MN Legislature

Accessibility menu

Session laws use visual text formatting such as stricken text to denote deleted language, and underlined text to denote new language. For users of the jaws screenreader it is recommended to configure jaws to use the proofreading scheme which will alter the pitch of the reading voice when reading stricken and underlined text. Instructions for configuring your jaws reader are provided by following this link.
If you can not or do not wish to configure your screen reader, deleted language will begin with the phrase "deleted text begin" and be followed by the phrase "deleted text end", new language will begin with the phrase "new text begin" and be followed by "new text end". Skip to text of Chapter 233.

Menu

Revisor of Statutes Menu

Authenticate

Pdf

1997 Minnesota Session Laws

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

                            CHAPTER 233-S.F.No. 637 
                  An act relating to retirement; increasing pension 
                  benefit accrual rates; adjusting financing for pension 
                  plans; adding supplemental financial conditions 
                  information for pension funds; reducing 
                  appropriations; modifying or establishing various 
                  pension aids; appropriating money; amending Minnesota 
                  Statutes 1996, sections 3.85, subdivisions 11 and 12; 
                  3A.02, subdivisions 1 and 4; 3A.07; 11A.18, 
                  subdivision 9; 69.011, subdivisions 1, 2, and by 
                  adding a subdivision; 69.021, subdivisions 5, 7a, 10, 
                  and 11; 69.031, subdivision 5; 352.01, subdivision 25; 
                  352.04, subdivisions 2 and 3; 352.115, subdivision 3; 
                  352.72, subdivision 2; 352.92, subdivisions 1 and 2; 
                  352.93, subdivisions 2, 3, and by adding a 
                  subdivision; 352.95, subdivisions 1 and 5; 352B.02, 
                  subdivisions 1a and 1c; 352B.08, subdivisions 2 and 
                  2a; 352B.10, subdivision 1; 352B.30, by adding a 
                  subdivision; 352C.031, subdivision 4; 352C.033; 
                  352D.02, subdivisions 1 and 2; 352D.04, subdivisions 1 
                  and 2; 353.01, subdivision 37; 353.27, subdivisions 2 
                  and 3a; 353.29, subdivision 3; 353.651, subdivision 3; 
                  353.656, subdivision 1; 353.71, subdivision 2; 
                  353A.08, subdivisions 1 and 2; 353A.083, by adding a 
                  subdivision; 354.05, subdivision 38; 354.42, 
                  subdivisions 2, 3, and 5; 354.44, subdivision 6, and 
                  by adding a subdivision; 354.53, subdivision 1; 
                  354.55, subdivision 11; 354A.011, subdivision 15a; 
                  354A.12, subdivisions 1, 2a, 3a, 3b, and 3c; 354A.31, 
                  subdivisions 4 and 4a; 356.20, subdivision 2; 356.215, 
                  subdivisions 2, 4d, and 4g; 356.217; 356.30, 
                  subdivisions 1 and 3; 356.32, subdivision 2; 422A.06, 
                  subdivision 8; 422A.151; 423B.01, subdivision 9, and 
                  by adding a subdivision; 423B.06, by adding a 
                  subdivision; 423B.07; 423B.09, subdivision 1, and by 
                  adding a subdivision; 423B.10, subdivision 1; 423B.15, 
                  subdivisions 2, 3, 6, and by adding a subdivision; and 
                  490.124, subdivisions 1 and 5; Laws 1965, chapter 519, 
                  section 1, as amended; Laws 1979, chapter 109, section 
                  1, as amended; Laws 1989, chapter 319, article 19, 
                  section 7, subdivisions 1, as amended, 3, 4, as 
                  amended, and 7; Laws 1993, chapter 125, article 1, 
                  section 1; and Laws 1996, chapter 448, article 1, 
                  section 3; proposing coding for new law in Minnesota 
                  Statutes, chapters 124; 273; 352; 352C; 354A; 355; and 
                  356; repealing Minnesota Statutes 1996, sections 
                  124.195, subdivision 12; 124.2139; 353C.01; 353C.02; 
                  353C.03; 353C.04; 353C.05; 353C.06; 353C.07; 353C.08; 
                  353C.09; 353C.10; 354A.12, subdivision 2b; 356.70; and 
                  356.88, subdivision 2; Laws 1985, chapter 259, section 
                  3; and Laws 1993, chapter 336, article 3, section 1. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
                                   ARTICLE 1 
                         PENSION UNIFORMITY PROVISIONS 
           Section 1.  Minnesota Statutes 1996, section 3.85, 
        subdivision 11, is amended to read: 
           Subd. 11.  [VALUATIONS AND REPORTS TO LEGISLATURE.] (a) The 
        commission shall contract with an established actuarial 
        consulting firm to conduct annual actuarial valuations for the 
        retirement plans named in paragraph (b).  The contract must 
        include provisions for performing cost analyses of proposals for 
        changes in benefit and funding policies.  
           (b) The contract for actuarial valuation must include 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; and 
           (13) the elective state officers retirement plan, Minnesota 
        state retirement system; and 
           (14) the public employees local government correctional 
        service retirement plan, public employees retirement 
        association, if there are any participants in that plan.  
           (c) The contract must specify completion of annual 
        actuarial valuation calculations on a fiscal year basis with 
        their contents as specified in section 356.215, and the 
        standards for actuarial work adopted by the commission.  
           The contract must specify 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) rate of return on investments based on current asset 
        value; 
           (3) payroll growth; 
           (4) mortality; 
           (5) retirement age; 
           (6) withdrawal; and 
           (7) disablement.  
           (d) The actuary retained by the commission shall annually 
        prepare a report to the legislature, including the commentary on 
        the actuarial valuation calculations for the plans named in 
        paragraph (b) and summarizing the results of the actuarial 
        valuation calculations.  The commission-retained actuary shall 
        include with the report the actuary's recommendations concerning 
        the appropriateness of the support rates to achieve proper 
        funding of the retirement funds by the required funding dates.  
        The commission-retained actuary shall, as part of the 
        quadrennial published 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 commission, the 
        actuary retained by the commission shall prepare a special 
        experience study for a plan listed in paragraph (b), clause (3), 
        (4), (5), (6), (8), (9), (10), (11), (12), or (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 commission and the 
        actuary retained by the commission is two years, plus not to 
        exceed two one-year extensions before competitive bidding.  The 
        contract is subject to competitive bidding procedures as 
        specified by the commission. 
           Sec. 2.  Minnesota Statutes 1996, section 3.85, subdivision 
        12, is amended to read: 
           Subd. 12.  [ALLOCATION OF ACTUARIAL COST.] (a) The 
        commission shall assess each retirement plan specified in 
        subdivision 11, paragraph (b), the compensation paid to the 
        actuary retained by the commission for the actuarial valuation 
        calculations, quadrennial projection valuations, and quadrennial 
        experience studies.  The assessment is 100 percent of the amount 
        of contract compensation for the actuarial consulting firm 
        retained by the commission for actuarial valuation calculations, 
        including the public employees police and fire plan 
        consolidation accounts of the public employees retirement 
        association, 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 as follows: 
           (1) Each pension plan specified in subdivision 11, 
        paragraph (b), clauses (1) to (14) (13), must pay the following 
        indexed amount based on its total active, deferred, inactive, 
        and benefit recipient membership: 
               up to 2,000 members, inclusive         $2.55 per member 
               2,001 through 10,000 members           $1.13 per member 
               over 10,000 members                    $0.11 per member  
           The amount specified is applicable for the assessment of 
        the July 1, 1991, to June 30, 1992, fiscal year actuarial 
        compensation amounts.  For the July 1, 1992, to June 30, 1993, 
        fiscal year and subsequent fiscal year actuarial compensation 
        amounts, the amount specified must be increased at the same 
        percentage increase rate as the implicit price deflator for 
        state and local government purchases of goods and services for 
        the 12-month period ending with the first quarter of the 
        calendar year following the completion date for the actuarial 
        valuation calculations, as published by the federal Department 
        of Commerce, and rounded upward to the nearest full cent. 
           (2) The total per-member portion of the allocation must be 
        determined, and that total per-member amount must be subtracted 
        from the total amount for allocation.  Of the remainder dollar 
        amount, the following per-retirement system and per-pension plan 
        charges must be determined and the charges must be paid by the 
        system or plan: 
           (i) 37.87 percent is the total additional per-retirement 
        system charge, of which one-seventh must be paid by each 
        retirement system specified in subdivision 11, paragraph (b), 
        clauses (1), (2), (6), (7), (9), (10), and (11). 
           (ii) 62.13 percent is the total additional per-pension plan 
        charge, of which one-thirteenth must be paid by each pension 
        plan specified in subdivision 11, paragraph (b), clauses (1) to 
        (13), if there are not any participants in the plan specified in 
        subdivision 11, paragraph (b), clause (14), or of which 
        one-fourteenth must be paid by each pension plan specified in 
        subdivision 11, paragraph (b), clauses (1) to (14), if there are 
        participants in the plan specified in subdivision 11, paragraph 
        (b), clause (14). 
           (b) The assessment must be made following the completion of 
        the actuarial valuation calculations and the experience 
        analysis.  The amount of the assessment is appropriated from the 
        retirement fund applicable to the retirement plan.  Receipts 
        from assessments must be deposited in the state treasury and 
        credited to the general fund. 
           Sec. 3.  Minnesota Statutes 1996, section 3A.02, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [QUALIFICATIONS.] (a) A former legislator 
        is entitled, upon written application to the director, to 
        receive a retirement allowance monthly, if the person: 
           (1) has served at least six full years, without regard to 
        the application of section 3A.10, subdivision 2, or has served 
        during all or part of four regular sessions as a member of the 
        legislature, which service need not be continuous; 
           (2) has attained the normal retirement age; 
           (3) has retired as a member of the legislature; and 
           (4) has made all contributions provided for in section 
        3A.03, has made payments for past service under subdivision 2, 
        or has made payments in lieu of contributions under Minnesota 
        Statutes 1992, section 3A.031, prior to July 1, 1994. 
           (b) This paragraph applies to members of the legislature 
        who terminate service as a legislator before July 1, 1997.  For 
        service rendered before the beginning of the 1979 legislative 
        session, but not to exceed eight years of service, the 
        retirement allowance is an amount equal to five percent per year 
        of service of that member's average monthly salary.  For service 
        in excess of eight years rendered before the beginning of the 
        1979 legislative session, and for service rendered after the 
        beginning of the 1979 legislative session, the retirement 
        allowance is an amount equal to 2-1/2 percent per year of 
        service of that member's average monthly salary. 
           (c) This paragraph applies to members of the legislature 
        who terminate service as a legislator after June 30, 1997.  The 
        retirement allowance is an amount equal to the applicable rate 
        or rates under paragraph (b) per year of service of the member's 
        average monthly salary adjusted for that person on an actuarial 
        equivalent basis to reflect the change in the postretirement 
        interest rate actuarial assumption under section 356.215, 
        subdivision 4d, from five percent to six percent.  The 
        adjustment must be calculated by or, alternatively, the 
        adjustment procedure must be specified by, the actuary retained 
        by the legislative commission on pensions and retirement.  The 
        purpose of this adjustment is to ensure that the total amount of 
        benefits that the actuary predicts an individual member will 
        receive over the member's lifetime under this paragraph will be 
        the same as the total amount of benefits the actuary predicts 
        the individual member would receive over the member's lifetime 
        under the law in effect before enactment of this paragraph. 
           (d) The retirement allowance accrues beginning with the 
        first day of the month of receipt of the application, but not 
        before age 60, and for the remainder of the former legislator's 
        life, if the former legislator is not serving as a member of the 
        legislature or as a constitutional officer or commissioner as 
        defined in section 352C.021, subdivisions 2 and 3.  The annuity 
        shall does not begin to accrue prior to retirement as a 
        legislator.  No annuity payment shall may be made retroactive 
        for more than 180 days before the date the annuity application 
        is filed with the director. 
           (d) (e) Any member who has served during all or part of 
        four regular sessions is considered to have served eight years 
        as a member of the legislature. 
           (e) (f) The retirement allowance ceases with the last 
        payment that accrued to the retired legislator during the 
        retired legislator's lifetime, except that the surviving spouse, 
        if any, is entitled to the retirement allowance for the calendar 
        month in which the retired legislator died. 
           Sec. 4.  Minnesota Statutes 1996, section 3A.02, 
        subdivision 4, is amended to read: 
           Subd. 4.  [DEFERRED ANNUITIES AUGMENTATION.] (a) The 
        deferred annuity of any former legislator shall must be 
        augmented as provided herein.  The required reserves applicable 
        to the deferred annuity, determined as of the date the benefit 
        begins to accrue using an appropriate mortality table and an 
        interest assumption of five six percent, shall must be augmented 
        from the first of the month following termination of service, or 
        July 1, 1973, whichever is later, to the first day of the month 
        in which the annuity begins to accrue, at the rate of five 
        percent per annum compounded annually until January 1, 1981, and 
        thereafter at the rate of three percent per annum compounded 
        annually until January 1 of the year in which the former 
        legislator attains age 55.  From that date to the effective date 
        of retirement, the rate is five percent compounded annually. 
           (b) The retirement allowance of, or the survivor benefit 
        payable on behalf of, a former member of the legislature who 
        terminated service before July 1, 1997, which is not first 
        payable until after June 30, 1997, must be increased on an 
        actuarial equivalent basis to reflect the change in the 
        postretirement interest rate actuarial assumption under section 
        356.215, subdivision 4d, from five percent to six percent under 
        a calculation procedure and tables adopted by the board of 
        directors of the Minnesota state retirement system and approved 
        by the actuary retained by the legislative commission on 
        pensions and retirement. 
           Sec. 5.  Minnesota Statutes 1996, 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 must 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 2.5 percent.  For the 
        Minneapolis employees retirement fund, the amount certified must 
        not exceed 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 must 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 must be separately reported 
        as additional "noneligible reserves."  The amount of "eligible" 
        and "noneligible" required reserves shall must 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 reserves 
        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 must be certified to the state board by the 
        commission-retained actuary.  The total "eligible" required 
        reserves shall must 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 must be 
        carried to five decimal places and shall must 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 must 
        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. 6.  Minnesota Statutes 1996, section 69.011, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DEFINITIONS.] Unless the language or 
        context clearly indicates that a different meaning is intended, 
        the following words and terms shall for the purposes of this 
        chapter and chapters 423, 423A, 424 and 424A have the meanings 
        ascribed to them: 
           (a) "Commissioner" means the commissioner of revenue. 
           (b) "Municipality" means any home rule charter or statutory 
        city, organized town or park district subject to chapter 398, 
        the University of Minnesota, and, for purposes of the fire state 
        aid program only, an American Indian tribal government entity 
        located within a federally recognized American Indian 
        reservation, and, for purposes of the police state aid program 
        only, the metropolitan airports commission, with respect to 
        employees peace officers covered under chapter 422A, or the 
        department of natural resources and the department of public 
        safety with respect to peace officers covered under chapter 352B.
           (c) "Minnesota Firetown Premium Report" means a form 
        prescribed by the commissioner containing space for reporting by 
        insurers of fire, lightning, sprinkler leakage and extended 
        coverage premiums received upon risks located or to be performed 
        in this state less return premiums and dividends. 
           (d) "Firetown" means the area serviced by any municipality 
        having a qualified fire department or a qualified incorporated 
        fire department having a subsidiary volunteer firefighters' 
        relief association. 
           (e) "Market value" means latest available market value of 
        all property in a taxing jurisdiction, whether the property is 
        subject to taxation, or exempt from ad valorem taxation obtained 
        from information which appears on abstracts filed with the 
        commissioner of revenue or equalized by the state board of 
        equalization. 
           (f) "Minnesota Aid to Police Premium Report" means a form 
        prescribed by the commissioner for reporting by each fire and 
        casualty insurer of all premiums received upon direct business 
        received by it in this state, or by its agents for it, in cash 
        or otherwise, during the preceding calendar year, with reference 
        to insurance written for insuring against the perils contained 
        in auto insurance coverages as reported in the Minnesota 
        business schedule of the annual financial statement which each 
        insurer is required to file with the commissioner in accordance 
        with the governing laws or rules less return premiums and 
        dividends. 
           (g) "Peace officer" means any person: 
           (1) whose primary source of income derived from wages is 
        from direct employment by a municipality or county as a law 
        enforcement officer on a full-time basis of not less than 30 
        hours per week; 
           (2) who has been employed for a minimum of six months prior 
        to December 31 preceding the date of the current year's 
        certification under subdivision 2, clause (b); 
           (3) who is sworn to enforce the general criminal laws of 
        the state and local ordinances; 
           (4) who is licensed by the peace officers standards and 
        training board and is authorized to arrest with a warrant; and 
           (5) who is a member of a local police relief association to 
        which section 69.77 applies, the state patrol retirement plan, 
        the public employees police and fire fund, or the Minneapolis 
        employees retirement fund. 
           (h) "Full-time equivalent number of peace officers 
        providing contract service" means the integral or fractional 
        number of peace officers which would be necessary to provide the 
        contract service if all peace officers providing service were 
        employed on a full-time basis as defined by the employing unit 
        and the municipality receiving the contract service. 
           (i) "Retirement benefits other than a service pension"  
        means any disbursement authorized under section 424A.05, 
        subdivision 3, clauses (2), (3) and (4).  
           (j) "Municipal clerk, municipal clerk-treasurer or county 
        auditor" means the person who was elected or appointed to the 
        specified position or, in the absence of the person, another 
        person who is designated by the applicable governing body.  In a 
        park district the clerk is the secretary of the board of park 
        district commissioners.  In the case of the University of 
        Minnesota, the clerk is that official designated by the board of 
        regents.  For the metropolitan airports commission, the clerk is 
        the person designated by the commission.  For the department of 
        natural resources or the department of public safety, the clerk 
        is the respective commissioner. 
           Sec. 7.  Minnesota Statutes 1996, section 69.011, 
        subdivision 2, is amended to read: 
           Subd. 2.  [QUALIFICATION FOR FIRE OR POLICE STATE AID.] (a) 
        In order to qualify to receive fire state aid, on or before 
        March 15 annually, in conjunction with the financial report 
        required pursuant to section 69.051, the clerk of each 
        municipality having a duly organized fire department as provided 
        in subdivision 4, or the secretary of each independent nonprofit 
        firefighting corporation having a subsidiary incorporated 
        firefighters' relief association whichever is applicable, and 
        the fire chief, shall jointly certify the existence of the 
        municipal fire department or of the independent nonprofit 
        firefighting corporation, whichever is applicable, which meets 
        the minimum qualification requirements set forth in this 
        subdivision, and the fire personnel and equipment of the 
        municipal fire department or the independent nonprofit 
        firefighting corporation as of the preceding December 31.  
        Certification shall be made to the commissioner on a form 
        prescribed by the commissioner and shall include any other facts 
        the commissioner may require.  The certification shall be made 
        to the commissioner in duplicate.  Each copy of the certificate 
        shall be duly executed and deemed an original.  The commissioner 
        shall forward one copy to the auditor of the county wherein the 
        fire department is located and retain one copy. 
           (b) On or before March 15 annually the clerk of each 
        municipality having a duly organized police department and 
        having a duly incorporated relief association shall certify that 
        fact to the county auditor of the county where the police 
        department is located and to the commissioner on a form 
        prescribed by the commissioner together with the other facts the 
        commissioner or auditor may require. 
           Except as provided in subdivision 2b, on or before March 15 
        annually, the clerk of each municipality and the auditor of each 
        county employing one or more peace officers as defined in 
        subdivision 1, clause (h) (g), shall certify the number of such 
        peace officers to the commissioner on forms prescribed by the 
        commissioner.  Credit for officers employed less than a full 
        year shall be apportioned.  Each full month of employment of a 
        qualifying officer during the calendar year shall entitle the 
        employing municipality or county to credit for 1/12 of the 
        payment for employment of a peace officer for the entire year.  
        For purposes of sections 69.011 to 69.051, employment of a peace 
        officer shall commence when the peace officer is entered on the 
        payroll of the respective municipal police department or county 
        sheriff's department.  No peace officer shall be included in the 
        certification of the number of peace officers by more than one 
        municipality or county for the same month. 
           Sec. 8.  Minnesota Statutes 1996, section 69.011, is 
        amended by adding a subdivision to read: 
           Subd. 2b.  [DEPARTMENTS OF NATURAL RESOURCES AND PUBLIC 
        SAFETY.] (a) On or before July 1, 1997, the commissioner of 
        natural resources shall certify one-half of the number of peace 
        officers as defined in subdivision 1, clause (g), employed by 
        the enforcement division during calendar year 1996 and the 
        commissioner of public safety shall certify one-half of the 
        number of peace officers as defined in subdivision 1, clause 
        (g), employed by the bureau of criminal apprehension, the 
        gambling enforcement division, and the state patrol division 
        during calendar year 1996. 
           (b) On or before March 15, 1998, the commissioner of 
        natural resources shall certify seven-tenths of the number of 
        peace officers as defined in subdivision 1, clause (g), employed 
        by the enforcement division and the commissioner of public 
        safety shall certify seven-tenths of the number of peace 
        officers as defined in subdivision 1, clause (g), employed by 
        the bureau of criminal apprehension, the gambling enforcement 
        division, and the state patrol division. 
           (c) On or before March 15, 1999, and annually on or before 
        March 15, thereafter, the commissioner of natural resources 
        shall certify the number of peace officers as defined in 
        subdivision 1, clause (g), employed by the enforcement division 
        and the commissioner of public safety shall certify the number 
        of peace officers as defined in subdivision 1, clause (g), 
        employed by the bureau of criminal apprehension, the gambling 
        enforcement division, and the state patrol division. 
           (d) The certification must be on a form prescribed by the 
        commissioner.  Peace officers certified under this paragraph 
        must be included in the total certifications under subdivision 2.
           Sec. 9.  Minnesota Statutes 1996, section 69.021, 
        subdivision 5, is amended to read: 
           Subd. 5.  [CALCULATION OF STATE AID.] (a) The amount of 
        fire state aid available for apportionment shall be equal to 107 
        percent of the amount of premium taxes paid to the state upon 
        the fire, lightning, sprinkler leakage, and extended coverage 
        premiums reported to the commissioner by insurers on the 
        Minnesota Firetown Premium Report.  This amount shall be reduced 
        by the amount required to pay the state auditor's costs and 
        expenses of the audits or exams of the firefighters relief 
        associations. 
           (b) The total amount for apportionment in respect to peace 
        officer state aid is equal to 104 percent of the amount of 
        premium taxes paid to the state upon the premiums reported to 
        the commissioner by insurers on the Minnesota Aid to Police 
        Premium Report, plus the payment amounts received under section 
        60A.152 since the last aid apportionment, and reduced by the 
        amount required to pay the state auditor's costs and expenses of 
        the audits or exams of the police relief associations.  The 
        total amount for apportionment in respect to firefighters state 
        aid shall not be less than two percent of the premiums reported 
        to the commissioner by insurers on the Minnesota Firetown 
        Premium Report after subtracting (1) the amount required to pay 
        the state auditor's costs and expenses of the audits or exams of 
        the firefighters relief associations, and (2) one percent of the 
        premiums reported by town and farmers' mutual insurance 
        companies and mutual property and casualty companies with total 
        assets of $5,000,000 or less.  The total amount for 
        apportionment in respect to the police state aid program shall 
        not be less than two percent of the amount of premiums reported 
        to the commissioner by insurers on the Minnesota Aid to Police 
        Premium Report after subtracting the amount required to pay the 
        state auditor's cost and expenses of the audits or exams of the 
        police relief associations.  The commissioner shall calculate 
        the percentage of increase or decrease reflected in the 
        apportionment over or under the previous year's available state 
        aid using the same premiums as a basis for comparison. 
           (c) The amount for apportionment in respect to peace 
        officer state aid under paragraph (b) must be further reduced by 
        $1,779,000 in fiscal year 1999, $2,077,000 in fiscal year 2000, 
        and $2,404,000 in fiscal year 2001.  These reductions in this 
        paragraph cancel to the general fund. 
           Sec. 10.  Minnesota Statutes 1996, section 69.021, 
        subdivision 7a, is amended to read: 
           Subd. 7a.  [APPORTIONMENT OF POLICE STATE AID.] (a) The 
        commissioner shall apportion the state peace officer aid to each 
        municipality and to the county in the following manner: 
           (1) for all municipalities maintaining police departments 
        and the county, counties, the department of natural resources, 
        and the department of public safety, the police state aid must 
        be distributed in proportion to the total number of peace 
        officers, as determined under section 69.011, subdivision 1, 
        clause (g), and subdivision 2, clause (b), employed by 
        each municipality and by the county employing unit for 12 
        calendar months and the proportional or fractional number who 
        were employed less than 12 months; 
           (2) for each municipality which contracts with the county 
        for police service, a proportionate amount of the state aid 
        distributed to the county based on the full-time equivalent 
        number of peace officers providing contract service must be 
        credited against the municipality's contract obligation; and 
           (3) for each municipality which contracts with another 
        municipality for police service, a proportionate amount of the 
        state aid distributed to the municipality providing contract 
        service based on the full-time equivalent number of peace 
        officers providing contract service on a full-time equivalent 
        basis must be credited against the contract obligation of the 
        municipality receiving contract service. 
           (b) No municipality entitled to receive state peace officer 
        aid may be apportioned less state peace officer aid for any year 
        under Laws 1976, chapter 315, than the amount which was 
        apportioned to it for calendar year 1975 based on premiums 
        reported to the commissioner for calendar year 1974; provided, 
        the amount of state peace officer aid to other municipalities 
        within the county and to the county must be adjusted in 
        proportion to the total number of peace officers in the 
        municipalities and the county, so that the amount of state peace 
        officer aid apportioned does not exceed the amount of state 
        peace officer aid available for apportionment. 
           Sec. 11.  Minnesota Statutes 1996, section 69.021, 
        subdivision 10, is amended to read: 
           Subd. 10.  [REDUCTION IN POLICE STATE AID 
        APPORTIONMENT.] (a) The commissioner of revenue shall reduce the 
        apportionment of police state aid under subdivisions 5, 
        paragraph (b), 6, and 7 7a, for eligible employer units by 
        any excess police state aid. 
           (b) "Excess police state aid" is: 
           (1) for counties and for municipalities in which police 
        retirement coverage is provided wholly by the public employees 
        police and fire fund and all police officers are members of the 
        plan governed by sections 353.63 to 353.657, the amount in 
        excess of the employer's total prior calendar year obligation 
        under section 353.65, as defined in paragraph (c), as certified 
        by the executive director of the public employees retirement 
        association.; 
           (2) for municipalities in which police retirement coverage 
        is provided in part by the public employees police and fire fund 
        governed by sections 353.63 to 353.657 and in part by a local 
        police consolidation account governed by chapter 353A, the 
        amount in excess of the employer's total prior calendar year 
        obligation as defined in paragraph (c), as certified by the 
        executive director of the public employees retirement 
        association; 
           (3) for municipalities in which police retirement coverage 
        is provided in part by the public employees police and fire fund 
        governed by sections 353.63 to 353.657 and in part by a local 
        police relief association governed by sections 69.77 and 
        423A.01, the amount in excess of the employer's total prior 
        calendar year obligation as defined in paragraph (c), as 
        certified by the executive director of the public employees 
        retirement association, plus the amount of the financial 
        requirements of the relief association certified to the 
        applicable municipality during the prior calendar year under 
        section 69.77, subdivisions 2b and 2c, reduced by the amount of 
        member contributions deducted from the covered salary of the 
        relief association during the prior calendar year under section 
        69.77, subdivision 2a, as certified by the chief administrative 
        officer of the applicable municipality; 
           (4) for the metropolitan airports commission, if there are 
        police officers hired before July 1, 1978, with retirement 
        coverage by the Minneapolis employees retirement fund remaining, 
        the amount in excess of the commission's total prior calendar 
        year obligation as defined in paragraph (c), as certified by the 
        executive director of the public employees retirement 
        association, plus the amount determined by expressing the 
        commission's total prior calendar year contribution to the 
        Minneapolis employees retirement fund under section 422A.101, 
        subdivisions 2 and 2a, as a percentage of the commission's total 
        prior calendar year covered payroll for commission employees 
        covered by the Minneapolis employees retirement fund and 
        applying that percentage to the commission's total prior 
        calendar year covered payroll for commission police officers 
        covered by the Minneapolis employees retirement fund, as 
        certified by the chief administrative officer of the 
        metropolitan airports commission; and 
           (5) for the department of natural resources and for the 
        department of public safety, the amount in excess of the 
        employer's total prior calendar year obligation under section 
        352B.02, subdivision 1c, for plan members who are peace officers 
        under section 69.011, subdivision 1, clause (g), as certified by 
        the executive director of the Minnesota state retirement system. 
           (c) The employer's total prior calendar year obligation 
        with respect to the public employees police and fire plan is the 
        total prior calendar year obligation under section 353.65, 
        subdivision 3, for police officers as defined in section 353.64, 
        subdivision 2, and the actual total prior calendar year 
        obligation under section 353.65, subdivision 3, for 
        firefighters, as defined in section 353.64, subdivision 3, but 
        not to exceed for those firefighters the applicable following 
        amount: 
          municipality                       maximum amount 
          Albert Lea                          $54,157.01
          Anoka                                10,399.31
          Apple Valley                          5,442.44 
          Austin                               49,864.73
          Bemidji                              27,671.38
          Brooklyn Center                       6,605.92
          Brooklyn Park                        24,002.26  
          Burnsville                           15,956.00 
          Cloquet                               4,260.49 
          Coon Rapids                          39,920.00 
          Cottage Grove                         8,588.48
          Crystal                               5,855.00
          East Grand Forks                     51,009.88
          Edina                                32,251.00
          Elk River                             5,216.55
          Ely                                  13,584.16
          Eveleth                              16,288.27
          Fergus Falls                          6,742.00
          Fridley                              33,420.64
          Golden Valley                        11,744.61 
          Hastings                             16,561.00 
          Hopkins                               4,324.23  
          International Falls                  14,400.69 
          Lakeville                               782.35 
          Lino Lakes                            5,324.00 
          Little Falls                          7,889.41 
          Maple Grove                           6,707.54 
          Maplewood                             8,476.69 
          Minnetonka                           10,403.00 
          Montevideo                            1,307.66 
          Moorhead                             68,069.26 
          New Hope                              6,739.72 
          North St. Paul                        4,241.14 
          Northfield                              770.63 
          Owatonna                             37,292.67 
          Plymouth                              6,754.71 
          Red Wing                              3,504.01 
          Richfield                            53,757.96 
          Rosemount                             1,712.55 
          Roseville                             9,854.51 
          St. Anthony                          33,055.00 
          St. Louis Park                       53,643.11 
          Thief River Falls                    28,365.04 
          Virginia                             31,164.46 
          Waseca                               11,135.17 
          West St. Paul                        15,707.20 
          White Bear Lake                       6,521.04 
          Woodbury                              3,613.00 
          any other municipality                    0.00 
           (d) The total shall amount of excess police state aid must 
        be deposited in a separate the excess police state-aid account 
        in the general fund, administered and distributed as provided in 
        subdivision 11. 
           Sec. 12.  Minnesota Statutes 1996, section 69.021, 
        subdivision 11, is amended to read: 
           Subd. 11.  [EXCESS POLICE STATE-AID HOLDING ACCOUNT.] (a) 
        An excess police state-aid holding account is established in the 
        general fund. 
           (b) Excess police state aid determined according to section 
        69.021, subdivision 10, must be deposited in the excess police 
        state-aid holding account. 
           (c) From the balance in the excess police state-aid holding 
        account, $1,000,000 must be transferred annually to the 
        ambulance service personnel longevity award and incentive 
        suspense account established by section 144C.03, subdivision 2. 
           (d) If a police officer stress reduction program is created 
        by law and money is appropriated for that program, an amount 
        equal to that appropriation must be transferred from the balance 
        in the excess police state-aid holding account. 
           (e) On October 1, 1997, and annually on each October 1, on 
        October 1, 2001, and annually on October 1 thereafter, one-half 
        of the balance of the excess police state-aid holding account 
        remaining after deductions under paragraphs (c) and (d) is 
        appropriated for additional amortization aid under section 
        423A.02, subdivision 1b. 
           (f) On October 1, 1998, and annually each October 1 in 1999 
        and 2000, the entire balance of the excess police state-aid 
        holding account remaining after transfers under paragraphs (c) 
        and (d) is appropriated for additional amortization aid under 
        section 423A.02, subdivision 1b. 
           (g) The remaining balance in the excess police state-aid 
        holding account, after the deductions under paragraphs (c), (d), 
        and (e), cancels to the general fund. 
           Sec. 13.  Minnesota Statutes 1996, section 69.031, 
        subdivision 5, is amended to read: 
           Subd. 5.  [DEPOSIT OF STATE AID.] (1) (a) The municipal 
        treasurer, on receiving the fire state aid, shall within 30 days 
        after receipt transmit it to the treasurer of the duly 
        incorporated firefighters' relief association if there is one 
        organized and the association has filed a financial report with 
        the municipality; but if there is no relief association 
        organized, or if any association dissolve, be removed, or has 
        heretofore dissolved, or has been removed as trustees of state 
        aid, then the treasurer of the municipality shall keep the money 
        in the municipal treasury as provided for in section 424A.08 and 
        shall be disbursed only for the purposes and in the manner set 
        forth in that section.  
           (2) (b) The municipal treasurer, upon receipt of the police 
        state aid, shall disburse the police state aid in the following 
        manner: 
           (a) (1) For a municipality in which a local police relief 
        association exists and all peace officers are members of the 
        association, the total state aid shall be transmitted to the 
        treasurer of the relief association within 30 days of the date 
        of receipt, and the treasurer of the relief association shall 
        immediately deposit the total state aid in the special fund of 
        the relief association; 
           (b) (2) For a municipality in which police retirement 
        coverage is provided by the public employees police and fire 
        fund and all peace officers are members of the fund, the total 
        state aid shall be applied toward the municipality's employer 
        contribution to the public employees police and fire fund 
        pursuant to section 353.65, subdivision 3; or 
           (c) (3) For a municipality other than a city of the first 
        class with a population of more than 300,000 in which both a 
        police relief association exists and police retirement coverage 
        is provided in part by the public employees police and fire 
        fund, the municipality may elect at its option to transmit the 
        total state aid to the treasurer of the relief association as 
        provided in clause (a), to use the total state aid to apply 
        toward the municipality's employer contribution to the public 
        employees police and fire fund subject to all the provisions set 
        forth in clause (b), or to allot the total state aid 
        proportionately to be transmitted to the police relief 
        association as provided in this subdivision and to apply toward 
        the municipality's employer contribution to the public employees 
        police and fire fund subject to the provisions of clause (b) on 
        the basis of the respective number of active full-time peace 
        officers, as defined in section 69.011, subdivision 1, clause 
        (g). 
           For a city of the first class with a population of more 
        than 300,000, in addition, the city may elect to allot the 
        appropriate portion of the total police state aid to apply 
        toward the employer contribution of the city to the public 
        employees police and fire fund based on the covered salary of 
        police officers covered by the fund each payroll period and to 
        transmit the balance to the police relief association. 
           (3) (c) The county treasurer, upon receipt of the police 
        state aid for the county, shall apply the total state aid toward 
        the county's employer contribution to the public employees 
        police and fire fund pursuant to section 353.65, subdivision 3. 
           (4) (d) The designated metropolitan airports commission 
        official, upon receipt of the police state aid for the 
        metropolitan airports commission, shall apply the total police 
        state aid toward the commission's employer contribution to the 
        Minneapolis employees retirement fund under section 422A.101, 
        subdivision 2a. 
           (e) The police state aid apportioned to the departments of 
        public safety and natural resources under section 69.021, 
        subdivision 7a, is appropriated to the commissioner of finance 
        for transfer to the funds and accounts from which the salaries 
        of peace officers certified under section 69.011, subdivision 
        2a, are paid.  The commissioner of revenue shall certify to the 
        commissioners of public safety, natural resources, and finance 
        the amounts to be transferred from the appropriation for police 
        state aid.  The commissioners of public safety and natural 
        resources shall certify to the commissioner of finance the 
        amounts to be credited to each of the funds and accounts from 
        which the peace officers employed by their respective 
        departments are paid.  Each commissioner must allocate the 
        police state aid first for employer contributions for employees 
        funded from the general fund and then for employer contributions 
        for employees funded from other funds.  For peace officers whose 
        salaries are paid from the general fund, the amounts transferred 
        from the appropriation for police state aid must be canceled to 
        the general fund. 
           Sec. 14.  [124.2141] [AID ADJUSTMENTS DUE TO CHANGES IN 
        EMPLOYER RETIREMENT CONTRIBUTION RATES.] 
           Subdivision 1.  [AID ADJUSTMENT.] Beginning in fiscal year 
        1998 and each year thereafter, the commissioner of children, 
        families, and learning shall adjust state aid payments to school 
        operating funds for independent school district No. 625, 
        independent school district No. 709 and special school district 
        No. 1, by the net amount of clauses (1) and (2) and for all 
        other districts, including charter schools, but excluding any 
        education organizations that are prohibited from receiving 
        direct state aids under section 124.193 or 124.32, subdivision 
        12, by the net amount of clauses (1), (2) and (3): 
           (1) a decrease equal to each district's share of the fiscal 
        year 1997 adjustment effected under Minnesota Statutes 1996, 
        section 124.2139; 
           (2) an increase equal to one percent of the salaries paid 
        to members of the general plan of the public employees 
        retirement association in fiscal year 1997, multiplied by 0.35 
        for fiscal year 1998 and 0.70 each year thereafter; 
           (3) a decrease equal to 2.34 percent of the salaries paid 
        to members of the teachers retirement association in fiscal year 
        1997.  
           Subd. 2.  [APPROPRIATION AND ESTIMATED NET SAVINGS.] The 
        amounts necessary to pay any positive net adjustments under this 
        section to any school district are appropriated annually from 
        the general fund to the commissioner of children, families, and 
        learning.  The estimated net general fund savings under this 
        section is $29,819,000 in fiscal year 1998, and $26,997,000 in 
        each fiscal year thereafter. 
           Subd. 3.  [LIMITS ON ADJUSTMENTS AND POTENTIAL REDUCTIONS.] 
        Increases to any school districts under subdivision 1, clause 
        (2), and decreases under subdivision 1, clauses (1) and (3), are 
        limited to the fiscal year 1999 amounts.  The commissioner of 
        children, families, and learning may permanently reduce the 
        adjustments to school districts under subdivision 1, clauses (1) 
        and (2), in the same manner as prescribed for nonschool 
        jurisdictions under section 273.13985, subdivision 2.  The 
        commissioner may, from time to time, require that the most 
        recent fiscal year payroll information be certified by the 
        executive director of the teachers retirement association.  For 
        any school district where the newly certified teachers 
        retirement association payroll is significantly lower than the 
        fiscal 1997 amount as determined by the commissioner, the 
        commissioner shall recalculate the lower reduction under 
        subdivision 1, clause (3), and shall permanently reduce the 
        adjustment amount in subsequent years. 
           Subd. 4.  [EFFECT OF REORGANIZATIONS.] The commissioner of 
        children, families, and learning shall reapportion the aid 
        adjustments to school districts under this section to account 
        for significant changes in boundaries or consolidations, as 
        determined by the commissioner.  If a school district is 
        dissolved, or a school district function thereof is assumed by 
        either the state or a nonpublic organization, adjustments for 
        all or the appropriate fraction of the total payroll under this 
        section must terminate. 
           Subd. 5.  [ADJUSTMENT TERMINATION.] All adjustments under 
        this section terminate on June 30, 2020. 
           Sec. 15.  [273.1385] [AID FOR PUBLIC EMPLOYEES RETIREMENT 
        ASSOCIATION EMPLOYER CONTRIBUTION RATE INCREASE.] 
           Subdivision 1.  [AID TO OFFSET RATE INCREASE.] Beginning 
        with the December 26, 1997, payment, and according to the 
        schedule for payment of local aid under section 477A.015 
        thereafter, the commissioner of revenue shall pay to each city, 
        county, town, and other nonschool jurisdiction an amount equal 
        to 0.35 percent of the fiscal year 1997 payroll for employees 
        who were members of the general plan of the public employees 
        retirement association.  Except for the December 1997 
        distribution under this section, the amount of aid must be 
        certified before September 1 of the year preceding the 
        distribution year to the affected local government.  The 
        executive director of the public employees retirement 
        association shall certify the general plan fiscal year covered 
        payroll and other information requested by the commissioner of 
        revenue, on or before August 1, 1997, and in subsequent years 
        where necessary, in order to facilitate administration of this 
        section.  The amount necessary to make these aid payments is 
        appropriated annually from the general fund to the commissioner 
        of revenue.  Expenditures under this section are estimated to be 
        $7,942,500 in fiscal year 1998, and $15,885,000 in each 
        subsequent fiscal year, less any future reductions under 
        subdivision 2. 
           Subd. 2.  [LIMIT ON AID AND POTENTIAL FUTURE PERMANENT AID 
        REDUCTIONS.] The aid amount received by any jurisdiction in 
        fiscal year 2000 or any year thereafter may not exceed the 
        amount it received in fiscal year 1999.  The commissioner may, 
        from time to time, request the most recent fiscal year payroll 
        information by jurisdiction to be certified by the executive 
        director of the public employees retirement association.  For 
        any jurisdiction where newly certified public employees 
        retirement association general plan payroll is significantly 
        lower than the fiscal 1997 amount, as determined by the 
        commissioner, the commissioner shall recalculate the aid amount 
        based on the most recent fiscal year payroll information, 
        certify the recalculated aid amount for the next distribution 
        year, and permanently reduce the aid amount to that jurisdiction.
           Subd. 3.  [EFFECT OF REORGANIZATIONS.] The commissioner of 
        revenue may adjust the aid amounts for separate jurisdictions to 
        account for significant changes in boundaries or in the form of 
        government, as determined by the commissioner.  If a local 
        government function and the associated public employees 
        retirement association general plan payroll is assumed by either 
        the state, or a nonpublic organization, the aid amounts 
        attributable to the function under this section must terminate.  
           Subd. 4.  [AID TERMINATION.] The aid provided under this 
        section terminates on June 30, 2020.  
           Sec. 16.  Minnesota Statutes 1996, section 352.01, 
        subdivision 25, is amended to read: 
           Subd. 25.  [NORMAL RETIREMENT AGE.] "Normal retirement age" 
        means age 65 for a person who first became a covered employee or 
        a member of a pension fund listed in section 356.30, subdivision 
        3, before July 1, 1989.  For a person who first becomes a 
        covered employee after June 30, 1989, normal retirement age 
        means the higher of age 65 or "retirement age," as defined in 
        United States Code, title 42, section 416(l), as amended, but 
        not to exceed age 66. 
           Sec. 17.  Minnesota Statutes 1996, section 352.04, 
        subdivision 2, is amended to read: 
           Subd. 2.  [EMPLOYEE CONTRIBUTIONS.] The employee 
        contribution to the fund must be equal to 4.07 4.0 percent of 
        salary.  These contributions must be made by deduction from 
        salary as provided in subdivision 4. 
           Sec. 18.  Minnesota Statutes 1996, section 352.04, 
        subdivision 3, is amended to read: 
           Subd. 3.  [EMPLOYER CONTRIBUTIONS.] (a) The employer 
        contribution to the fund must be equal to 4.2 4.0 percent of 
        salary. 
           (b) By January 1 of each year, the board of directors shall 
        report to the legislative commission on pensions and retirement, 
        the chair of the committee on appropriations of the house of 
        representatives, and the chair of the committee on finance of 
        the senate on the amount raised by the employer and employee 
        contribution rates in effect and whether the total amount is 
        less than, the same as, or more than the actuarial requirement 
        determined under section 356.215. 
           (c) If the legislative commission on pensions and 
        retirement, based on the most recent valuation performed by its 
        actuary, determines that the total amount raised by the employer 
        and employee contributions under subdivision 2 and paragraph (b) 
        is less than the actuarial requirements determined under section 
        356.215, the employer and employee rates must be increased by 
        equal amounts as necessary to meet the actuarial requirements.  
        The employee rate may not exceed 4.15 percent of salary and the 
        employer rate may not exceed 4.29 percent of salary.  The 
        increases are effective on the next January 1 following the 
        determination by the commission.  The executive director of the 
        Minnesota state retirement system shall notify employing units 
        of any increases under this paragraph. 
           Sec. 19.  Minnesota Statutes 1996, section 352.115, 
        subdivision 3, is amended to read: 
           Subd. 3.  [RETIREMENT ANNUITY FORMULA.] (a) This paragraph, 
        in conjunction with section 352.116, subdivision 1, applies to a 
        person who became a covered employee or a member of a pension 
        fund listed in section 356.30, subdivision 3, before July 1, 
        1989, unless paragraph (b), in conjunction with section 352.116, 
        subdivision 1a, produces a higher annuity amount, in which case 
        paragraph (b) will apply.  The employee's average salary, as 
        defined in subdivision 2, multiplied by one the percent 
        specified in section 356.19, subdivision 1, per year of 
        allowable service for the first ten years and 1.5 the percent 
        specified in section 356.19, subdivision 2, for each later year 
        of allowable service and pro rata for completed months less than 
        a full year shall determine the amount of the retirement annuity 
        to which the employee is entitled. 
           (b) This paragraph applies to a person who has become at 
        least 55 years old and first became a covered employee after 
        June 30, 1989, and to any other covered employee who has become 
        at least 55 years old and whose annuity amount, when calculated 
        under this paragraph and in conjunction with section 352.116, 
        subdivision 1a, is higher than it is when calculated under 
        paragraph (a), in conjunction with section 352.116, subdivision 
        1.  The employee's average salary, as defined in subdivision 2, 
        multiplied by 1.5 the percent specified in section 356.19, 
        subdivision 2, for each year of allowable service and pro rata 
        for months less than a full year shall determine the amount of 
        the retirement annuity to which the employee is entitled. 
           Sec. 20.  Minnesota Statutes 1996, section 352.72, 
        subdivision 2, is amended to read: 
           Subd. 2.  [COMPUTATION OF DEFERRED ANNUITY.] (a) The 
        deferred annuity, if any, accruing under subdivision 1, or 
        section 352.22, subdivision 3, must be computed as provided in 
        section 352.22, subdivision 3, on the basis of allowable service 
        before termination of state service and augmented as provided 
        herein.  The required reserves applicable to a deferred annuity 
        or to an annuity for which a former employee was eligible but 
        had not applied or to any deferred segment of an annuity must be 
        determined as of the date the benefit begins to accrue and 
        augmented by interest compounded annually from the first day of 
        the month following the month in which the employee ceased to be 
        a state employee, or July 1, 1971, whichever is later, to the 
        first day of the month in which the annuity begins to accrue.  
        The rates of interest used for this purpose must be five percent 
        compounded annually until January 1, 1981, and three percent 
        compounded annually thereafter until January 1 of the year 
        following the year in which the former employee attains age 55.  
        From that date to the effective date of retirement, the rate is 
        five percent compounded annually.  If a person has more than one 
        period of uninterrupted service, the required reserves related 
        to each period must be augmented by interest under this 
        subdivision.  The sum of the augmented required reserves so 
        determined is the present value of the annuity.  "Uninterrupted 
        service" for the purpose of this subdivision means periods of 
        covered employment during which the employee has not been 
        separated from state service for more than two years.  If a 
        person repays a refund, the service restored by the repayment 
        must be considered continuous with the next period of service 
        for which the employee has credit with this system.  The formula 
        percentages used for each period of uninterrupted service must 
        be those applicable to a new employee.  The mortality table and 
        interest assumption used to compute the annuity must be those in 
        effect when the employee files application for annuity.  This 
        section shall does not reduce the annuity otherwise payable 
        under this chapter. 
           (b) The retirement annuity or disability benefit of, or the 
        survivor benefit payable on behalf of, a former state employee 
        who terminated service before July 1, 1997, which is not first 
        payable until after June 30, 1997, must be increased on an 
        actuarial equivalent basis to reflect the change in the 
        postretirement interest rate actuarial assumption under section 
        356.215, subdivision 4d, from five percent to six percent under 
        a calculation procedure and the tables adopted by the board and 
        approved by the actuary retained by the legislative commission 
        on pensions and retirement. 
           Sec. 21.  Minnesota Statutes 1996, section 352.92, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [EMPLOYEE CONTRIBUTIONS.] Beginning with 
        the first full pay period after July 1, 1984, in lieu of 
        employee contributions payable under section 352.04, subdivision 
        2, Employee contributions by of covered correctional employees 
        must be in an amount equal to 4.90 5.50 percent of salary.  
           Sec. 22.  Minnesota Statutes 1996, section 352.92, 
        subdivision 2, is amended to read: 
           Subd. 2.  [EMPLOYER CONTRIBUTIONS.] In lieu of employer 
        contributions payable under section 352.04, subdivision 3, The 
        employer shall contribute for covered correctional employees an 
        amount equal to 6.75 7.70 percent of salary.  
           Sec. 23.  Minnesota Statutes 1996, section 352.93, 
        subdivision 2, is amended to read: 
           Subd. 2.  [CALCULATING MONTHLY ANNUITY.] The monthly 
        annuity under this section must be determined by multiplying the 
        average monthly salary by the number of years, or completed 
        months, of covered correctional service by 2.5 the percent 
        specified in section 356.19, subdivision 5.  However, the 
        monthly annuity must not exceed 75 percent of the average 
        monthly salary.  
           Sec. 24.  Minnesota Statutes 1996, section 352.93, 
        subdivision 3, is amended to read: 
           Subd. 3.  [PAYMENTS; DURATION AND AMOUNT ANNUITY ACCRUAL.] 
        The annuity under this section shall must begin to accrue as 
        provided in section 352.115, subdivision 8., and must be paid 
        for an additional 84 full calendar months or to the first of the 
        month following the month in which the employee attains normal 
        retirement age, whichever occurs first, except that payment must 
        not cease before the first of the month following the month in 
        which the employee becomes 62.  It must then be reduced to the 
        amount as calculated at normal retirement age under section 
        352.115, except that if this amount, when added to that portion 
        of the social security benefit based on state service the 
        employee would be eligible to receive at the time, is less than 
        the benefit payable under subdivision 2, the retired employee 
        shall receive an amount that when added to the social security 
        benefit will equal the amount payable under subdivision 2.  If 
        the employee retired prior to age 55, the reduced benefit as 
        calculated under section 352.115 must be actuarially reduced as 
        provided in subdivision 2a.  
           When an annuity is reduced under this subdivision, the 
        percentage adjustments, if any, that have been applied to the 
        original annuity under section 11A.18, before the reduction, 
        must be compounded and applied to the reduced annuity.  A former 
        correctional employee employed by the state in a position 
        covered by the regular plan or the unclassified employees 
        retirement program between the age of 58 and normal retirement 
        age shall receive a partial return of correctional contributions 
        at retirement with six percent interest based on the following 
        formula: 
        
         Employee contributions             Years and complete    
         contributed as a                   months of regular     
         correctional employee              service between     
         in excess of the                   age 58 and the    
         contributions the                  normal retirement age 
         employee would have       X        ..................... 
         contributed as a                   number of years between
         regular employee                   age 58 and normal 
                                            retirement age 
           Sec. 25.  Minnesota Statutes 1996, section 352.93, is 
        amended by adding a subdivision to read: 
           Subd. 3a.  [OPTIONAL ANNUITIES.] The board may establish 
        optional annuity forms to pay a higher amount from the date of 
        retirement until an employee is first eligible to draw social 
        security benefits or up to the age the employee is eligible to 
        receive unreduced social security benefits, at which time the 
        monthly benefits must be reduced.  The optional annuity forms 
        must be actuarially equivalent to the normal single life annuity 
        form provided in subdivision 2.  The optional annuity forms must 
        be approved by the actuary retained by the legislative 
        commission on pensions and retirement. 
           Sec. 26.  [352.931] [SURVIVOR BENEFITS.] 
           Subdivision 1.  [SURVIVING SPOUSE BENEFIT.] (a) If the 
        correctional employee was at least age 50, has credit for at 
        least three years allowable service, and dies before an annuity 
        or disability benefit has become payable, notwithstanding any 
        designation of beneficiary to the contrary, the surviving spouse 
        of the employee may elect to receive, in lieu of the refund 
        under section 352.12, subdivision 1, an annuity for life equal 
        to the joint and 100 percent survivor annuity which the employee 
        could have qualified for had the employee terminated service on 
        the date of death.  The election may be made at any time after 
        the date of death of the employee.  The surviving spouse benefit 
        begins to accrue as of the first of the month next following the 
        date on which the application for the benefit was filed. 
           (b) If the employee was under age 50, dies, and had credit 
        for at least three years of allowable service credit on the date 
        of death but did not yet qualify for retirement, the surviving 
        spouse may elect to receive a 100 percent joint and survivor 
        annuity based on the age of the employee and surviving spouse at 
        the time of death.  The annuity is payable using the early 
        retirement reduction under section 352.93, subdivision 2a, to 
        age 50, and one-half of the early retirement reduction from age 
        50 to the age payment begins.  The surviving spouse eligible for 
        surviving spouse benefits under this paragraph may apply for the 
        annuity at any time after the employee's death.  Sections 
        352.22, subdivision 3, and 352.72, subdivision 2, apply to a 
        deferred annuity or surviving spouse benefit payable under this 
        subdivision.  
           (c) The annuity must cease with the last payment received 
        by the surviving spouse in the lifetime of the surviving 
        spouse.  Any employee may request in writing that this 
        subdivision not apply and that payment be made only to a 
        designated beneficiary as otherwise provided by this chapter. 
           Subd. 2.  [SURVIVING SPOUSE COVERAGE; TERM CERTAIN.] In 
        lieu of the 100 percent optional annuity under subdivision 1, 
        the surviving spouse of a deceased employee may elect to receive 
        survivor coverage in a term certain of ten, 15, or 20 years.  
        The monthly term certain annuity must be actuarially equivalent 
        to the 100 percent optional annuity under subdivision 1 and must 
        be approved by the actuary retained by the legislative 
        commission on pensions and retirement.  The optional annuity 
        ceases upon the expiration of the term certain period.  If a 
        survivor elects a term certain annuity and dies before the 
        expiration of the specified term certain period, the commuted 
        value of the remaining annuity payments must be paid in a lump 
        sum to the survivor's estate. 
           Subd. 3.  [DEPENDENT CHILD SURVIVOR COVERAGE.] If there is 
        no surviving spouse eligible for benefits under subdivision 1, a 
        dependent child as defined in section 352.01, subdivision 26, is 
        eligible for a dependent child survivor benefit.  Benefits to a 
        dependent child must be paid from the date of the employee's 
        death to the date the dependent child attains age 20 if the 
        child is under age 15 on the date of death.  If the child is 15 
        years or older on the date of death, the benefit is payable for 
        five years.  The payment to a dependent child is an amount 
        actuarially equivalent to the value of a 100 percent joint and 
        survivor optional annuity using the age of the employee and age 
        of the dependent child at the date of death in lieu of the age 
        of the surviving spouse.  If there is more than one dependent 
        child, each dependent child shall receive a proportionate share 
        of the actuarial value of the employee's account, with the 
        amount of the benefit payable to each child to be determined 
        based on the portion of the total eligibility period that each 
        child is eligible.  The process for calculating the dependent 
        child survivor benefit must be approved by the actuary retained 
        by the legislative commission on pensions and retirement. 
           Subd. 4.  [DEATH REFUND.] An amount equal to the excess, if 
        any, of the accumulated contributions credited to the account of 
        the deceased employee in excess of the total of the benefits 
        paid to the surviving spouse and surviving child or children 
        must be paid to the deceased employee's last designated 
        beneficiary or, if none, as specified under section 352.12, 
        subdivision 1. 
           Subd. 5.  [APPLICATION.] The benefit elections under this 
        section must be made on an application form prescribed by the 
        executive director and must be filed with the executive director.
           Sec. 27.  Minnesota Statutes 1996, section 352.95, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [JOB-RELATED DISABILITY.] A covered 
        correctional employee who becomes disabled and physically unfit 
        to perform the duties of the position as a direct result of an 
        injury, sickness, or other disability incurred in or arising out 
        of any act of duty that makes the employee physically or 
        mentally unable to perform the duties, is entitled to a 
        disability benefit based on covered correctional service only.  
        The benefit amount must equal 50 percent of the average salary 
        defined in section 352.93, plus an additional 2-1/2 percent 
        equal to that specified in section 356.19, subdivision 5, for 
        each year of covered correctional service in excess of 20 years, 
        ten months, prorated for completed months. 
           Sec. 28.  Minnesota Statutes 1996, section 352.95, 
        subdivision 5, is amended to read: 
           Subd. 5.  [RETIREMENT STATUS AT NORMAL RETIREMENT AGE.] The 
        disability benefit paid to a disabled correctional employee 
        under this section shall terminate at the end of the month in 
        which the employee reaches age 62.  If the disabled correctional 
        employee is still disabled when the employee reaches age 62, the 
        employee shall be deemed to be a retired employee.  If the 
        employee had elected an optional annuity under subdivision 1a, 
        the employee shall receive an annuity in accordance with the 
        terms of the optional annuity previously elected.  If the 
        employee had not elected an optional annuity under subdivision 
        1a, the employee may within 90 days of attaining age 65 or 
        reaching the five-year anniversary of the effective date of the 
        disability benefit, whichever is later, either elect to receive 
        a normal retirement annuity computed in the manner provided in 
        section 352.115 352.93 or elect to receive an optional annuity 
        as provided in section 352.116, subdivision 3, based on the same 
        length of service as used in the calculation of the disability 
        benefit.  Election of an optional annuity must be made within 90 
        days before attaining age 65 or reaching the five-year 
        anniversary of the effective date of the disability benefit, 
        whichever is later.  The reduction for retirement before normal 
        retirement age as provided in section 352.116, subdivision 1 or 
        1a, does not apply.  The savings clause provision of section 
        352.93, subdivision 3, applies.  If an optional annuity is 
        elected, the optional annuity shall begin to accrue on the first 
        of the month following the month in which the employee reaches 
        age 65 or the five-year anniversary of the effective date of the 
        disability benefit, whichever is later. 
           Sec. 29.  Minnesota Statutes 1996, section 352B.02, 
        subdivision 1a, is amended to read: 
           Subd. 1a.  [MEMBER CONTRIBUTIONS.] Each member shall pay a 
        sum equal to 8.92 8.40 percent of the member's salary, which 
        shall constitute the member contribution to the fund.  
           Sec. 30.  Minnesota Statutes 1996, section 352B.02, 
        subdivision 1c, is amended to read: 
           Subd. 1c.  [EMPLOYER CONTRIBUTIONS.] (a) In addition to 
        member contributions, department heads shall pay a sum equal to 
        14.88 12.60 percent of the salary upon which deductions were 
        made, which shall constitute the employer contribution to the 
        fund.  Department contributions must be paid out of money 
        appropriated to departments for this purpose. 
           (b) By January 1 of each year, the board of directors shall 
        report to the legislative commission on pensions and retirement, 
        the chair of the committee on appropriations of the house of 
        representatives, and the chair of the committee on finance of 
        the senate on the amount raised by the employer and employee 
        contribution rates in effect and whether the total amount is 
        less than, the same as, or more than the actuarial requirement 
        determined under section 356.215. 
           Sec. 31.  Minnesota Statutes 1996, section 352B.08, 
        subdivision 2, is amended to read: 
           Subd. 2.  [NORMAL RETIREMENT ANNUITY.] The annuity must be 
        paid in monthly installments.  The annuity shall be equal to the 
        amount determined by multiplying the average monthly salary of 
        the member by 2.65 the percent specified in section 356.19, 
        subdivision 6, for each year and pro rata for completed months 
        of service.  
           Sec. 32.  Minnesota Statutes 1996, section 352B.08, 
        subdivision 2a, is amended to read: 
           Subd. 2a.  [EARLY RETIREMENT.] Any member who has become at 
        least 50 years old, or former member if service ended after June 
        30, 1989, and who has at least three years of allowable service 
        is entitled upon application to a reduced retirement annuity 
        equal to the annuity calculated under subdivision 2, reduced so 
        that the reduced annuity is the actuarial equivalent of the 
        annuity that would be payable if the member deferred receipt of 
        the annuity from the day the annuity begins to accrue to age 
        55 by two-tenths of one percent for each month that the member 
        is under age 55 at the time of retirement. 
           Sec. 33.  Minnesota Statutes 1996, section 352B.10, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [INJURIES, PAYMENT AMOUNTS.] Any member who 
        becomes disabled and physically or mentally unfit to perform 
        duties as a direct result of an injury, sickness, or other 
        disability incurred in or arising out of any act of duty, shall 
        receive disability benefits while disabled.  The benefits must 
        be paid in monthly installments equal to the member's average 
        monthly salary multiplied by 53 60 percent, plus an additional 
        2.65 percent equal to that specified in section 356.19, 
        subdivision 6, for each year and pro rata for completed months 
        of service in excess of 20 years, if any. 
           Sec. 34.  Minnesota Statutes 1996, section 352B.30, is 
        amended by adding a subdivision to read: 
           Subd. 4.  [1997 POSTRETIREMENT FUND INTEREST CHANGES.] The 
        retirement annuity or disability benefit of, or the survivor 
        benefit payable on behalf of, a former member who terminated 
        service before July 1, 1997, which is not first payable until 
        after June 30, 1997, must be increased on an actuarial 
        equivalent basis to reflect the change in the postretirement 
        interest rate actuarial assumption under section 356.215, 
        subdivision 4d, from five percent to six percent under a 
        calculation procedure and tables adopted by the board and 
        approved by the actuary retained by the legislative commission 
        on pensions and retirement. 
           Sec. 35.  Minnesota Statutes 1996, section 352C.031, 
        subdivision 4, is amended to read: 
           Subd. 4.  [RETIREMENT ALLOWANCE FORMULA.] (a) This 
        paragraph applies to constitutional officers who terminate that 
        service before July 1, 1997.  The average salary multiplied by 
        2-1/2 percent for each year of allowable service and pro rata 
        for completed months less than a full year shall determine the 
        amount of the normal retirement allowance. 
           (b) This paragraph applies to constitutional officers who 
        terminate that service after June 30, 1997.  The retirement 
        allowance is an amount equal to the rate under paragraph (a) per 
        year of service of the constitutional officer's average monthly 
        salary adjusted for that person on an actuarial equivalent basis 
        to reflect the change in the postretirement interest rate 
        actuarial assumption under section 356.215, subdivision 4d, from 
        five percent to six percent.  The adjustment must be calculated 
        by or, alternatively, the adjustment procedure must be specified 
        by the actuary retained by the legislative commission on 
        pensions and retirement. 
           Sec. 36.  Minnesota Statutes 1996, section 352C.033, is 
        amended to read: 
           352C.033 [DEFERRED ANNUITIES AUGMENTATION.] 
           (a) The deferred retirement allowance for any former 
        constitutional officer shall must be augmented as provided in 
        this section.  The required reserves applicable to the deferred 
        retirement allowance, determined as of the date the retirement 
        allowance begins to accrue using the appropriate mortality table 
        and an interest assumption of five six percent, shall be 
        augmented from the first of the month following termination of 
        service as a constitutional officer, or January 1, 1979, 
        whichever is later, to the first day of the month in which the 
        annuity begins to accrue, at the rate of five percent per annum 
        compounded annually until January 1, 1981, and thereafter at the 
        rate of three percent per annum compounded annually until 
        January 1 of the year in which the former constitutional officer 
        attains age 55.  From that date to the effective date of 
        retirement, the rate is five percent compounded annually. 
           (b) The retirement allowance of, or the survivor benefit 
        payable on behalf of, a former constitutional officer who 
        terminated service before July 1, 1997, which is not first 
        payable until after June 30, 1997, must be increased on an 
        actuarial equivalent basis to reflect the change in the 
        postretirement interest rate actuarial assumption under section 
        356.215, subdivision 4d, from five percent to six percent under 
        a calculation procedure and tables adopted by the board as 
        recommended by an approved actuary and approved by the actuary 
        retained by the legislative commission on pensions and 
        retirement. 
           Sec. 37.  Minnesota Statutes 1996, section 353.01, 
        subdivision 37, is amended to read: 
           Subd. 37.  [NORMAL RETIREMENT AGE.] "Normal retirement age" 
        means age 65 for a person who first became a public employee or 
        a member of a pension fund listed in section 356.30, subdivision 
        3, before July 1, 1989.  For a person who first becomes a public 
        employee after June 30, 1989, "normal retirement age" means the 
        higher of age 65 or "retirement age," as defined in United 
        States Code, title 42, section 416(l), as amended, but not to 
        exceed age 66. 
           Sec. 38.  Minnesota Statutes 1996, section 353.27, 
        subdivision 2, is amended to read: 
           Subd. 2.  [EMPLOYEE CONTRIBUTION.] The employee 
        contribution shall be an amount (a) for a "basic member" equal 
        to 8.23 8.75 percent of total salary; and (b) for a "coordinated 
        member" equal to 4.23 4.75 percent of total salary.  These 
        contributions shall must be made by deduction from salary in the 
        manner provided in subdivision 4.  Where any portion of a 
        member's salary is paid from other than public funds, such 
        member's employee contribution shall must be based on the total 
        salary received from all sources. 
           Sec. 39.  Minnesota Statutes 1996, section 353.27, 
        subdivision 3a, is amended to read: 
           Subd. 3a.  [ADDITIONAL EMPLOYER CONTRIBUTION.] (a) An 
        additional employer contribution shall must be made equal to (a) 
        2-1/2 2.68 percent of the total salary of each "basic member"; 
        and (b) one-quarter of one .43 percent of the total salary of 
        each "coordinated member."  These contributions shall must be 
        made from funds available to the employing subdivision by the 
        means and in the manner provided in section 353.28.  
           (b) This subdivision is repealed once the actuarial value 
        of the assets of the plan equal or exceed the actuarial accrued 
        liability of the plan as determined by the actuary retained by 
        the legislative commission on pensions and retirement under 
        section 356.215.  The repeal is effective on the first day of 
        the first full pay period occurring after March 31 of the 
        calendar year following the issuance of the actuarial valuation 
        upon which the repeal is based. 
           Sec. 40.  Minnesota Statutes 1996, section 353.29, 
        subdivision 3, is amended to read: 
           Subd. 3.  [RETIREMENT ANNUITY FORMULA.] (a) This paragraph, 
        in conjunction with section 353.30, subdivisions 1, 1a, 1b, and 
        1c, applies to any member who first became a public employee or 
        a member of a pension fund listed in section 356.30, subdivision 
        3, before July 1, 1989, unless paragraph (b), in conjunction 
        with section 353.30, subdivision 5, produces a higher annuity 
        amount, in which case paragraph (b) will apply.  The average 
        salary as defined in subdivision 2, multiplied by two the 
        percent specified in section 356.19, subdivision 3, for each 
        year of allowable service for the first ten years and thereafter 
        by 2.5 the percent specified in section 356.19, subdivision 4, 
        per year of allowable service and completed months less than a 
        full year for the "basic member," and one the percent specified 
        in section 356.19, subdivision 1, for each year of allowable 
        service for the first ten years and thereafter by 1.5 the 
        percent specified in section 356.19, subdivision 2, per year of 
        allowable service and completed months less than a full year for 
        the "coordinated member," shall determine the amount of the 
        "normal" retirement annuity. 
           (b) This paragraph applies to a member who has become at 
        least 55 years old and first became a public employee after June 
        30, 1989, and to any other member whose annuity amount, when 
        calculated under this paragraph and in conjunction with section 
        353.30, subdivision 5, is higher than it is when calculated 
        under paragraph (a), in conjunction with section 353.30, 
        subdivisions 1, 1a, 1b, and 1c.  The average salary, as defined 
        in subdivision 2, multiplied by 2.5 the percent specified in 
        section 356.19, subdivision 4, for each year of allowable 
        service and completed months less than a full year for a basic 
        member and 1.5 the percent specified in section 356.19, 
        subdivision 2, per year of allowable service and completed 
        months less than a full year for a coordinated member, shall 
        determine the amount of the normal retirement annuity. 
           Sec. 41.  Minnesota Statutes 1996, section 353.651, 
        subdivision 3, is amended to read: 
           Subd. 3.  [RETIREMENT ANNUITY FORMULA.] The average salary 
        as defined in subdivision 2, multiplied by 2.65 the percent 
        specified in section 356.19, subdivision 6, per year of 
        allowable service determines the amount of the normal retirement 
        annuity.  If the member has earned allowable service for 
        performing services other than those of a police officer or 
        firefighter, the annuity representing such service is computed 
        under sections 353.29 and 353.30. 
           Sec. 42.  Minnesota Statutes 1996, section 353.656, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [IN LINE OF DUTY; COMPUTATION OF BENEFITS.] 
        A member of the police and fire fund who becomes disabled and 
        physically unfit to perform duties as a police officer or 
        firefighter subsequent to June 30, 1973, as a direct result of 
        an injury, sickness, or other disability incurred in or arising 
        out of any act of duty, which has or is expected to render the 
        member physically or mentally unable to perform duties as a 
        police officer or firefighter for a period of at least one year, 
        shall receive disability benefits during the period of such 
        disability.  The benefits must be in an amount equal to 53 60 
        percent of the "average salary" under subdivision 3, plus an 
        additional 2.65 percent specified in section 356.19, subdivision 
        6, of said average salary for each year of service in excess of 
        20 years.  Should disability under this subdivision occur before 
        the member has at least five years of allowable service credit 
        in the police and fire fund, the disability benefit must be 
        computed on the "average salary" from which deductions were made 
        for contribution to the police and fire fund. 
           Sec. 43.  Minnesota Statutes 1996, section 353.71, 
        subdivision 2, is amended to read: 
           Subd. 2.  [DEFERRED ANNUITY COMPUTATION; AUGMENTATION.] (a) 
        The deferred annuity, if any, accruing under subdivision 1, or 
        sections 353.34, subdivision 3, and 353.68, subdivision 4, shall 
        must be computed in the manner provided in said sections, on the 
        basis of allowable service prior to termination of public 
        service and augmented as provided herein.  The required reserves 
        applicable to a deferred annuity, or to an annuity for which a 
        former member was eligible but had not applied, or to any 
        deferred segment of an annuity shall be determined as of the 
        date the annuity begins to accrue and shall be augmented from 
        the first day of the month following the month in which the 
        former member ceased to be a public employee, or July 1, 1971, 
        whichever is later, to the first day of the month in which the 
        annuity begins to accrue, at the rate of five percent per annum 
        compounded annually until January 1, 1981, and at the rate of 
        three percent thereafter until January 1 of the year following 
        the year in which the former member attains age 55.  From that 
        date to the effective date of retirement, the rate is five 
        percent per annum compounded annually.  If a person has more 
        than one period of uninterrupted service, the required reserves 
        related to each period shall be augmented by interest pursuant 
        to this subdivision.  The sum of the augmented required reserves 
        so determined shall be the present value of the annuity.  
        Uninterrupted service for the purpose of this subdivision shall 
        mean periods of covered employment during which the employee has 
        not been separated from public service for more than two years.  
        If a person repays a refund, the service restored thereby shall 
        be considered as continuous with the next period of service for 
        which the employee has credit with this association. The formula 
        percentages used for each period of uninterrupted service shall 
        be those as would be applicable to a new employee.  This section 
        shall not reduce the annuity otherwise payable under this 
        chapter.  This subdivision shall apply to deferred annuitants of 
        record on July 1, 1971, and to employees who thereafter become 
        deferred annuitants; it shall also apply from July 1, 1971, to 
        former members who make application for an annuity after July 1, 
        1973. 
           (b) The retirement annuity or disability benefit of, or the 
        survivor benefit payable on behalf of, a former member who 
        terminated service before July 1, 1997, which is not first 
        payable until after June 30, 1997, must be increased on an 
        actuarial equivalent basis to reflect the change in the 
        postretirement interest rate actuarial assumption under section 
        356.215, subdivision 4d, from five percent to six percent under 
        a calculation procedure and tables adopted by the board and 
        approved by the actuary retained by the legislative commission 
        on pensions and retirement. 
           Sec. 44.  Minnesota Statutes 1996, section 353A.08, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ELECTION OF COVERAGE BY CURRENT RETIREES.] 
        A person who is receiving a service pension, disability benefit, 
        or survivorship survivor benefit is eligible to elect benefit 
        coverage provided under the relevant provisions of the public 
        employees police and fire fund benefit plan or to retain benefit 
        coverage provided under the relief association benefit plan in 
        effect on the effective date of the consolidation.  The relevant 
        provisions of the public employees police and fire fund benefit 
        plan for the person electing that benefit coverage are limited 
        to participation in the Minnesota postretirement investment fund 
        for any future postretirement adjustments based on the amount of 
        the benefit or pension payable on December 31, if December 31 is 
        the effective date of consolidation, or on the December 1 
        following the effective date of the consolidation, if other than 
        December 31.  The survivorship survivor benefit payable on 
        behalf of any service pension or disability benefit recipient 
        who elects benefit coverage under the public employees police 
        and fire fund benefit plan must be calculated under the relief 
        association benefit plan and is subject to participation in the 
        Minnesota postretirement investment fund for any future 
        postretirement adjustments based on the amount of the 
        survivorship survivor benefit payable.  
           A survivor benefit calculated under the relief association 
        benefit plan which is first payable after June 30, 1997, to the 
        surviving spouse of a retired member of a consolidation account 
        who, before July 1, 1997, chose to participate in the Minnesota 
        postretirement investment fund as provided under this 
        subdivision must be increased on the effective date of the 
        survivor benefit on an actuarial equivalent basis to reflect the 
        change in the postretirement interest rate actuarial assumption 
        under section 356.215, subdivision 4d, from five percent to six 
        percent under a calculation procedure and tables adopted by the 
        board and approved by the actuary retained by the legislative 
        commission on pensions and retirement. 
           By electing the public employees police and fire fund 
        benefit plan, a current service pension or disability benefit 
        recipient who, as of the first January 1 occurring after the 
        effective date of consolidation, has been receiving the pension 
        or benefit for at least seven months, or any survivor benefit 
        recipient who, as of the first January 1 occurring after the 
        effective date of consolidation, has been receiving the benefit 
        on the person's own behalf or in combination with a prior 
        applicable service pension or disability benefit for at least 
        seven months is eligible to receive a partial adjustment payable 
        from the Minnesota postretirement investment fund under section 
        11A.18, subdivision 9. 
           The election by any pension or benefit recipient must be 
        made on or before the deadline established by the board of the 
        public employees retirement association in a manner that 
        recognizes the number of persons eligible to make the election 
        and the anticipated time required to conduct any required 
        benefit counseling.  
           Sec. 45.  Minnesota Statutes 1996, section 353A.08, 
        subdivision 2, is amended to read: 
           Subd. 2.  [ELECTION OF COVERAGE BY CURRENT DEFERRED 
        RETIREES.] (a) Any person who has terminated active employment 
        as a police officer or firefighter, whichever applies, with the 
        municipality, has sufficient credit for service to entitle the 
        person to an eventual service pension and has not taken a refund 
        of accumulated member contributions, if applicable, shall have 
        the option to elect to have benefit coverage provided under the 
        relevant provisions of the public employees police and fire fund 
        benefit plan or to retain benefit coverage provided by the 
        relief association benefit plan in effect on the effective date 
        of consolidation.  The relevant provisions of the public 
        employees police and fire fund benefit plan for the person 
        electing that benefit coverage shall be the provisions specified 
        in subdivision 1.  
           The election shall be made when the person files an 
        application for receipt of the deferred service pension and 
        shall accompany that application.  
           (b) The retirement annuity for a deferred member of a 
        consolidated local relief association which consolidated before 
        July 1, 1997, who elected the relevant provisions of the public 
        employees police and fire fund benefit plan under subdivision 1 
        must be increased on an actuarial equivalent basis to reflect 
        the change in the postretirement interest rate actuarial 
        assumption under section 356.215, subdivision 4d, from five 
        percent to six percent under a calculation procedure and tables 
        adopted by the board of trustees of the public employees 
        retirement association and approved by the actuary retained by 
        the legislative commission on pensions and retirement. 
           Sec. 46.  Minnesota Statutes 1996, section 353A.083, is 
        amended by adding a subdivision to read: 
           Subd. 3.  [PRE-1997 CONSOLIDATION.] (a) For any 
        consolidation plan account in effect on July 1, 1997, the 
        applicable benefit plan coverage defined in paragraph (b) or (c) 
        applies unless the consolidation account's city approves the 
        extension of the post-June 30, 1997, public employees police and 
        fire fund benefit plan to the consolidation account members. 
           (b) If the applicable municipality has approved the July 1, 
        1993, public employees police and fire fund benefit provisions, 
        but has not approved the extension of the post-June 30, 1997, 
        public employees police and fire fund benefit provisions: 
           (1) the benefit accrual rate for calculating retirement 
        annuities that apply to consolidation account members who have 
        elected or elect coverage under the provisions of the public 
        employees police and fire fund benefit plan is 2.9 percent of 
        average salary under section 353.651, subdivision 2, per year of 
        allowable service; 
           (2) the optional survivor annuities payable to the 
        survivors of these consolidated members who elected coverage 
        under the provisions of the public employees police and fire 
        fund benefit plan must be determined using a benefit accrual 
        rate of 2.9 percent of average salary under section 353.651, 
        subdivision 2, per year of the member's allowable service; 
           (3) the disability benefit payable for these consolidated 
        members who elected or elect coverage under the provisions of 
        the public employees police and fire fund benefit plan and: 
           (i) who become disabled in the line of duty, as defined 
        under section 353.656, subdivision 1, is an amount equal to 58 
        percent of average salary under section 353.651, subdivision 2, 
        plus an additional 2.9 percent of that average salary for each 
        year of service in excess of 20 years; or 
           (ii) who become disabled because of sickness or injury 
        occurring while not on duty, as defined under section 353.656, 
        subdivision 3, is an amount equal to 43.50 percent of average 
        salary under section 353.651, subdivision 2, plus an additional 
        2.9 percent of that average salary for each year of service in 
        excess of 15 years. 
           (c) If the applicable municipality has not approved the 
        July 1, 1993, public employees police and fire fund benefit 
        provisions, and has not approved the extension of the post-June 
        30, 1997, public employees police and fire fund benefit 
        provisions: 
           (1) the benefit accrual rate for calculating retirement 
        annuities that apply to consolidation account members who have 
        elected or elect coverage under the provisions of the public 
        employees police and fire fund benefit plan is 2.74 percent of 
        average salary under section 353.651, subdivision 2, per year of 
        allowable service; 
           (2) the optional survivor annuities payable to the 
        survivors of these consolidated members who elected coverage 
        under the provisions of the public employees police and fire 
        fund benefit plan must be determined using a benefit accrual 
        rate of 2.74 percent of average salary under section 353.651, 
        subdivision 2, per year of the member's allowable service; 
           (3) the disability benefit payable for consolidated members 
        who elected or elect the coverage under the provisions of the 
        public employees police and fire fund benefit plan and: 
           (i) who become disabled in the line of duty, as defined 
        under section 353.656, subdivision 1, is an amount equal to 
        54.80 percent of the average salary under section 353.651, 
        subdivision 2, plus an additional 2.74 percent of that average 
        salary for each year of service in excess of 20 years; or 
           (ii) who become disabled because of sickness or injury 
        occurring while not on duty, as defined under section 353.656, 
        subdivision 3, is an amount equal to 41.10 percent of the 
        average salary under section 353.651, subdivision 2, plus an 
        additional 2.74 percent of that average salary for each year of 
        service in excess of 15 years. 
           Sec. 47.  Minnesota Statutes 1996, section 354.05, 
        subdivision 38, is amended to read: 
           Subd. 38.  [NORMAL RETIREMENT AGE.] "Normal retirement age" 
        means age 65 for a person who first became a member of the 
        association or a member of a pension fund listed in section 
        356.30, subdivision 3, before July 1, 1989.  For a person who 
        first becomes a member of the association after June 30, 1989, 
        normal retirement age means the higher of age 65 or "retirement 
        age," as defined in United States Code, title 42, section 
        416(l), as amended, but not to exceed age 66. 
           Sec. 48.  Minnesota Statutes 1996, section 354.42, 
        subdivision 2, is amended to read: 
           Subd. 2.  [EMPLOYEE.] The employee contribution to the fund 
        shall be is an amount equal to 6.5 5.0 percent of the salary of 
        every coordinated member and 10.5 9.0 percent of the salary of 
        every basic member.  This contribution shall must be made by 
        deduction from salary.  Where any portion of a member's salary 
        is paid from other than public funds, such the member's employee 
        contribution shall must be based on the entire salary received.  
           Sec. 49.  Minnesota Statutes 1996, section 354.42, 
        subdivision 3, is amended to read: 
           Subd. 3.  [EMPLOYER.] The employer contribution to the fund 
        shall be is an amount equal to 4-1/2 5.0 percent of the salary 
        of each coordinated member and 8-1/2 9.0 percent of the salary 
        of each basic member.  
           Sec. 50.  Minnesota Statutes 1996, section 354.42, 
        subdivision 5, is amended to read: 
           Subd. 5.  [ADDITIONAL EMPLOYER CONTRIBUTION.] (a) To 
        amortize the unfunded actuarial accrued liability computed under 
        the entry age actuarial cost method and disclosed under the 
        annual actuarial valuations prepared by the commission-retained 
        actuary under section 356.215, an additional employer 
        contribution shall must be made in the amount of 3.64 1.64 
        percent of the salary of each member.  
           (b) This contribution must be made in the manner provided 
        in section 354.52, subdivision 4.  
           (c) This subdivision is repealed once the actuarial value 
        of the assets of the plan equal or exceed the actuarial accrued 
        liability of the plan as determined by the actuary retained by 
        the legislative commission on pensions and retirement under 
        section 356.215.  The repeal is effective on the first day of 
        the first full pay period occurring after March 31 of the 
        calendar year following the issuance of the actuarial valuation 
        upon which the repeal is based. 
           By January 1 of each year, the board of directors shall 
        report to the legislative commission on pensions and retirement, 
        the chair of the committee on appropriations of the house of 
        representatives, and the chair of the committee on finance of 
        the senate on the amount raised by the additional employer 
        contribution rate in effect and whether that amount is less 
        than, the same as, or more than the required amortization 
        contribution determined under section 356.215. 
           Sec. 51.  Minnesota Statutes 1996, section 354.44, 
        subdivision 6, is amended to read: 
           Subd. 6.  [COMPUTATION OF FORMULA PROGRAM RETIREMENT 
        ANNUITY.] (1) The formula retirement annuity hereunder shall 
        must be computed in accordance with the applicable provisions of 
        the formulas stated in clause (2) or (4) on the basis of each 
        member's average salary for the period of the member's formula 
        service credit.  
           For all years of formula service credit, "average salary," 
        for the purpose of determining the member's retirement annuity, 
        means the average salary upon which contributions were made and 
        upon which payments were made to increase the salary limitation 
        provided in Minnesota Statutes 1971, section 354.511, for the 
        highest five successive years of formula service credit 
        provided, however, that such "average salary" shall not include 
        any more than the equivalent of 60 monthly salary payments.  
        Average salary must be based upon all years of formula service 
        credit if this service credit is less than five years. 
           (2) This clause, in conjunction with clause (3), applies to 
        a person who first became a member of the association or a 
        member of a pension fund listed in section 356.30, subdivision 
        3, before July 1, 1989, unless clause (4), in conjunction with 
        clause (5), produces a higher annuity amount, in which case 
        clause (4) applies.  The average salary as defined in clause 
        (1), multiplied by the following percentages per year of formula 
        service credit shall determine the amount of the annuity to 
        which the member qualifying therefor is entitled: 
                               Coordinated Member   Basic Member
        Each year of service     1.13 the           2.13 the
         during first ten        percent            percent
                                 specified in       specified in
                                 section 356.19,    section 356.19,
                                 subdivision 1,     subdivision 3,
                                 per year           per year
        Each year of service     1.63 the           2.63 the
         thereafter              percent            percent
                                 specified in       specified in
                                 section 356.19,    section 356.19,
                                 subdivision 2,     subdivision 4,
                                 per year           per year
           (3)(i) This clause applies only to a person who first 
        became a member of the association or a member of a pension fund 
        listed in section 356.30, subdivision 3, before July 1, 1989, 
        and whose annuity is higher when calculated under clause (2), in 
        conjunction with this clause than when calculated under clause 
        (4), in conjunction with clause (5). 
           (ii) Where any member retires prior to normal retirement 
        age under a formula annuity, the member shall be paid a 
        retirement annuity in an amount equal to the normal annuity 
        provided in clause (2) reduced by one-quarter of one percent for 
        each month that the member is under normal retirement age at the 
        time of retirement except that for any member who has 30 or more 
        years of allowable service credit, the reduction shall be 
        applied only for each month that the member is under age 62. 
           (iii) Any member whose attained age plus credited allowable 
        service totals 90 years is entitled, upon application, to a 
        retirement annuity in an amount equal to the normal annuity 
        provided in clause (2), without any reduction by reason of early 
        retirement. 
           (4) This clause applies to a member who has become at least 
        55 years old and first became a member of the association after 
        June 30, 1989, and to any other member who has become at least 
        55 years old and whose annuity amount when calculated under this 
        clause and in conjunction with clause (5), is higher than it is 
        when calculated under clause (2), in conjunction with clause (3).
        The average salary, as defined in clause (1) multiplied by 2.63 
        the percent specified by section 356.19, subdivision 4, for each 
        year of service for a basic member and by 1.63 the 
        percent specified in section 356.19, subdivision 2, for each 
        year of service for a coordinated member shall determine the 
        amount of the retirement annuity to which the member is entitled.
           (5) This clause applies to a person who has become at least 
        55 years old and first becomes a member of the association after 
        June 30, 1989, and to any other member who has become at least 
        55 years old and whose annuity is higher when calculated under 
        clause (4) in conjunction with this clause than when calculated 
        under clause (2), in conjunction with clause (3).  An employee 
        who retires under the formula annuity before the normal 
        retirement age shall be paid the normal annuity provided in 
        clause (4) reduced so that the reduced annuity is the actuarial 
        equivalent of the annuity that would be payable to the employee 
        if the employee deferred receipt of the annuity and the annuity 
        amount were augmented at an annual rate of three percent 
        compounded annually from the day the annuity begins to accrue 
        until the normal retirement age. 
           Sec. 52.  Minnesota Statutes 1996, section 354.44, is 
        amended by adding a subdivision to read: 
           Subd. 6a.  [EXTENSION OF 1997 PERMANENT INCREASE.] (a) A 
        percentage of the permanent increase for benefit recipients 
        effective July 1, 1997, under section 71, as specified in 
        paragraph (b), is payable to: 
           (1) a member who terminates service after June 30, 1997, 
        and whose benefit begins to accrue during the period of July 2, 
        1997, to July 1, 2002, based on the member's age at retirement. 
           (2) a member who is determined to be totally and 
        permanently disabled under section 354.05, subdivision 14, after 
        June 30, 1997, and whose benefit begins to accrue during the 
        period of July 2, 1997, to July 1, 2002, based on the member's 
        age at disability. 
           (3) the survivor of a member who terminates service and 
        dies after June 30, 1997, and whose benefit begins to accrue 
        during the period of July 2, 1997, to July 1, 2002. 
           (b) The percentage of the permanent increase is the amount 
        designated for the applicable beginning benefit accrual date, as 
        follows: 
         Beginning Benefit                    Percentage of  
           Accrual Date                     Permanent Increase  
         July 2, 1997 to July 1, 1998          50 percent  
         July 2, 1998 to July 1, 1999          40 percent  
         July 2, 1999 to July 1, 2000          30 percent  
         July 2, 2000 to July 1, 2001          20 percent  
         July 2, 2001 to July 1, 2002          10 percent 
           Sec. 53.  Minnesota Statutes 1996, section 354.53, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [EMPLOYEE AND EMPLOYER CONTRIBUTIONS.] Any 
        employee given a leave of absence to enter military service and 
        who returns to teaching service upon discharge from military 
        service as provided in section 192.262, shall may obtain credit 
        for the period of military service but shall not receive credit 
        for any voluntary extension of military service at the instance 
        of the member beyond the initial period of enlistment, induction 
        or call to active duty.  The member shall obtain credit by 
        paying into the fund an employee contribution based upon 
        the salary of the member at the date of return from military 
        service.  The amount of this contribution shall be as follows: 
        
               Period          Basic Member     Coordinated Member
             July 1, 1973       8 percent          4 percent
        thru
        June 30, 1979
        July 1, 1979
        and 8.5 percent 4.5 percent
        thereafter
           The contributions specified in this subdivision shall be 
        contribution rates in effect at the time that the military 
        service was performed multiplied by the annual salary rate of 
        the member for the year beginning with the date of return from 
        military service and the number of years of military service 
        together with interest thereon at an annual rate of 8.5 percent 
        compounded annually from the time the military service was 
        rendered to the first date of payment.  The employer 
        contribution and additional contribution provided in section 
        354.42 shall must be paid by the employing unit at the rates in 
        effect at the time that the military service was performed, 
        applied to the annual salary rate of the member for the year 
        beginning with the date of return from military service, in the 
        manner provided in section 354.52, subdivision 4. 
           Sec. 54.  Minnesota Statutes 1996, section 354.55, 
        subdivision 11, is amended to read: 
           Subd. 11.  [DEFERRED ANNUITY; AUGMENTATION.] (a) Any person 
        covered under section 354.44, subdivision 6, who ceases to 
        render teaching service, may leave the person's accumulated 
        deductions in the fund for the purpose of receiving a deferred 
        annuity at retirement.  Eligibility for an annuity under this 
        subdivision shall be is governed pursuant to section 354.44, 
        subdivision 1, or 354.60. 
           (b) The amount of the deferred retirement annuity shall be 
        is determined by section 354.44, subdivision 6, and augmented as 
        provided in this subdivision.  The required reserves related to 
        that portion of the annuity which had accrued when the member 
        ceased to render teaching service shall must be augmented by 
        interest compounded annually from the first day of the month 
        following the month during which the member ceased to render 
        teaching service to the effective date of retirement.  There 
        shall be no augmentation if this period is less than three 
        months or if this period commences prior to July 1, 1971.  The 
        rates of interest used for this purpose shall must be five 
        percent compounded annually commencing July 1, 1971, until 
        January 1, 1981, and three percent compounded annually 
        thereafter until January 1 of the year following the year in 
        which the former member attains age 55.  From that date to the 
        effective date of retirement, the rate is five percent 
        compounded annually.  If a person has more than one period of 
        uninterrupted service, a separate average salary determined 
        under section 354.44, subdivision 6, must be used for each 
        period and the required reserves related to each period shall 
        must be augmented by interest pursuant to this subdivision.  The 
        sum of the augmented required reserves so determined shall be 
        the basis for purchasing the deferred annuity.  If a person 
        repays a refund, the service restored by the repayment must be 
        considered as continuous with the next period of service for 
        which the person has credit with this fund.  If a person does 
        not render teaching service in any one fiscal year or more 
        consecutive fiscal years and then resumes teaching service, the 
        formula percentages used from the date of the resumption of 
        teaching service shall must be those applicable to new members.  
        The mortality table and interest assumption used to compute the 
        annuity shall must be the applicable mortality table established 
        by the board under section 354.07, subdivision 1, and the 
        interest rate assumption under section 356.215 in effect when 
        the member retires.  A period of uninterrupted service for the 
        purposes of this subdivision means a period of covered teaching 
        service during which the member has not been separated from 
        active service for more than one fiscal year. 
           (c) In no case shall the annuity payable under this 
        subdivision be less than the amount of annuity payable pursuant 
        to section 354.44, subdivision 6. 
           (d) The requirements and provisions for retirement before 
        normal retirement age contained in section 354.44, subdivision 
        6, clause (3) or (5), shall also apply to an employee fulfilling 
        the requirements with a combination of service as provided in 
        section 354.60. 
           (e) The augmentation provided by this subdivision applies 
        to the benefit provided in section 354.46, subdivision 2. 
           (f) The augmentation provided by this subdivision shall not 
        apply to any period in which a person is on an approved leave of 
        absence from an employer unit covered by the provisions of this 
        chapter.  
           (g) The retirement annuity or disability benefit of, or the 
        survivor benefit payable on behalf of, a former teacher who 
        terminated service before July 1, 1997, which is not first 
        payable until after June 30, 1997, must be increased on an 
        actuarial equivalent basis to reflect the change in the 
        postretirement interest rate actuarial assumption under section 
        356.215, subdivision 4d, from five percent to six percent under 
        a calculation procedure and tables adopted by the board as 
        recommended by an approved actuary and approved by the actuary 
        retained by the legislative commission on pensions and 
        retirement. 
           Sec. 55.  [356.19] [RETIREMENT BENEFIT FORMULA 
        PERCENTAGES.] 
           Subdivision 1.  [COORDINATED PLAN MEMBERS.] The applicable 
        benefit accrual rate is 1.2 percent. 
           Subd. 2.  [COORDINATED PLAN MEMBERS.] The applicable 
        benefit accrual rate is 1.7 percent. 
           Subd. 3.  [BASIC PLAN MEMBERS.] The applicable benefit 
        accrual rate is 2.2 percent. 
           Subd. 4.  [BASIC PLAN MEMBERS.] The applicable benefit 
        accrual rate is 2.7 percent. 
           Subd. 5.  [CORRECTIONAL PLAN MEMBERS.] The applicable 
        benefit accrual rate is 2.4 percent. 
           Subd. 6.  [STATE TROOPERS PLAN AND POLICE/FIRE PLAN 
        MEMBERS.] The applicable benefit accrual rate is 3.0 percent. 
           Subd. 7.  [JUDGES PLAN.] The applicable benefit accrual 
        rate is 2.7 percent. 
           Subd. 8.  [JUDGES PLAN.] The applicable benefit accrual 
        rate is 3.2 percent. 
           Subd. 9.  [FUTURE BENEFIT ACCRUAL RATE INCREASES.] After 
        January 2, 1998, benefit accrual rate increases under this 
        section must apply only to allowable service or formula service 
        rendered after the effective date of the benefit accrual rate 
        increase. 
           Sec. 56.  Minnesota Statutes 1996, section 356.20, 
        subdivision 2, is amended to read: 
           Subd. 2.  [COVERED PUBLIC PENSION FUNDS.] This section 
        applies to the following public pension plans: 
           (1) State employees retirement fund. 
           (2) Public employees retirement fund. 
           (3) Teachers retirement association. 
           (4) State patrol retirement fund. 
           (5) Minneapolis teachers retirement fund association. 
           (6) St. Paul teachers retirement fund association. 
           (7) Duluth teachers retirement fund association. 
           (8) Minneapolis employees retirement fund. 
           (9) University of Minnesota faculty retirement plan. 
           (10) University of Minnesota faculty supplemental 
        retirement plan. 
           (11) Judges retirement fund. 
           (12) Any police or firefighter's relief association 
        enumerated in section 69.77, subdivision 1a or 69.771, 
        subdivision 1. 
           (13) Public employees police and fire fund.  
           (14) Minnesota state retirement system correctional 
        officers retirement fund.  
           (15) Public employees local government correctional service 
        retirement plan. 
           Sec. 57.  Minnesota Statutes 1996, 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, the 
        legislative commission on pensions and retirement shall have 
        prepared by the actuary retained by the commission annual 
        actuarial valuations of the retirement plans enumerated in 
        section 3.85, subdivision 11, paragraph (b), and quadrennial 
        experience studies of the retirement plans enumerated in section 
        3.85, subdivision 11, paragraph (b), clauses (1), (2), and (7), 
        and, two years after each set of quadrennial experience studies, 
        quadrennial projection valuations of the retirement plans 
        enumerated in section 3.85, subdivision 11, paragraph (b), 
        clauses (1), (2), and (7), and of any other retirement plan 
        enumerated in section 3.85, subdivision 11, paragraph (b), for 
        which it determines that the analysis is beneficial.  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 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 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 coming within the provisions of section 356.216. 
           (b) The quadrennial projection valuations required under 
        paragraph (a) are intended to serve as an additional analytical 
        tool with which policy makers may assess the future funding 
        status of public plans through forecasting and testing various 
        potential outcomes over time if certain plan assumptions or 
        valuation methods were to be modified.  In consultation with the 
        executive director of the legislative commission on pensions and 
        retirement, the retirement fund directors, the state economist, 
        the state demographer, the commissioner of finance, and the 
        commissioner of employee relations, the actuary retained by the 
        legislative commission on pensions and retirement shall perform 
        the quadrennial projection valuations, testing future 
        implications for plan funding by modifying assumptions and 
        methods currently in place.  The commission-retained actuary 
        shall provide advice to the commission as to the periods over 
        which such projections should be made, the nature and scope of 
        the scenarios to be analyzed, the measures of funding status to 
        be employed, and shall report the results of these analyses in 
        the same manner as for quadrennial experience studies. 
           Sec. 58.  Minnesota Statutes 1996, section 356.215, 
        subdivision 4d, is amended to read: 
           Subd. 4d.  [INTEREST AND SALARY ASSUMPTIONS.] (a) For funds 
        governed by chapters chapter 352B, 353C, and by sections 352.90 
        through 352.951 and 353.63 through 353.68, the actuarial 
        valuation must use a preretirement interest assumption of 8.5 
        percent, a postretirement interest assumption of five six 
        percent, and a future salary increase assumption of 6.5 percent. 
           (b) For funds governed by chapter 354A, the actuarial 
        valuation must use preretirement and postretirement assumptions 
        of 8.5 percent and a future salary increase assumption of 6.5 
        percent, but the actuarial valuation must reflect the payment of 
        postretirement adjustments to retirees, based on the methods 
        specified in the bylaws of the fund as approved by the 
        legislature.  For a fund governed by chapter 422A, the actuarial 
        valuation shall use a preretirement interest assumption of six 
        percent, a postretirement interest assumption of five percent, 
        and an assumption that in each future year the salary on which a 
        retirement or other benefit is based is 1.04 multiplied by the 
        salary for the preceding year.  
           (c) For all other funds not specified in paragraph (a), 
        (b), (d), or (e), the actuarial valuation must use a 
        preretirement interest assumption of five percent, a 
        postretirement interest assumption of five percent, and a future 
        salary increase assumption of 3.5 percent. 
           (d) For funds governed by chapters 3A, 352C, and 490, the 
        actuarial valuation must use a preretirement interest assumption 
        of 8.5 percent, a postretirement interest assumption of five six 
        percent, and a future salary increase assumption of 6.5 percent 
        in each future year in which the salary amount payable is not 
        determinable from section 3.099, 15A.081, subdivision 6, or 
        15A.083, subdivision 1, whichever applies, or from applicable 
        compensation council recommendations under section 15A.082. 
           (e) For funds governed by sections 352.01 through 352.86, 
        353.01 through 353.46, and chapter 354, the actuarial valuation 
        must use a preretirement interest assumption of 8.5, a 
        postretirement interest assumption of five six percent, and a 
        graded rate future salary increase assumption as follows: 
                General state   General public   
                  employees       employees         Teachers  
                 retirement      retirement        retirement 
         Age        plan            plan              plan 
         16        7.2500%         8.71%              7.25%
         17        7.2500          8.71               7.25 
         18        7.2500          8.70               7.25 
         19        7.2500          8.70               7.25 
         20        7.2500          7.70               7.25 
         21        7.1454          7.70               7.25 
         22        7.1094          7.70               7.25 
         23        7.0725          7.70               7.20 
         24        7.0363          7.70               7.15 
         25        7.0000          7.60               7.10 
         26        7.0000          7.51               7.05 
         27        7.0000          7.39               7.00 
         28        7.0000          7.30               7.00 
         29        7.0000          7.20               7.00 
         30        7.0000          7.20               7.00 
         31        7.0000          7.10               7.00 
         32        7.0000          7.10               7.00 
         33        7.0000          7.00               7.00 
         34        7.0000          7.00               7.00 
         35        7.0000          6.90               7.00 
         36        6.9019          6.80               7.00 
         37        6.8074          6.70               7.00 
         38        6.7125          6.60               6.90 
         39        6.6054          6.50               6.80 
         40        6.5000          6.40               6.70 
         41        6.3540          6.30               6.60 
         42        6.2087          6.30               6.50 
         43        6.0622          6.30               6.35 
         44        5.9048          6.20               6.20 
         45        5.7500          6.20               6.05 
         46        5.6940          6.09               5.90 
         47        5.6375          6.00               5.75 
         48        5.5822          5.90               5.70 
         49        5.5405          5.80               5.65 
         50        5.5000          5.70               5.60 
         51        5.4384          5.70               5.55 
         52        5.3776          5.70               5.50 
         53        5.3167          5.70               5.45 
         54        5.2826          5.70               5.40 
         55        5.2500          5.70               5.35 
         56        5.2500          5.70               5.30 
         57        5.2500          5.70               5.25 
         58        5.2500          5.70               5.25 
         59        5.2500          5.70               5.25 
         60        5.2500          5.00               5.25 
         61        5.2500          5.00               5.25 
         62        5.2500          5.00               5.25 
         63        5.2500          5.00               5.25 
         64        5.2500          5.00               5.25 
         65        5.2500          5.00               5.25 
         66        5.2500          5.00               5.25 
         67        5.2500          5.00               5.25 
         68        5.2500          5.00               5.25 
         69        5.2500          5.00               5.25 
         70        5.2500          5.00               5.25 
           Sec. 59.  Minnesota Statutes 1996, section 356.215, 
        subdivision 4g, is amended to read: 
           Subd. 4g.  [AMORTIZATION CONTRIBUTIONS.] (a) In addition to 
        the exhibit indicating the level normal cost, the actuarial 
        valuation must contain an exhibit indicating the additional 
        annual contribution sufficient to amortize the unfunded 
        actuarial accrued liability.  For funds governed by chapters 3A, 
        352, 352B, 352C, 353, 353C, 354, 354A, and 490, the additional 
        contribution must be calculated on a level percentage of covered 
        payroll basis by the established date for full funding in effect 
        when the valuation is prepared.  For funds governed by chapter 
        3A, sections 352.90 through 352.951, chapters 352B, 352C, 
        sections 353.63 through 353.68, and chapters 353C, 354A, and 
        490, the level percent additional contribution must be 
        calculated assuming annual payroll growth of 6.5 percent.  For 
        funds governed by sections 352.01 through 352.86 and chapter 
        354, the level percent additional contribution must be 
        calculated assuming an annual payroll growth of five percent.  
        For the fund governed by sections 353.01 through 353.46, the 
        level percent additional contribution must be calculated 
        assuming an annual payroll growth of six percent.  For all other 
        funds, the additional annual contribution must be calculated on 
        a level annual dollar amount basis. 
           (b) For any fund other than the Minneapolis employees 
        retirement fund, after the first actuarial valuation date 
        occurring after June 1, 1989, if there has not been a change in 
        the actuarial assumptions used for calculating the actuarial 
        accrued liability of the fund, a change in the benefit plan 
        governing annuities and benefits payable from the fund, a change 
        in the actuarial cost method used in calculating the actuarial 
        accrued liability of all or a portion of the fund, or a 
        combination of the three, which change or changes by themselves 
        without inclusion of any other items of increase or decrease 
        produce a net increase in the unfunded actuarial accrued 
        liability of the fund, the established date for full funding for 
        the first actuarial valuation made after June 1, 1989, and each 
        successive actuarial valuation is the first actuarial valuation 
        date occurring after June 1, 2020.  
           (c) For any fund or plan other than the Minneapolis 
        employees retirement fund, after the first actuarial valuation 
        date occurring after June 1, 1989, if there has been a change in 
        any or all of the actuarial assumptions used for calculating the 
        actuarial accrued liability of the fund, a change in the benefit 
        plan governing annuities and benefits payable from the fund, a 
        change in the actuarial cost method used in calculating the 
        actuarial accrued liability of all or a portion of the fund, or 
        a combination of the three, and the change or changes, by 
        themselves and without inclusion of any other items of increase 
        or decrease, produce a net increase in the unfunded actuarial 
        accrued liability in the fund, the established date for full 
        funding must be determined using the following procedure:  
           (i) the unfunded actuarial accrued liability of the fund 
        must be determined in accordance with the plan provisions 
        governing annuities and retirement benefits and the actuarial 
        assumptions in effect before an applicable change; 
           (ii) the level annual dollar contribution or level 
        percentage, whichever is applicable, needed to amortize the 
        unfunded actuarial accrued liability amount determined under 
        item (i) by the established date for full funding in effect 
        before the change must be calculated using the interest 
        assumption specified in subdivision 4d in effect before the 
        change; 
           (iii) the unfunded actuarial accrued liability of the fund 
        must be determined in accordance with any new plan provisions 
        governing annuities and benefits payable from the fund and any 
        new actuarial assumptions and the remaining plan provisions 
        governing annuities and benefits payable from the fund and 
        actuarial assumptions in effect before the change; 
           (iv) the level annual dollar contribution or level 
        percentage, whichever is applicable, needed to amortize the 
        difference between the unfunded actuarial accrued liability 
        amount calculated under item (i) and the unfunded actuarial 
        accrued liability amount calculated under item (iii) over a 
        period of 30 years from the end of the plan year in which the 
        applicable change is effective must be calculated using the 
        applicable interest assumption specified in subdivision 4d in 
        effect after any applicable change; 
           (v) the level annual dollar or level percentage 
        amortization contribution under item (iv) must be added to the 
        level annual dollar amortization contribution or level 
        percentage calculated under item (ii); 
           (vi) the period in which the unfunded actuarial accrued 
        liability amount determined in item (iii) is amortized by the 
        total level annual dollar or level percentage amortization 
        contribution computed under item (v) must be calculated using 
        the interest assumption specified in subdivision 4d in effect 
        after any applicable change, rounded to the nearest integral 
        number of years, but not to exceed 30 years from the end of the 
        plan year in which the determination of the established date for 
        full funding using the procedure set forth in this clause is 
        made and not to be less than the period of years beginning in 
        the plan year in which the determination of the established date 
        for full funding using the procedure set forth in this clause is 
        made and ending by the date for full funding in effect before 
        the change; and 
           (vii) the period determined under item (vi) must be added 
        to the date as of which the actuarial valuation was prepared and 
        the date obtained is the new established date for full funding.  
           (d) For the Minneapolis employees retirement fund, the 
        established date for full funding is June 30, 2020. 
           (e) For the public employees retirement association police 
        and fire fund plan, the correctional employees retirement plan 
        of the Minnesota state retirement system, and the state patrol 
        retirement plan, an excess of valuation assets over actuarial 
        accrued liability will must be amortized in the same manner over 
        the same period as an unfunded actuarial accrued liability 
        but will must serve to reduce the required contribution instead 
        of increasing it. 
           Sec. 60.  Minnesota Statutes 1996, section 356.217, is 
        amended to read: 
           356.217 [MODIFICATIONS IN ACTUARIAL SERVICES.] 
           (a) The actuary retained by the legislative commission on 
        pensions and retirement is not required to prepare actuarial 
        valuations of the public employees local government correctional 
        employees retirement plan unless the plan is implemented by a 
        county under section 353C.04. 
           (b) The cost of any requested benefit projections by the 
        commission-retained actuary relating to the Minnesota 
        postretirement investment fund for the state board of investment 
        is payable by the state board of investment. 
           (c) (b) Actuarial valuations under section 356.215, for 
        July 1, 1991, and thereafter, are not required to have an 
        individual commentary section.  The commentary section, if 
        omitted from the individual plan actuarial valuation, must be 
        included in an appropriate generalized format as part of the 
        report to the legislature under section 3.85, subdivision 11. 
           (d) (c) Actuarial valuations under section 356.215, for 
        July 1, 1991, and thereafter, are not required to contain 
        separate actuarial valuation results for basic and coordinated 
        programs unless each program has a membership of at least ten 
        percent of the total membership of the fund.  Actuarial 
        valuations under section 356.215, for July 1, 1991, and 
        thereafter, are not required to contain cash flow forecasts. 
           (e) (d) Actuarial valuations of the public employees police 
        and fire fund local consolidation accounts for July 1, 1991, and 
        thereafter, are not required to contain separate tabulations or 
        summaries of active member, service retirement, disability 
        retirement, and survivor data for each local consolidation 
        account. 
           (f) (e) The commission-retained actuary is: 
           (1) required to publish experience findings for plans for 
        which experience findings are required only on a quadrennial 
        basis for the four-year period ending June 30, 1992, and every 
        four years thereafter; 
           (2) not required to prepare a separate experience analysis 
        or publish separate experience findings for basic and 
        coordinated programs if separate actuarial valuation results for 
        the programs are not required; and 
           (3) not required to calculate investment rate of return 
        experience results on any basis other than current asset value 
        as defined in section 356.215, subdivision 1, clause (6). 
           Sec. 61.  Minnesota Statutes 1996, section 356.30, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ELIGIBILITY; COMPUTATION OF ANNUITY.] (1) 
        Notwithstanding any provisions to the contrary of the laws 
        governing the funds enumerated in subdivision 3, a person who 
        has met the qualifications of clause (2) may elect to receive a 
        retirement annuity from each fund in which the person has at 
        least six months allowable service, based on the allowable 
        service in each fund, subject to the provisions of clause (3).  
           (2) A person may receive upon retirement a retirement 
        annuity from each fund in which the person has at least six 
        months allowable service, and augmentation of a deferred annuity 
        calculated under the laws governing each public pension plan or 
        fund named in subdivision 3, from the date the person terminated 
        all public service if: 
           (a) the person has allowable service totaling an amount 
        that allows the person to receive an annuity in any two or more 
        of the enumerated funds; and 
           (b) the person has not begun to receive an annuity from any 
        enumerated fund or the person has made application for benefits 
        from all funds and the effective dates of the retirement annuity 
        with each fund under which the person chooses to receive an 
        annuity are within a one-year period.  
           (3) The retirement annuity from each fund must be based 
        upon the allowable service in each fund, except that:  
           (a) The laws governing annuities must be the law in effect 
        on the date of termination from the last period of public 
        service under a covered fund with which the person earned a 
        minimum of one-half year of allowable service credit during that 
        employment.  
           (b) The "average salary" on which the annuity from each 
        covered fund in which the employee has credit in a formula plan 
        shall be based on the employee's highest five successive years 
        of covered salary during the entire service in covered funds.  
           (c) The formula percentages to be used by each fund must be 
        those percentages prescribed by each fund's formula as continued 
        for the respective years of allowable service from one fund to 
        the next, recognizing all previous allowable service with the 
        other covered funds.  
           (d) Allowable service in all the funds must be combined in 
        determining eligibility for and the application of each fund's 
        provisions in respect to actuarial reduction in the annuity 
        amount for retirement prior to normal retirement.  
           (e) The annuity amount payable for any allowable service 
        under a nonformula plan of a covered fund must not be affected 
        but such service and covered salary must be used in the above 
        calculation.  
           (f) This section shall not apply to any person whose final 
        termination from the last public service under a covered fund is 
        prior to May 1, 1975.  
           (g) For the purpose of computing annuities under this 
        section the formula percentages used by any covered fund, except 
        the basic program of the teachers retirement association, the 
        public employees police and fire fund, and the state patrol 
        retirement fund, must not exceed 2-1/2 the percent specified in 
        section 356.19, subdivision 4, per year of service for any year 
        of service or fraction thereof.  The formula percentage used by 
        the public employees police and fire fund and the state patrol 
        retirement fund must not exceed 2.65 the percent specified in 
        section 356.19, subdivision 6, per year of service for any year 
        of service or fraction thereof.  The formula percentage used by 
        the teachers retirement association must not exceed 2.63 percent 
        per year of basic program service for any year of basic program 
        service or fraction thereof.  The formula percentage used by the 
        legislators retirement plan and the elective state officers 
        retirement must not exceed 2.5 percent, but this limit does not 
        apply to the adjustment provided under section 3A.02, 
        subdivision 1, paragraph (c), or 352C.031, paragraph (b). 
           (h) Any period of time for which a person has credit in 
        more than one of the covered funds must be used only once for 
        the purpose of determining total allowable service.  
           (i) If the period of duplicated service credit is more than 
        six months, or the person has credit for more than six months 
        with each of the funds, each fund shall apply its formula to a 
        prorated service credit for the period of duplicated service 
        based on a fraction of the salary on which deductions were paid 
        to that fund for the period divided by the total salary on which 
        deductions were paid to all funds for the period.  
           (j) If the period of duplicated service credit is less than 
        six months, or when added to other service credit with that fund 
        is less than six months, the service credit must be ignored and 
        a refund of contributions made to the person in accord with that 
        fund's refund provisions.  
           Sec. 62.  Minnesota Statutes 1996, section 356.30, 
        subdivision 3, is amended to read: 
           Subd. 3.  [COVERED FUNDS.] This section applies to the 
        following retirement funds: 
           (1) state employees retirement fund, established pursuant 
        to chapter 352; 
           (2) correctional employees retirement program, established 
        pursuant to chapter 352; 
           (3) unclassified employees retirement plan, established 
        pursuant to chapter 352D; 
           (4) state patrol retirement fund, established pursuant to 
        chapter 352B; 
           (5) legislators' retirement plan, established pursuant to 
        chapter 3A; 
           (6) elective state officers' retirement plan, established 
        pursuant to chapter 352C; 
           (7) public employees retirement association, established 
        pursuant to chapter 353; 
           (8) public employees police and fire fund, established 
        pursuant to chapter 353; 
           (9) teachers retirement association, established pursuant 
        to chapter 354; 
           (10) Minneapolis employees retirement fund, established 
        pursuant to chapter 422A; 
           (11) Minneapolis teachers retirement fund association, 
        established pursuant to chapter 354A; 
           (12) St. Paul teachers retirement fund association, 
        established pursuant to chapter 354A; 
           (13) Duluth teachers retirement fund association, 
        established pursuant to chapter 354A; 
           (14) public employees local government correctional service 
        retirement plan established by sections 353C.01 to 353C.10; and 
           (15) (14) judges' retirement fund, established by sections 
        490.121 to 490.132. 
           Sec. 63.  Minnesota Statutes 1996, section 356.32, 
        subdivision 2, is amended to read: 
           Subd. 2.  [COVERED FUNDS.] The provisions of this section 
        shall apply to the following retirement funds: 
           (1) state employees retirement fund, established pursuant 
        to chapter 352; 
           (2) correctional employees retirement program, 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 association, established pursuant 
        to chapter 354; 
           (7) Minneapolis employees retirement fund, established 
        pursuant to chapter 422A; 
           (8) Duluth teachers retirement fund association, 
        established pursuant to chapter 354A; 
           (9) Minneapolis teachers retirement fund association, 
        established pursuant to chapter 354A; and 
           (10) St. Paul teachers retirement fund association, 
        established pursuant to chapter 354A; 
           (11) public employees local government correctional service 
        retirement plan established by sections 353B.01 to 353B.10. 
           Sec. 64.  Minnesota Statutes 1996, section 422A.06, 
        subdivision 8, is amended to read: 
           Subd. 8.  [RETIREMENT BENEFIT FUND.] (a) The retirement 
        benefit fund shall consist of amounts held for payment of 
        retirement allowances for members retired pursuant to this 
        chapter.  
           (b) Assets equal to the required reserves for retirement 
        allowances pursuant to this chapter determined in accordance 
        with the appropriate mortality table adopted by the board of 
        trustees based on the experience of the fund as recommended by 
        the commission-retained actuary shall be transferred from the 
        deposit accumulation fund to the retirement benefit fund as of 
        the last business day of the month in which the retirement 
        allowance begins.  The income from investments of these assets 
        shall be allocated to this fund.  There shall be paid from this 
        fund the retirement annuities authorized by law.  A required 
        reserve calculation for the retirement benefit fund must be made 
        by the actuary retained by the legislative commission on 
        pensions and retirement and must be certified to the retirement 
        board by the commission-retained actuary. 
           (c) The retirement benefit fund shall be governed by the 
        applicable laws governing the accounting and audit procedures, 
        investment, actuarial requirements, calculation and payment of 
        postretirement benefit adjustments, discharge of any deficiency 
        in the assets of the fund when compared to the actuarially 
        determined required reserves, and other applicable operations 
        and procedures regarding the Minnesota postretirement investment 
        fund in effect on June 30, 1997, established pursuant to under 
        Minnesota Statutes 1996, section 11A.18, and any legal or 
        administrative interpretations of those laws of the state board 
        of investment, the legal advisor to the board of investment and 
        the executive director of the state board of investment in 
        effect on June 30, 1997.  If a deferred yield adjustment account 
        is established for the Minnesota postretirement investment 
        fund before June 30, 1997, under Minnesota Statutes 1996, 
        section 11A.18, subdivision 5, the retirement board shall also 
        establish and maintain a deferred yield adjustment account 
        within this fund.  
           (d) Annually, following the calculation of any 
        postretirement adjustment payable from the retirement benefit 
        fund, the board of trustees shall submit a report to the 
        executive director of the legislative commission on pensions and 
        retirement and to the commissioner of finance indicating the 
        amount of any postretirement adjustment and the underlying 
        calculations on which that postretirement adjustment amount is 
        based, including the amount of dividends, the amount of 
        interest, and the amount of net realized capital gains or losses 
        utilized in the calculations. 
           (e) With respect to a former contributing member who began 
        receiving a retirement annuity or disability benefit under 
        section 422A.151, paragraph (a), clause (2), after June 30, 
        1997, or with respect to a survivor of a former contributing 
        member who began receiving a survivor benefit under section 
        422A.151, paragraph (a), clause (2), after June 30, 1997, the 
        reserves attributable to the one percent lower amount of the 
        cost-of-living adjustment payable to those annuity or benefit 
        recipients annually must be transferred back to the deposit 
        accumulation fund to the credit of the metropolitan airports 
        commission.  The calculation of this annual reduced 
        cost-of-living adjustment reserve transfer must be reviewed by 
        the actuary retained by the legislative commission on pensions 
        and retirement. 
           Sec. 65.  Minnesota Statutes 1996, section 422A.151, is 
        amended to read: 
           422A.151 [ALTERNATIVE CALCULATION OF ANNUITY.] 
           (a) In the case of a contributing member of the Minneapolis 
        employees retirement fund who is employed as a licensed peace 
        officer or firefighter with the metropolitan airports commission 
        and who retires, becomes disabled within the meaning of section 
        422A.18, or dies, the retirement, disability, or survivor 
        allowance is equal to the higher of the following: 
           (1) the retirement, disability, or survivor allowance 
        calculated for the person under the applicable provisions of the 
        Minneapolis employees retirement fund; or 
           (2) the retirement, disability, or survivor benefit that 
        the person would be entitled to upon meeting the applicable age 
        and allowable service requirements of section 353.651, 353.656, 
        or 353.657 if all employment as a licensed peace officer or 
        firefighter with the metropolitan airports commission had been 
        allowable service under the public employees retirement 
        association police and fire fund, instead of being covered by 
        the Minneapolis employees retirement fund.  In computing the 
        alternative benefit under section 353.651, 353.656, or 353.657, 
        the applicable definitions and related provisions of chapter 353 
        must be used. 
           A firefighter or licensed peace officer terminating 
        employment by the metropolitan airports commission after June 
        30, 1997, or the survivor of a deceased firefighter or licensed 
        peace officer terminating employment by the metropolitan 
        airports commission after June 30, 1997, under section 353.651, 
        353.656, or 353.657, shall receive a one percent lower 
        cost-of-living adjustment than otherwise payable under section 
        422A.06, subdivision 5.  If the cost-of-living adjustment 
        payable under section 422A.06, subdivision 5, is less than one 
        percent, the firefighter or licensed peace officer who retired 
        after June 30, 1997, must not have a reduction in the previously 
        received annuity or benefit amount, but future cost-of-living 
        adjustments must be modified equal to the percentage the benefit 
        would have been reduced below the person's current annuity or 
        benefit amount to reflect the one percent lower cost-of-living 
        adjustment under section 422A.06, subdivision 5. 
           (b) If a contributing member under paragraph (a) has 
        periods of coverage by the Minneapolis employees retirement fund 
        that include service other than employment as a licensed peace 
        officer or firefighter as well as employment as a licensed peace 
        officer or firefighter, the calculation of the benefit under 
        paragraph (a), clause (2), may only utilize service as a 
        licensed peace officer or firefighter employed by the 
        metropolitan airports commission. 
           Sec. 66.  Minnesota Statutes 1996, section 490.124, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [BASIC RETIREMENT ANNUITY.] Except as 
        qualified hereinafter from and after mandatory retirement date, 
        normal retirement date, early retirement date, or one year from 
        the disability retirement date, as the case may be, a retirement 
        annuity shall be payable to a retiring judge from the judges' 
        retirement fund in an amount equal to:  (1) 2-1/2 the percent of 
        specified in section 356.19, subdivision 7, multiplied by the 
        judge's final average compensation multiplied by the number of 
        years and fractions of years of allowable service rendered prior 
        to July 1, 1980; plus (2) three the percent of specified in 
        section 356.19, subdivision 8, multiplied by the judge's final 
        average compensation multiplied by the number of years and 
        fractions of years of allowable service rendered after June 30, 
        1980; provided that the annuity shall must not exceed 65 70 
        percent of the judge's annual salary for the 12 months 
        immediately preceding retirement.  
           Sec. 67.  Minnesota Statutes 1996, section 490.124, 
        subdivision 5, is amended to read: 
           Subd. 5.  [DEFERRED BENEFITS.] (a) Any benefit to which a 
        judge is entitled under this section may be deferred until early 
        or normal retirement date, notwithstanding termination of such 
        judge's service prior thereto. 
           (b) The retirement annuity of, or the survivor benefit 
        payable on behalf of, a former judge, who terminated service 
        before July 1, 1997, which is not first payable until after June 
        30, 1997, must be increased on an actuarial equivalent basis to 
        reflect the change in the postretirement interest rate actuarial 
        assumption under section 356.215, subdivision 4d, from five 
        percent to six percent under a calculation procedure and tables 
        adopted by the board of directors of the Minnesota state 
        retirement system and approved by the actuary retained by the 
        legislative commission on pensions and retirement. 
           Sec. 68.  Laws 1996, chapter 448, article 1, section 3, is 
        amended to read:  
           Sec. 3.  [EFFECTIVE DATE.] 
           (a) Sections 1 and 2 are effective on the day following 
        approval by the Itasca county board and compliance with 
        Minnesota Statutes, section 645.021. 
           (b) Notwithstanding Minnesota Statutes, section 645.021, 
        the approval and compliance required by paragraph (a) is 
        effective if accomplished before January 1, 1999.  
           Sec. 69.  [APPROPRIATIONS; DEPARTMENT OF CORRECTIONS AND 
        LEGISLATIVE COMMISSION ON PENSIONS AND RETIREMENT.] 
           (a) $900,000 in fiscal year 1998 and $900,000 in fiscal 
        year 1999 is appropriated from the general fund to the 
        commissioner of corrections.  The commissioner of finance shall 
        include this amount in the base budget for the agency when 
        developing the governor's budget recommendations for the 
        biennium ending June 30, 2001. 
           (b) For fiscal year 1999, $50,000 is appropriated to the 
        legislative coordinating commission for allocation to the 
        legislative commission on pensions and retirement. 
           Sec. 70.  [APPROPRIATION REDUCTION.] 
           Subdivision 1.  [REDUCTIONS BY RETIREMENT PLAN AND 
        EMPLOYER.] In fiscal years 1998 and 1999, the commissioner of 
        finance shall reduce allotments and cancel to the general fund 
        the amounts determined by multiplying the general fund supported 
        salaries of employees who are members of the teachers retirement 
        association according to clauses (1) and (2), and for employees 
        who are members of the general state employees retirement plan 
        of the Minnesota state retirement system according to clauses 
        (3), (4), and (5): 
           (1) 0.90 percent for the Minnesota state colleges and 
        universities; 
           (2) 1.50 percent for all agencies other than the Minnesota 
        state colleges and universities 
           (3) 0.20 percent for all agencies other than the Minnesota 
        state colleges and universities and the university of Minnesota; 
           (4) 0.12 percent for the Minnesota state colleges and 
        universities; 
           (5) 0.0728 percent for the university of Minnesota. 
           Subd. 2.  [APPROPRIATION REDUCTIONS APPLIED TO BASE 
        BUDGETS.] The commissioner of finance shall include the 
        reductions under subdivision 1 when developing the base budgets 
        for all affected organizations as submitted with the governor's 
        recommended budget for the biennium ending June 30, 2001. 
           Subd. 3.  [PROJECTED SAVINGS.] For the biennium ending June 
        30, 1999, the projected general fund savings attributable to the 
        reductions under subdivision 1 are as follows: 
                                                  fiscal year 
                                                1998        1999 
         subdivision 1, clauses (1) and (2)  $1,937,000  $2,053,000 
         subdivision 1, clauses (3)          $1,162,000  $1,233,000 
         subdivision 1, clauses (4) and (5)  $  480,000  $  509,000 
           Sec. 71.  [APPROPRIATION] 
           For the fiscal years ending June 30, 1998, and June 30, 
        1999, the amounts transferred under section 13 to funds and 
        accounts from which the salaries of peace officers employed by 
        the department of natural resources are paid are appropriated 
        from those funds and accounts to the commissioner of natural 
        resources to assist in making the employer contributions to the 
        state patrol retirement plan under Minnesota Statutes, section 
        352B.02, subdivision 1c.  Notwithstanding section 13, for fiscal 
        years 1998 and 1999, amounts transferred to the general fund for 
        peace officers employed by the department of natural resources 
        do not cancel but are appropriated to the commissioner of 
        natural resources to assist in making employer contributions to 
        the state patrol retirement plan.  The amounts appropriated in 
        this section must be included in the department's budgetary base 
        for the next biennium. 
           Sec. 72.  [PERMANENT INCREASE FOR BENEFIT RECIPIENTS.] 
           A monthly survivor, disability, or retirement benefit paid 
        under Minnesota Statutes, chapters 3A, 352, 352B, 352C, 352D, 
        353, 353A, 354, and 490 on June 30, 1997, is permanently 
        increased effective July 1, 1997, to reflect the change in the 
        postretirement fund interest assumption from five percent to six 
        percent.  The benefit payable under the six percent 
        postretirement interest assumption must be actuarially 
        equivalent to the benefit payable under the five percent 
        interest assumption and must be based on tables adopted by the 
        applicable board and approved by the actuary retained by the 
        legislative commission on pensions and retirement. 
           Sec. 73.  [ALTERNATIVE BENEFIT ADJUSTMENTS.] 
           If the permanent increase under section 71, along with the 
        annual cost-of-living adjustments paid during the ten years 
        after the effective date of this section averages less than 
        inflation as measured by the Consumer Price Index or 3.5 
        percent, whichever is lower, the executive directors of the 
        teachers retirement association, public employees retirement 
        association, and the Minnesota state retirement system shall 
        suggest alternative benefit adjustments for retirees receiving 
        benefits on June 30, 1997, who exceed their life expectancy by 
        three or more years. 
           Sec. 74.  [MANDATED PENSION COMMISSION STUDY; DISPOSITION 
        OF PERA-P&F CONSOLIDATION ACCOUNTS.] 
           (a) The legislative commission on pensions and retirement, 
        in consultation with the affected constituencies, shall study 
        the advantages and disadvantages of the blending of some or all 
        local police and salaried firefighter consolidation accounts 
        into the public employees police and fire retirement plan 
        established under Minnesota Statutes, sections 353.63 to 353.68. 
           (b) The report must be transmitted on or before January 31, 
        1998, to the chair of the committee on governmental operations 
        and veterans of the senate, the chair of the governmental 
        operations budget division of the senate, the chair of the 
        committee on governmental operations of the house of 
        representatives, and the chair of the state government finance 
        division of the house of representatives. 
           Sec. 75.  [MANDATED PENSION COMMISSION STUDY; FIRST CLASS 
        CITY TEACHER RETIREMENT FUND CONSOLIDATION OPTIONS.] 
           (a) The legislative commission on pensions and retirement, 
        in consultation with the affected constituencies, shall study 
        the advantages and disadvantages of the restructuring or the 
        consolidation of the first class city teacher retirement fund 
        associations and the statewide teachers retirement association.  
        In its deliberations, the commission shall review the future 
        state funding needs of the Minneapolis employees retirement fund 
        and other applicable state pension funding resources. 
           (b) The report must be transmitted on or before January 31, 
        1998, to the chair of the committee on governmental operations 
        and veterans of the senate, the chair of the governmental 
        operations budget division of the senate, the chair of the 
        committee on governmental operations of the house of 
        representatives, and the chair of the state governmental finance 
        division of the house of representatives. 
           Sec. 76.  [TERMINATION DATE; CERTAIN TEACHERS.] 
           Notwithstanding Minnesota Statutes, section 354.44, 
        subdivision 4, for purposes of eligibility for retirement 
        benefits from the teachers retirement association, the 
        termination date of a teacher terminating active teaching 
        service at the end of the school year in a school where the 
        school year was disrupted or extended by flooding during the 
        first half of calendar year 1997 or by fire damage or fire loss 
        to school buildings or facilities during the 1996-1997 school 
        year must be determined by the closing date of the school 
        calendar in effect immediately before the flooding or in effect 
        immediately before the fire. 
           Sec. 77.  [POLICE STATE AID ADJUSTMENT.] 
           The legislature determines that the total employer 
        contributions paid to the public employees police and fire fund 
        for calendar year 1995, as certified to the commissioner of 
        revenue by the public employees retirement association in August 
        1996 for determining the amount of police state aid to be 
        distributed in September 1996, were overstated for some of the 
        counties and cities and understated for other counties and 
        cities.  The executive director of the public employees 
        retirement association shall certify to the commissioner of 
        revenue the amount of the overstated or understated 1995 
        calendar year employer contributions paid to the public 
        employees police and fire fund by each county and city; and the 
        commissioner of revenue shall adjust the October 1997 police 
        state aid distributions by the applicable amount of overpaid or 
        underpaid police state aid distributed in September 1996. 
           The estimated net adjustment for police state aid in the 
        fiscal year ending June 30, 1998, is $1,835,000.  The expected 
        net reduction to future police state aid expenditures resulting 
        from this adjustment is 6.5 percent less each year. 
           Sec. 78.  [REPEALER.] 
           (a) Minnesota Statutes 1996, sections 124.195, subdivision 
        12; 124.2139; 356.70; and 356.88, subdivision 2, are repealed. 
           (b) Minnesota Statutes 1996, sections 353C.01; 353C.02; 
        353C.03; 353C.04; 353C.05; 353C.06; 353C.07; 353C.08; 353C.09; 
        and 353C.10, are repealed. 
           Sec. 79.  [EFFECTIVE DATES.] 
           Sections 38 and 39 are effective the first full pay period 
        after December 31, 1997.  Sections 17, 18, 21, 22, 29, and 30 
        are effective the first full pay period after June 30, 1997.  
        Sections 48, 49, and 50 are effective for all salary paid July 
        1, 1997, or later.  Sections 1 to 16, 19, 20, 23 to 28, 31 to 
        36, 37, 40 to 47, 51 to 67, 69 to 75, 77, and 78 are effective 
        July 1, 1997.  Sections 68 and 76 are effective the day 
        following final enactment.  
                                   ARTICLE 2
                    LEGISLATORS AND CONSTITUTIONAL OFFICERS
           Section 1.  Minnesota Statutes 1996, section 3A.07, is 
        amended to read: 
           3A.07 [APPLICATION.] 
           (a) Except as provided in paragraph (b), this chapter 
        applies to members of the legislature in service upon after July 
        1, 1965, or thereafter, who otherwise meet the requirements of 
        this chapter. 
           (b) Members of the legislature who were elected for the 
        first time after June 30, 1997, or members of the legislature 
        who were elected before July 1, 1997, and who, after July 1, 
        1998, elect not to be members of the plan established by this 
        chapter are covered by the unclassified employees retirement 
        program governed by chapter 352D. 
           (c) The post-July 1, 1998, coverage election under 
        paragraph (b) is irrevocable and must be made on a form 
        prescribed by the director. 
           Sec. 2.  [352C.011] [APPLICABILITY.] 
           (a) Except as provided in paragraph (b), this chapter 
        applies only to constitutional officers first elected before 
        July 1, 1997, to a constitutional office.  
           (b) Constitutional officers elected for the first time to a 
        constitutional office after June 30, 1997, or constitutional 
        officers who were elected before July 1, 1997, and who, after 
        July 1, 1998, elect not to be members of the plan established by 
        this chapter are covered by the unclassified employees 
        retirement program governed by chapter 352D. 
           (c) The post-July 1, 1998, coverage election under 
        paragraph (b) is irrevocable and must be made on a form 
        prescribed by the executive director of the Minnesota state 
        retirement system. 
           Sec. 3.  Minnesota Statutes 1996, section 352D.02, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [COVERAGE.] (a) Employees enumerated in 
        paragraph (b) (c), clauses 2, 3, 4, and 6 to 15, if they are in 
        the unclassified service of the state or metropolitan council 
        and are eligible for coverage under the general state employees 
        retirement plan under chapter 352, are participants in the 
        unclassified program under this chapter unless the employee 
        gives notice to the executive director of the Minnesota state 
        retirement system within one year following the commencement of 
        employment in the unclassified service that the employee desires 
        coverage under the general state employees retirement plan.  For 
        the purposes of this chapter, an employee who does not file 
        notice with the executive director is deemed to have exercised 
        the option to participate in the unclassified plan. 
           (b) Persons referenced in paragraph (c), clauses (1) and 
        (5), are participants in the unclassified program under this 
        chapter unless the person is eligible to elect different 
        coverage under section 3A.07 or 352C.011 and, after July 1, 
        1998, elects retirement coverage by the applicable alternative 
        retirement plan. 
           (c) Enumerated employees and referenced persons are: 
           (1) the governor, the lieutenant governor, the secretary of 
        state, the state auditor, the state treasurer, and the attorney 
        general; 
           (2) an employee in the office of the governor, lieutenant 
        governor, secretary of state, state auditor, state treasurer, 
        attorney general, or; 
           (3) an employee of the state board of investment; 
           (2) (4) the head of a department, division, or agency 
        created by statute in the unclassified service, an acting 
        department head subsequently appointed to the position, or an 
        employee enumerated in section 15A.081, subdivision 1 or 
        15A.083, subdivision 4; 
           (3) (5) a member of the legislature; 
           (6) a permanent, full-time unclassified employee of the 
        legislature or a commission or agency of the legislature or a 
        temporary legislative employee having shares in the supplemental 
        retirement fund as a result of former employment covered by this 
        chapter, whether or not eligible for coverage under the 
        Minnesota state retirement system; 
           (4) (7) a person who is employed in a position established 
        under section 43A.08, subdivision 1, clause (3), or in a 
        position authorized under a statute creating or establishing a 
        department or agency of the state, which is at the deputy or 
        assistant head of department or agency or director level; 
           (5) (8) the regional administrator, or executive director 
        of the metropolitan council, general counsel, division 
        directors, operations managers, and other positions as 
        designated by the council, all of which may not exceed 27 
        positions at the council and the chair, provided that upon 
        initial designation of all positions provided for in this 
        clause, no further designations or redesignations may be made 
        without approval of the board of directors of the Minnesota 
        state retirement system; 
           (6) (9) the executive director, associate executive 
        director, and not to exceed nine positions of the higher 
        education services office in the unclassified service, as 
        designated by the higher education services office before 
        January 1, 1992, or subsequently redesignated with the approval 
        of the board of directors of the Minnesota state retirement 
        system, unless the person has elected coverage by the individual 
        retirement account plan under chapter 354B; 
           (7) (10) the clerk of the appellate courts appointed under 
        article VI, section 2, of the Constitution of the state of 
        Minnesota; 
           (8) (11) the chief executive officers of correctional 
        facilities operated by the department of corrections and of 
        hospitals and nursing homes operated by the department of human 
        services; 
           (9) (12) an employee whose principal employment is at the 
        state ceremonial house; 
           (10) (13) an employee of the Minnesota educational 
        computing corporation; 
           (11) (14) an employee of the world trade center board; and 
           (12) (15) an employee of the state lottery board who is 
        covered by the managerial plan established under section 43A.18, 
        subdivision 3. 
           Sec. 4.  Minnesota Statutes 1996, section 352D.02, 
        subdivision 2, is amended to read: 
           Subd. 2.  [COVERAGE UPON EMPLOYMENT CHANGE.] A person 
        becoming a participant in the unclassified program by virtue of 
        employment in a position specified in subdivision 1, 
        clause (2) (4) and remaining in the unclassified service shall 
        remain a participant in the program even though the position the 
        person occupies is deleted from any of the sections referenced 
        in subdivision 1, clause (2) (4) by subsequent amendment, except 
        that a person shall not be eligible to elect the unclassified 
        program after separation from unclassified service if on the 
        return of the person to service, that position is not specified 
        in subdivision 1, clause (2) (4).  Any person employed in a 
        position specified in subdivision 1 shall cease to participate 
        in the unclassified program in the event the position is placed 
        in the classified service. 
           Sec. 5.  Minnesota Statutes 1996, section 352D.04, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [INVESTMENT OPTIONS.] (a) An employee A 
        person 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 person 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 person'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) 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, 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. 6.  Minnesota Statutes 1996, section 352D.04, 
        subdivision 2, is amended to read: 
           Subd. 2.  [CONTRIBUTION RATES.] (a) The moneys money used 
        to purchase shares under this section shall be is the employee 
        and employer contributions provided in this subdivision. 
           (a) (b) The employee contribution shall be is an amount 
        equal to the employee contribution specified in section 352.04, 
        subdivision 2.  
           (b) (c) The employer contribution shall be is an amount 
        equal to six percent of salary.  
           (d) These contributions shall must be made by deduction 
        from salary in the manner provided in section 352.04, 
        subdivisions 4, 5, and 6.  
           (e) For members of the legislature, the contributions under 
        this subdivision also must be made on per diem payments received 
        during a regular or special legislative session, but may not be 
        made on per diem payments received outside of a regular or 
        special legislative session, on the additional compensation 
        attributable to a leadership position under section 3.099, 
        subdivision 3, living expense payments under section 3.101, or 
        special session living expense payments under section 3.103. 
           Sec. 7.  [355.621] [LEGISLATORS AND CONSTITUTIONAL 
        OFFICERS; SOCIAL SECURITY COVERAGE REFERENDUM.] 
           Subdivision 1.  [DEFINITIONS GENERALLY.] For the purposes 
        of sections 7 to 14, each of the terms defined in this section 
        has the indicated meaning. 
           Subd. 2.  [ENABLING ACT.] "Enabling act" means sections 
        355.01 to 355.07. 
           Subd. 3.  [LEGISLATOR.] "Legislator" means a member of the 
        legislature duly elected and sworn into office. 
           Subd. 4.  [CONSTITUTIONAL OFFICER.] "Constitutional officer"
        means the governor, the lieutenant governor, the attorney 
        general, the secretary of state, the state auditor, and the 
        state treasurer duly elected and sworn into office. 
           Subd. 5.  [ADDITIONAL TERMS.] The terms "social security 
        act," "state agency," "employment," "wages," "contribution 
        fund," "federal insurance contributions act," and "political 
        subdivision" each have the meaning ascribed in the enabling act. 
           Sec. 8.  [355.622] [REFERENDUM.] 
           Under the enabling act, the governor shall designate an 
        agency or individual to supervise a referendum to be held after 
        July 1, 1998, in accordance with provisions of section 
        218(d)(6)(c) of the Social Security Act, for legislators and for 
        constitutional officers. 
           Sec. 9.  [355.623] [NOTICE OF REFERENDUM.] 
           The notice of referendum required by section 218(d) of the 
        Social Security Act that is to be provided to legislators and to 
        constitutional officers must contain a statement of the rights 
        which accrue under the Social Security Act.  The statement must 
        be in the form that the agency or individual designated to 
        supervise the referendum deems necessary and sufficient to 
        inform legislators and constitutional officers of their Social 
        Security Act rights.  The statement must also inform the 
        legislators and constitutional officers of the effect that 
        social security coverage will have on their future public 
        retirement coverage. 
           Sec. 10.  [355.624] [DIVISION OF THE LEGISLATORS RETIREMENT 
        PLAN AND THE ELECTIVE STATE OFFICERS RETIREMENT PLAN.] 
           (a) In accord with section 218(d)(6)(c) of the Social 
        Security Act, the state agency shall divide the legislators 
        retirement plan into two parts or divisions and shall divide the 
        elective state officers retirement plan into two parts or 
        divisions. 
           (b) One division or part of the legislators retirement plan 
        must be composed of legislators who desire coverage under an 
        agreement under section 218(d) of the Social Security Act, and 
        those legislators must have their future public pension plan 
        coverage under chapter 352D.  Also included in this division or 
        part are legislators who are elected after July 1, 1997.  The 
        other division or part of the legislators retirement plan must 
        be composed of legislators who do not desire coverage under an 
        agreement under section 218(d) of the Social Security Act, and 
        those legislators must have their future public pension plan 
        coverage under chapter 3A. 
           (c) One division or part of the elective state officers 
        retirement plan must be composed of constitutional officers who 
        desire coverage under an agreement under section 218(d) of the 
        Social Security Act, and those constitutional officers must have 
        their future public pension plan coverage under chapter 352D.  
        Also included in this division or part are constitutional 
        officers who are elected after July 1, 1997.  The other division 
        or part of the elective state officers retirement plan must be 
        composed of constitutional officers who do not desire coverage 
        under an agreement under section 218(d) of the Social Security 
        Act, and those constitutional officers must have their future 
        public pension plan coverage under chapter 352C. 
           Sec. 11.  [355.625] [TRANSFER OF MEMBERS.] 
           In accord with section 218(d)(6)(f) of the Social Security 
        Act and when the legislators retirement plan or the elective 
        state officers retirement plan, whichever applies, is divided 
        into two parts or divisions, a legislator or constitutional 
        officer who does not desire coverage under an agreement under 
        section 218(d) of the Social Security Act may be transferred to 
        the other part or division if the agreement with the federal 
        Department of Health and Human Services so provides and if the 
        legislator or constitutional officer files with the state agency 
        a written request for the transfer. 
           Sec. 12.  [355.626] [CERTIFICATION BY GOVERNOR.] 
           If the governor receives satisfactory evidence that the 
        conditions specified in section 218(d)(7) of the Social Security 
        Act have been met with respect to the legislators retirement 
        plan or the elective state officers retirement plan, whichever 
        applies, the governor shall so certify to the secretary of the 
        federal Department of Health and Human Services. 
           Sec. 13.  [355.627] [AGREEMENTS WITH FEDERAL AGENCY.] 
           Upon the governor's certification under section 12, the 
        state agency, with the approval of the governor, is authorized 
        after June 30, 1998, to enter into or modify an agreement with 
        the secretary of the federal Department of Health and Human 
        Services with respect to legislators or constitutional officers, 
        whichever applies. 
           Sec. 14.  [355.628] [SOCIAL SECURITY CONTRIBUTIONS.] 
           Subdivision 1.  [EMPLOYER CONTRIBUTIONS.] Employer 
        contributions required under the agreement or modification under 
        section 13 and payments required by section 355.49 must be paid 
        by the senate, the house of representatives, or the relevant 
        constitutional office, whichever applies. 
           Subd. 2.  [EMPLOYEE CONTRIBUTIONS; DEDUCTION FROM 
        WAGES.] (a) After the date on which the agreement or 
        modification under section 13 is executed, there must be paid as 
        a deduction from wages an employee contribution by legislators 
        or constitutional officers in an amount equal to the tax that 
        would be imposed by the Federal Insurance Contribution Act if 
        the service constituted employment within the meaning of the act.
           (b) Contributions made under this subdivision must be paid 
        into the contribution fund in partial discharge of the employer 
        liability for social security coverage. 
           (c) A failure to deduct employee contributions does not 
        relieve the legislator or constitutional officer or the senate, 
        the house of representatives, or the relevant constitutional 
        office of the liability to make the contribution. 
           Sec. 15.  [COVERAGE ELECTION.] 
           (a) Members of the legislature who were members of the 
        legislators retirement plan on the effective date of this 
        section and constitutional officers who were members of the 
        elective state officers retirement plan on the effective date of 
        this section may elect coverage by the unclassified employees 
        retirement program governed by Minnesota Statutes, chapter 352D, 
        instead of the prior retirement coverage, as part of the social 
        security referendum under section 10. 
           (b) The election of a retirement coverage change applies 
        only to prospective service as a member of the legislature or a 
        constitutional officer.  The election must be made in 
        conjunction with the referendum selection under section 10.  A 
        member of the legislature or a constitutional officer who elects 
        a retirement coverage change under this section is entitled to 
        an augmented deferred retirement annuity under Minnesota 
        Statutes, section 3A.02, subdivisions 1 and 4, or Minnesota 
        Statutes, sections 352C.031 and 352C.033, whichever applies, 
        notwithstanding any provision of law to the contrary. 
           (c) A member of the legislature or a constitutional officer 
        who elects a retirement coverage change under this section is 
        not entitled to a refund under Minnesota Statutes, section 
        3A.03, subdivision 2, or 352C.09, subdivision 2, whichever 
        applies, until the person terminates service as a member of the 
        legislature or a constitutional officer. 
           Sec. 16.  [STUDY OF LEGISLATORS AND CONSTITUTIONAL OFFICER 
        PENSION COVERAGE.] 
           Subdivision 1.  [STUDY MANDATE.] The legislative commission 
        on pensions and retirement shall study the issue of the 
        appropriate pension coverage for legislators and for 
        constitutional officers during the 1997-1998 interim. 
           Subd. 2.  [STUDY CONTENTS.] At a minimum, the commission 
        must study the following: 
           (1) the appropriate member contribution rates to the 
        legislators retirement plan and the elective state officers 
        retirement plan and their adequacy in funding the normal cost 
        and administrative expenses of the applicable plan in comparison 
        to other public pension plans; 
           (2) the appropriateness of including new legislators and 
        constitutional officers and of including current legislators and 
        constitutional officers in coverage by the social security 
        program and the necessary adaptations to the defined 
        contribution plan coverage established in section 3 and the 
        legislators retirement plan established in Minnesota Statutes, 
        chapter 3A, or the elective state officers retirement plan 
        established in Minnesota Statutes, chapter 352C, to supplement 
        that coverage; and 
           (3) the appropriateness of permitting current legislators 
        and current constitutional officers to elect the defined 
        contribution plan coverage established in section 3 for future 
        service and the impact of the election on past service credit 
        under Minnesota Statutes, chapter 3A, or Minnesota Statutes, 
        chapter 352C. 
           Subd. 3.  [STUDY PRINCIPLES.] The study must reflect the 
        following principles: 
           (1) to the extent practicable, the public pension plan 
        coverage to be provided to legislators and constitutional 
        officers should match or parallel the pension coverage provided 
        to legislative employees and agency heads; 
           (2) the public pension plan coverage to be provided to 
        legislators and constitutional officers may appropriately 
        reflect the part-time nature of legislative service for many 
        legislators and the unique character of elected public service 
        for other legislators and for constitutional officers; and 
           (3) the public pension coverage ultimately provided to 
        legislators and constitutional officers should conform with the 
        applicable provisions of the principles of pension policy of the 
        commission.  
           Subd. 4.  [STUDY RESULTS.] The results of the study should 
        include any applicable proposed legislation, including, but not 
        limited to, amending or repealing, in whole or in part, sections 
        1 to 15. 
           Subd. 5.  [REPORT.] The study and any recommended proposed 
        legislation must be reported to the 1998 legislative session.  
           Sec. 17.  [EFFECTIVE DATE.] 
           Sections 1 to 6 and 16 are effective July 1, 1997.  
        Sections 7 to 15 are effective July 1, 1998. 
                                   ARTICLE 3
                   FIRST CLASS CITY TEACHER RETIREMENT FUNDS
           Section 1.  Minnesota Statutes 1996, section 354A.011, 
        subdivision 15a, is amended to read: 
           Subd. 15a.  [NORMAL RETIREMENT AGE.] "Normal retirement 
        age" means age 65 for a person who first became a member of the 
        coordinated program of the Minneapolis or St. Paul teachers 
        retirement fund association or the new law coordinated program 
        of the Duluth teachers retirement fund association or a member 
        of a pension fund listed in section 356.30, subdivision 3, 
        before July 1, 1989.  For a person who first became a member of 
        the coordinated program of the Minneapolis or St. Paul teachers 
        retirement fund association or the new law coordinated program 
        of the Duluth teachers retirement fund association after June 
        30, 1989, normal retirement age means the higher of age 65 or 
        retirement age, as defined in United States Code, title 42, 
        section 416(l), as amended, but not to exceed age 66.  For a 
        person who is a member of the basic program of the Minneapolis 
        or St. Paul teachers retirement fund association or the old law 
        coordinated program of the Duluth teachers retirement fund 
        association, normal retirement age means the age at which a 
        teacher becomes eligible for a normal retirement annuity 
        computed upon meeting the age and service requirements specified 
        in the applicable provisions of the articles of incorporation or 
        bylaws of the respective teachers retirement fund association. 
           Sec. 2.  Minnesota Statutes 1996, section 354A.12, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [EMPLOYEE CONTRIBUTIONS.] The contribution 
        required to be paid by each member of a teachers retirement fund 
        association shall not be less than the percentage of total 
        salary specified below for the applicable association and 
        program: 
             Association and Program              Percentage of
                                                  Total Salary
        Duluth teachers retirement
          association
                  old law and new law
                  coordinated programs              5.5 percent
        Minneapolis teachers retirement
          association
                  basic program                     8.5 percent
                  coordinated program               4.5 5.5 percent
        St. Paul teachers retirement
          association
                  basic program                     8 percent
                  coordinated program               4.5 5.5 percent
           Contributions shall be made by deduction from salary and 
        must be remitted directly to the respective teachers retirement 
        fund association at least once each month. 
           Sec. 3.  Minnesota Statutes 1996, section 354A.12, 
        subdivision 2a, is amended to read: 
           Subd. 2a.  [EMPLOYER REGULAR AND ADDITIONAL CONTRIBUTION 
        RATES.] (a) The employing units shall make the following 
        employer contributions to teachers retirement fund associations: 
           (1) for any coordinated member of a teachers retirement 
        fund association in a city of the first class, the employing 
        unit shall pay the employer social security taxes in accordance 
        with section 355.46, subdivision 3, clause (b); 
           (2) for any coordinated member of one of the following 
        teachers retirement fund associations in a city of the first 
        class, the employing unit shall make a regular employer 
        contribution to the respective retirement fund association in an 
        amount equal to the designated percentage of the salary of the 
        coordinated member as provided below: 
             Duluth teachers retirement
             fund association                        4.50 percent
             Minneapolis teachers retirement
             fund association                        4.50 percent
             St. Paul teachers retirement
             fund association                        4.50 percent;
           (3) for any basic member of one of the following teachers 
        retirement fund associations in a city of the first class, the 
        employing unit shall make a regular employer contribution to the 
        respective retirement fund in an amount equal to the designated 
        percentage of the salary of the basic member as provided below: 
             Minneapolis teachers retirement
             fund association                        8.50 percent
             St. Paul teachers retirement
             fund association                        8.00 percent
           (4) for a basic member of a teachers retirement fund 
        association in a city of the first class, the employing unit 
        shall make an additional employer contribution to the respective 
        fund in an amount equal to the designated percentage of the 
        salary of the basic member, as provided below: 
             Minneapolis teachers retirement 
             fund association 
               July 1, 1993 - June 30, 1994          4.85 percent 
               July 1, 1994, and thereafter          3.64 percent
             St. Paul teachers retirement 
             fund association 
               July 1, 1993 - June 30, 1995          4.63 percent 
               July 1, 1995, and thereafter          3.64 percent
           (5) for a coordinated member of a teachers retirement fund 
        association in a city of the first class, the employing unit 
        shall make an additional employer contribution to the respective 
        fund in an amount equal to the applicable percentage of the 
        coordinated member's salary, as provided below: 
             Duluth teachers retirement
             fund association                        1.29 percent 
             Minneapolis teachers retirement
             fund association
               July 1, 1993 - June 30, 1994          0.50 percent 
               July 1, 1994, and thereafter          3.64 percent
             St. Paul teachers retirement 
             fund association 
               July 1, 1993 - June 30, 1994          0.50 percent 
               July 1, 1994 - June 30, 1995          1.50 percent 
               July 1, 1995 1997, and thereafter     3.64
                                                     3.84 percent
           (b) The regular and additional employer contributions must 
        be remitted directly to the respective teachers retirement fund 
        association at least once each month.  Delinquent amounts are 
        payable with interest under the procedure in subdivision 1a. 
           (c) Payments of regular and additional employer 
        contributions for school district or technical college employees 
        who are paid from normal operating funds must be made from the 
        appropriate fund of the district or technical college. 
           Sec. 4.  Minnesota Statutes 1996, section 354A.12, 
        subdivision 3a, is amended to read: 
           Subd. 3a.  [SPECIAL DIRECT STATE AID TO ST. PAUL FIRST 
        CLASS CITY TEACHERS RETIREMENT FUND ASSOCIATION ASSOCIATIONS.] 
        (a) In fiscal year 1998, the state shall pay $4,827,000 to the 
        St. Paul teachers retirement fund association $500,000 in fiscal 
        year 1994, $17,954,000 to the Minneapolis teachers retirement 
        fund association, and $486,000 to the Duluth teachers retirement 
        fund association.  In each subsequent fiscal year, the payment 
        these payments to the St. Paul first class city teachers 
        retirement fund association associations must be increased at 
        the same rate as the increase in the general education revenue 
        formula allowance under section 124A.22, subdivision 2, in 
        subsequent fiscal years $2,827,000 for St. Paul, $12,954,000 for 
        Minneapolis, and $486,000 for Duluth. 
           (b) The direct state aid is aids under this subdivision are 
        payable October 1 annually.  The commissioner of finance shall 
        pay the direct state aid.  The amount required under this 
        subdivision is appropriated annually from the general fund to 
        the commissioner of finance. 
           Sec. 5.  Minnesota Statutes 1996, section 354A.12, 
        subdivision 3b, is amended to read: 
           Subd. 3b.  [SPECIAL DIRECT STATE MATCHING AID TO THE 
        MINNEAPOLIS TEACHERS RETIREMENT FUND ASSOCIATION.] (a) Special 
        school district No. 1 may make an additional employer 
        contribution to the Minneapolis teachers retirement fund 
        association.  The city of Minneapolis may make a contribution to 
        the Minneapolis teachers retirement fund association.  This 
        contribution may be made by a levy of the board of estimate and 
        taxation of the city of Minneapolis, and the levy, if made, is 
        classified as that of a special taxing district for purposes of 
        sections 275.065 and 276.04, and for all other property tax 
        purposes. 
           (b) For every $1,000 contributed in equal proportion by 
        special school district No. 1 and by the city of Minneapolis to 
        the Minneapolis teachers retirement fund association under 
        paragraph (a), the state shall pay to the Minneapolis teachers 
        retirement fund association $1,000, but not to exceed $2,500,000 
        in total in fiscal year 1994.  The total amount available for 
        each subsequent fiscal year must be increased at the same rate 
        as the increase in the general education revenue formula 
        allowance under section 124A.22, subdivision 2, in subsequent 
        fiscal years.  The superintendent of special school district No. 
        1, the mayor of the city of Minneapolis, and the executive 
        director of the Minneapolis teachers retirement fund association 
        shall jointly certify to the commissioner of finance the total 
        amount that has been contributed by special school district No. 
        1 and by the city of Minneapolis to the Minneapolis teachers 
        retirement fund association.  Any certification to the 
        commissioner of children, families, and learning must be made 
        quarterly.  If the total certifications for a fiscal year exceed 
        the maximum annual direct state matching aid amount in any 
        quarter, the amount of direct state matching aid payable to the 
        Minneapolis teachers retirement fund association must be limited 
        to the balance of the maximum annual direct state matching aid 
        amount available.  The amount required under this paragraph, 
        subject to the maximum direct state matching aid amount, is 
        appropriated annually to the commissioner of finance. 
           (c) The commissioner of finance may prescribe the form of 
        the certifications required under paragraph (b). 
           Sec. 6.  Minnesota Statutes 1996, section 354A.12, 
        subdivision 3c, is amended to read: 
           Subd. 3c.  [TERMINATION OF SUPPLEMENTAL CONTRIBUTIONS AND 
        DIRECT MATCHING AND STATE AID.] (a) The supplemental 
        contributions payable to the Minneapolis teachers retirement 
        fund association by special school district No. 1 and the city 
        of Minneapolis under section 423A.02, subdivision 3, or to the 
        St. Paul teachers retirement fund association by independent 
        school district No. 625 under section 423A.02, subdivision 3, or 
        the direct state aid aids under subdivision 3a to the St. Paul 
        first class city teachers retirement association associations, 
        and the direct matching and state aid under subdivision 3b to 
        the Minneapolis teachers retirement fund association terminates 
        terminate for the respective fund at the end of the fiscal year 
        in which the accrued liability funding ratio for that fund, as 
        determined in the most recent actuarial report for that fund by 
        the actuary retained by the legislative commission on pensions 
        and retirement, equals or exceeds the accrued liability funding 
        ratio for the teachers retirement association, as determined in 
        the most recent actuarial report for the teachers retirement 
        association by the actuary retained by the legislative 
        commission on pensions and retirement. 
           (b) If the state direct matching, state supplemental, or 
        state aid is terminated for the St. Paul a first class city 
        teachers retirement fund association or the Minneapolis teachers 
        retirement fund association under paragraph (a), it may not 
        again be received by that fund. 
           (c) If either the Minneapolis teachers retirement fund 
        association, or the St. Paul teachers retirement fund 
        association, or the Duluth teachers retirement fund association 
        remain funded at less than the funding ratio applicable to the 
        teachers retirement association when the provisions of paragraph 
        (b) become effective, then any state aid not distributed to that 
        association must be immediately transferred to the other 
        association associations in proportion to the relative sizes of 
        their unfunded actuarial accrued liabilities. 
           Sec. 7.  [354A.29] [ST. PAUL TEACHERS RETIREMENT FUND 
        ASSOCIATION POSTRETIREMENT ADJUSTMENT.] 
           Subdivision 1.  [ARTICLES OF INCORPORATION AND 
        BYLAWS.] Permission is granted for the St. Paul teachers 
        retirement fund association under Minnesota Statutes, section 
        354A.12, subdivision 4, to amend its articles of incorporation 
        and bylaws to provide postretirement adjustments under this 
        section. 
           Subd. 2.  [ELIMINATION OF PRIOR LUMP SUM POSTRETIREMENT 
        ADJUSTMENT MECHANISM.] As a condition precedent to the 
        implementation of subdivisions 3 through 6, the lump sum 
        postretirement adjustment mechanism in effect on the date of 
        enactment of this section must be eliminated and the articles of 
        incorporation and bylaws of the association must be amended 
        accordingly. 
           Subd. 3.  [POSTRETIREMENT ADJUSTMENT.] (a) The 
        postretirement adjustment described in the articles and bylaws 
        of the St. Paul teachers retirement fund association must be 
        determined by the board annually after June 30 using the 
        procedures under this section. 
           (b) Each eligible person who has been receiving an annuity 
        or benefit under the articles of incorporation, the bylaws, or 
        this chapter for at least 12 months as of the end of the fiscal 
        year is eligible to receive a postretirement adjustment of 2.0 
        percent that is payable each January 1. 
           Subd. 4.  [ADDITIONAL INVESTMENT PERCENTAGE 
        ADJUSTMENT.] (a) An excess investment earnings percentage 
        adjustment must be computed and paid under this subdivision to 
        those annuitants and eligible benefit recipients who have been 
        receiving an annuity or benefit for at least 12 months as 
        determined each June 30 by the board of trustees. 
           (b) The board shall also determine the five-year annualized 
        rate of return attributable to the assets of the St. Paul 
        teachers retirement fund association under the formula specified 
        in section 11A.04, clause (11), and the amount of the excess 
        five-year annualized rate of return over the preretirement 
        interest assumption specified in Minnesota Statutes, section 
        356.215. 
           (c) The excess investment percentage adjustment must be 
        determined by multiplying the quantity one minus the rate of 
        contribution deficiency, as specified in the most recent 
        actuarial report of the actuary retained by the legislative 
        commission on pensions and retirement under section 356.215, by 
        the rate of return excess as determined in paragraph (b). 
           (d) The excess investment percentage adjustment is payable 
        to all annuitants and benefit recipients on the following 
        January 1. 
           Subd. 5.  [EFFECT ON ANNUITY.] The adjustments calculated 
        under subdivisions 3 and 4 must be included in all annuities or 
        benefits paid to the recipient after the adjustments take effect.
           Subd. 6.  [LUMP SUM POSTRETIREMENT ADJUSTMENT 
        TRANSITION.] This subdivision applies to all annuitants and 
        beneficiaries of the association who received a lump sum 
        postretirement adjustment before the calculation of the first 
        postretirement adjustment under subdivisions 3 and 4.  Before 
        the calculation of the first postretirement adjustment under 
        subdivisions 3 and 4, the annual retirement annuity must be 
        increased by the amount of the lump sum postretirement 
        adjustment described in the association bylaws and paid to the 
        annuitant or beneficiary in 1997 before the effective date of 
        this section or if the annuitant or beneficiary was not eligible 
        for a lump sum postretirement adjustment, then the annual 
        benefit paid to that annuitant or benefit recipient must be 
        increased by the cumulative percentage increase in the Consumer 
        Price Index for urban wage earners and clerical workers All 
        Items Index published by the United States Department of Labor, 
        Bureau of Labor Statistics, from the date of the initial receipt 
        of a retirement annuity or benefit of the person whose service 
        is the basis of the benefit to June 30, 1997. 
           Sec. 8.  Minnesota Statutes 1996, section 354A.31, 
        subdivision 4, is amended to read: 
           Subd. 4.  [COMPUTATION OF THE NORMAL COORDINATED RETIREMENT 
        ANNUITY; MINNEAPOLIS AND ST. PAUL FUNDS.] (a) This subdivision 
        applies to the coordinated programs of the Minneapolis teachers 
        retirement fund association and the St. Paul teachers retirement 
        fund association.  
           (b) The normal coordinated retirement annuity shall be an 
        amount equal to a retiring coordinated member's average salary 
        multiplied by the retirement annuity formula percentage.  
        Average salary for purposes of this section shall mean an amount 
        equal to the average salary upon which contributions were made 
        for the highest five successive years of service credit, but 
        which shall not in any event include any more than the 
        equivalent of 60 monthly salary payments.  Average salary must 
        be based upon all years of service credit if this service credit 
        is less than five years. 
           (c) This paragraph, in conjunction with subdivision 6, 
        applies to a person who first became a member or a member in a 
        pension fund listed in section 356.30, subdivision 3, before 
        July 1, 1989, unless paragraph (d), in conjunction with 
        subdivision 7, produces a higher annuity amount, in which case 
        paragraph (d) will apply.  The retirement annuity formula 
        percentage for purposes of this paragraph is one the percent 
        specified in section 356.19, subdivision 1, per year for each 
        year of coordinated service for the first ten years and 1.5 the 
        percent specified in section 356.19, subdivision 2, for each 
        year of coordinated service thereafter.  
           (d) This paragraph applies to a person who has become at 
        least 55 years old and who first becomes a member after June 30, 
        1989, and to any other member who has become at least 55 years 
        old and whose annuity amount, when calculated under this 
        paragraph and in conjunction with subdivision 7 is higher than 
        it is when calculated under paragraph (c), in conjunction with 
        the provisions of subdivision 6.  The retirement annuity formula 
        percentage for purposes of this paragraph is 1.5 the percent 
        specified in section 356.19, subdivision 2, for each year of 
        coordinated service.  
           Sec. 9.  Minnesota Statutes 1996, section 354A.31, 
        subdivision 4a, is amended to read: 
           Subd. 4a.  [COMPUTATION OF THE NORMAL COORDINATED 
        RETIREMENT ANNUITY; DULUTH FUND.] (a) This subdivision applies 
        to the new law coordinated program of the Duluth teachers 
        retirement fund association. 
           (b) The normal coordinated retirement annuity is an amount 
        equal to a retiring coordinated member's average salary 
        multiplied by the retirement annuity formula percentage.  
        Average salary for purposes of this section means an amount 
        equal to the average salary upon which contributions were made 
        for the highest five successive years of service credit, but may 
        not in any event include any more than the equivalent of 60 
        monthly salary payments.  Average salary must be based upon all 
        years of service credit if this service credit is less than five 
        years. 
           (c) This paragraph, in conjunction with subdivision 6, 
        applies to a person who first became a member or a member in a 
        pension fund listed in section 356.30, subdivision 3, before 
        July 1, 1989, unless paragraph (d), in conjunction with 
        subdivision 7, produces a higher annuity amount, in which case 
        paragraph (d) applies.  The retirement annuity formula 
        percentage for purposes of this paragraph is 1.13 the percent 
        specified in section 356.19, subdivision 1, per year for each 
        year of coordinated service for the first ten years and 1.63 the 
        percent specified in section 356.19, subdivision 2, for each 
        subsequent year of coordinated service. 
           (d) This paragraph applies to a person who is at least 55 
        years old and who first becomes a member after June 30, 1989, 
        and to any other member who is at least 55 years old and whose 
        annuity amount, when calculated under this paragraph and in 
        conjunction with subdivision 7, is higher than it is when 
        calculated under paragraph (c) in conjunction with subdivision 
        6.  The retirement annuity formula percentage for purposes of 
        this paragraph is 1.63 the percent specified in section 356.19, 
        subdivision 2, for each year of coordinated service. 
           Sec. 10.  Laws 1979, chapter 109, section 1, as amended by 
        Laws 1981, chapter 157, section 1, is amended to read: 
           Section 1.  Authorization is hereby granted in accordance 
        with Minnesota Statutes, Section 354A.12, for the St. Paul 
        teachers retirement fund association to amend its bylaws as 
        follows: 
           (1) Paragraph 9 of Section 3 of Article IV of the bylaws 
        may be amended to provide a lump sum payment to annuitants and 
        survivor benefit recipients who have been receiving annuities or 
        benefits for at least three years, payable three months 
        following the end of a fiscal year.  The payments shall only be 
        made if the investment income of the fund during the preceding 
        fiscal year was in excess of 5-1/2 percent of the asset value of 
        the fund at the end of that fiscal year.  The amount that each 
        eligible annuitant or benefit recipient shall be entitled to 
        receive shall be determined as follows: 
           (a) The years of service of each annuitant as credited by 
        the fund and the years of service of each person on behalf of 
        whom a survivor benefit is paid as credited by the fund shall be 
        totaled; 
           (b) The dollar amount equal to one-half of one percent of 
        the asset value of the fund at the end of the previous fiscal 
        year shall be determined; 
           (c) The dollar amount determined pursuant to clause (b) 
        shall be divided by the aggregate years of credited service 
        totaled pursuant to clause (a), the result to be considered the 
        bonus figure per year of service credit; 
           (d) For each eligible annuitant and benefit recipient, the 
        payment shall be equal to the bonus figure per year of service 
        credit determined pursuant to clause (c) multiplied by each year 
        of service credited for that person by the fund. 
           (2) A new paragraph may be added to Section 2 of Article IV 
        of the bylaws to provide that any active member of the fund with 
        service credit prior to July 1, 1978 who elects in the social 
        security referendum to become a coordinated member shall be 
        entitled to a retirement annuity when otherwise qualified, the 
        calculation of which shall utilize the formula specified in Laws 
        1977, Chapter 429, Section 61 for that portion of credited 
        service which was served prior to July 1, 1978 and the new 
        coordinated formula specified in the bylaws for the remainder of 
        credited service, both applied to the average salary as 
        specified in Paragraph 2 of Section 1 of Article IX.  The 
        formula percentages to be used in calculating the coordinated 
        portion of a retirement annuity on coordinated service shall 
        recognize the coordinated service as a continuation of any 
        service prior to July 1, 1978. 
           (3) (2) Paragraph 5 of Section 3 of Article IV of the 
        bylaws in effect on June 1, 1978 may be amended to provide that 
        the recomputation of a disability benefit in an amount equal to 
        a service pension shall occur when the member attains the age of 
        60 years and shall be recomputed without any reduction for early 
        retirement, and that if the disability terminates prior to age 
        60 the member shall be eligible for benefits as provided in 
        Paragraph 1 of Section 3 of Article IV and the years of service 
        and final average salary accrued to disability termination date 
        would be used as provided in Paragraph 5 of Section 3 of Article 
        IV of the bylaws in effect June 1, 1978 and that Paragraph 3 of 
        Section 4 of Article IV be amended to conform to this provision. 
           (4) (3) Article VIII of the bylaws in effect July 1, 1978 
        may be amended by adding a new section 5 providing augmentation 
        of benefits in the same manner as Minnesota Statutes 1978, 
        Section 354.55, Subdivision 11. 
           Sec. 11.  [DULUTH OLD PLAN BYLAWS; AUTHORITY GRANTED TO 
        INCREASE FORMULAS.] 
           In accordance with Minnesota Statutes, section 354A.12, 
        subdivision 4, approval is granted for the Duluth teachers 
        retirement fund association to amend its articles of 
        incorporation or bylaws by increasing the formula percentage 
        used in computing annuities for old law coordinated program 
        members in the Duluth teachers retirement fund association to 
        1.45 percent for each year of credited service. 
           Sec. 12.  [REPEALER.] 
           (a) Minnesota Statutes 1996, section 354A.12, subdivision 
        2b, is repealed. 
           (b) Laws 1985, chapter 259, section 3; and Laws 1993, 
        chapter 336, article 3, section 1, are repealed. 
           Sec. 13.  [EFFECTIVE DATES.] 
           Sections 2 and 3 are effective for all salary paid on or 
        after July 1, 1997.  Sections 1 and 4 to 12 are effective July 
        1, 1997. 
                                   ARTICLE 4
                      MINNEAPOLIS POLICE AND FIREFIGHTERS
           Section 1.  Minnesota Statutes 1996, section 423B.01, 
        subdivision 9, is amended to read: 
           Subd. 9.  [EXCESS INVESTMENT INCOME.] "Excess investment 
        income" means the amount, if any, by which the average time 
        weighted total rate of return earned by the fund in the most 
        recent prior five fiscal years has exceeded the actual average 
        percentage increase in the current monthly salary of a first 
        grade patrol officer in the most recent prior five fiscal years 
        plus two percent, and must be expressed as a dollar amount and.  
        The amount may not exceed one percent of the total assets of the 
        fund, except when the actuarial value of assets of the fund 
        according to the most recent annual actuarial valuation prepared 
        in accordance with sections 356.215 and 356.216 is greater than 
        102 percent of its actuarial accrued liabilities, in which case 
        the amount must not exceed 1-1/2 percent of the total assets of 
        the fund, and does not exist unless the yearly average 
        percentage increase of the time weighted total rate of return of 
        the fund for the previous five years exceeds by two percent the 
        yearly average percentage increase in monthly salary of a first 
        grade patrol officer during the previous five calendar years. 
           Sec. 2.  Minnesota Statutes 1996, section 423B.01 is 
        amended by adding a new subdivision to read: 
           Subd. 15.  [ACTUARIAL EQUIVALENT.] "Actuarial equivalent" 
        or "actuarially equivalent" means the condition of one annuity 
        or benefit having an equal actuarial present value as another 
        annuity or benefit, determined as of a given date at a specified 
        age with each actuarial present value based on the appropriate 
        mortality table adopted by the board of directors based on the 
        experience of the fund and approved by the actuary retained by 
        the legislative commission on pensions and retirement and using 
        the applicable preretirement or postretirement interest rate 
        assumptions specified in section 356.216. 
           Sec. 3.  Minnesota Statutes 1996, section 423B.06, is 
        amended by adding a subdivision to read: 
           Subd. 5.  [TAX LEVY.] Notwithstanding any provision of 
        section 69.77 to the contrary, if in any year after the 
        actuarial value of assets of the fund according to the most 
        recent annual actuarial valuation prepared in accordance with 
        sections 356.215 and 356.216 is greater than 102 percent of the 
        actuarial accrued liabilities of the fund and subsequently the 
        actuarial value of assets are less than 100 percent of the 
        actuarial accrued liabilities, the city of Minneapolis is not 
        required to levy a property tax to amortize any unfunded 
        actuarial accrued liability unless the fund experiences two 
        successive years when the actuarial value of assets are less 
        than 100 percent of the actuarial accrued liabilities according 
        to the most recent annual actuarial valuation prepared in 
        accordance with sections 356.215 and 356.216. 
           Sec. 4.  Minnesota Statutes 1996, section 423B.07, is 
        amended to read: 
           423B.07 [AUTHORIZED FUND DISBURSEMENTS.] 
           The police pension fund may be used only for the payment of:
           (1) service, disability, or dependency pensions; 
           (2) notwithstanding a contrary provision of section 69.80, 
        the salary of the secretary of the association in an amount not 
        to exceed 30 percent of the base salary of a first grade patrol 
        officer, the salary of the president of the association in an 
        amount not to exceed ten percent of the base salary of a first 
        grade patrol officer, and the salaries of the other elected 
        members of the board of trustees in an amount not to exceed 
        three units; 
           (3) expenses of officers and employees of the association 
        in connection with the protection of the fund; 
           (4) expenses of operating and maintaining the association, 
        including the administrative expenses related to the 
        administration of the insurance plan authorized in section 
        423B.08; 
           (5) support for hospital and medical insurance for 
        pensioners who have completed 20 years or more of service or 
        permanent disabilitants and surviving spouses of deceased active 
        members, disabilitants, or service pensioners who have completed 
        20 years or more of service in an amount equal to one unit per 
        month, to be added to the pension otherwise provided; 
           (6) health and welfare benefits of one unit per month in 
        addition to other benefits for members who retired after July 1, 
        1980, and have completed 20 years or more of service or for 
        members who are permanent disabilitants; and 
           (7) (5) other expenses authorized by section 69.80, or 
        other applicable law. 
           Sec. 5.  Minnesota Statutes 1996, section 423B.09, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [MINNEAPOLIS POLICE; PERSONS ENTITLED TO 
        RECEIVE PENSIONS.] The association shall grant pensions payable 
        from the police pension fund in monthly installments to persons 
        entitled to pensions in the manner and for the following 
        purposes. 
           (a) When the actuarial value of assets of the fund 
        according to the most recent annual actuarial valuation 
        performed in accordance with sections 356.215 and 356.216 is 
        less than 90 percent of the actuarial accrued liabilities, an 
        active member or a deferred pensioner who has performed duty as 
        a member of the police department of the city for five years or 
        more, upon written application after retiring from duty and 
        reaching at least age 50, is entitled to be paid monthly for 
        life a service pension equal to eight units.  For full years of 
        service beyond five years, the service pension increases by 1.6 
        units for each full year, to a maximum of 40 units.  When the 
        actuarial value of assets of the fund according to the most 
        recent annual actuarial valuation prepared in accordance with 
        sections 356.215 and 356.216 is greater than 90 percent of 
        actuarial accrued liabilities, active members, deferred members, 
        and service pensioners are entitled to a service pension 
        according to the following schedule: 
                       5 years           8.0 units
                       6 years           9.6 units
                       7 years          11.2 units
                       8 years          12.8 units
                       9 years          14.4 units
                      10 years          16.0 units
                      11 years          17.6 units
                      12 years          19.2 units
                      13 years          20.8 units
                      14 years          22.4 units
                      15 years          24.0 units
                      16 years          25.6 units
                      17 years          27.2 units
                      18 years          28.8 units
                      19 years          30.4 units
                      20 years          34.0 units
                      21 years          35.6 units
                      22 years          37.2 units
                      23 years          38.8 units
                      24 years          40.4 units
                      25 years          42.0 units
           Fractional years of service may not be used in computing 
        pensions. 
           (b) An active member who after five years' service but less 
        than 20 years' service with the police department of the city, 
        becomes superannuated so as to be permanently unable to perform 
        the person's assigned duties, is entitled to be paid monthly for 
        life a superannuation pension equal to two four units for five 
        years of service and an additional two units for each full year 
        of service over five years and less than 20 years. 
           (c) An active member who is not eligible for a service 
        pension and who, while a member of the police department of the 
        city, becomes diseased or sustains an injury while in the 
        service that permanently unfits the member for the performance 
        of police duties is entitled to be paid monthly for life a 
        pension equal to 32 34 units while so disabled. 
           Sec. 6.  Minnesota Statutes 1996, section 423B.09, is 
        amended by adding a subdivision to read: 
           Subd. 6.  [OPTIONAL ANNUITIES.] A member who is retired or 
        disabled on the effective date of this subdivision may elect an 
        optional retirement annuity within 60 days of the effective date 
        instead of the normal retirement annuity.  A member who retires 
        or becomes disabled after the effective date of this subdivision 
        may elect an optional retirement annuity prior to the receipt of 
        any benefits.  The optional retirement annuity may be a 50 
        percent, a 75 percent, or a 100 percent joint and survivor 
        annuity without reinstatement in the event of the designated 
        beneficiary predeceasing the member or a 50 percent, a 75 
        percent, or a 100 percent joint and survivor annuity with 
        reinstatement in the event of the designated beneficiary 
        predeceasing the member.  Optional retirement annuity forms must 
        be actuarially equivalent to the service pension and automatic 
        survivor coverage otherwise payable to the retiring member and 
        the member's beneficiaries.  Once selected, the optional annuity 
        is irrevocable. 
           Sec. 7.  Minnesota Statutes 1996, section 423B.10, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ENTITLEMENT; BENEFIT AMOUNT.] (a) The 
        surviving spouse of a deceased service pensioner, disability 
        pensioner, deferred pensioner, superannuation pensioner, or 
        active member, who was the legally married spouse of the 
        decedent, residing with the decedent, and who was married while 
        or before the time the decedent was on the payroll of the police 
        department, and who, if the deceased member was a service or 
        deferred pensioner, was legally married to the member for a 
        period of at least one year before retirement from the police 
        department, is entitled to a surviving spouse benefit.  The 
        surviving spouse benefit is equal to 21 22 units per month if 
        the person is the surviving spouse of a deceased active member 
        or disabilitant.  The surviving spouse benefit is equal to six 
        units per month, plus an additional one unit for each year of 
        service to the credit of the decedent in excess of five years, 
        to a maximum of 21 22 units per month, if the person is the 
        surviving spouse of a deceased service pensioner, deferred 
        pensioner, or superannuation pensioner.  The surviving spouse 
        benefit is payable for the life of the surviving spouse. 
           (b) A surviving child of a deceased service pensioner, 
        disability pensioner, deferred pensioner, superannuation 
        pensioner, or active member, who was living while the decedent 
        was an active member of the police department or was born within 
        nine months after the decedent terminated active service in the 
        police department, is entitled to a surviving child benefit.  
        The surviving child benefit is equal to eight units per month if 
        the person is the surviving child of a deceased active member or 
        disabilitant.  The surviving child benefit is equal to two units 
        per month, plus an additional four-tenths of one unit per month 
        for each year of service to the credit of the decedent in excess 
        of five years, to a maximum of eight units, if the person is the 
        surviving child of a deceased service pensioner, deferred 
        pensioner, or superannuation pensioner.  The surviving child 
        benefit is payable until the person attains age 18, or, if in 
        full-time attendance during the normal school year, in a school 
        approved by the board of directors, until the person receives a 
        bachelor's degree or attains the age of 22 years, whichever 
        occurs first.  In the event of the death of both parents leaving 
        a surviving child or children entitled to a surviving child 
        benefit as determined in this paragraph, the surviving child is, 
        or the surviving children are, entitled to a surviving child 
        benefit in such sums as determined by the board of directors to 
        be necessary for the care and education of such surviving child 
        or children, but not to exceed the family maximum benefit per 
        month, to the children of any one family.  
           (c) The surviving spouse and surviving child benefits are 
        subject to a family maximum benefit.  The family maximum benefit 
        is 40 41 units per month. 
           (d) A surviving spouse who is otherwise not qualified may 
        receive a benefit if the surviving spouse was married to the 
        decedent for a period of five years and was residing with the 
        decedent at the time of death.  The surviving spouse benefit is 
        the same as that provided in paragraph (a), except that if the 
        surviving spouse is younger than the decedent, the surviving 
        spouse benefit must be actuarially equivalent to a surviving 
        spouse benefit that would have been paid to the member's spouse 
        had the member been married to a person of the same age or a 
        greater age than the member's age before retirement. 
           Sec. 8.  Minnesota Statutes 1996, section 423B.15, 
        subdivision 2, is amended to read: 
           Subd. 2.  [DETERMINATION OF EXCESS INVESTMENT INCOME.] The 
        board of trustees of the relief association shall determine by 
        May 1 of each year whether or not the fund has excess investment 
        income.  The amount of excess investment income, if any, must be 
        stated as a dollar amount and reported by the chief 
        administrative officer of the relief association to the mayor 
        and governing body of the city, the state auditor, the 
        commissioner of finance, and the executive director of the 
        legislative commission on pensions and retirement.  The dollar 
        amount of excess investment income up to one percent of the 
        assets of the fund, except when the actuarial value of assets of 
        the fund according to the most recent annual actuarial valuation 
        prepared in accordance with sections 356.215 and 356.216 is 
        greater than 102 percent of its actuarial accrued liabilities in 
        which case the amount may not exceed 1-1/2 percent of the assets 
        of the fund, must be applied for the purpose specified in 
        subdivision 3.  Excess investment income must not be considered 
        as income to or assets of the fund for actuarial valuations of 
        the fund for that year under sections 69.77, 356.215, and 
        356.216 and the provisions of this section except to offset the 
        annual postretirement payment.  Additional investment income is 
        any realized or unrealized investment income other than the 
        excess investment income and must be included in the actuarial 
        valuations performed under sections 69.77, 356.215, and 356.216 
        and the provisions of this section. 
           Sec. 9.  Minnesota Statutes 1996, section 423B.15, 
        subdivision 3, is amended to read: 
           Subd. 3.  [AMOUNT OF ANNUAL POSTRETIREMENT PAYMENT.] The 
        amount determined under subdivision 2 must be applied in 
        accordance with this subdivision.  When the actuarial value of 
        assets of the fund according to the most recent annual actuarial 
        valuation prepared in accordance with sections 356.215 and 
        356.216 is less than 102 percent of its total actuarial 
        liabilities, the relief association shall apply the first 
        one-half of excess investment income to the payment of an annual 
        postretirement payment as specified in this subdivision. and the 
        second one-half of excess investment income up to one-half of 
        one percent of the assets of the fund must be applied to reduce 
        the state amortization state aid or supplementary amortization 
        state aid payments otherwise due to the relief association under 
        section 423A.02 for the current calendar year.  When the 
        actuarial value of assets of the fund according to the most 
        recent annual actuarial valuation prepared in accordance with 
        sections 356.215 and 356.216 is less than 102 percent funded and 
        other conditions are met, the relief association shall pay an 
        annual postretirement payment to all eligible members in an 
        amount not to exceed one-half of one percent of the assets of 
        the fund.  When the actuarial value of assets of the fund 
        according to the most recent annual actuarial valuation prepared 
        in accordance with sections 356.215 and 356.216 is greater than 
        102 percent of its actuarial accrued liabilities, the relief 
        association shall pay an annual postretirement payment to all 
        eligible members in an amount not to exceed 1-1/2 percent of the 
        assets of the fund.  Payment of the annual postretirement 
        payment must be in a lump sum amount on June 1 following the 
        determination date in any year.  Payment of the annual 
        postretirement payment may be made only if the average time 
        weighted total rate of return for the most recent prior five 
        years exceeds by two percent the actual average percentage 
        increase in the current monthly salary of a top grade patrol 
        officer in the most recent prior five fiscal years.  The total 
        amount of all payments to members may not exceed the amount 
        determined under this subdivision.  Payment to each eligible 
        member must be calculated by dividing the total number of 
        pension units to which eligible members are entitled into the 
        excess investment income available for distribution to members, 
        and then multiplying that result by the number of units to which 
        each eligible member is entitled to determine each eligible 
        member's annual postretirement payment.  When the actuarial 
        value of assets of the fund according to the most recent annual 
        actuarial valuation prepared in accordance with sections 356.215 
        and 356.216 is less than 102 percent of its actuarial accrued 
        liabilities, payment to each eligible member may not exceed an 
        amount equal to the total monthly benefit that the eligible 
        member was entitled to in the prior year under the terms of the 
        benefit plan of the relief association or each eligible member's 
        proportionate share of the excess investment income, whichever 
        is less.  When the actuarial value of assets of the fund 
        according to the most recent annual actuarial valuation prepared 
        in accordance with sections 356.215 and 356.216 is greater than 
        102 percent of its actuarial accrued liabilities, payment to 
        each eligible member must not exceed the member's proportionate 
        share of 1-1/2 percent of the assets of the fund. 
           A person who received a pension or benefit for the entire 
        12 months before the determination date is eligible for a full 
        annual postretirement payment.  A person who received a pension 
        or benefit for less than 12 months before the determination date 
        is eligible for a prorated annual postretirement payment. 
           Sec. 10.  Minnesota Statutes 1996, section 423B.15, 
        subdivision 6, is amended to read: 
           Subd. 6.  [NO GUARANTEE OF ANNUAL POSTRETIREMENT PAYMENT.] 
        No provision of or payment made under this section may be 
        interpreted or relied upon by any member of the relief 
        association to guarantee or entitle a member to annual 
        postretirement payments for a period when no excess investment 
        income is earned by the fund.  If the actuarial value of assets 
        of the fund according to the most recent annual actuarial 
        valuation prepared in accordance with sections 356.215 and 
        356.216 is less than 102 percent of its actuarial accrued 
        liabilities, the distribution of assets under this section must 
        not exceed one-half of one percent. 
           Sec. 11.  Minnesota Statutes 1996, section 423B.15, is 
        amended by adding a subdivision to read: 
           Subd. 7.  [ANNUAL ACTUARIAL VALUATION DATE.] 
        Notwithstanding any provision of section 69.77, subdivision 2h, 
        356.215 or 356.216 to the contrary, the annual actuarial 
        valuation of the fund must be completed by May 1 of each year. 
           Sec. 12.  Laws 1965, chapter 519, section 1, as amended by 
        Laws 1967, chapter 819, section 1; Laws 1969, chapter 123, 
        section 1; Laws 1975, chapter 57, section 1; Laws 1977, chapter 
        164, section 2; Laws 1990, chapter 589, article 1, section 5; 
        Laws 1992, chapter 454, section 2; and Laws 1994, chapter 591, 
        article 1, section 1, is amended to read: 
           Section 1.  [MINNEAPOLIS, CITY OF; FIREFIGHTER'S RELIEF 
        ASSOCIATION; SURVIVING SPOUSE'S ENTITLEMENT.] Notwithstanding 
        the provisions of Minnesota Statutes 1965, Section 69.48, to the 
        contrary, when a service pensioner, disability pensioner, or 
        deferred pensioner, or an active member of a relief association 
        dies, leaving: 
           (1) A surviving spouse who was a legally married spouse, 
        residing with the decedent, and who was married while or prior 
        to the time the decedent was on the payroll of the fire 
        department in the case of a deceased active member; and who, in 
        case the deceased member was a service or deferred pensioner was 
        legally married to the member at least five years before death; 
        or 
           (2) A child or children who were living while the deceased 
        was on the payroll of the fire department, or born within nine 
        months after the decedent was withdrawn from the payroll of the 
        fire department, the surviving spouse and the child or children 
        shall be entitled to a pension or pensions, as follows: 
           (a) To the surviving spouse, a pension of not less than 17 
        units, and not to exceed the total of 22 units per month, as the 
        bylaws of the association provide, for life; provided, that if 
        the spouse shall remarry then the pension shall cease and 
        terminate as of the date of remarriage; provided, further, if 
        the remarriage terminates for any reason, the surviving spouse 
        shall again be entitled to a pension as the bylaws of the 
        association provide; 
           (b) To the child or children, if their other parent is 
        living, a pension of not to exceed eight units per month for 
        each child up to the time each child reaches the age of not less 
        than 16 years and not to exceed an age of 18 years; provided, 
        however, upon approval by the board of trustees, such a child 
        who is a full-time student, upon proof of compliance with the 
        provisions of this act, may be entitled to such pension so long 
        as the child is a full-time student and has not reached 22 years 
        of age, all in conformity with the bylaws of the association; 
        provided, further, the total pensions hereunder for the 
        surviving spouse and children of the deceased member shall not 
        exceed the sum of 41 units per month; 
           (c) A child or children of a deceased member after the 
        death of their other parent, or in the event their other parent 
        predeceases the member, be entitled to receive a pension or 
        pensions in such amount as the board of trustees of the 
        association shall deem necessary to properly support the child 
        or children until they reach the age of not less than 16 and not 
        more than 18 years; provided, however, upon approval by the 
        board of trustees, such a child who is a full-time student, upon 
        proof of compliance with the provisions of this act, may be 
        entitled to such pension so long as the child is a full-time 
        student and has not reached 22 years of age, as the bylaws of 
        the association may provide; but the total amount of the pension 
        or pensions hereunder for any child or children shall not exceed 
        the sum of 41 units per month; 
           (d) For the purposes of this act, a full-time student is 
        defined as an individual who is in full-time attendance as a 
        student at an educational institution.  Whether or not the 
        student was in full-time attendance would be determined by the 
        board of trustees of the association in the light of the 
        standards and practices of the school involved.  Specifically 
        excluded is a person who is paid by the person's employer while 
        attending school at the request of the person's employer.  
        Benefits may continue during any period of four calendar months 
        or less in any 12 month period in which a person does not attend 
        school if the person shows to the satisfaction of the board of 
        trustees that the person intends to continue in full-time school 
        attendance immediately after the end of the period.  An 
        educational institution is defined so as to permit the payment 
        of benefits to students taking vocational or academic courses in 
        all approved, accredited or licensed schools, colleges, and 
        universities.  The board of trustees shall make the final 
        determination of eligibility for benefits if any question arises 
        concerning the approved status of the educational institution 
        which the student attends or proposes to attend; 
           (e) In the event that a child who is receiving a pension as 
        provided above shall marry before the age of 22 years, the 
        pension shall cease as of the date of the marriage.; and 
           (f) A surviving spouse of a deceased service pensioner, 
        disability pensioner, deferred pensioner, or service pensioner 
        who is otherwise not qualified may receive a benefit if the 
        surviving spouse was legally married to the decedent for a 
        period of five years and was residing with the decedent at the 
        time of death.  The surviving spouse benefit is the same as that 
        provided under paragraph (a), except that if the surviving 
        spouse is younger than the decedent, the surviving spouse 
        benefit must be actuarially equivalent to a surviving spouse 
        benefit that would have been paid to the member's spouse had the 
        member been married to a person of the same age or a greater age 
        than the member's age prior to retirement.  A benefit paid under 
        this paragraph may be less than 17 units, notwithstanding the 17 
        unit minimum established under paragraph (a). 
           Sec. 13.  Laws 1989, chapter 319, article 19, section 7, 
        subdivision 1, as amended by Laws 1992, chapter 471, article 2, 
        section 5, and Laws 1996, chapter 438, article 4, section 12, is 
        amended to read: 
           Subdivision 1.  [MINNEAPOLIS FIRE DEPARTMENT RELIEF 
        ASSOCIATION; DEFINITIONS.] For the purposes of this section, 
        each of the terms in this subdivision have the meanings given 
        them in paragraphs (a) to (h). 
           (a) "Annual postretirement payment" means the payment of a 
        lump sum postretirement benefit to an eligible member on June 1 
        following the determination date in any year. 
           (b) "City" means the city of Minneapolis. 
           (c) "Determination date" means December 31 of each year. 
           (d) "Eligible member" means a person, including a service 
        pensioner, a disability pensioner, a survivor, or dependent of a 
        deceased active member, service pensioner, or disability 
        pensioner, who received a pension or benefit from the relief 
        association during the 12 months before the determination date.  
        A person who received a pension or benefit for the entire 12 
        months before the determination date is eligible for a full 
        annual postretirement payment.  A person who received a pension 
        or benefit for less than 12 months before the determination date 
        is eligible for a prorated annual postretirement payment. 
           (e) "Excess investment income" means the amount by which 
        the average time weighted total rate of return earned by the 
        fund in the most recent prior five fiscal years has exceeded the 
        actual average percentage increase in the current monthly salary 
        of a top grade firefighter in the most recent prior five fiscal 
        years plus two percent.  The excess investment income must be 
        expressed as a dollar amount and may not exceed one percent of 
        the total assets of the fund, except when the actuarial value of 
        assets of the fund according to the most recent annual actuarial 
        valuation prepared in accordance with Minnesota Statutes, 
        sections 356.215 and 356.216 is greater than 102 percent of its 
        actuarial accrued liabilities in which case the amount must not 
        exceed 1-1/2 percent of the assets of the funds. 
           (f) "Fund" means the Minneapolis fire department relief 
        association. 
           (g) "Relief association" means the Minneapolis fire 
        department relief association.  
           (h) "Time weighted total rate of return" means the 
        percentage amount determined by using the formula or formulas 
        established by the state board of investment under Minnesota 
        Statutes, section 11A.04, clause (11), and in effect on January 
        1, 1987. 
           Sec. 14.  Laws 1989, chapter 319, article 19, section 7, 
        subdivision 3, is amended to read: 
           Subd. 3.  [DETERMINATION OF EXCESS INVESTMENT INCOME.] The 
        board of trustees of the relief association shall determine by 
        May 1 of each year whether or not the relief association has 
        excess investment income.  The amount of excess investment 
        income, if any, must be stated as a dollar amount and reported 
        by the chief administrative officer of the relief association to 
        the mayor and governing body of the city, the state auditor, the 
        commissioner of finance, and the executive director of the 
        legislative commission on pensions and retirement.  The dollar 
        amount of excess investment income up to one percent of the 
        assets of the fund, except if the actuarial value of assets of 
        the fund according to the most recent annual actuarial valuation 
        prepared in accordance with Minnesota Statutes, sections 356.215 
        and 356.216 is greater than 102 percent of its actuarial accrued 
        liabilities, must be applied for the purpose specified in 
        subdivision 4.  Excess investment income must not be considered 
        as income to or assets of the fund for actuarial valuations of 
        the fund for that year under sections 69.77, 356.215, and 
        356.216 and the provisions of this section except to offset the 
        annual postretirement payment.  Additional investment income is 
        any realized or unrealized investment income other than the 
        excess investment income and must be included in the actuarial 
        valuations performed under sections 69.77, 356.215, and 356.216 
        and the provisions of this section. 
           Sec. 15.  Laws 1989, chapter 319, article 19, section 7, 
        subdivision 4, as amended by Laws 1990, chapter 570, article 12, 
        section 63, Laws 1992, chapter 471, article 2, section 6, and 
        Laws 1996, chapter 438, article 4, section 13, is amended to 
        read: 
           Subd. 4.  [AMOUNT OF ANNUAL POSTRETIREMENT PAYMENT.] The 
        amount determined under subdivision 3 must be applied in 
        accordance with this subdivision.  When the actuarial value of 
        assets of the fund according to the most recent annual actuarial 
        valuation prepared in accordance with Minnesota Statutes, 
        sections 356.215 and 356.216 is less than 102 percent of its 
        actuarial accrued liabilities, the relief association shall 
        apply the first one-half of one percent of assets which 
        constitute excess investment income to the payment of an annual 
        postretirement payment as specified in this subdivision. and the 
        second one-half of one percent of assets which constitute excess 
        investment income shall be applied to reduce the state 
        amortization state aid or supplementary amortization state aid 
        payments otherwise due to the relief association under section 
        423A.02 for the current calendar year.  When the actuarial value 
        of assets of the fund according to the most recent annual 
        actuarial valuation prepared in accordance with Minnesota 
        Statutes, sections 356.215 and 356.216 is less than 102 percent 
        of its actuarial accrued liabilities, the relief association 
        shall pay an annual postretirement payment to all eligible 
        members in an amount not to exceed one-half of one percent of 
        the assets of the fund.  Payment of the annual postretirement 
        payment must be in a lump sum amount on June 1 following the 
        determination date in any year.  When the actuarial value of 
        assets of the fund according to the most recent annual actuarial 
        valuation prepared in accordance with Minnesota Statutes, 
        sections 356.215 and 356.216 is greater than 102 percent of its 
        actuarial accrued liabilities, the relief association shall pay 
        an annual postretirement payment to all eligible members in an 
        amount not to exceed 1-1/2 percent of the assets of the fund.  
        Payment of the annual postretirement payment may be made only if 
        the average time weighted total rate of return in the most 
        recent prior five fiscal years exceeds by two percent the actual 
        average percentage increase in the current monthly salary of a 
        top grade firefighter in the most recent prior five fiscal 
        years.  The total amount of all payments to members may not 
        exceed the amount determined under subdivision 3.  Payment to 
        each eligible member must be calculated by dividing the total 
        number of pension units to which eligible members are entitled 
        into the excess investment income available for distribution to 
        members, and then multiplying that result by the number of units 
        to which each eligible member is entitled to determine each 
        eligible member's annual postretirement payment.  When the fund 
        actuarial value of assets according to the most recent annual 
        actuarial valuation prepared in accordance with Minnesota 
        Statutes, sections 356.215 and 356.216 is less than 102 percent 
        of its actuarial accrued liabilities, payment to each eligible 
        member may not exceed an amount equal to the total monthly 
        benefit that the eligible member was entitled to in the prior 
        year under the terms of the benefit plan of the relief 
        association or each eligible member's proportionate share of the 
        excess investment income, whichever is less.  When the actuarial 
        value of assets of the fund according to the most recent annual 
        actuarial valuation prepared in accordance with Minnesota 
        Statutes, sections 356.215 and 356.216 is greater than 102 
        percent of its actuarial accrued liabilities, payment to each 
        eligible member may not exceed the member's proportionate share 
        of 1-1/2 percent of assets of the fund. 
           Sec. 16.  Laws 1989, chapter 319, article 19, section 7, 
        subdivision 7, is amended to read: 
           Subd. 7.  [NO GUARANTEE OF ANNUAL POSTRETIREMENT PAYMENT.] 
        No provision of or payment made under this section may be 
        interpreted or relied upon by any member of the relief 
        association to guarantee or entitle a member to annual 
        postretirement payments for a period when no excess investment 
        income is earned by the fund.  If the actuarial value of assets 
        of the fund according to the most recent annual actuarial 
        valuation prepared in accordance with Minnesota Statutes, 
        sections 356.215 and 356.216 is less than 102 percent of its 
        actuarial accrued liabilities, a distribution of the fund assets 
        must not exceed one-half of one percent. 
           Sec. 17.  Laws 1993, chapter 125, article 1, section 1, is 
        amended to read: 
           Section 1.  [MINNEAPOLIS, CITY OF; SERVICE PENSION RATES.] 
           Notwithstanding the provisions of Minnesota Statutes, 
        section 69.45, Laws 1971, chapter 542, section 1, and Laws 1980, 
        chapter 607, article XV, section 9, to the contrary, when the 
        actuarial value of assets of the fund according to the most 
        recent annual actuarial valuation prepared in accordance with 
        Minnesota Statutes, sections 356.215 and 356.216 is less than 90 
        percent of its actuarial accrued liabilities, the service 
        pensions payable by the Minneapolis fire department relief 
        association for members terminating active service as a 
        Minneapolis firefighter after June 1, 1993, must be computed as 
        follows: 
                    length of                   service 
                credited service            pension payable
                    10 years                  16.0 units
                    11 years                  17.6 units
                    12 years                  19.2 units
                    13 years                  20.8 units
                    14 years                  22.4 units
                    15 years                  24.0 units
                    16 years                  25.6 units
                    17 years                  27.2 units
                    18 years                  28.8 units
                    19 years                  30.4 units
                    20 years                  33.0 units
                    21 years                  34.6 units
                    22 years                  36.2 units
                    23 years                  37.8 units
                    24 years                  39.4 units
                    25 years                  41.0 units
           When the actuarial value of assets of the fund according to 
        the most recent annual actuarial valuation prepared in 
        accordance with Minnesota Statutes, sections 356.215 and 356.216 
        is of greater than 90 percent of actuarial accrued liabilities, 
        the following schedule applies to all active members and retired 
        service pensioners who otherwise met the then existing 
        requirements to receive a benefit: 
                    length of                   service 
                credited service            pension payable
                     5 years                   8.0 units
                     6 years                   9.6 units
                     7 years                  11.2 units
                     8 years                  12.8 units
                     9 years                  14.4 units
                    10 years                  16.0 units
                    11 years                  17.6 units
                    12 years                  19.2 units
                    13 years                  20.8 units
                    14 years                  22.4 units
                    15 years                  24.0 units
                    16 years                  25.6 units
                    17 years                  27.2 units
                    18 years                  28.8 units
                    19 years                  30.4 units
                    20 years                  33.0 33.5 units
                    21 years                  34.6 35.1 units
                    22 years                  36.2 37.7 units
                    23 years                  37.8 38.3 units
                    24 years                  39.4 39.9 units
                    25 years                  41.0 41.5 units
           When the actuarial value of assets of the fund according to 
        the most recent annual actuarial valuation prepared in 
        accordance with Minnesota Statutes, sections 356.215 and 356.216 
        is of greater than 92.5 percent of actuarial accrued 
        liabilities, the following schedule applies to all active 
        members and retired service pensioners who otherwise met the 
        then existing requirements to receive a benefit: 
                    length of                   service 
                credited service            pension payable
                     5 years                   8.0 units
                     6 years                   9.6 units
                     7 years                  11.2 units
                     8 years                  12.8 units
                     9 years                  14.4 units
                    10 years                  16.0 units
                    11 years                  17.6 units
                    12 years                  19.2 units
                    13 years                  20.8 units
                    14 years                  22.4 units
                    15 years                  24.0 units
                    16 years                  25.6 units
                    17 years                  27.2 units
                    18 years                  28.8 units
                    19 years                  30.4 units
                    20 years                  34.0 units
                    21 years                  35.6 units
                    22 years                  37.2 units
                    23 years                  38.8 units
                    24 years                  40.4 units
                    25 years                  42.0 units
           Sec. 18.  [MINNEAPOLIS FIRE DEPARTMENT RELIEF ASSOCIATION; 
        OPTIONAL ANNUITIES.] 
           A member of the Minneapolis fire department relief 
        association who is retired or disabled on the effective date of 
        this section may elect an optional retirement annuity within 60 
        days of the effective date instead of the normal retirement 
        pension.  A member who retires or becomes disabled after the 
        effective date of this section may elect an optional retirement 
        annuity prior to the receipt of any benefits.  The optional 
        retirement annuity may be a 50 percent, a 75 percent, or a 100 
        percent joint and survivor annuity without reinstatement in the 
        event of the designated beneficiary predeceasing the member or a 
        joint and survivor annuity with reinstatement in the event of 
        the designated beneficiary predeceasing the member.  An optional 
        retirement annuity must be actuarially equivalent to the service 
        pension and automatic survivor coverage otherwise payable to the 
        retiring member and the member's beneficiaries.  Once selected, 
        the optional annuity is irrevocable. 
           Sec. 19.  [MINNEAPOLIS FIRE DEPARTMENT RELIEF ASSOCIATION 
        TAX LEVY.] 
           If in any year after the Minneapolis fire department relief 
        actuarial value of assets of the association according to the 
        most recent annual actuarial valuation prepared in accordance 
        with Minnesota Statutes, sections 356.215 and 356.216 is greater 
        than 102 percent of the actuarial accrued liabilities of the 
        fund and subsequently the actuarial value of assets are less 
        than 100 percent of the actuarial accrued liabilities according 
        to the most recent annual actuarial valuation prepared in 
        accordance with Minnesota Statutes, sections 356.215 and 
        356.216, the city of Minneapolis is not required to levy a 
        property tax to fund any deficit unless the fund has two 
        successive years when the actuarial value of assets are less 
        than 100 percent of the actuarial accrued liabilities according 
        to the most recent annual actuarial valuation prepared in 
        accordance with Minnesota Statutes, sections 356.215 and 356.216.
           Sec. 20.  [ACTUARIAL VALUATION DATE.] 
           Notwithstanding Minnesota Statutes, section 69.77, 
        subdivision 2h, 356.215 or 356.216, the annual actuarial 
        valuation of the Minneapolis fire department relief association 
        must be completed by May 1 of each year. 
           Sec. 21.  [ACTUARIAL EQUIVALENT.] 
           For the purposes of the Minneapolis fire department relief 
        association, "actuarial equivalent" or "actuarially equivalent" 
        means the condition of one annuity or benefit having an equal 
        actuarial present value as another annuity or benefit, 
        determined as of a given date at a specified age with each 
        actuarial present value based on the appropriate mortality table 
        adopted by the board of directors based on the experience of the 
        fund and approved by the actuary retained by the legislative 
        commission on pensions and retirement and using the applicable 
        preretirement or postretirement interest rate assumptions 
        specified in Minnesota Statutes, section 356.216. 
           Sec. 22.  [BENEFIT EXCHANGE.] 
           The one unit health and welfare benefit granted to members 
        of the Minneapolis fire department relief association in Laws 
        1980, chapter 667, article XV, section 9, who retired after July 
        1, 1980, must be reduced by one-half unit upon the 
        implementation of the benefit improvement in section 17 when the 
        actuarial value of assets of the fund according to the most 
        recent annual actuarial valuation report under Minnesota 
        Statutes, sections 356.215 and 356.216 exceeds 90 percent of its 
        actuarial accrued liabilities and the benefit must be eliminated 
        when the actuarial value of assets of the fund exceeds 92.5 
        percent of its actuarial accrued liabilities and the benefit in 
        section 15 is fully implemented. 
           Sec. 23.  [EFFECTIVE DATE.] 
           The sections of this article are effective on the day after 
        compliance by the governing body of the city of Minneapolis with 
        Minnesota Statutes, section 645.021, subdivision 2.  Section 4 
        is effective when the provisions of section 5 take effect.  The 
        disability pension and superannuation pension unit amount change 
        in section 5 is effective only when section 4 takes effect.  
        Sections 7 and 12 are effective retroactive to July 1, 1996 and 
        apply to all current spouses of members, except that the unit 
        increases for surviving spouses in section 7 shall not otherwise 
        increase the surviving spouse benefit beyond 22 units. 
           Presented to the governor May 29, 1997 
           Signed by the governor June 2, 1997, 2:00 p.m.

700 State Office Building, 100 Rev. Dr. Martin Luther King Jr. Blvd., St. Paul, MN 55155 ♦ Phone: (651) 296-2868 ♦ TTY: 1-800-627-3529 ♦ Fax: (651) 296-0569