LEGISLATIVE COMMISSION ON PENSIONS AND RETIREMENT

Senator Dean E. Johnson, Chair of the Legislative Commission on Pensions and Retirement, called the meeting to order at 9:40 a.m.

Representatives Philip Krinkie, Ann Lenczewski, Harry Mares, and Mary Murphy

Senators Don Betzold, Dean Johnson, and Lawrence Pogemiller

Representative Steve Smith

Senators Dan Stevens and Roy Terwilliger

Mr. David Bergstrom, Executive Director, MSRS, and chair of the task force, reported back that the group of interested parties met on August 22 and reduced the size of the task force to eleven members. The task force will consist of representatives from MSRS and PERA, the State Patrol Communications Supervisor, representatives from Teamsters 320, MAPE, AFSCME, the Minnesota Association of County Probation Officers, the Metropolitan Inter-County Association, the League of Cities, the Department of Corrections Labor Relations Manager, and a State Patrol designee. Mr. Bergstrom said that the task force is planning to meet again on September 24 with task force members to put together position papers by September 13, and that the meeting will be open to anyone who is interested.

Mr. Daniel J. Wells, Director of Law Enforcement Labor Services, testified that as the largest representative of peace officers, corrections officers, and 911 dispatchers in the state he believes they should be represented on the task force.

Mr. Bergstrom said that there were some people who were already told no, and that AFSCME has been appointed to represent the county post-sentencing officers. He noted that all of the meetings would be open and that they would try to include everyone they possibly can.

Sen. Johnson asked Mr. Wells if it would be satisfactory if he were assured that his organization and interests are allowed to give testimony to the group. Mr. Wells responded that would suffice, so long as they are provided the information about meeting dates and are allowed to provide input.

Mr. Edward Burek, Deputy Director, Legislative Commission on Pensions and Retirement, continued the review of Minnesota public pension plan investment performance that was begun at the July Commission meeting, noting that a few modifications were made to the memo in order to include Minneapolis Fire information that was not available for the prior meeting. Mr. Burek then reviewed the remainder of the staff memo on the topic.

Sen. Betzold asked if, while many of the smaller funds desire to manage their own investment, there is anything to prohibit them from turning them over to the State Board of Investment (SBI) and have it invest the money. Mr. Burek responded that they have authority in law to do so, and that there are at least 70 that do have at least a portion of their assets invested in the SBI. Mr. Burek cautioned members that even if volunteer relief associations decide to invest all of their assets with the SBI it doesn’t necessarily mean that the results are going to be all that desirable because under current law the relief association would still continue to control the asset mix.

Sen. Johnson asked if anyone wished to respond to the investment document reviewed by Mr. Burek.

Ms. Judith Johnson, Executive Director, testified with suggestions to help create more knowledge on the part of the Commission: 1) if Mr. Burek could either have pension funds furnish or could prepare how they get their performance information and how it is calculated; 2) the State Auditor considered that if the return was within ½ percent of what the custodian calculated that was close enough, so perhaps Commission staff should suggest 1/10^th of one percent if a closer standard is desired; and 3) Ms. Johnson recommends looking at the risk level for each specific plan with regard to level of return.

Rep. Krinkie asked Ms. Johnson for an update on any further action by MERF regarding the termination of AIM. Ms. Johnson replied that there has been a lot going on – AIM has announced that they are going out of business, MERF has initiated a lawsuit filed in district court and turned over regulatory complaints to the three federal agencies.

Rep. Lenczewski thanked Mr. Burek for the report. She said that she has spent time with the Bloomington mayor, city manager, fire chief, and relief association board and that they are reviewing, responding, and reacting to the information.

Representative Krinkie informed members that Mr. Burek prepared for him a comparison between the actual rates of return and the actuarial assumption rates and if other members so desire, they can request a copy of the document from staff.

Ms. Karen Kilberg, Executive Director, MTRFA, updated members on the AIM situation. On August 9, MTRFA filed a lawsuit covering nine items against the firm and its major owners.

Ms. Kilberg responded to members’ questions regarding MTRFA’s investment performance reporting. Ms. Kilberg said that it would be helpful for staff to look at longer-term performance (10 years or more).

Senator Betzold asked whether the Minnesota Congressional delegation had been informed about the AIM situation. Ms. Kilberg said that MTRFA has not done so, but they will if they do not get any satisfaction from the Securities and Exchange Commission (SEC). Ms. Johnson replied that MERF intends to file the complaints with the two senators. Senator Betzold recommended that the entire delegation be informed so they can be prepared.

Senator Pogemiller suggested that the fund directors, the State Auditor, and Commission staff meet to discuss how to resolve the differences in the computed investment returns as shown in Table 4 of the staff memo on investment performance, and to discuss an appropriate longer time horizon.

Mr. Brian Rice, representing the Minneapolis police and fire relief associations, commented that the Office of the State Auditor report number was done pursuant to legislation and that most of these funds have professionals who are hired to calculate their rates of returns. Mr. Rice stated that he does not believe the OSA has the same level of expertise as those professionals.

Ms. Judith Strobel, Director, Office of the State Auditor Pension Oversight Division, indicated that that they always welcome working with the fund directors and that she would immediately relay the Commission’s request to Auditor Dutcher.

This item was laid over.

The meeting adjourned at 11:20 a.m.