07-27-1998 Council Packet - Laserfiche WebLink

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CITY OF ORONO, MINNESOTA Notes to Financial Statements (continued) December 31, 1997 NOTE 7 - DEFERRED COMPENSATION PLANS The City offers its employees deferred compensation plans created in accordance with Internal Revenue Code § 457. The plans, available to all employees, permit them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death, or unforeseen emergency. During the year ended December 31,1997, the City ’s deferred compensation plan administrators placed all plan assets in trust for the exclusive benefit of the plan participants or their beneficiaries. Consequently, these assets are no longer the property of the City, and the Agency Funds in which the assets had been reported were closed. 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 defined 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 Statutes, Chapters 353 and 356. PERF members belong to either the Coordinated Plan or the 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 stamte, 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 termiiiation of service. 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 formul.i (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member who retires before July 1, 1997 is 2.0% 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 after July 1,1997 is 2.2% or average salary for e,. '• of the first 10 years of service and 2.7% for each remaining year. For a Coordinated Plan member wh > retires before July 1, 1997, the annuity accrual rate is 1.0% of the average salary for each cf the first 10 years and 1.5% for each remaining year. For Coordinated Plan members who retire on or after July 1, 1 >97, 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. Annuity accrual rates increase 0.2% for members who retire on or after July 1, 1997. For PEPFF members, the annuity accrual rate is 2.65% for each year of service for members retiring before July 1, 1997. Effective July 1,1997, the annuity accrual rate is increase to 3.0%. For all PEPFF members and for PERF members whose armuity 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. -43-