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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2015 Note 6 PENSION PLANS A. PUBLIC EMPLOYEES RETIREMENT ASSOCIATION (PERA)-DEFINED BENEFIT PLANS PLAN DESCRIPTION The City participates in the following cost-sharing multiple-employer defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA's defined benefit pension plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERA's defined benefit pension plans are tax qualified plans under Section 401 (a) of the Internal Revenue Code. I. General Employees Retirement Fund (GERF) All full-time and certain part-time employees of the City are covered by the General Employees Retirement Fund (GERF). GERF 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. The Basic Plan was closed to new members in 1967. All new members must participate in the Coordinated Plan. 2. Public Employees Police and Fire Fund (PEPFF) The PEPFF, originally established for police officers and firefighters not covered by a local relief association, now covers all police officers and firefighters hired since 1980. Effective July I, 1999, the PEPFF also covers police officers and firefighters belonging to a local relief association that elected to merge with and transfer assets and administration to PERA. BENEFITS PROVIDED PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can only be modified by the state legislature. Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. Members in plans that are at least 90"/o funded for two consecutive years are given 2.5% increases. Members in plans that have not exceeded 90% funded, or have fallen below 80%, are given I% increases. The benefit provisions stated in the following 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. I. GERF Benefits 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 PERA's Coordinated and Basic Plan 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 I, the annuity accrual rate for a Basic Plan member is 2.2% of average salary for each of the first ten years of service and 2. 7% for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2 percent of average salary for each of the first ten years and I. 7% for each remaiuing year. Under Method 2, the annuity accrual rate is 2. 7% of average salary for Basic Plan members and l. 7% for Coordinated Plan members for each year of service. For members hired prior to July I, 1989, a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31,2015 Note 6 PENSION PLANS !CONTINUED> A. PUBLIC EMPLOYEES RETIREMENT ASSOCIATION (PERA)-DEFINED BENEFIT PLANS (CONTINUED) I. GERF Benefits (Continued) For members hired on or after July I, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66. Disability benefits are available for vested members and are based upon years of service and average high-five salary. 2. PEPFF Benefits Benefits for the PEPFF members first hired after June 30, 2010, but before July I, 2014, vest on a prorated basis from 50% after five years up to I 00% after ten years of credited service. Benefits for PEPFF members first hired after June 30, 2014, vest on a prorated basis from 50"/o after ten years up to I 00% after twenty years of credited service. The annuity accrual rate is 3% of average salary for each year of service. ForPEPFF who were first hired prior to July I, 1989, a full annuity is available when age plus years of service equal at least 90. CONTRIBUTIONS Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state legislature. I. GERF Contributions Basic Plan members and Coordinated Plan members were required to contribute 9.1% and 6.50"/o, respectively, of their annual covered salary in calendar year 2015. The City was required to contribute 11.78% of pay for Basic Plan members and 7.50"/o for Coordinated Plan members in calendar year 2015. The City contributions to the GERF for the year ended December 31, 2015, were $182,102. The City contributions were equal to the required contributions as set by state statute. 2. PEPFF Contributions Plan members were required to contribute 10.8% of their annual covered salary in calendar year 2015. The City was required to contribute 16.20% of pay for PEPFF members in calendar year 2015. The City contributions to the PEPFF for the year ended December 31, 2015, were $393,560. The City contributions were equal to the required contributions as set by state statute. PENSION COSTS I. GERF Pension Costs At December 31, 2015, the City reported a liability of $2,124,833 for its proportionate share of the GERF's net pension liability. The net pension liability was measured as of June 30, 2015, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The City's proportion of the net pension liability was based on the City's contributions received by PERA during the measurement period for employer payroll paid dates from July I, 2014, through June 30, 2015, relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2015, the City's proportion share was .00410% which was a decrease of .0022% from its proportion measured as ofJune 30, 2014. For the year ended December 31,2015, the City recognized pension expense of$257,399 for its proportionate share of the GERF's pension expense. IV-27