulting services as necessary to
fulfill the purposes of this chapter. All contracts are subject
to chapter 16C. The commissioner of administration shall not
approve, and the association shall not enter into, any contract
to provide lobbying services or legislative advocacy of any
kind. Any approved actuary retained by the executive director
shall function as the actuarial advisor of the board and the
executive director and may perform actuarial valuations and
experience studies to supplement those performed by the actuary
retained by the Legislative Commission on Pensions and
Retirement under section 356.214. Any supplemental actuarial
valuations or experience studies shall be filed with the
executive director of the Legislative Commission on Pensions and
Retirement. Copies of professional management survey reports
shall be transmitted to the secretary of the senate, the chief
clerk of the house of representatives, and the Legislative
Reference Library as provided by section 3.195, and to the
executive director of the commission at the same time as reports
are furnished to the board. Only management firms experienced
in conducting management surveys of federal, state, or local
public retirement systems shall be qualified to contract with
the director hereunder;
(7) with the approval of the board provide in-service
training for the employees of the association;
(8) make refunds of accumulated contributions to former
members and to the designated beneficiary, surviving spouse,
legal representative or next of kin of deceased members or
deceased former members, as provided in this chapter;
(9) determine the amount of the annuities and disability
benefits of members covered by the association and authorize
payment of the annuities and benefits beginning as of the dates
on which the annuities and benefits begin to accrue, in
accordance with the provisions of this chapter;
(10) pay annuities, refunds, survivor benefits, salaries,
and necessary operating expenses of the association;
(11) prepare and submit to the board and the legislature an
annual financial report covering the operation of the
association, as required by section 356.20;
(12) prepare and submit biennial and annual budgets to the
board for its approval and submit the approved budgets to the
department of finance for approval by the commissioner;
(13) reduce all or part of the accrued interest payable
under section 353.27, subdivisions 12, 12a, and 12b, or 353.28,
subdivision 5, upon receipt of proof by the association of an
unreasonable processing delay or other extenuating circumstances
of the employing unit. The executive director shall prescribe
and submit for approval by the board the conditions under which
such interest may be reduced; and
(14) with the approval of the board, perform such other
duties as may be required for the administration of the
association and the other provisions of this chapter and for the
transaction of its business.
Sec. 4. Minnesota Statutes 2002, section 354.06,
subdivision 2a, is amended to read:
Subd. 2a. [DUTIES OF EXECUTIVE DIRECTOR.] The management
of the association is vested in the executive director who shall
be the executive and administrative head of the association.
The executive director shall act as advisor to the board on all
matters pertaining to the association and shall also act as the
secretary of the board. The executive director shall:
(1) attend all meetings of the board;
(2) prepare and recommend to the board appropriate rules to
carry out the provisions of this chapter;
(3) establish and maintain an adequate system of records
and accounts following recognized accounting principles and
controls;
(4) designate an assistant executive director in the
unclassified service and two assistant executive directors in
the classified service with the approval of the board, and
appoint such employees, both permanent and temporary, as are
necessary to carry out the provisions of this chapter;
(5) organize the work of the association as the director
deems necessary to fulfill the functions of the association, and
define the duties of its employees and delegate to them any
powers or duties, subject to the director's control and under
such conditions as the director may prescribe;
(6) with the approval of the board, contract and set the
compensation for the services of an approved actuary,
professional management services, and any other consulting
services. These contracts are not subject to the competitive
bidding procedure prescribed by chapter 16C. An approved
actuary retained by the executive director shall function as the
actuarial advisor of the board and the executive director and
may perform actuarial valuations and experience studies to
supplement those performed by the actuary retained by the
legislative commission on pensions and retirement under section
356.214. Any supplemental actuarial valuations or experience
studies shall be filed with the executive director of the
Legislative Commission on Pensions and Retirement. Copies of
professional management survey reports must be transmitted to
the secretary of the senate, the chief clerk of the house of
representatives, and the legislative reference library as
provided by section 3.195, and to the executive director of the
commission at the same time as reports are furnished to the
board. Only management firms experienced in conducting
management surveys of federal, state, or local public retirement
systems are qualified to contract with the executive director;
(7) with the approval of the board, provide in-service
training for the employees of the association;
(8) make refunds of accumulated contributions to former
members and to the designated beneficiary, surviving spouse,
legal representative, or next of kin of deceased members or
deceased former members, under this chapter;
(9) determine the amount of the annuities and disability
benefits of members covered by the association and authorize
payment of the annuities and benefits beginning as of the dates
on which the annuities and benefits begin to accrue, under this
chapter;
(10) pay annuities, refunds, survivor benefits, salaries,
and necessary operating expenses of the association;
(11) prepare and submit to the board and the legislature an
annual financial report covering the operation of the
association, as required by section 356.20;
(12) certify funds available for investment to the state
board of investment;
(13) with the advice and approval of the board, request the
State Board of Investment to sell securities on determining that
funds are needed for the purposes of the association;
(14) prepare and submit biennial and annual budgets to the
board and with the approval of the board submit those budgets to
the department of finance; and
(15) with the approval of the board, perform such other
duties as may be required for the administration of the
association and the other provisions of this chapter and for the
transaction of its business. The executive director may:
(i) reduce all or part of the accrued interest and fines
payable by an employing unit for reporting requirements under
section 354.52, based on an evaluation of any extenuating
circumstances of the employing unit;
(ii) assign association employees to conduct field audits
of an employing unit to ensure compliance with the provisions of
this chapter; and
(iii) recover overpayments, if not repaid to the
association, by suspending or reducing the payment of a
retirement annuity, refund, disability benefit, survivor
benefit, or optional annuity under this chapter until the
overpayment, plus interest, has been recovered.
Sec. 5. Minnesota Statutes 2002, section 354A.021,
subdivision 7, is amended to read:
Subd. 7. [ACTUARIAL CONSULTANT.] The board of trustees or
directors of each teachers retirement fund association may
contract for the services of an approved actuary and fix the
reasonable compensation for those services. Any approved
actuary retained by the board shall function as the actuarial
advisor to the board and may perform actuarial valuations and
experience studies to supplement those performed by the actuary
retained by the Legislative Commission on Pensions and
Retirement under section 356.214. Any supplemental actuarial
valuations or experience studies shall must be filed with the
executive director of the Legislative Commission on Pensions and
Retirement.
Sec. 6. [356.214] [ACTUARIAL VALUATION PREPARATION; JOINT
RETENTION OF CONSULTING ACTUARY.]
Subdivision 1. [JOINT RETENTION.] (a) The chief
administrative officers of the Minnesota State Retirement
System, the Public Employees Retirement Association, the
Teachers Retirement Association, the Duluth Teachers Retirement
Fund Association, the Minneapolis Teachers Retirement Fund
Association, the Minneapolis Employees Retirement Fund, and the
St. Paul Teachers Retirement Fund Association, jointly, on
behalf of the state, its employees, its taxpayers, and its
various public pension plans, shall contract with an established
actuarial consulting firm to conduct annual actuarial valuations
and related services for the retirement plans named in paragraph
(b). The principal from the actuarial consulting firm on the
contract must be an approved actuary under section 356.215,
subdivision 1, paragraph (c). Prior to becoming effective, the
contract under this section is subject to a review and approval
by the Legislative Commission on Pensions and Retirement.
(b) The contract for actuarial services must include the
preparation of actuarial valuations and related actuarial work
for the following retirement plans:
(1) the teachers retirement plan, Teachers Retirement
Association;
(2) the general state employees retirement plan, Minnesota
State Retirement System;
(3) the correctional employees retirement plan, Minnesota
State Retirement System;
(4) the State Patrol retirement plan, Minnesota State
Retirement System;
(5) the judges retirement plan, Minnesota State Retirement
System;
(6) the Minneapolis employees retirement plan, Minneapolis
Employees Retirement Fund;
(7) the public employees retirement plan, Public Employees
Retirement Association;
(8) the public employees police and fire plan, Public
Employees Retirement Association;
(9) the Duluth teachers retirement plan, Duluth Teachers
Retirement Fund Association;
(10) the Minneapolis teachers retirement plan, Minneapolis
Teachers Retirement Fund Association;
(11) the St. Paul teachers retirement plan, St. Paul
Teachers Retirement Fund Association;
(12) the legislators retirement plan, Minnesota State
Retirement System;
(13) the elective state officers retirement plan, Minnesota
State Retirement System; and
(14) local government correctional service retirement plan,
Public Employees Retirement Association.
(c) The contract must require completion of the annual
actuarial valuation calculations on a fiscal year basis, with
the contents of the actuarial valuation calculations as
specified in section 356.215, and in conformity with the
standards for actuarial work adopted by the Legislative
Commission on Pensions and Retirement.
The contract must require completion of annual experience
data collection and processing and a quadrennial published
experience study for the plans listed in paragraph (b), clauses
(1), (2), and (7), as provided for in the standards for
actuarial work adopted by the commission. The experience data
collection, processing, and analysis must evaluate the following:
(1) individual salary progression;
(2) the rate of return on investments based on the current
asset value;
(3) payroll growth;
(4) mortality;
(5) retirement age;
(6) withdrawal; and
(7) disablement.
The contract must include provisions for the preparation of
cost analyses by the jointly retained actuary for proposed
legislation that include changes in benefit provisions or
funding policies prior to their consideration by the Legislative
Commission on Pensions and Retirement.
(d) The actuary retained by the joint retirement systems
shall annually prepare a report to the legislature, including a
commentary on the actuarial valuation calculations for the plans
named in paragraph (b) and summarizing the results of the
actuarial valuation calculations. The actuary shall include
with the report the actuary's recommendations to the legislature
concerning the appropriateness of the support rates to achieve
proper funding of the retirement plans by the required funding
dates. The actuary shall, as part of the quadrennial experience
study, include recommendations to the legislature on the
appropriateness of the actuarial valuation assumptions required
for evaluation in the study.
(e) If the actuarial gain and loss analysis in the
actuarial valuation calculations indicates a persistent pattern
of sizable gains or losses, as directed by the joint retirement
systems or as requested by the chair of the Legislative
Commission on Pensions and Retirement, the actuary shall prepare
a special experience study for a plan listed in paragraph (b),
clause (3), (4), (5), (6), (8), (9), (10), (11), (12), (13), or
(14), in the manner provided for in the standards for actuarial
work adopted by the commission.
(f) The term of the contract between the joint retirement
systems and the actuary retained may not exceed five years. The
joint retirement system administrative officers shall establish
procedures for the consideration and selection of contract
bidders and the requirements for the contents of an actuarial
services contract under this section. The procedures and
requirements must be submitted to the Legislative Commission on
Pensions and Retirement for review and comment prior to final
approval by the joint administrators. The contract is subject
to the procurement procedures under chapter 16C. The
consideration of bids and the selection of a consulting
actuarial firm by the chief administrative officers must occur
at a meeting that is open to the public and reasonable timely
public notice of the date and the time of the meeting and its
subject matter must be given.
(g) The actuarial services contract may not limit the
ability of the Minnesota legislature and its standing committees
and commissions to rely on the actuarial results of the work
prepared under the contract.
(h) The joint retirement systems shall designate one of the
retirement system executive directors as the actuarial services
contract manager.
Subd. 2. [ALLOCATION OF ACTUARIAL COSTS.] (a) The
actuarial services contract manager shall assess each retirement
plan specified in subdivision 1, paragraph (b), its appropriate
portion of the total compensation paid to the actuary retained
by the joint retirement systems for the actuarial valuation
calculations and quadrennial experience studies. The total
assessment is 100 percent of the amount of contract compensation
for the actuarial consulting firm for actuarial valuation
calculations, including any public employees police and fire
plan consolidation accounts of the Public Employees Retirement
Association established after March 1, 1999, annual experience
data collection and processing, and quadrennial experience
studies.
The portion of the total assessment payable by each
retirement system or pension plan must be determined based on
each plan's proportion of the actuarial services required, as
determined by the retained actuary, to complete the actuarial
valuation calculations, annual experience data collection and
processing, and quadrennial experience studies for all plans.
The assessment must be made within 30 days following the
end of the fiscal year and must be reported to the chief
administrative officers of the applicable retirement plans. The
amount of the assessment is appropriated from the retirement
fund applicable to the retirement plan.
(b) The actuarial services contract manager shall assess
each retirement plan or each interest group which requested the
preparation of a cost analysis for proposed legislation the cost
of the actuary retained by the joint retirement systems incurred
in the cost analysis preparation. With respect to interest
groups, the actuarial services contract manager shall obtain a
written commitment for the payment of the assessment in advance
of the cost analysis preparation and may require an advance
deposit or advance payment before authorizing the cost analysis
preparation. The retirement plan or the interest group shall
pay the assessment within 30 days of the date on which the
assessment is billed. The amount of the assessment is
appropriated from the retirement fund applicable to the
retirement plan for cost analyses requested by a retirement plan
or system.
(c) The actuarial services contract manager shall assess to
the Legislative Commission on Pensions and Retirement the cost
of the actuarial cost analysis preparation for the proposed
legislation requested by the chair of the Legislative Commission
on Pensions and Retirement or by the commission executive
director. The commission shall pay the assessment within 30
days of the date on which the assessment is billed.
Subd. 3. [REPORTING TO THE COMMISSION.] A copy of the
actuarial valuations, experience studies, and actuarial cost
analyses prepared by the actuary retained by the joint
retirement systems under the contract provided for in this
section must be filed with the executive director of the
Legislative Commission on Pensions and Retirement at the same
time that the document is transmitted to the actuarial services
contract manager or to any other document recipient.
Sec. 7. Minnesota Statutes 2002, section 356.215,
subdivision 2, is amended to read:
Subd. 2. [REQUIREMENTS.] (a) It is the policy of the
legislature that it is necessary and appropriate to determine
annually the financial status of tax supported retirement and
pension plans for public employees. To achieve this goal:
(1) the Legislative Commission on Pensions and Retirement
shall have prepared by the actuary retained by the commission
under section 356.214 shall prepare annual actuarial valuations
of the retirement plans enumerated in section 3.85 356.214,
subdivision 11 1, paragraph (b), and quadrennial experience
studies of the retirement plans enumerated in section 3.85
356.214, subdivision 11 1, paragraph (b), clauses (1), (2), and
(7); and
(2) the commissioner of finance may have prepared by the
actuary retained by the commission, two years after each set of
quadrennial experience studies, quadrennial projection
valuations of at least one of the retirement plans enumerated in
section 3.85 6, subdivision 11 1, paragraph (b), for which the
commissioner determines that the analysis may be beneficial.
(b) The governing or managing board or administrative
officials of each public pension and retirement fund or plan
enumerated in section 356.20, subdivision 2, clauses (9), (10),
and (12), shall have prepared by an approved actuary annual
actuarial valuations of their respective funds as provided in
this section. This requirement also applies to any fund or plan
that is the successor to any organization enumerated in section
356.20, subdivision 2, or to the governing or managing board or
administrative officials of any newly formed retirement fund,
plan, or association operating under the control or supervision
of any public employee group, governmental unit, or institution
receiving a portion of its support through legislative
appropriations, and any local police or fire fund to which
section 356.216 applies.
Sec. 8. Minnesota Statutes 2002, section 356.215,
subdivision 18, is amended to read:
Subd. 18. [ESTABLISHMENT OF ACTUARIAL ASSUMPTIONS.] (a)
The actuarial assumptions used for the preparation of actuarial
valuations under this section that are other than those set
forth in this section may be changed only with the approval of
the Legislative Commission on Pensions and Retirement.
(b) A change in the applicable actuarial assumptions may be
proposed by the governing board of the applicable pension fund
or relief association, by the actuary retained by the
Legislative Commission on Pensions and Retirement joint
retirement systems under section 356.214, by the actuarial
advisor to a pension fund governed by chapter 352, 353, 354, or
354A, or by the actuary retained by a local police or
firefighters relief association governed by sections 69.77 or
69.771 to 69.776, if one is retained.
Sec. 9. Minnesota Statutes 2002, section 422A.06,
subdivision 2, is amended to read:
Subd. 2. [ACTUARIAL VALUATION REQUIRED.] As of July 1 of
each year, an actuarial valuation of the retirement fund shall
be prepared by the commission-retained actuary retained by the
joint retirement systems under section 356.214 and filed in
conformance with the provisions and requirements of sections
356.215 to 356.23. Experience studies shall be prepared at
those times required by statute, required by the standards for
actuarial work adopted by the Legislative Commission on Pensions
and Retirement or ordered by the board.
The board may contract for the services of an approved
actuary and fix the reasonable compensation for those services.
Any approved actuary retained by the board shall function as the
actuarial advisor to the board and may perform actuarial
valuations and experience studies to supplement those performed
by the actuary retained by the Legislative Commission on
Pensions and Retirement joint retirement systems under section
356.214. Any supplemental actuarial valuations or experience
studies shall must be filed with the executive director of the
Legislative Commission on Pensions and Retirement.
Sec. 10. [APPROPRIATION REDUCTION.]
The general fund appropriation in Laws 2003, First Special
Session chapter 1, article 1, section 2, subdivision 4, for the
fiscal year ending June 30, 2005, is reduced by $152,000.
Sec. 11. [REPEALER.]
Minnesota Statutes 2002, sections 3.85, subdivisions 11 and
12; and 356.217, are repealed.
Sec. 12. [EFFECTIVE DATE.]
Sections 1 to 11 are effective on the day following final
enactment.
Presented to the governor May 15, 2004
Signed by the governor May 19, 2004, 10:45 a.m.
Official Publication of the State of Minnesota
Revisor of Statutes