HF4517

Purpose

• Establish a formal process to change the investment return assumption used to compute joint and survivor annuities for covered retirement plans.
• Set a default investment return assumption of 6.5% for these computations unless a different percentage is approved or deemed approved.
• Require updates to the actuarial standards appendix whenever such changes are approved or deemed approved.

Main Provisions

• Default assumption: For joint and survivor annuity computations, the investment return assumption is 6.5% unless a different percentage is approved or deemed approved for a specific covered retirement plan.
• Change process: A governing board of a covered retirement plan may propose a change to the investment return assumption.
• Approval requirement: A change may take effect only with approval from the Legislative Commission on Pensions and Retirement (LCPR), or after one year has passed since the proposal was received by the LCPR if no action is taken (deemed approved).
• Actuarial standards update: The executive director of the LCPR must update the appendix to the standards for actuarial work whenever a change is approved or deemed approved.

How it works in practice

• For joint and survivor annuity calculations under each covered retirement plan, the 6.5% default applies unless a plan has a different approved or deemed-approved rate.
• If a plan wants to change the rate, the governing board submits the proposal.
• The change cannot become effective until the LCPR approves it, or until a year passes with no action (deemed approval).
• Once approved or deemed approved, the appendix to the actuarial standards is updated to reflect the new assumption.

Significance and impact on law

• Introduces a formal, time-bound process for adjusting the investment return assumption used to compute joint and survivor annuities.
• Establishes a uniform default rate (6.5%) across covered retirement plans, with a clear pathway to modify it.
• Ties changes to oversight by the Legislative Commission on Pensions and Retirement, enhancing legislative review.
• Keeps actuarial guidance up to date by requiring updates to the appendix of the standards for actuarial work.

Implementation and Oversight

• Governing boards of covered retirement plans initiate changes.
• Legislative Commission on Pensions and Retirement reviews and approves changes or allows them to become effective after deemed approval.
• Executive Director of the LCPR updates the actuarial standards appendix to reflect any approved or deemed-approved changes.

Relevant Terms - investment return assumption - joint and survivor annuity - 6.5 percent - covered retirement plan - governing board - Legislative Commission on Pensions and Retirement (LCPR) - approval - deemed approved - appendix to the standards for actuarial work - standards for actuarial work - Minnesota Statutes 2024 section 356.461 subdivision 1