2006 Minnesota Statutes

356.219 DISCLOSURE OF PUBLIC PENSION PLAN INVESTMENT PORTFOLIO
AND PERFORMANCE INFORMATION.
    Subdivision 1. Report required. (a) Except as indicated in subdivision 4, the State Board of
Investment, on behalf of the public pension funds and programs for which it is the investment
authority, and any Minnesota public pension plan that is not fully invested through the State
Board of Investment, including a local police or firefighters relief association governed by
sections 69.77 or 69.771 to 69.775, shall report the information specified in subdivision 3 to the
state auditor. The state auditor may prescribe a form or forms for the purposes of the reporting
requirements contained in this section.
(b) A local police or firefighters relief association governed by section 69.77 or sections
69.771 to 69.775 is fully invested during a given calendar year for purposes of this section
if all assets of the applicable pension plan beyond sufficient cash equivalent investments to
cover six months expected expenses are invested under section 11A.17. The board of any fully
invested public pension plan remains responsible for submitting investment policy statements and
subsequent revisions as required by subdivision 3, paragraph (a).
(c) For purposes of this section, the State Board of Investment is considered to be the
investment authority for any Minnesota public pension fund required to be invested by the State
Board of Investment under section 11A.23, or for any Minnesota public pension fund authorized
to invest in the supplemental investment fund under section 11A.17 and which is fully invested
by the State Board of Investment.
    Subd. 2. Asset class definition. (a) For purposes of this section, "asset class" means any of
the following asset groupings as authorized in applicable law, bylaws, or articles of incorporation:
(1) cash and any cash equivalent investments with maturities of one year or less when issued;
(2) debt securities with maturities greater than one year when issued, including but not
limited to mortgage participation certificates and pools, asset backed securities, guaranteed
investment contracts, and authorized government and corporate obligations of corporations
organized under laws of the United States or any state, or the Dominion of Canada or its provinces;
(3) stocks or convertible issues of any corporation organized under laws of the United States
or any state, or the Dominion of Canada or its provinces, or any corporation listed on the New
York Stock Exchange or the American Stock Exchange;
(4) international stocks or convertible issues;
(5) international debt securities; and
(6) real estate and venture capital.
(b) If the pension plan is investing under section 69.77, subdivision 9, section 69.775, or any
other applicable law, in open-end investment companies registered under the federal Investment
Company Act of 1940, or in the Minnesota supplemental investment fund under section 11A.17,
this investment must be included under an asset class indicated in paragraph (a), clauses (1)
through (6), as appropriate. If the investment vehicle includes underlying securities from more
than one asset class as indicated by paragraph (a), clauses (1) through (6), the investment may
be treated as a separate asset class.
    Subd. 3. Content of reports. (a) The report required by subdivision 1 must include a written
statement of the investment policy. Following that initial report, subsequent reports must include
investment policy changes and the effective date of each policy change rather than a complete
statement of investment policy, unless the state auditor requests submission of a complete current
statement. The report must also include the information required by the following paragraphs, as
applicable.
(b) If, after four years of reporting under this paragraph, the total portfolio time weighted
rate of return, net of all investment related costs and fees, provided by the public pension plan
differs by no more than 0.1 percent from the comparable return for the plan calculated by the
Office of the State Auditor, and if a public pension plan has a total market value of $25,000,000
or more as of the beginning of the calendar year, and if the public pension plan's annual audit is
performed by the state auditor or by the legislative auditor, the report required by subdivision
1 must include the market value of the total portfolio and the market value of each asset class
included in the pension fund as of the beginning of the calendar year and as of the end of the
calendar year. At the discretion of the state auditor, the public pension plan may be required to
submit the market value of the total portfolio and the market value of each investment account,
investment portfolio, or asset class included in the pension fund for each month, and the amount
and date of each injection and withdrawal to the total portfolio and to each investment account,
investment portfolio, or asset class. If the market value of a public pension plan's fund drops
below $25,000,000 in a subsequent year, it must continue reporting under this paragraph for any
subsequent year in which the public pension plan is not fully invested as specified in subdivision
1, paragraph (b), except that if the public pension plan's annual audit is not performed by the state
auditor or legislative auditor, paragraph (c) applies.
(c) If paragraph (b) would apply if the annual audit were provided by the state auditor or
legislative auditor, the report required by subdivision 1 must include the market value of the total
portfolio and the market value of each asset class included in the pension fund as of the beginning
of the calendar year and for each month, and the amount and date of each injection and withdrawal
to the total portfolio and to each investment account, investment portfolio, or asset class.
(d) For public pension plans to which paragraph (b) or (c) applies, the report required by
subdivision 1 must also include a calculation of the total time-weighted rate of return available
from index-matching investments assuming the asset class performance targets and target asset
mix indicated in the written statement of investment policy. The provided information must
include a description of indices used in the analyses and an explanation of why those indices are
appropriate. This paragraph does not apply to any fully invested plan, as defined by subdivision
1, paragraph (b). Reporting by the State Board of Investment under this paragraph is limited to
information on the Minnesota public pension plans required to be invested by the State Board of
Investment under section 11A.23.
(e) If a public pension plan has a total market value of less than $25,000,000 as of the
beginning of the calendar year and was never required to file under paragraph (b) or (c), the report
required by subdivision 1 must include the amount and date of each total portfolio injection and
withdrawal. In addition, the report must include the market value of the total portfolio as of the
beginning of the calendar year and for each quarter.
(f) Any public pension plan reporting under paragraph (b) or (c) must include computed
time-weighted rates of return with the report, in addition to all other required information, as
applicable. The chief administrative officer of the public pension plan submitting the returns must
certify, on a form prescribed by the state auditor, that the returns have been computed by the
pension plan's investment performance consultant or custodial bank. The chief administrative
officer of the public pension plan submitting the returns also must certify that the returns are
net of all costs and fees, including investment management fees, and that the procedures used
to compute the returns are consistent with Bank Administration Institute studies of investment
performance measurement and presentation standards set by the Certified Financial Analyst
Institute. If the certifications required under this paragraph are not provided, the reporting
requirements of paragraph (c) apply.
(g) For public pension plans reporting under paragraph (e), the public pension plan must
retain supporting information specifying the date and amount of each injection and withdrawal
to each investment account and investment portfolio. The public pension plan must also retain
the market value of each investment account and investment portfolio at the beginning of the
calendar year and for each quarter. Information that is required to be collected and retained for
any given year or years under this paragraph must be submitted to the Office of the State Auditor
if the Office of the State Auditor requests in writing that the information be submitted by a public
pension plan or plans, or be submitted by the State Board of Investment for any plan or plans
for which the State Board of Investment is the investment authority under this section. If the
state auditor requests information under this subdivision, and the public plan fails to comply,
the pension plan is subject to penalties under subdivision 5, unless penalties are waived by the
state auditor under that subdivision.
    Subd. 4. Alternative reporting; certain plans. In lieu of requirements in subdivision 3,
the applicable administration for the individual retirement account plans under chapters 354B
and 354D and for the University of Minnesota faculty retirement plan shall submit computed
time-weighted rates of return to the Office of the State Auditor. These time-weighted rates of
return must cover the most recent complete calendar year, and must be computed separately for
each investment option available to plan members. To the extent feasible, the returns must be
computed net of all investment costs, fees, and charges, so that the computed return reflects
the net time-weighted return available to the investor. If this is not practical, the existence
of any remaining investment cost, fee, or charge which could further lower the net return
must be disclosed. The procedures used to compute the returns must be consistent with Bank
Administration Institute studies of investment performance measurement and Association for
Investment Management and Research presentation standards, or, if applicable, Securities
Exchange Commission requirements. The individual who computes the returns must certify that
the supplied returns comply with this subdivision. The applicable plan administrator must also
submit, with the return information, the total amounts invested by the plan members, in aggregate,
in each investment option as of the last day of the calendar year.
    Subd. 5. Penalty for noncompliance. Failure to comply with the reporting requirements
of this section must result in a withholding of all state aid or state appropriation to which the
pension plan may otherwise be directly or indirectly entitled until the pension plan has complied
with the reporting requirements. The state auditor shall instruct the commissioners of revenue
and finance to withhold any state aid or state appropriation from any pension plan that fails to
comply with the reporting requirements contained in this section, until the pension plan has
complied with the reporting requirements. The state auditor may waive the withholding of state
aid or state appropriations if the state auditor determines in writing that compliance would create
an excessive hardship for the pension plan.
    Subd. 6. Investment disclosure report. (a) The state auditor shall prepare an annual report
to the legislature on the investment performance of the various public pension plans subject to this
section. The content of the report is specified in paragraphs (b) to (f).
(b) For each public pension plan reporting under subdivision 3, paragraph (b), the state
auditor shall report total portfolio and asset class time-weighted rates of return, net of all
investment-related costs and fees. If the state auditor has required a plan to submit the market value
of the total portfolio and the market value of each investment account, investment portfolio, or
asset class included in the pension fund for each month, and the amount and date of each injection
and withdrawal to the total portfolio and to each investment account, investment portfolio, or
asset class as prescribed under subdivision 3, paragraph (b), the state auditor shall also compute
and report total portfolio and asset class time-weighted rates of return, net of all costs and fees.
(c) For each public pension plan reporting under subdivision 3, paragraph (c), the state
auditor shall compute and report total portfolio and asset class time-weighted rates of return, net
of all costs and fees.
(d) For each public pension plan reporting under subdivision 3, paragraph (e), the state
auditor shall compute and report total portfolio time-weighted rates of return, net of all costs and
fees. If the state auditor has requested data for a plan under subdivision 3, paragraph (g), the state
auditor may also compute and report asset class time-weighted rates of return, net of all costs
and fees.
(e) The report by the state auditor must include the information submitted by the pension
plans under subdivision 3, paragraph (d), or a synopsis of that information.
(f) The report by the state auditor may also include a presentation of multiyear performance,
information collected under subdivision 4, and any other information or analysis deemed
appropriate by the state auditor.
    Subd. 7. Expense of report. All administrative expenses incurred relating to the investment
report by the state auditor described in subdivision 6 must be borne by the Office of the State
Auditor and may not be charged back to the entities described in subdivisions 1 or 4.
    Subd. 8. Timing of reports. (a) For salaried firefighter relief associations, police relief
associations, and volunteer firefighter relief associations, the information required under this
section must be submitted by the due date for reports required under section 69.051, subdivision 1
or 1a, as applicable. If a relief association satisfies the definition of a fully invested plan under
subdivision 1, paragraph (b), for the calendar year covered by the report required under section
69.051, subdivision 1 or 1a, as applicable, the chief administrative officer of the covered pension
plan shall certify that compliance on a form prescribed by the state auditor. The state auditor
shall transmit annually to the State Board of Investment a list or lists of covered pension plans
which submitted certifications in order to facilitate reporting by the State Board of Investment
under paragraph (c).
(b) For the Minneapolis Teachers Retirement Fund Association, the St. Paul Teachers
Retirement Fund Association, the Duluth Teachers Retirement Fund Association, the Minneapolis
Employees Retirement Fund, the University of Minnesota faculty supplemental retirement plan,
and the applicable administrators for the University of Minnesota faculty retirement plan and
the individual retirement account plans under chapters 354B and 354D, the information required
under this section must be submitted to the state auditor by June 1 of each year.
(c) The State Board of Investment, on behalf of pension funds specified in subdivision 1,
paragraph (c), must report information required under this section by September 1 of each year.
    Subd. 9. Data availability. Any information received by the state auditor under this section,
if the data are public, must be made available to individuals or organizations which request that
information. The state auditor is authorized to charge fees sufficient to cover the cost of providing
the requested information in usable formats.
    Subd. 10. Pension performance reporting. In addition to report presentations that the
state auditor is required to provide elsewhere in this section, the state auditor shall provide an
analysis comparing the one-year and the five-year rate of return for each pension fund and the
benchmark rate of return for each fund. The state auditor shall select the benchmark rate of
return based on the best practice in the industry.
History: 1994 c 565 art 2 s 1; 1995 c 262 art 9 s 1; 1996 c 438 art 10 s 1; 1997 c 241 art 10
s 4; 2002 c 392 art 1 s 8; art 11 s 10; 2006 c 271 art 8 s 4,5; 2006 c 277 art 6 s 1,2