356.215 ACTUARIAL VALUATIONS AND EXPERIENCE STUDIES.

§

Subdivision 1.Definitions.

(a) For the purposes of sections 3.85 and 356.20 to 356.23, each of the terms in the following paragraphs has the meaning given.

(b) “Actuarial valuation” means a set of calculations prepared by an actuary retained under section 356.214 if so required under section 3.85, or otherwise, by an approved actuary, to determine the normal cost and the accrued actuarial liabilities of a benefit plan, according to the entry age actuarial cost method and based upon stated assumptions including, but not limited to rates of interest, mortality, salary increase, disability, withdrawal, and retirement and to determine the payment necessary to amortize over a stated period any unfunded accrued actuarial liability disclosed as a result of the actuarial valuation of the benefit plan.

(c) “Approved actuary” means:

(1) a person who is regularly engaged in the business of providing actuarial services and who is a fellow in the Society of Actuaries; or

(2) a firm that retains a person described in clause (1) on its staff.

(d) “Entry age actuarial cost method” means an actuarial cost method under which the actuarial present value of the projected benefits of each individual currently covered by the benefit plan and included in the actuarial valuation is allocated on a level basis over the service of the individual, if the benefit plan is governed by section 424A.093, or over the earnings of the individual, if the benefit plan is governed by any other law, between the entry age and the assumed exit age, with the portion of the actuarial present value which is allocated to the valuation year to be the normal cost and the portion of the actuarial present value not provided for at the valuation date by the actuarial present value of future normal costs to be the actuarial accrued liability, with aggregation in the calculation process to be the sum of the calculated result for each covered individual and with recognition given to any different benefit formulas which may apply to various periods of service.

(e) “Experience study” means a report providing experience data and an actuarial analysis of the adequacy of the actuarial assumptions on which actuarial valuations are based.

(f) “Actuarial value of assets” means the market value of all assets as of the preceding June 30, reduced by:

(1) 20 percent of the difference between the actual net change in the market value of total assets between the June 30 that occurred three years earlier and the June 30 that occurred four years earlier and the computed increase in the market value of total assets over that fiscal year period if the assets had earned a rate of return on assets equal to the annual percentage investment return assumption used in the actuarial valuation for the July 1 that occurred four years earlier;

(2) 40 percent of the difference between the actual net change in the market value of total assets between the June 30 that occurred two years earlier and the June 30 that occurred three years earlier and the computed increase in the market value of total assets over that fiscal year period if the assets had earned a rate of return on assets equal to the annual percentage investment return assumption used in the actuarial valuation for the July 1 that occurred three years earlier;

(3) 60 percent of the difference between the actual net change in the market value of total assets between the June 30 that occurred one year earlier and the June 30 that occurred two years earlier and the computed increase in the market value of total assets over that fiscal year period if the assets had earned a rate of return on assets equal to the annual percentage investment return assumption used in the actuarial valuation for the July 1 that occurred two years earlier; and

(4) 80 percent of the difference between the actual net change in the market value of total assets between the most recent June 30 and the June 30 that occurred one year earlier and the computed increase in the market value of total assets over that fiscal year period if the assets had earned a rate of return on assets equal to the annual percentage investment return assumption used in the actuarial valuation for the July 1 that occurred one year earlier.

(g) “Unfunded actuarial accrued liability” means the total current and expected future benefit obligations, reduced by the sum of the actuarial value of assets and the present value of future normal costs.

(h) “Standards for actuarial work” means the document required under section 3.85, subdivision 10, to be adopted by the Legislative Commission on Pensions and Retirement as so adopted and amended from time to time. §

Subd. 2.Requirements.

(a) It is the policy of the legislature that it is necessary and appropriate to determine annually the financial status of tax-supported retirement and pension plans for public employees. To achieve this goal, the actuary retained under section 356.214 shall prepare annual actuarial valuations, as of the beginning of each fiscal year, of the retirement plans enumerated in section 356.214, subdivision 1, paragraph (b), and quadrennial experience studies of the retirement plans enumerated in section 356.214, subdivision 1, paragraph (b), clauses (1), (2), and (6).

(b) The governing board or executive director of each public pension and retirement plan enumerated in section 356.20, subdivision 2, clauses (7), (9), and (10), shall have prepared by an approved actuary annual actuarial valuations of their respective funds as provided in this section. This requirement also applies to any plan that is the successor to any organization enumerated in section 356.20, subdivision 2, or to the governing board or chief administrative officer of any newly formed retirement fund, plan, or association operating under the control or supervision of any public employee group, governmental unit, or institution receiving a portion of its support through legislative appropriations, and any local police or fire relief association to which section 356.216 applies. §

Subd. 2a.

[Repealed, 2008 c 349 art 10 s 18] §

Subd. 3.Reports.

(a) The governing board or executive director of each public pension plan required to prepare an annual valuation under subdivision 2 must deliver the annual valuation to the executive director of the Legislative Commission on Pensions and Retirement, the commissioner of management and budget, and the Legislative Reference Library no later than the last day of the sixth month occurring after the end of the previous fiscal year. The annual valuation may be delivered by email.

(b) The governing board or executive director of each public pension plan required to prepare a quadrennial experience study under subdivision 2 must deliver the quadrennial experience study to the executive director of the Legislative Commission on Pensions and Retirement, the commissioner of management and budget, and the Legislative Reference Library, no later than the last day of the 12th month occurring after the end of the last fiscal year of the four-year period covered by the experience study. The quadrennial experience study may be delivered by email. §

Subd. 4.Actuarial valuation; contents.

(a) The actuarial valuation must be made in conformity with the requirements of the definition contained in subdivision 1 and the standards for actuarial work.

(b) The actuarial valuation must measure all aspects of the benefit plan of the fund in accordance with changes in benefit plans, if any, and salaries reasonably anticipated to be in force during the ensuing fiscal year. The actuarial valuation must be prepared in accordance with the entry age actuarial cost method. The actuarial valuation required under this section must include the information required in subdivisions 5 to 15. §

Subd. 4a.

[Renumbered subd 5] §

Subd. 4b.

[Renumbered subd 6] §

Subd. 4c.

[Renumbered subd 7] §

Subd. 4d.

[Renumbered subd 8] §

Subd. 4e.

[Renumbered subd 9] §

Subd. 4f.

[Renumbered subd 10] §

Subd. 4g.

[Renumbered subd 11] §

Subd. 4h.

[Renumbered subd 12] §

Subd. 4i.

[Renumbered subd 13] §

Subd. 4j.

[Renumbered subd 14] §

Subd. 4k.

[Renumbered subd 15] §

Subd. 5.

MS 2000 [Renumbered subd 16] §

Subd. 5.Normal cost.

For a fund providing benefits in whole or in part under a defined benefit plan, the actuarial valuation must indicate the level normal cost of the benefits provided under the laws governing the fund as of the date of the valuation, calculated in accordance with the entry age actuarial cost method. The normal cost must be expressed as a level percentage of the present value of future payrolls of the active participants of the fund as of the date of the valuation. §

Subd. 6.

MS 2000 [Renumbered subd 17] §

Subd. 6.Accrued liability.

For a fund providing benefits under a defined benefit plan, the actuarial valuation must contain an exhibit indicating the actuarial accrued liabilities of the fund. This figure is the present value of future benefits reduced by the present value of future normal costs, calculated in accordance with the entry age actuarial cost method. §

Subd. 7.

MS 2000 [Renumbered subd 18] §

Subd. 7.Defined contribution plan accumulations.

For each fund providing benefits under a money purchase or defined contribution plan, the actuarial valuation must contain an exhibit indicating the member contributions accumulated at interest, as apportioned to members accounts, to the date of the valuation. These accumulations must be separately tabulated in a manner which properly reflects any differences in money purchase or defined contribution annuity rates which may apply. §

Subd. 8.Actuarial assumptions.

(a) The actuarial valuation must use the applicable following investment return assumption:

(b) The actuarial valuation for each of the covered retirement plans listed in section 356.415, subdivision 2, and the St. Paul Teachers Retirement Fund Association must take into account the postretirement adjustment rate or rates applicable to the plan as specified in section 354A.29, subdivision 7, or 356.415, whichever applies.

(c) The actuarial valuation must use the applicable salary increase and payroll growth assumptions found in the appendix to the standards for actuarial work. The appendix must be updated whenever new assumptions have been approved or deemed approved under subdivision 18.

(d) The assumptions set forth in the appendix to the standards for actuarial work continue to apply, unless a different salary assumption or a different payroll increase assumption:

(1) has been proposed by the governing board of the applicable retirement plan;

(2) is accompanied by the concurring recommendation of the actuary retained under section 356.214, subdivision 1, if applicable, or by the approved actuary preparing the most recent actuarial valuation report if section 356.214 does not apply; and

(3) has been approved or deemed approved under subdivision 18. §

Subd. 9.Other assumptions.

(a) Each plan’s actuarial valuation must use assumptions concerning base mortality rates, disability, retirement, withdrawal, retirement age, and any other relevant demographic or economic factor. These assumptions must be set at levels consistent with those determined in the most recent quadrennial experience study completed under subdivision 16, if required, or as recommended by the plan’s approved actuary, if a quadrennial experience study is not required.

(b) The actuarial valuation may use an assumption concerning future mortality improvement. This assumption may be set at levels consistent with those determined in the most recent mortality improvement scale published by the Society of Actuaries or as otherwise recommended by the plan’s approved actuary.

(c) The actuarial valuation must contain an exhibit indicating the actuarial assumptions used in preparing the valuation report. §

Subd. 10.Public sector accounting disclosure information.

The actuarial valuation must contain those actuarial calculations that are necessary to allow the retirement plan administration or participating employing units to prepare the pension-related portions of annual financial reporting that meet generally accepted accounting principles for the public sector. §

Subd. 11.Amortization contributions.

(a) The actuarial valuation of each pension plan listed in subdivision 8, paragraph (a), other than the legislators retirement plan, the Bloomington Fire Department Relief Association, and the local monthly benefit volunteer firefighter relief associations, must contain an exhibit indicating the additional annual contribution sufficient to amortize on a level percent of payroll basis the unfunded actuarial accrued liability resulting from any of the following changes, over the period specified for that change, except that the pension plan’s unfunded actuarial accrued liability as of July 1, 2024, must be amortized over a period that ends June 30, 2048:

(1) experience gain or loss: 15 years;

(2) assumption or method change: 20 years;

(3) benefit change for active members: 15 years;

(4) long-term benefit change for inactive members: 15 years;

(5) short-term benefit change for inactive members: the number of years during which the benefit change will be in effect; and

(6) an annual contribution that is more or less than the actuarially determined contribution: 15 years.

(b) The amortization periods specified in paragraph (a) apply:

(1) unless the standards for actuarial work state otherwise;

(2) except that, for the legislators retirement plan, the additional annual contribution sufficient to amortize the unfunded actuarial accrued liability must be calculated on a level dollar basis with an amortization period of one year; and

(3) except that, for the State Patrol retirement plan, the public employees police and fire retirement plan, and the Teachers Retirement Association, the unfunded actuarial accrued liability resulting from benefit increases enacted in 2025 must be amortized over a period that ends June 30, 2048. §

Subd. 12.Actuarial gains and losses.

The actuarial valuation must contain an exhibit consisting of an analysis by the actuary explaining the net increase or decrease in the unfunded actuarial accrued liability since the last valuation. The explanation must subdivide the net increase or decrease in the unfunded actuarial accrued liability into at least the following parts:

(1) increases or decreases in the unfunded actuarial accrued liability because of changes in benefits;

(2) increases and decreases in the unfunded actuarial accrued liability because of changes in actuarial assumptions;

(3) increases or decreases in the unfunded actuarial accrued liability attributable to actuarial gains or losses resulting from any experience deviations from the assumptions on which the valuation is based, as follows:

(i) actual investment earnings;

(ii) actual postretirement mortality rates;

(iii) actual salary increase rates; and

(iv) the remainder of the increase or decrease not attributable to any separate source;

(4) increases or decreases in unfunded actuarial accrued liability because of other reasons, including the effect of any amortization contribution paid or additional amortization contribution previously calculated but unpaid; and

(5) increases or decreases in unfunded actuarial accrued liability because of changes in eligibility requirements or groups included in the membership of the fund. §

Subd. 13.Membership tabulation.

(a) The actuarial valuation must contain a tabulation of active membership and annuitants in the fund. If the membership of a fund is under more than one general benefit program, a separate tabulation must be made for each general benefit program.

(b) The tabulations must be prepared by the administration of the pension fund and must contain the following information:

(c) The tabulation required under paragraph (b), clause (2), must be made separately for each of the following classes of benefit recipients:

(1) service retirement annuitants;

(2) disability benefit recipients;

(3) survivor benefit recipients; and

(4) deferred annuitants. §

Subd. 14.Administrative expenses.

(a) The actuarial valuation must indicate the administrative expenses of the fund, expressed both in dollars and as a percentage of covered payroll.

(b) Administrative expenses are the costs incurred by the retirement plans in the course of operating the plan, excluding investment expenses. Investment expenses include all expenses incurred for the retention of professional external investment managers and professional investment consultants, custodian bank fees, investment transaction costs, and the costs incurred by the retirement plans to manage investment portfolios or assets internally. Investment expenses must be deducted from the investment return used in the actuarial valuation, and must not be included in administrative expenses when calculating the allowance for expenses. §

Subd. 15.Benefit plan summary.

The actuarial valuation must contain a summary of the principal provisions of the benefit plan upon which the valuation is based. §

Subd. 16.Quadrennial experience study; contents.

A quadrennial experience study, if required, must contain an analysis by the approved actuary of the experience of the fund and a comparison of the experience with the actuarial assumptions on which the most recent actuarial valuation of the retirement fund was based. §

Subd. 17.Actuarial services by approved actuaries.

(a) The actuarial valuation or quadrennial experience study must be made and any actuarial consulting services for a retirement fund or plan must be provided by an approved actuary. The actuarial valuation or quadrennial experience study must include a signed written declaration that it has been prepared according to sections 356.20 to 356.23 and according to the standards for actuarial work.

(b) Actuarial valuations or experience studies prepared by an approved actuary retained by a retirement fund or plan must be submitted to the Legislative Commission on Pensions and Retirement within ten days of the submission of the document to the retirement fund or plan. §

Subd. 18.Establishment of actuarial assumptions.

(a) The actuarial assumptions used for the preparation of actuarial valuations under this section that are other than the interest rate may be changed only with the approval of the Legislative Commission on Pensions and Retirement or after a period of one year has elapsed since the date on which the proposed assumption change or changes were received by the Legislative Commission on Pensions and Retirement without commission action.

(b) A change in the applicable actuarial assumptions may be proposed by the governing board of the applicable pension fund or relief association, by an actuary retained under section 356.214 or by the actuary retained by a local relief association governed by sections 424A.091 to 424A.096 or by Laws 2013, chapter 111, article 5, sections 31 to 42, if one is retained.

History:

1975 c 192 s 3; 1978 c 563 s 9,10; 1979 c 184 s 1; 1981 c 224 s 169; 1984 c 564 s 43; 1Sp1985 c 7 s 27; 1986 c 359 s 26; 1986 c 458 s 20; 1987 c 259 s 55; 1989 c 319 art 13 s 90,91; 1991 c 199 art 2 s 24; 1991 c 269 art 3 s 3-19; 1991 c 345 art 4 s 3,4; 1993 c 336 art 4 s 1; 1993 c 352 s 7; 1995 c 141 art 3 s 14,15; 1997 c 233 art 1 s 57-59; 1997 c 241 art 4 s 1; 1998 c 390 art 8 s 2; 1999 c 222 art 4 s 14; 2000 c 461 art 1 s 3-6; 1Sp2001 c 10 art 11 s 18; 2002 c 392 art 9 s 1; art 11 s 7,53; 2004 c 223 s 7,8; 1Sp2005 c 8 art 11 s 2; 2006 c 271 art 3 sec 47; 2006 c 277 art 3 s 33,34; 2008 c 204 s 41; 2008 c 349 art 10 s 10-15; 2009 c 86 art 1 s 90; 2009 c 101 art 2 s 109; 2009 c 169 art 1 s 70,71; 2010 c 359 art 1 s 68,69; art 9 s 1; art 11 s 19,20; 1Sp2011 c 8 art 3 s 1; art 6 s 19; art 7 s 19; art 8 s 6,14; 2012 c 286 art 1 s 1-3; art 8 s 7; art 11 s 6; 2013 c 111 art 2 s 26,27; art 5 s 61,80; art 13 s 17; 2014 c 275 art 2 s 25; 2014 c 296 art 6 s 34,49; art 7 s 3; art 10 s 1,2; 2015 c 68 art 1 s 1; art 8 s 30; art 13 s 44,45; art 14 s 18; 2017 c 40 art 1 s 113; 2018 c 211 art 5 s 1-3; 1Sp2019 c 8 art 8 s 18,23; 2023 c 45 art 1 s 1; 2023 c 64 art 14 s 8; 2024 c 102 art 8 s 1; art 12 s 3,4; 2025 c 37 art 10 s 2-6

History: History: 1975 c 192 s 3; 1978 c 563 s 9,10; 1979 c 184 s 1; 1981 c 224 s 169; 1984 c 564 s 43; 1Sp1985 c 7 s 27; 1986 c 359 s 26; 1986 c 458 s 20; 1987 c 259 s 55; 1989 c 319 art 13 s 90,91; 1991 c 199 art 2 s 24; 1991 c 269 art 3 s 3-19; 1991 c 345 art 4 s 3,4; 1993 c 336 art 4 s 1; 1993 c 352 s 7; 1995 c 141 art 3 s 14,15; 1997 c 233 art 1 s 57-59; 1997 c 241 art 4 s 1; 1998 c 390 art 8 s 2; 1999 c 222 art 4 s 14; 2000 c 461 art 1 s 3-6; 1Sp2001 c 10 art 11 s 18; 2002 c 392 art 9 s 1; art 11 s 7,53; 2004 c 223 s 7,8; 1Sp2005 c 8 art 11 s 2; 2006 c 271 art 3 sec 47; 2006 c 277 art 3 s 33,34; 2008 c 204 s 41; 2008 c 349 art 10 s 10-15; 2009 c 86 art 1 s 90; 2009 c 101 art 2 s 109; 2009 c 169 art 1 s 70,71; 2010 c 359 art 1 s 68,69; art 9 s 1; art 11 s 19,20; 1Sp2011 c 8 art 3 s 1; art 6 s 19; art 7 s 19; art 8 s 6,14; 2012 c 286 art 1 s 1-3; art 8 s 7; art 11 s 6; 2013 c 111 art 2 s 26,27; art 5 s 61,80; art 13 s 17; 2014 c 275 art 2 s 25; 2014 c 296 art 6 s 34,49; art 7 s 3; art 10 s 1,2; 2015 c 68 art 1 s 1; art 8 s 30; art 13 s 44,45; art 14 s 18; 2017 c 40 art 1 s 113; 2018 c 211 art 5 s 1-3; 1Sp2019 c 8 art 8 s 18,23; 2023 c 45 art 1 s 1; 2023 c 64 art 14 s 8; 2024 c 102 art 8 s 1; art 12 s 3,4; 2025 c 37 art 10 s 2-6