06-09-1997 Council Packet - Laserfiche WebLink

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CITY OF ORONO, MINNESOTA Notes to Financial Statements (continued) December 31, 1996 NOTE 8 - DEFINED BENEFIT PENSION PLANS - STATEWIDE A. Plan Description All full-time and certain part-time employees of the City of Orono are covered by defmed benefit plans administered by the Public Employees ’ Retirement Association of Minnesota (PERA). PERA administers the Public Employees ’ Retirement Fund (PERF) and the Public Employees ’ Police and Fire Fund (PEPFF) which are cost-sharing, multiple-employer retirement plans. These plans are established and administered in accordance with Minnesota Stamtes, Chapters 353 and 356. PERF members belong to either the Coordinated Plan or tl .e Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, fire fighters, and peace officers who qualify for membership by statute are covered by the PEPFF. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by state statute, and vest after three years of credited service. The defined retirement benefits are based on a member ’s highest average salary for any five successive years of allowable service, age, and years of credit at termination of service. Two methods are used to compute benefits for PERF’s Coordinated and Basic Plan members, ‘fhe 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 is 2.0% of the average salary for each of the first 10 years of service and 2.5% for each remaining year. For a Coordinated Plan member, the annuity accrual rate is 1.0% of the average salary for each of the first 10 years and 1.5% for each remaining year. Using Method 2, the annuity accrual rate is 2.5% of the average salary for Basic Plan members and 1.5% for Coordinated Plan members. For PEPFF members, the annuity accrual rate is 2.65% for each year of service. 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 retirement 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 to 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. -44- 11 I t *'4 • I t « ri j ^ j f • ( ► • t » • * { • * j