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Comprehensive Annual Financial Report 12/31/2014
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Comprehensive Annual Financial Report 12/31/2014
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Comprehensive Annual Financial Report
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12/31/2014
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CITY OF LINO LAKES, MINNESOTA <br />NOTES TO FINANCIAL STATEMENTS <br />December 31, 2014 <br />Note 6 DEFINED BENEFIT PENSION PLANS — STATEWIDE <br />A. PLAN DESCRIPTION <br />All full-time and certain part-time employees of the City of Lino Lakes are covered by defined benefit <br />pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA <br />administers the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire <br />Fund (PEPFF) which are a cost-sharing, multiple -employer retirement plan. This plan is established and <br />administered in accordance with Minnesota Statutes, Chapter 353 and 356. <br />GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are <br />covered by Social Security and Basic Plan members are not. All new members must participate in the <br />Coordinated Plan. All police officers, firefighters and peace officers who qualify for membership by statute <br />are covered by the PEPFF. <br />PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors <br />upon death of eligible members. Benefits are established by State Statute, and vest after three years of <br />credited service. The defined retirement benefits are based on a member's highest average salary for any <br />five successive years of allowable service, age, and years of credit at termination of service. <br />Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members. The retiring <br />member receives the higher of step -rate benefit accrual formula (Method 1) or a level accrual formula <br />(Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2% of average salary <br />for each of the first 10 years of service and 2.7% for each remaining year. The annuity accrual rate for a <br />Coordinated Plan member is 1.2% of average salary for each of the first 10 years and 1.7% for each <br />remaining year. Under Method 2, the annuity accrual rate is 2.7% of average salary for Basic Plan <br />members and 1.7% for Coordinated Plan members for each year of service. For PEPFF members, the <br />annuity accrual rate is 3.0% for each year of service. <br />For GERF and PEPFF members hired prior to July 1, 1989 whose annuity is calculated using Method 1, a <br />full annuity is available when age plus years of service equal 90. Normal retirement age is 65 for Basic and <br />Coordinated members hired prior to July 1, 1989. Normal retirement age is the age for unreduced Social <br />Security benefits capped at 66 for coordinated members hired on or after July 1, 1989. A reduced <br />retirement annuity is also available to eligible members seeking early retirement. <br />There are different types of annuities available to members upon retirement. A single -life annuity is a <br />lifetime annuity that ceases upon the death of the retiree, no survivor annuity is payable. There are also <br />various types of joint and survivor annuity options available which will be payable over joint lives. <br />Members may also leave their contributions in the fund upon termination of public service in order to <br />qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to <br />members who leave public service, but before retirement benefits begin. <br />The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to <br />active plan participants. Vested, terminated employees, who are entitled to benefits but are not receiving <br />them yet, are bound by the provisions in effect at the time they last terminated their public service. <br />PERA issues a publicly available financial report that includes financial statements and required <br />supplementary information for GERF and PEPFF. That report may be obtained on the internet at <br />www.nmpera.org, by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088 or by <br />calling (651) 296-7460 or 1-800-652-9026. <br />51 <br />
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