07-10-1995 Council Packet - Laserfiche WebLink

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cm’ OF ORONO, MINNESOTA Notes to Financial Statements (continued) December 31. 1994 NOTE 7 - FLEXIBLE BENEFIT PLAN *11)6 City offers a flexible benefit plan. The plan is a "cafeteria plan" under § 125 of the Internal Revenue Code. All employees who meet the eligibility requirements may participate in the plan. To be eligible an employee must be at lea.st 20 years of age and be an employee who is regularly scheduled to work more than 20 houra per week. Eligible employees can elect to participate by contributing pre-tax dollars withheld from payroll checks to the plan for health care and dependent care benefits. Payments are made from the plan to participating employees upon submitting a request for reimbursement of eligible expen.ses actually incurred by the participant. All a.ssets of the plan are held by the City. The plan is admini.stered by an independent contract adm inistrator for child care and medical expense reimbursements, and by the City for health insurance premiums. The plan is included in the financial statements as an Expendable Trust Fund. All plan property and income attributable to that property is solely the property of the City, subject to the claims of the City ’s general creditors. Participants’ rights under the plan are equal to tho.se of general creditors of the City in an amount equal to the eligible health care and dependent care expenses incurred by the participants. The City believes that it is unlikely that it w ill use the a.s.sets to satisfv the claims of general creditors in the future. NOTE 8 - DEFINED BENEFIT PENSION PLANS - STATEWIDE A.Plan Description All full-time and certain part-time employees of the City of Ortmo are covered by defined benefit pension 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. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated members are covered by Social Security and Basic members are not. All new members must participate in the Coordinated Plan. All police officers, fire fighters, and peace officers who qualifx for membership by .statute are covered by the PEPFF. The payroll for employees covered by PERF and PEPFF for the /ear ended December 31. 1994 was approximately $933,532 and $717,055. respectively; the City s total payroll was $1,687,199. PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon the 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 average salary for any five successive year- f allowable service, age. and years of credit at termination of service. Two methods are used to compute benefits for Coordinated and Basic members. The retiring member receives the higher of a step-rate benefit accrual formula (.Method I) or a level accrual formula (Method 2). Under Method 1. the annuity accrual rate tor a Basic member is 2.0% of the average salary for each of the first ten years of .service and 2.5% for each remaining year. For a Coordinated member, the annuit,, accrual rate is 1.0% of the average salary for each of the first ten years and 1.5% for each remaining year. -47-