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CITY OF ORONO <br />NOTES TO BASIC FINANCIAL STATEMENTS <br />DECEMBER 31, 2015 <br /> <br /> <br />(48) <br /> <br />NOTE 8 DEFINED BENEFIT PENSION PLANS – STATE-WIDE (CONTINUED) <br />B. Benefits Provided (Continued) <br />1. GERF Benefits <br />Benefits are based on a member’s highest average salary for any five successive <br />years of allowable service, age, and years of credit at termination of service. Two <br />methods are used to compute benefits for PERA’s Coordinated and Basic Plan <br />members. The retiring member receives the higher of a step-rate benefit accrual <br />formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the <br />annuity accrual rate for a Basic Plan member is 2.2% of average salary for each of <br />the first ten years of service and 2.7% for each remaining year. The annuity accrual <br />rate for a Coordinated Plan member is 1.2 percent of average salary for each of the <br />first ten years and 1.7% for each remaining year. Under Method 2, the annuity <br />accrual rate is 2.7% of average salary for Basic Plan members and 1.7% for <br />Coordinated Plan members for each year of service. For members hired prior to <br />July 1, 1989, a full annuity is available when age plus years of service equal 90 and <br />normal retirement age is 65. For members hired on or after July 1, 1989, normal <br />retirement age is the age for unreduced Social Security benefits capped at 66. <br />Disability benefits are available for vested members and are based upon years of <br />service and average high-five salary. <br /> <br />2. PEPFF Benefits <br />Benefits for the PEPFF members first hired after June 30, 2010, but before July 1, <br />2014, vest on a prorated basis from 50% after five years up to 100% after ten years <br />of credited service. Benefits for PEPFF members first hired after June 30, 2014, vest <br />on a prorated basis from 50% after ten years up to 100% after twenty years of <br />credited service. The annuity accrual rate is 3% of average salary for each year of <br />service. For PEPFF who were first hired prior to July 1, 1989, a full annuity is <br />available when age plus years of service equal at least 90. <br /> <br />C. Contributions <br />Minnesota Statutes Chapter 353 sets the rates for employer and employee <br />contributions. Contribution rates can only be modified by the state legislature. <br /> <br />1. GERF Contributions <br />Basic Plan members and Coordinated Plan members were required to contribute <br />9.1% and 6.50%, respectively, of their annual covered salary in calendar year 2015. <br />The City was required to contribute 11.78% of pay for Basic Plan members and <br />7.50% for Coordinated Plan members in calendar year 2015. The City contributions <br />to the GERF for the year ended December 31, 2015, were $123,284. The City <br />contributions were equal to the required contributions as set by state statute. <br /> <br />2. PEPFF Contributions <br />Plan members were required to contribute 10.8% of their annual covered salary in <br />calendar year 2015. The City was required to contribute 16.20% of pay for PEPFF <br />members in calendar year 2015. The City contributions to the PEPFF for the year <br />ended December 31, 2015, were $342,006. The City contributions were equal to the <br />required contributions as set by state statute.