1.1 	A bill for an act
1.2 	relating to retirement; Minneapolis Teachers
1.3 	Retirement Fund Association and expanded list plans;
1.4 	clarifying mutual fund authority; revising investment
1.5 	authority to exclude below-investment grade bonds;
1.6 	amending Minnesota Statutes 2004, sections 354A.28,
1.7 	subdivision 5; 356A.06, subdivision 7.
1.8 	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

1.9 	Section 1. Minnesota Statutes 2004, section 354A.28,
1.10 	subdivision 5, is amended to read:
1.11 		Subd. 5.Investment.  The assets of the annuity reserve
1.12 	fund must be invested, reinvested, and retained in the
1.13 	discretion of by the board of trustees of the Minneapolis
1.14 	Teachers Retirement Fund Association in authorized investments
1.15 	under section 11A.24 356A.06, subdivision 7.

1.16 	Sec. 2. Minnesota Statutes 2004, section 356A.06,
1.17 	subdivision 7, is amended to read:
1.18 		Subd. 7.Expanded list of authorized investment
1.19 	securities.  (a)  [AUTHORITY.] Except to the extent otherwise
1.20 	authorized by law or bylaws, a covered pension plan not
1.21 	described by subdivision 6, paragraph (a), may shall invest its
1.22 	assets only in accordance with this subdivision.
1.23 	(b)  [SECURITIES GENERALLY.] The covered pension plan has
1.24 	the authority to purchase, sell, lend, or exchange the
1.25 	securities specified in paragraphs (c) to (g) (h), including
1.26 	puts and call options and future contracts traded on a contract
2.1 	market regulated by a governmental agency or by a financial
2.2 	institution regulated by a governmental agency.  These
2.3 	securities may be owned as units in commingled trusts that own
2.4 	the securities described in paragraphs (c) to (g) (h).
2.5 	(c)  [GOVERNMENT OBLIGATIONS.] The covered pension plan may
2.6 	invest funds in governmental bonds, notes, bills, mortgages, and
2.7 	other evidences of indebtedness provided the issue is backed by
2.8 	the full faith and credit of the issuer or the issue is rated
2.9 	among the top four quality rating categories by a nationally
2.10 	recognized rating agency.  The obligations in which funds may be
2.11 	invested under this paragraph include guaranteed or insured
2.12 	issues of (1) the United States, its agencies, its
2.13 	instrumentalities, or organizations created and regulated by an
2.14 	act of Congress; (2) Canada and its provinces, provided the
2.15 	principal and interest is payable in United States dollars; (3)
2.16 	the states and their municipalities, political subdivisions,
2.17 	agencies, or instrumentalities; (4) the International Bank for
2.18 	Reconstruction and Development, the Inter-American Development
2.19 	Bank, the Asian Development Bank, the African Development Bank,
2.20 	or any other United States government sponsored organization of
2.21 	which the United States is a member, provided the principal and
2.22 	interest is payable in United States dollars.
2.23 	(d)  [CORPORATE OBLIGATIONS.] The covered pension plan may
2.24 	invest funds in bonds, notes, debentures, transportation
2.25 	equipment obligations, or any other longer term evidences of
2.26 	indebtedness issued or guaranteed by a corporation organized
2.27 	under the laws of the United States or any state thereof, or the
2.28 	Dominion of Canada or any province thereof if they conform to
2.29 	the following provisions:
2.30 	(1) the principal and interest of obligations of
2.31 	corporations incorporated or organized under the laws of the
2.32 	Dominion of Canada or any province thereof must be payable in
2.33 	United States dollars; and
2.34 	(2) obligations must be rated among the top four quality
2.35 	categories by a nationally recognized rating agency.
2.36 	(e)  [OTHER OBLIGATIONS.] (1) The covered pension plan may
3.1 	invest funds in bankers acceptances, certificates of deposit,
3.2 	deposit notes, commercial paper, mortgage participation
3.3 	certificates and pools, asset backed securities, repurchase
3.4 	agreements and reverse repurchase agreements, guaranteed
3.5 	investment contracts, savings accounts, and guaranty fund
3.6 	certificates, surplus notes, or debentures of domestic mutual
3.7 	insurance companies if they conform to the following provisions:
3.8 	(i) bankers acceptances and deposit notes of United States
3.9 	banks are limited to those issued by banks rated in the highest
3.10 	four quality categories by a nationally recognized rating
3.11 	agency;
3.12 	(ii) certificates of deposit are limited to those issued by
3.13 	(A) United States banks and savings institutions that are rated
3.14 	in the highest four quality categories by a nationally
3.15 	recognized rating agency or whose certificates of deposit are
3.16 	fully insured by federal agencies; or (B) credit unions in
3.17 	amounts up to the limit of insurance coverage provided by the
3.18 	National Credit Union Administration;
3.19 	(iii) commercial paper is limited to those issued by United
3.20 	States corporations or their Canadian subsidiaries and rated in
3.21 	the highest two quality categories by a nationally recognized
3.22 	rating agency;
3.23 	(iv) mortgage participation or pass through certificates
3.24 	evidencing interests in pools of first mortgages or trust deeds
3.25 	on improved real estate located in the United States where the
3.26 	loan to value ratio for each loan as calculated in accordance
3.27 	with section 61A.28, subdivision 3, does not exceed 80 percent
3.28 	for fully amortizable residential properties and in all other
3.29 	respects meets the requirements of section 61A.28, subdivision
3.30 	3;
3.31 	(v) collateral for repurchase agreements and reverse
3.32 	repurchase agreements is limited to letters of credit and
3.33 	securities authorized in this section;
3.34 	(vi) guaranteed investment contracts are limited to those
3.35 	issued by insurance companies or banks rated in the top four
3.36 	quality categories by a nationally recognized rating agency or
4.1 	to alternative guaranteed investment contracts where the
4.2 	underlying assets comply with the requirements of this
4.3 	subdivision;
4.4 	(vii) savings accounts are limited to those fully insured
4.5 	by federal agencies; and
4.6 	(viii) asset backed securities must be rated in the top
4.7 	four quality categories by a nationally recognized rating agency.
4.8 	(2) Sections 16A.58, 16C.03, subdivision 4, and 16C.05 do
4.9 	not apply to certificates of deposit and collateralization
4.10 	agreements executed by the covered pension plan under clause
4.11 	(1), item (ii).
4.12 	(3) In addition to investments authorized by clause (1),
4.13 	item (iv), the covered pension plan may purchase from the
4.14 	Minnesota Housing Finance Agency all or any part of a pool of
4.15 	residential mortgages, not in default, that has previously been
4.16 	financed by the issuance of bonds or notes of the agency.  The
4.17 	covered pension plan may also enter into a commitment with the
4.18 	agency, at the time of any issue of bonds or notes, to purchase
4.19 	at a specified future date, not exceeding 12 years from the date
4.20 	of the issue, the amount of mortgage loans then outstanding and
4.21 	not in default that have been made or purchased from the
4.22 	proceeds of the bonds or notes.  The covered pension plan may
4.23 	charge reasonable fees for any such commitment and may agree to
4.24 	purchase the mortgage loans at a price sufficient to produce a
4.25 	yield to the covered pension plan comparable, in its judgment,
4.26 	to the yield available on similar mortgage loans at the date of
4.27 	the bonds or notes.  The covered pension plan may also enter
4.28 	into agreements with the agency for the investment of any
4.29 	portion of the funds of the agency.  The agreement must cover
4.30 	the period of the investment, withdrawal privileges, and any
4.31 	guaranteed rate of return.
4.32 	(f)  [CORPORATE STOCKS.] The covered pension plan may
4.33 	invest funds in stocks or convertible issues of any corporation
4.34 	organized under the laws of the United States or the states
4.35 	thereof, the Dominion of Canada or its provinces, or any
4.36 	corporation listed on the New York Stock Exchange or the
5.1 	American Stock Exchange, if they conform to the following
5.2 	provisions:
5.3 	(1) the aggregate value of corporate stock investments, as
5.4 	adjusted for realized profits and losses, plus the aggregate
5.5 	value of investments under paragraph (h),must not exceed 85
5.6 	percent of the market or book value, whichever is less, of a
5.7 	fund, less the aggregate value of investments according to
5.8 	subdivision 6; and 
5.9 	(2) investments must not exceed five percent of the total
5.10 	outstanding shares of any one corporation.
5.11 	(g)  [COMINGLED OR MUTUAL INVESTMENTS.] The covered pension
5.12 	plan may invest in index funds or mutual funds, including index
5.13 	mutual funds, through bank-sponsored collective funds and shares
5.14 	of open-end investment companies registered under the Federal
5.15 	Investment Company Act of 1940, if the investments of the index
5.16 	or mutual fund comply with paragraphs (c) to (f), and paragraph
5.17 	(h), clause (1)(iv).
5.18 	(h) [OTHER INVESTMENTS.] (1) In addition to the
5.19 	investments authorized in paragraphs (b) to (f) (g), and subject
5.20 	to the provisions in clause (2), the covered pension plan may
5.21 	invest funds in:
5.22 	(i) venture capital investment businesses through
5.23 	participation in limited partnerships and corporations;
5.24 	(ii) real estate ownership interests or loans secured by
5.25 	mortgages or deeds of trust through investment in limited
5.26 	partnerships, bank sponsored collective funds, trusts, and
5.27 	insurance company commingled accounts, including separate
5.28 	accounts;
5.29 	(iii) regional and mutual funds through bank sponsored
5.30 	collective funds and open-end investment companies registered
5.31 	under the Federal Investment Company Act of 1940;
5.32 	(iv) resource investments through limited partnerships,
5.33 	private placements, and corporations; and 
5.34 	(v) (iv) international securities; and 
5.35 	(v) high yield bonds or emerging market debt; up to no more
5.36 	than five percent of total fund assets.
6.1 	(2) The investments authorized in clause (1) must conform
6.2 	to the following provisions:
6.3 	(i) the aggregate value of all investments made according
6.4 	to clause (1) may not exceed 35 percent of the market value of
6.5 	the fund for which the covered pension plan is investing;
6.6 	(ii) there must be at least four unrelated owners of the
6.7 	investment other than the state board covered pension plan for
6.8 	investments made under clause (1), item (i), (ii), or (iii), or
6.9 	(iv);
6.10 	(iii) covered pension plan participation in an investment
6.11 	vehicle is limited to 20 percent thereof for investments made
6.12 	under clause (1), item (i), (ii), or (iii), or (iv); and
6.13 	(iv) covered pension plan participation in a limited
6.14 	partnership does not include a general partnership interest or
6.15 	other interest involving general liability.  The covered pension
6.16 	plan may not engage in any activity as a limited partner which
6.17 	creates general liability.

6.18 	Sec. 3. TRANSITION PROVISION.
 6.19 	A covered pension plan with investments that on the day
6.20 	prior to the effective date of this section do not comply with
6.21 	section 2 shall divest of any assets not in compliance before
6.22 	January 1, 2008.

6.23 	Sec. 4. EFFECTIVE DATE.
 6.24 	Sections 1 to 3 are effective the day following final
6.25 	enactment.