Laws of Minnesota 1985 

                        CHAPTER 224-S.F.No. 319 
           An act relating to the state board of investment; 
          clarifying powers and duties; amending Minnesota 
          Statutes 1984, sections 11A.14, subdivision 5; 11A.17, 
          subdivision 13; and 11A.24, subdivisions 2, 3, and 4. 
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
    Section 1.  Minnesota Statutes 1984, section 11A.14, 
subdivision 5, is amended to read: 
    Subd. 5.  [PARTICIPATING PUBLIC RETIREMENT PLANS OR FUNDS.] 
The following public retirement plans and funds shall 
participate in the Minnesota combined investment funds: 
    (1) State employees retirement fund established pursuant to 
chapter 352;  
    (2) Correctional employees retirement plan established 
pursuant to chapter 352;  
    (3) State patrol retirement fund established pursuant to 
chapter 352B;  
    (4) Public employees retirement fund established pursuant 
to chapter 353;  
    (5) Public employees police and fire fund established 
pursuant to chapter 353;  
    (6) Teachers retirement fund established pursuant to 
chapter 354;  
    (7) Judges retirement fund established pursuant to chapter 
490; and 
    (8) The permanent school fund established under the 
Minnesota Constitution, article XI, section 8; 
     (9) The supplemental investment fund established under 
section 11A.17; 
     (10) The variable annuity investment fund established under 
section 11A.19; and 
     (11) Any other fund required by law to participate. 
    Sec. 2.  Minnesota Statutes 1984, section 11A.17, 
subdivision 13, is amended to read: 
    Subd. 13.  [RATE OF INTEREST FOR FIXED RETURN ACCOUNT AND 
BOND ACCOUNT.] At the beginning of each fiscal year, and as 
often as the state board determines appropriate, the state board 
shall set an assumed interest rate for moneys invested in 
the accounts during that year, with the rate applicable to all 
sums invested during that 12 month period fixed return account.  
At the end of the 12 months, The state board may determine for 
the bond account the period over which the established rate is 
to apply to funds so invested, depending on the average yield 
and maturity of the securities purchased.  At the end of the 12 
months period, the state board may determine the annual rate for 
moneys invested in the fixed return account based on the average 
yield for the year period.  Any earnings accrued to the accounts 
fixed return account above the rate earlier indicated may be 
used to purchase additional shares on behalf of each 
participating public retirement plan or fund at fiscal year end 
after necessary reserves are established.  At the end of each 
fiscal year the state board may determine for the bond account 
the period over which the established rate is to apply to funds 
so invested depending on the average yield and maturity of the 
securities purchased. 
    Sec. 3.  Minnesota Statutes 1984, section 11A.24, 
subdivision 2, is amended to read: 
    Subd. 2.  [GOVERNMENT OBLIGATIONS.] The state board may 
invest funds in governmental bonds, notes, bills, mortgages and 
other fixed obligations, including guaranteed or insured issues 
of (a) the United States, its agencies or, its instrumentalities 
, or organizations created and regulated by an act of Congress; 
(b) Canada and its provinces, provided the principal and 
interest is payable in United States dollars; (c) the states and 
their municipalities, political subdivisions, agencies or 
instrumentalities, where backed by the state's full faith and 
credit or if the issuer has not been in default in payments of 
principal or interest within the past ten years or in the case 
of revenue bonds the obligor has been completely self-supporting 
for the five prior years; (d) the International Bank for 
Reconstruction and Development, the Inter-American Development 
Bank, the Asian Development Bank, the African Development Bank, 
or any other United States Government sponsored organization of 
which the United States is a member, provided the principal and 
interest is payable in United States dollars and the issues are 
rated in the highest quality category by a nationally recognized 
rating agency. 
    Sec. 4.  Minnesota Statutes 1984, section 11A.24, 
subdivision 3, is amended to read: 
    Subd. 3.  [CORPORATE OBLIGATIONS.] The state board may 
invest funds in bonds, notes, debentures, transportation 
equipment obligations, or any other longer term evidences of 
indebtedness issued or guaranteed by a corporation organized 
under the laws of the United States or any state thereof, or the 
Dominion of Canada or any province thereof if they conform to 
the following provisions: 
    (a) The principal and interest of obligations of 
corporations incorporated or organized under the laws of the 
Dominion of Canada or any province thereof shall be payable in 
United States dollars; 
    (b) The consolidated net pretax earnings of corporations 
other than finance corporations shall have been on average for 
the preceding five years at least 1.5 times the annual interest 
charges on total funded debt applicable to that period; 
    (c) The consolidated net pretax earnings of banks and 
finance corporations shall have been on average for the 
preceding five years at least 1.2 times the annual interest 
charges on total funded debt applicable to that period; 
    (d) Obligations shall be rated among the top four quality 
categories by a nationally recognized rating agency or if 
unrated, then the corporation shall have other comparably 
secured issues similarly rated or the consolidated net pretax 
earnings of the corporation shall have been on average for the 
preceding five fiscal years at least twice the ratios required 
in clauses (b) and (c);  
    (c) For unrated obligations, the corporation shall have 
issued other similar securities rated according to clause (b) 
or:  (i) the consolidated net pretax earnings of corporations 
other than banks and finance corporations shall have been on 
average for the preceding five years at least three times the 
annual interest charges on total funded debt applicable to that 
period; or (ii) the consolidated net pretax earnings of banks 
and finance corporations shall have been on average for the 
preceding five years at least 2.4 times the annual interest 
charges on total funded debt applicable to that period. 
    Sec. 5.  Minnesota Statutes 1984, section 11A.24, 
subdivision 4, is amended to read: 
    Subd. 4.  [OTHER OBLIGATIONS.] The state board may invest 
funds in bankers acceptances, certificates of deposit, 
commercial paper, mortgage participation certificates and pools, 
repurchase agreements and reverse repurchase agreements, 
guaranteed investment contracts, and savings accounts if they 
conform to the following provisions: 
    (a) Bankers acceptances of United States banks shall be 
limited to those eligible for purchase by the Federal Reserve 
System; 
    (b) Certificates of deposit shall be limited to those 
issued by banks and savings institutions that meet the 
collateral requirements established in section 9.031, unless 
sufficient volume is unavailable at competitive interest rates.  
In that event, noncollateralized certificates of deposit may be 
purchased from United States banks and savings institutions that 
are rated in the highest quality category by a nationally 
recognized rating agency; 
    (c) Commercial paper shall be limited to those issued by 
United States corporations or their Canadian subsidiaries, shall 
be of the highest quality and mature in 270 days or less; 
    (d) Mortgage participation or pass through certificates 
evidencing interests in pools of first mortgages or trust deeds 
on improved real estate located in the United States where the 
loan to value ratio for each loan as calculated in accordance 
with section 61A.28, subdivision 3 does not exceed 80 percent 
for fully amortizable residential properties and in all other 
respects meets the requirements of section 61A.28, subdivision 
3.  In addition the state board may purchase from the Minnesota 
housing finance agency all or any part of any pool of 
residential mortgages, not in default, which has previously been 
financed by the issuance of bonds or notes of the agency.  The 
state board may also enter into a commitment with the agency, at 
the time of any issue of bonds or notes, to purchase at a 
specified future date, not exceeding twelve years from the date 
of the issue, the amount of mortgage loans then outstanding and 
not in default, which have been made or purchased from the 
proceeds of the bonds or notes.  The state board may charge 
reasonable fees for any such commitment, and may agree to 
purchase the mortgage loans at a price such that the yield 
thereon to the state board will, in its judgment, be comparable 
to that available on similar mortgage loans at the date of the 
bonds or notes.  The state board may also enter into agreements 
with the agency for the investment of any portion of the funds 
of the agency for such period, with such withdrawal privileges, 
and at such guaranteed rate of return, if any, as may be agreed 
between the state board and the agency.  
    (e) Collateral for repurchase agreements and reverse 
repurchase agreements shall be limited to the securities 
described in subdivision 2, clause (a) letters of credit and 
securities authorized in section 11A.24; 
    (f) Guaranteed investment contracts shall be limited to 
those issued by insurance companies rated in the top four 
quality categories by a nationally recognized rating agency; 
    (g) Savings accounts shall be limited to those fully 
insured by the Federal Deposit Insurance Corporation or the 
Federal Savings and Loan Insurance Corporation.  
    Sec. 6.  [EFFECTIVE DATE.] 
    Sections 1 to 5 are effective the day following final 
enactment. 
    Approved May 23, 1985