1.1 	A bill for an act
1.2 	relating to retirement; modifying allocation requirements; changing reporting 
1.3 	mandates; modifying definitions; amending Minnesota Statutes 2004, section 
1.4 	356.219, subdivisions 3, 6; Minnesota Statutes 2005 Supplement, section 
1.5 	356A.06, subdivision 7; repealing Minnesota Statutes 2004, section 356A.06, 
1.6 	subdivisions 4, 5, 8b.
1.7 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.8 	Section 1. Minnesota Statutes 2004, section 356.219, subdivision 3, is amended to read:
1.9 		Subd. 3.Content of reports. (a) The report required by subdivision 1 must include 
1.10 	a written statement of the investment policy in effect on June 30, 1997, if that statement 
1.11 	has not been previously submitted. Following that date, subsequent reports must include 
1.12 	investment policy changes and the effective date of each policy change rather than a 
1.13 	complete statement of investment policy, unless the state auditor requests submission of 
1.14 	a complete current statement. The report must also include the information required by 
1.15 	the following paragraphs, as applicable.
1.16 	(b) If a public pension plan has a total market value of $10,000,000 or more as of 
1.17 	the beginning of the calendar year, the report required by subdivision 1 must include the 
1.18 	market value of the total portfolio and the market value of each investment account, 
1.19 	investment portfolio, or asset class included in the pension fund as of the beginning of 
1.20 	the calendar year and for each month, and the amount and date of each injection and 
1.21 	withdrawal to the total portfolio and to each investment account, investment portfolio, 
1.22 	or asset class the end of the calendar year. In addition, the plan must submit a report on 
1.23 	a form prescribed by the state auditor that includes the time-weighted return, net of any 
1.24 	investment-related fees, on a total portfolio and asset class basis. If a public pension plan 
1.25 	once files a report under this paragraph, it must continue reporting under this paragraph 
2.1 	for any subsequent year in which the public pension plan is not fully invested as specified 
2.2 	in subdivision 1, paragraph (b), even if asset values drop below $10,000,000 in market 
2.3 	value in that subsequent year.
2.4 	(c) For public pension plans to which paragraph (b) applies, the report required by 
2.5 	subdivision 1 must also include a calculation of the total time-weighted rate of return 
2.6 	available from index-matching investments assuming the asset class performance targets 
2.7 	and target asset mix indicated in the written statement of investment policy. The provided 
2.8 	information must include a description of indices used in the analyses and an explanation 
2.9 	of why those indices are appropriate. This paragraph does not apply to any fully invested 
2.10 	plan, as defined by subdivision 1, paragraph (b). Reporting by the State Board of 
2.11 	Investment under this paragraph is limited to information on the Minnesota public pension 
2.12 	plans required to be invested by the State Board of Investment under section  11A.23. 
2.13 	(d) If a public pension plan has a total market value of less than $10,000,000 as of 
2.14 	the beginning of the calendar year and was never required to file under paragraph (b), the 
2.15 	report required by subdivision 1 must include the amount and date of each total portfolio 
2.16 	injection and withdrawal. In addition, the report must include the market value of the total 
2.17 	portfolio as of the beginning of the calendar year and for each quarter.
2.18 	(e) Any public pension plan reporting under paragraph (b) or (d) may include 
2.19 	computed time-weighted rates of return with the report, in addition to all other required 
2.20 	information, as applicable. If these returns are supplied, the individual who computed 
2.21 	the returns must certify that the returns are net of all costs and fees, including investment 
2.22 	management fees, and that the procedures used to compute the returns are consistent 
2.23 	with Bank Administration Institute studies of investment performance measurement and 
2.24 	Association for Investment Management and Research presentation standards.
2.25 	(f) For public pension plans reporting under paragraph (d), the public pension plan 
2.26 	must retain supporting information specifying the date and amount of each injection and 
2.27 	withdrawal to each investment account and investment portfolio. The public pension plan 
2.28 	must also retain the market value of each investment account and investment portfolio at 
2.29 	the beginning of the calendar year and for each quarter. Information that is required to be 
2.30 	collected and retained for any given year or years under this paragraph must be submitted 
2.31 	to the Office of the State Auditor if the Office of the State Auditor requests in writing that 
2.32 	the information be submitted by a public pension plan or plans, or be submitted by the 
2.33 	State Board of Investment for any plan or plans for which the State Board of Investment is 
2.34 	the investment authority under this section. If the state auditor requests information under 
2.35 	this subdivision, and the public plan fails to comply, the pension plan is subject to penalties 
2.36 	under subdivision 5, unless penalties are waived by the state auditor under that subdivision.

3.1 	Sec. 2. Minnesota Statutes 2004, section 356.219, subdivision 6, is amended to read:
3.2 		Subd. 6.Investment disclosure report. (a) The state auditor shall prepare an annual 
3.3 	report to the legislature on the investment performance of the various public pension plans 
3.4 	subject to this section. The content of the report is specified in paragraphs (b) to (e).
3.5 	(b) For each public pension plan reporting under subdivision 3, paragraph (b), the 
3.6 	state auditor shall compute compile and report total portfolio and asset class time-weighted 
3.7 	rates of return, net of all investment-related costs and fees as provided by the pension plan.
3.8 	(c) For each public pension plan reporting under subdivision 3, paragraph (d), the 
3.9 	state auditor shall compute and report total portfolio time-weighted rates of return, net of 
3.10 	all costs and fees. If the state auditor has requested data for a plan under subdivision 3, 
3.11 	paragraph (f), the state auditor may also compute and report asset class time-weighted 
3.12 	rates of return, net of all costs and fees.
3.13 	(d) The report by the state auditor must include the information submitted by the 
3.14 	pension plans under subdivision 3, paragraph (c), or a synopsis of that information.
3.15 	(e) The report by the state auditor may also include a presentation of multiyear 
3.16 	performance, information collected under subdivision 4, and any other information or 
3.17 	analysis deemed appropriate by the state auditor.

3.18 	Sec. 3. Minnesota Statutes 2005 Supplement, section 356A.06, subdivision 7, is 
3.19 	amended to read:
3.20 		Subd. 7.Expanded list of authorized investment securities. (a) Authority. 
3.21 	 Except to the extent otherwise authorized by law or bylaws, a covered pension plan not 
3.22 	described by subdivision 6, paragraph (a), may invest its assets only in accordance with 
3.23 	this subdivision.
3.24 	(b) Securities generally.  The covered pension plan has the authority to purchase, 
3.25 	sell, lend, or exchange the securities specified in paragraphs (c) to (h), including puts and 
3.26 	call options and future contracts traded on a contract market regulated by a governmental 
3.27 	agency or by a financial institution regulated by a governmental agency. These securities 
3.28 	may be owned as units in commingled trusts that own the securities described in 
3.29 	paragraphs (c) to (h) including real estate trusts and insurance company commingled 
3.30 	accounts, including separate accounts.
3.31 	(c) Government obligations. The covered pension plan may invest funds in 
3.32 	governmental bonds, notes, bills, mortgages, and other evidences of indebtedness 
3.33 	provided the issue is backed by the full faith and credit of the issuer or the issue is rated 
3.34 	among the top four quality rating categories by a nationally recognized rating agency. The 
3.35 	obligations in which funds may be invested under this paragraph include guaranteed or 
4.1 	insured issues of (1) the United States, its agencies, its instrumentalities, or organizations 
4.2 	created and regulated by an act of Congress; (2) Canada and its provinces, provided 
4.3 	the principal and interest is payable in United States dollars; (3) the states and their 
4.4 	municipalities, political subdivisions, agencies, or instrumentalities; (4) the International 
4.5 	Bank for Reconstruction and Development, the Inter-American Development Bank, the 
4.6 	Asian Development Bank, the African Development Bank, or any other United States 
4.7 	government sponsored organization of which the United States is a member, provided the 
4.8 	principal and interest is payable in United States dollars.
4.9 	(d) Corporate obligations. The covered pension plan may invest funds in bonds, 
4.10 	notes, debentures, transportation equipment obligations, or any other longer term 
4.11 	evidences of indebtedness issued or guaranteed by a corporation organized under the laws 
4.12 	of the United States or any state thereof, or the Dominion of Canada or any province 
4.13 	thereof if they conform to the following provisions:
4.14 	(1) the principal and interest of obligations of corporations incorporated or organized 
4.15 	under the laws of the Dominion of Canada or any province thereof must be payable in 
4.16 	United States dollars; and
4.17 	(2) obligations must be rated among the top four quality categories by a nationally 
4.18 	recognized rating agency.
4.19 	(e) Other obligations. (1) The covered pension plan may invest funds in 
4.20 	bankers acceptances, certificates of deposit, deposit notes, commercial paper, mortgage 
4.21 	participation certificates and pools, asset backed securities, repurchase agreements and 
4.22 	reverse repurchase agreements, guaranteed investment contracts, savings accounts, and 
4.23 	guaranty fund certificates, surplus notes, or debentures of domestic mutual insurance 
4.24 	companies if they conform to the following provisions:
4.25 	(i) bankers acceptances and deposit notes of United States banks are limited to those 
4.26 	issued by banks rated in the highest four quality categories by a nationally recognized 
4.27 	rating agency;
4.28 	(ii) certificates of deposit are limited to those issued by (A) United States banks and 
4.29 	savings institutions that are rated in the highest four quality categories by a nationally 
4.30 	recognized rating agency or whose certificates of deposit are fully insured by federal 
4.31 	agencies; or (B) credit unions in amounts up to the limit of insurance coverage provided 
4.32 	by the National Credit Union Administration;
4.33 	(iii) commercial paper is limited to those issued by United States corporations or 
4.34 	their Canadian subsidiaries and rated in the highest two quality categories by a nationally 
4.35 	recognized rating agency;
5.1 	(iv) mortgage participation or pass through certificates evidencing interests in pools 
5.2 	of first mortgages or trust deeds on improved real estate located in the United States where 
5.3 	the loan to value ratio for each loan as calculated in accordance with section 61A.28, 
5.4 	subdivision 3, does not exceed 80 percent for fully amortizable residential properties and 
5.5 	in all other respects meets the requirements of section 61A.28, subdivision 3;
5.6 	(v) collateral for repurchase agreements and reverse repurchase agreements is 
5.7 	limited to letters of credit and securities authorized in this section;
5.8 	(vi) guaranteed investment contracts are limited to those issued by insurance 
5.9 	companies or banks rated in the top four quality categories by a nationally recognized 
5.10 	rating agency or to alternative guaranteed investment contracts where the underlying 
5.11 	assets comply with the requirements of this subdivision;
5.12 	(vii) savings accounts are limited to those fully insured by federal agencies; and
5.13 	(viii) asset backed securities must be rated in the top four quality categories by a 
5.14 	nationally recognized rating agency.
5.15 	(2) Sections 16A.58, 16C.03, subdivision 4, and 16C.05 do not apply to certificates 
5.16 	of deposit and collateralization agreements executed by the covered pension plan under 
5.17 	clause (1), item (ii).
5.18 	(3) In addition to investments authorized by clause (1), item (iv), the covered 
5.19 	pension plan may purchase from the Minnesota Housing Finance Agency all or any part of 
5.20 	a pool of residential mortgages, not in default, that has previously been financed by the 
5.21 	issuance of bonds or notes of the agency. The covered pension plan may also enter into 
5.22 	a commitment with the agency, at the time of any issue of bonds or notes, to purchase 
5.23 	at a specified future date, not exceeding 12 years from the date of the issue, the amount 
5.24 	of mortgage loans then outstanding and not in default that have been made or purchased 
5.25 	from the proceeds of the bonds or notes. The covered pension plan may charge reasonable 
5.26 	fees for any such commitment and may agree to purchase the mortgage loans at a price 
5.27 	sufficient to produce a yield to the covered pension plan comparable, in its judgment, 
5.28 	to the yield available on similar mortgage loans at the date of the bonds or notes. The 
5.29 	covered pension plan may also enter into agreements with the agency for the investment 
5.30 	of any portion of the funds of the agency. The agreement must cover the period of the 
5.31 	investment, withdrawal privileges, and any guaranteed rate of return.
5.32 	(f) Corporate stocks. The covered pension plan may invest funds in stocks or 
5.33 	convertible issues of any corporation organized under the laws of the United States or the 
5.34 	states thereof, any corporation organized under the laws of the Dominion of Canada or its 
5.35 	provinces, or any corporation listed on an exchange regulated by an agency of the United 
5.36 	States or of the Canadian national government, if they conform to the following provisions:
6.1 	(1) the aggregate value of corporate stock investments, as adjusted for realized 
6.2 	profits and losses, must not exceed 85 percent of the market or book value, whichever is 
6.3 	less, of a fund, less the aggregate value of investments according to paragraph (h);
6.4 	(2) investments must not exceed five percent of the total outstanding shares of 
6.5 	any one corporation.
6.6 	(g) Exchange traded funds. The covered pension plan may invest funds in 
6.7 	exchange traded funds, subject to the maximums, the requirements, and the limitations set 
6.8 	forth in paragraph (d), (e), (f), or (h), whichever applies.
6.9 	(h) Other investments. (1) In addition to the investments authorized in paragraphs 
6.10 	(b) to (g), and subject to the provisions in clause (2), the covered pension plan may invest 
6.11 	funds in:
6.12 	(i) venture capital investment businesses through participation in limited partnerships 
6.13 	and corporations;
6.14 	(ii) real estate ownership interests or loans secured by mortgages or deeds of trust 
6.15 	through investment in limited partnerships,  or bank sponsored collective funds, trusts, and 
6.16 	insurance company commingled accounts, including separate accounts;
6.17 	(iii) regional and mutual funds through bank sponsored collective funds and 
6.18 	open-end investment companies registered under the Federal Investment Company Act 
6.19 	of 1940;
6.20 	(iv) (iii) resource investments through limited partnerships, private placements, 
6.21 	and corporations; and
6.22 	(v) (iv) international securities.
6.23 	(2) The investments authorized in clause (1) must conform to the following 
6.24 	provisions:
6.25 	(i) the aggregate value of all investments made according to clause (1) may not 
6.26 	exceed 35 45  percent of the market value of the fund for which the covered pension 
6.27 	plan is investing;
6.28 	(ii) there must be at least four unrelated owners of the investment other than the 
6.29 	covered pension plan for investments made under clause (1), item (i), (ii), (iii), or (iv);
6.30 	(iii) covered pension plan participation in an investment vehicle is limited to 20 
6.31 	percent thereof for investments made under clause (1), item (i), (ii), (iii), or (iv); and
6.32 	(iv) covered pension plan participation in a limited partnership does not include a 
6.33 	general partnership interest or other interest involving general liability. The covered 
6.34 	pension plan may not engage in any activity as a limited partner which creates general 
6.35 	liability.

7.1 	Sec. 4.  REPEALER.
 7.2 	Minnesota Statutes 2004, section 356A.06, subdivisions 4, 5, and 8b, are repealed.

7.3 	EFFECTIVE DATE. This section is effective the day following final enactment.