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SF 4588

Process to change the investment return assumption for computing joint and survivor annuities establishment

2025-2026 Regular Session Introduced by Nick Frentz

Sets 6.5% default for joint and survivor annuities and creates a two-track process (LCPR approval or deemed approved in 1 year) to change the rate.

Referred to State and Local Government
#commissions #retirement
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Bill Summary · SF 4588

Summary of SF 4588 (2025-2026) – Minnesota

Title

Process to change the investment return assumption for computing joint and survivor annuities establishment

Purpose and intent

The bill establishes a formal process to set and adjust the investment return assumption used when computing joint and survivor annuities for covered retirement plans. It aims to standardize the rate used in calculations and provide a defined mechanism for proposing and approving changes to that rate, with an explicit timetable and administrative updates to reference materials.

Key provisions

  • Default investment return assumption for joint and survivor annuities

    • For computing joint and survivor annuities under each covered retirement plan, the applicable investment return assumption is set at 6.5% unless a different percentage has been approved or deemed approved under the bill’s procedures.

  • Process to change the assumption

    • A covered retirement plan’s governing board may propose a change to the investment return assumption.
    • A proposed change can be approved in two ways:
    • Approval by the Legislative Commission on Pensions and Retirement (LCPR).
    • Deemed approved if no action is taken by the LCPR within one year after the proposal is received by the LCPR.
    • This creates a two-track path: explicit commission approval or a default “deemed approved” after one year of inaction.

  • Administrative updates

    • The executive director of the LCPR must update the appendix to the standards for actuarial work whenever a change in the investment return assumption is approved or deemed approved.

  • Effective date

    • The changes become effective on July 1, 2026.

Affected entities

  • Covered retirement plans and their governing boards that compute joint and survivor annuities using an investment return assumption.
  • Legislative Commission on Pensions and Retirement (LCPR), which reviews proposed changes and manages the deemed-approved timeline.
  • Executive director of the LCPR, who maintains the standards appendix.

Procedural and timeline considerations

  • A proposed change is submitted to the LCPR.
  • The LCPR has up to one year to act on the proposal.
    • If the LCPR does not act within that year, the change is deemed approved.
  • Once a change is approved or deemed approved, the executive director must update the appendix to the standards for actuarial work accordingly.
  • The baseline/default rate is 6.5% absent approval or deemed approval of a different rate.

Practical impact and considerations

  • Establishes a clear, centralized process for adjusting the actuarial assumption used in calculating joint and survivor annuities, which can affect plan valuations, funding requirements, and member benefits.
  • Introduces a potential shift in future annuity calculations if a different return assumption is approved (or deemed approved) after 2026.
  • The “deemed approved” mechanism accelerates the consideration of proposals but also places importance on timely action by the LCPR.
  • Administrative updates ensure actuarial standards reflect any changes, maintaining consistency across computations.

If you’d like, I can provide a simple example illustrating how a change from 6.5% to a new rate would affect joint and survivor annuity calculations.

Compiled from official sources — confirm details with the bill’s official record.

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