SF3897

Purpose

• Establish a framework to terminate firefighter relief associations’ retirement plans and dissolve the related special fund. The bill sets how to determine assets and liabilities, how to handle any surplus, how benefits are paid or rolled over, and how to locate or treat participants who cannot be found.

Key Provisions and What They Do

• Determination of assets, liabilities, and benefits (Sec. 1)

  • The board of trustees must determine, as of the termination date:
  • The fair market value of the special fund assets.
  • The present value of each participant’s accrued benefit, considering full vesting and any approved changes.
  • The present value of benefits still owed to any retirees or other recipients.
  • Administrative expenses incurred or expected through the distribution date.
  • The board must compile a detailed schedule listing each participant and retiree, the benefits owed, years of service, and earliest payment date.
  • If the relief association is dissolving, the board also must determine the legal obligations of the relief association’s general fund.

• Allocation of any surplus (Sec. 2)

  • If, after valuing assets, liabilities, and expenses, the plan has a surplus (for a defined benefit plan), the board must transfer the lesser of:
  • The surplus amount, or
  • The sum of all required contributions the municipality made to the relief association during the year of termination or the previous nine years.
  • If the municipality did not make required contributions or if surplus remains after the transfer in the previous step, the relief association and municipality must 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 municipality.
  • Any surplus kept by the relief association must be allocated among eligible participants in proportion to the present value of each participant’s accrued benefit, and each participant’s accrued benefit may be increased by their share of the surplus.
  • For participants receiving a monthly pension, the “accrued benefit” used for surplus allocation is the present value of the monthly pension benefits to which they are entitled.
  • Eligibility to share in the surplus may include current and certain former participants, with the method possibly adjusted if former participants are included.
  • Any surplus transferred to the municipality may only be used for purposes described in another statute (section 424A.08, paragraph a or b).

• Immediate distribution and payment methods (Sec. 3)

  • The board must liquidate the special fund and pay all retirement benefits and administrative expenses within 210 days after termination.
  • For plans that are defined contribution or pay lump sums (or defined benefits without monthly payments), participants/beneficiaries may elect:
  • An immediate distribution, or
  • A direct rollover to an eligible retirement plan, if the distribution is an eligible rollover distribution.
  • For defined benefit plans that pay monthly pension benefits:
  • The board must, at the participant’s/beneficiary’s election, either purchase an annuity contract naming the participant/beneficiary as insured, or distribute a lump sum equal to the present value of the monthly benefits.
  • If an annuity is chosen, the contract must commence on a date chosen by the insured, and the title to the annuity must be transferred to the insured.
  • If a lump sum is chosen, the option to take an immediate distribution or a direct rollover applies.
  • The board must complete all liquidations and distributions for all assets even for participants or beneficiaries who cannot be located or are unresponsive, and pay any remaining administrative expenses related to the termination.

• Missing or nonresponsive participants (Sec. 4)

  • Definitions are provided for terms used (retirement benefit, individual retirement account, etc.).
  • The board must make diligent efforts to locate participants or beneficiaries, including:
  • Sending notices by certified mail to addresses on file.
  • Coordinating with the Minnesota State Fire Department Association, the municipality, and any employer of the participant.
  • Checking with the participant’s designated beneficiary on file.
  • Using free Internet search tools.
  • If the board cannot locate the participant after these steps, or if the participant does not elect a distribution/rollover or an annuity, the board must:
  • Transfer the retirement benefit to an Individual Retirement Account under Internal Revenue Code section 408a, established in the participant’s name at a federally insured institution, or
  • Consider the retirement benefit abandoned and deposit the amount with the commissioner of commerce (as unclaimed property).
  • A monthly pension or annuity may be converted to a lump sum equal to its present value if needed to dispose of the benefit.
  • The term “retirement benefit” and related terms are defined to guide these actions.

Significant Changes to Existing Law

• Adds a comprehensive, published process for terminating firefighter relief associations, including:
  • A clear scheduling and reporting requirement (assets, liabilities, beneficiary details, and earliest payout dates).
  • A defined method for handling any surplus, including municipality payment history considerations and a formal 180-day decision window.
  • Explicit timelines for final distribution (210 days) and election options for distributions (immediate, rollover, or annuity) depending on plan type.
  • A robust framework for locating missing participants and options for disposing of unlocated benefits (including potential transfer to an IRA or to the state’s unclaimed property system).
• Changes emphasize that surplus allocations and fund disposals must align with specific sections and rules (e.g., 424A.08, 408a, 356.633), and require careful consideration of former participants and the present value of accrued benefits in allocations.

Practical Implications

• Firefighter relief associations will have a legally codified, time-bound path to terminate plans and distribute assets.
• Municipalities may receive surplus funds under specified conditions, affecting local funding and future budgeting.
• There are strict procedures for distributing benefits and for handling missing participants, reducing the risk of unclaimed assets and ensuring benefits reach eligible recipients or their estates.

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