07-26-1999 Council Packet - Laserfiche WebLink

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CITY OF ORONO, MINNESOTA Notes to Financial Statements (continued) December 31,1998 NOTE 7 - DEFINED BENEFIT PENSION PLANS - STATEWIDE (CONTINUED) Two methods are used to compute benefits for PERF’s Coordinated and Basic Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member who retires before July 1, 1997 is 2% of the average salary for each of the first 10 years of service and 2.5% for each remaining year. The annuity accrual rate for Basic Plan members who retire on or afier July 1,1997 is 2.2% of average salary for each of the first 10 years of service and 2.7% for each remaining year. For a Coordinated Plan member who retires before July 1, 1997, the annuity accrual rate is 1% of the average salary for each of the first 10 years and 1.5% for each remaining year. For Coordinated Plan members who retire on or after July 1,1997, the annuity accrual rates increase by 0.2% (to 1.2% of the average salary for each of the first 10 years and 1.7% for each remaining year). Under Method 2, the annuity accrual rate is 2.5% of the average salary for Basic Plan members and 1.5% for Coordinated Plan members who retire before July 1, 1997. Aiuiuity accrual rates increase 0.2% for members who retire on or after July 1, 1997. Fo*- PEPFF members, the annuity accrual rale is 2.65% for each year of serv ice for members retiring before July 1, 1997. Effective July 1, 1997, the annuity accrual rate is increase to 3%. For all PEPFF members and for PERF members whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. A reduced retiremer.t annuity is also available to eligible members seeking early retirement. There are different types of annuities available to members upon retirement. A normal annuity is a lifetime annuity that ceases upon the death of the retiree - no survivor annuity is payable. There are also various types of joint and survivor annuity options available which will reduce the monthly normal annuity amount, because the annuity is payable over joint lives. Members may also leave their contributions in the fund upon termination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time u members who leave public service, but before retirement benefits begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for PERF and PEPFF. That report may be obtained by writing to PERA, 514 St. Peter Street #200, St. Paul, Minnesota 55102 or by calling (651) 296-7460 or 1-800-652-9026. B. Funding Policy Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. PERF Basic Plan members and Coordinated Plan members are required to contribute 8.75% and 4.75%, respectively, of their annual covered salary. PEPFF members are requ ’red to contribute 7.6% 0"i their annual covered salary. The City of Orono is required to contribute the following percentages of annual covered payroll: 11.43% for Basic Plan PERF members, 5.18% for Coordinated Plan PERF members, and 11.4% for PEPFF members. The City ’s contributions for the years ended December 31, 1998, 1997, and 1996 were $155,895, $141,551, and $131,818, respectKely, equal to the contractually required contributions for each year as set by statute. -43- I I