Purpose

This bill changes how firefighter relief associations terminate their retirement plans. It sets detailed steps for calculating assets, liabilities, benefits, and expenses; specifies how any extra money (surplus) should be allocated between the relief association and the local government; and defines how benefits are paid or rolled over to participants, including what happens if people cannot be found.

Key players and terms

• Relief association: the firefighter retirement system being terminated.
• Board of trustees: the group that runs the relief association and implements the termination.
• Affiliated municipality: the local city or town that is connected to the relief association and may receive surplus.
• General fund: the municipal fund that may have legal obligations related to the dissolution.
• Special fund: the retirement fund being liquidated.
• Participants: current firefighters with accrued benefits.
• Retirees and other benefit recipients: people already receiving benefits.
• Present value: a calculation used to determine the current worth of future benefits.
• Accrued benefit: the amount a participant has earned that is due when the plan ends.
• Lump sum, monthly pension, annuity: different forms of payment.
• Direct rollover: moving a benefit directly into another retirement account (IRA or eligible plan).
• Immediate distribution: paying out benefits promptly after termination.
• Missing/nonresponsive participants: individuals who cannot be located or who do not respond to distribution efforts.

Main provisions

1) Section on determination of assets and liabilities at termination - The board must determine, as of termination: - The fair market value of the special fund’s assets. - The present value of each participant’s accrued benefit (with full vesting considerations). - The present value of benefits remaining to be paid to each retiree and other recipients. - Administrative expenses incurred or expected through the date all benefits are distributed or the dissolution date. - The board must also create a schedule listing: - Each participant and retiree entitled to a benefit. - The amount of each benefit, years of service, and earliest payable date. - If the relief association is dissolving, the board must determine the general fund obligations of the affiliated municipality related to the retirement plan.

2) Section on surplus (allocation of any money left after paying liabilities) - If the plan is defined benefit and there is a surplus after assets minus liabilities and expenses: - The board must transfer the lesser of (a) the surplus or (b) the total required contributions the municipality made to the relief association in the current year or the prior nine years, to the affiliated municipality. - If the municipality did not make required contributions in the current year or the prior nine years, the relief association and municipality will mutually agree on how to allocate the remaining surplus. - If no agreement is reached within 180 days after termination, the surplus is split 50/50 between the relief association and the affiliated municipality. - Surplus kept by the relief association must be allocated among all eligible participants in the same proportion as the present value of their accrued benefits. For those with monthly pensions, their accrued benefit is the lump-sum present value of the monthly pension. - The board may include former participants (who separated in the last three years or other years set by the board) in eligibility for the surplus; if former participants are included, the allocation method must be adjusted accordingly. - Any surplus transferred to the municipality can only be used for purposes described in section 424A.08, paragraphs a or b.

3) Section on immediate distribution and payment of remaining obligations - The board must liquidate the special fund’s assets and pay all retirement benefits and administrative expenses within 210 days after termination. - For defined contribution plans or defined benefit plans that pay lump sums (or monthly pensions that don’t require age 50 for conversion): - Each participant or recipient may choose immediate distribution or a direct rollover to an eligible retirement plan (if allowed by law). - For defined benefit plans paying monthly pensions: - At the participant’s or recipient’s election, the board must either buy an annuity contract (naming the participant/recipient) or distribute a lump sum equal to the present value of the monthly benefits. - If an annuity is chosen, the annuity must start at a date chosen by the participant and the annuity contract must be transferred to the participant. - If a lump sum is chosen, the participant may take an immediate distribution or a direct rollover. - All assets must be distributed, including final transfers for participants who cannot be located, with any remaining administrative expenses paid.

4) Section on missing or nonresponsive participants - Definitions are provided for terms used in this section (e.g., retirement benefit, individual retirement account). - The board must attempt to locate missing participants using: - Certified mail to the address on file. - Checks or coordination with the Minnesota State Fire Department Association, the municipality, and any employer of the participant. - Checks with the participant’s designated beneficiary on file. - Internet search tools free of charge. - If the participant remains unlocated after these efforts, or if the participant does not elect a distribution or rollover, the board must: - Transfer the retirement benefit to an individual retirement account under section 408a (established in the participant’s name at a federally insured financial institution) or - Consider the retirement benefit abandoned and deposit the funds with the Minnesota Commissioner of Commerce as abandoned property, subject to applicable laws. - For monthly pensions or annuities, they may be converted to a lump sum present value if the participant remains unlocated or does not respond. - The overall goal is to finalize distributions while resolving or properly disposing of unlocated funds accounts.

5) General alignment - Throughout, the bill specifies how distributions should be handled, what forms of payment are allowed, and how to treat assets, liabilities, and administrative costs to complete the termination process in a defined timeline.

Significant changes from current law (highlights)

• Adds a strict, time-bound process for terminating the plan (210 days to liquidate assets; 180 days to reach surplus allocation agreement; 210 days for final distributions).
• Requires explicit, itemized determination of assets, liabilities, accrued benefits, and remaining benefits as of termination.
• Creates a formal process for handling surplus, including specific allocation rules between the relief association and the affiliated municipality and a fallback 50/50 split if no agreement is reached within 180 days.
• Strengthens and standardizes how missing or nonresponsive participants are treated, including mandatory steps to locate participants and clear options for transferring benefits to IRAs or abandoning property if necessary.
• Expands the use of direct rollover and annuity options for benefit payment, with clear conditions and transfer requirements for annuities.
• Requires consideration of the general fund’s obligations when the relief association dissolves.
• Allows former participants to be included in surplus allocations and requires adjustments to the allocation method if they are included.

Relevant Terms - relief association - firefighter relief association - affiliated municipality - general fund - dissolution - termination - special fund - assets - liabilities - administrative expenses - fair market value - present value - accrued benefit - vesting - lump sum - monthly pension - annuity - direct rollover - immediate distribution - missing participants - nonresponsive participants - individual retirement account (IRA) - Internal Revenue Code 408a - qualified rollover (to eligible retirement plan) - 210-day liquidation - 180-day surplus agreement period - 424A.08 (criteria for surplus use) - beneficiary - beneficiary designation - internet search tools (for locating participants) - abandoned property (deposited with Commissioner of Commerce)