EXECUTIVE COMMITTEE of the
LEGISLATIVE COMMISSION ON PENSIONS AND RETIREMENT

Call to order: Representative Steve Smith called the meeting to order at 9:30 a.m.

Executive Committee Members Present: Representative Steve Smith and Senator Cal Larson

Mr. Lawrence Martin, Executive Director, Legislative Commission on Pensions and Retirement, reviewed the the Milliman USA contract issue and the potential courses of action set forth in the January 8, 2004, Commission staff memo. Representative Smith indicated his preference for Option #7, with Option #4 as a back-up, and Option #2 if the other options cannot be implemented.

Option #7 would retain a single actuary to be the production actuary for the official annual actuarial valuations, with that actuary retained jointly by the three largest pension funds. Option #4 would be a rebidding of the Commission actuarial contract in its current structure. Option #2 would be continued negotiations with Milliman USA over the liability limitation, mandatory arbitration, and third party reliance limitation issues.

Senator Larson indicated his support for Representative Smith’s preferences and made a motion that they be recommended to the Commission. The Commission staff indicated that, if the motion prevailed, the staff would attempt to develop the option more fully and would circulate the potential implementation plan to the Committee members and to the various interested parties for review and comment.

After receiving comments from David Bergstrom of MSRS, Mary Vanek of PERA, Gary Austin of TRA, and David Johnson, representing the Duluth Teachers Retirement Fund Association and the Minneapolis Fire Relief Association, the Executive Committee voted and the Larson motion passed. The comments from the pension plan representatives attending the meeting focused on several issues, including:

1. The question of who would bear the cost of actuarial work performed in response to a benefit increase request from a legislator or from an interest group which is at variance with the employees or employers covered by the pension plan;
2. How a joint actuary and the various actuaries retained by the seven pension systems currently would work;
3. How input from the four pension systems other than MSRS, PERA, and TRA on the actuarial selection and on contract terms would be incorporated into the process; and
4. To whom the jointly retained actuary would owe loyalty in resolving actuarial and related questions that have different potential answers.

During the public testimony portion of the Executive Committee meeting, Mr. Bergstrom also suggested a variation to Option #7, closer to Option #6, where each pension plan’s actuary would become the official production actuary for the annual actuarial valuation and the Commission’s actuary would become the reviewing actuary who would do some verifying actuarial work and would do benefit increase costings and experience studies. Mr. Bergstrom suggested that dropping any verification work for a year or two also would save some portion of the Commission budget.

Based on the passage of the Larson motion, the Commission staff will produce a first draft of a potential implementation plan for circulation to Committee members and to interested parties in the next day or two, with the goal of presenting a full proposal for Commission action at next week’s (March 1-5) Commission meeting.

The meeting adjourned at 10:05 a.m.