Subd. 1. General governance.

The individual retirement account plan is the administrative responsibility of the board of trustees of the Minnesota state colleges and universities. The board of trustees of the Minnesota state colleges and universities may administer the plan directly or may contract out for administrative services with a qualified third-party plan administrative entity.

Subd. 1a. Advisory committee.

1. (a) A committee is created to advise the state board of investment and the board of trustees of the Minnesota state colleges and universities concerning administration of the individual retirement account plan and the supplemental retirement plan established in chapter 354C. The committee shall adopt recommendations by majority vote of those members voting on each issue. The exclusive representatives of the state university instructional unit, the community college instructional unit, and the technical college instructional unit shall each appoint two members to the committee. The exclusive representatives of the general professional unit, the supervisory employees unit and the state university administrative unit shall each appoint one member to the committee. The chancellor of the Minnesota state colleges and universities shall appoint three members, at least one of whom shall be a personnel administrator. No member of the committee shall be retired. Members serve at the pleasure of the applicable appointing authority, but no member shall serve for more than a total of five years. Members shall be reimbursed from the administrative expense account of the individual retirement account plan for expenses as provided in section 15.059, subdivision 3.

2. (b) The committee shall:

   1. (1) advise the board of trustees of the Minnesota state colleges and universities on the structure and operation of the individual retirement account plan and the supplemental retirement plan;
   2. (2) along with any other consultants selected by the board, advise the state board of investment on selection of financial institutions and on the type of investment products to be offered by these institutions for the plans;
   3. (3) advise the board of trustees of the Minnesota state colleges and universities on administration of the plans, including selection of a third-party plan administrator, if any, for the individual retirement account plan.
3. (c) The board of trustees of the Minnesota state colleges and universities shall provide the advisory committee with meeting space and other administrative support.
4. (d) Expenses of the advisory committee are considered administrative expenses of the plans under subdivision 5 and section 354C.12, subdivision 4, and must be allocated between the two plans in proportion to the market value of the total assets of the plans as of the most recent prior audited annual financial report.

Subd. 2. Annuity contracts and custodial accounts.

1. (a) The plan administrator shall arrange for the purchase of fixed annuity contracts, variable annuity contracts, a combination of fixed and variable annuity contracts, or custodial accounts from financial institutions which have been selected by the state board of investment under subdivision 3, as the investment vehicle for the retirement coverage of plan participants and to provide retirement benefits to plan participants. Custodial accounts from financial institutions shall include open-end investment companies registered under the federal Investment Company Act of 1940, as amended.
2. (b) The annuity contracts or accounts must be purchased with contributions under section 354B.23 or with money or assets otherwise provided by law by authority of the board and deemed acceptable by the applicable financial institution.
3. (c) In addition to contracts and accounts from financial institutions, the Minnesota supplemental investment fund established under section 11A.17 and administered by the state board of investment is one of the investment options for the individual retirement account plan.

Subd. 3. Selection of financial institutions.

1. (a) The financial institutions provided for under subdivision 2 must be selected by the state board of investment. Financial institutions include open-end investment companies registered under the federal Investment Company Act of 1940, as amended.

2. (b) The state board of investment may select up to five financial institutions to provide annuity contracts, custodial accounts, or a combination, as investment options for the individual retirement account plan in addition to the Minnesota supplemental investment fund. In making its selection, at a minimum, the state board of investment shall consider at least the following:

   1. (1) the experience and ability of the financial institution to provide retirement and death benefits that are suited to meet the needs of plan participants;
   2. (2) the relationship of those retirement and death benefits provided by the financial institution to their cost; and
   3. (3) the financial strength and stability of the financial institution.
3. (c) After selecting a financial institution, the state board of investment must periodically review each financial institution selected under paragraph (b). The periodic review must occur at least every three years. In making its review, the state board of investment may retain appropriate consulting services to assist it in its periodic review, establish a budget for the cost of the periodic review process, and charge a proportional share of these costs to the reviewed financial institution.
4. (d) Contracts with financial institutions under this section must be executed by the board and must be approved by the state board of investment before execution.
5. (e) The state board of investment shall also establish policies and procedures under section 11A.04, clause (2), to carry out the provisions of this subdivision.

Subd. 4. Benefit ownership.

The retirement benefits provided by the annuity contracts and custodial accounts of the individual retirement account plan are held for the benefit of plan participants and must be paid according to this chapter and the plan document.

Subd. 5. Individual retirement account plan administrative expenses.

1. (a) The reasonable and necessary administrative expenses of the individual retirement account plan must be paid by plan participants in the following manner:

   1. (1) from plan participants with amounts invested in the Minnesota supplemental investment fund, the plan administrator may charge an administrative expense assessment in an amount such that annual total fees charged for plan administration cannot exceed 40/100 of one percent of the assets of the Minnesota supplemental investment funds; and
   2. (2) from plan participants with amounts through annuity contracts and custodial accounts purchased under subdivision 2, paragraph (a), the plan administrator may charge an administrative expense assessment of a designated amount, not to exceed two percent of member and employer contributions, as those contributions are made.
2. (b) Any administrative expense charge that is not actually needed for the administrative expenses of the individual retirement account plan must be refunded to member accounts.

3. (c) The board of trustees shall report annually, before October 1, to the advisory committee created in subdivision 1a on administrative expenses of the plan. The report must include a detailed accounting of charges for administrative expenses collected from plan participants and expenditure of the administrative expense charges. The administrative expense charges collected from plan participants must be kept in a separate account from any other funds under control of the board of trustees and may be used only for the necessary and reasonable administrative expenses of the plan.

   * NOTE: The amendment to subdivision 5 by Laws 1998, chapter *390, article 2, section 12, is effective July 1, 1999. Laws *1998, chapter 390, article 2, section 22.