11-13-2018 Council Meeting Packet

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 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% of average salary for each of the first ten years and 1. 7% for each remaining year. Under Method 2, the annuity accrual rate is 2. 7% of average salary for Basic Plan members and I. 7% for Coordinated Plan members for each year of service. For members hire prior to July I, 1989, a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July l, 1989, normal retirement age is the age for unreduced Social Security benefits capped at 66. 2. PEPFF Benefits Benefits for the PEPFF members first hired after June 30, 20 I 0, 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 bases 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. For PEPFF members who were first hired prior to July I, 1989, a full annuity is available when age plus years of service equal at least 90. C. CONTRIBUTIONS Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state legislature. 1. GERF Contributions Basic Plan members and Coordinated Plan members were required to contribute 9.1 % and 6.5%, respectively, of their annual covered salary in calendar year 2017. The City was required to contribute 11. 78% of pay for Basic Plan members and 7 .5% for Coordinated Plan members in calendar year 2017. The City contributions to the GERF for the year ended December 31, 2017 were $192,510. 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 2017. The City was required to contribute I 6.2% of pay for PEP FF members in calendar year 2017. The City contributions to the PEPFF for the year ended December 31, 2017 were $416,665. The City contributions were equal to the required contributions as set by state statute. D. PENSION COSTS I. GERF Pension Costs At December 31, 2017, the City reported a liability of $2,642,949 for its proportionate share of GERF's net pension liability. The City's net pension liability reflected a reduction due to the State of Minnesota's contribution of$6 million to the fund in 2017. The State of Minnesota is considered a non-employer contributing entity and the state's contribution meets the definition of a special funding situation. The State of Minnesota's proportionate share of the net pension liability CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2017 associated with the City totaled $33,230. The net pension liability was measured as of June 30, 2017, 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, 2016 through June 30, 2017, relative to the total employer contributions received from all of PERA's participating employers. At June 30, 2017, the City's proportionate share was 0.0414%, which was an increase of0.0027% from its proportionate share measured as of June 30, 2016. For the year ended December 31, 2017, the City recognized pension expense of $380,05 I for its proportionate share of the GERF's pension expense. In addition, the City recognized an additional $960 as pension expense {and grant revenue) for its proportionate share of the State of Minnesota's contribution of$6 million to the GERF. At December 31, 2017, the City reported its proportionate share of the GERF's deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Differences between expected and actual economic experience Changes in actuarial assumptions Difference between projected and actual investment earnings Changes in proportion Contributions paid to PERA subsequent to the measurement date Total Deferred Outflows of Resources $87,104 438,787 19,277 118,300 95,266 $758,734 Deferred Inflows of Resources $171,203 264,956 86,926 $52\085 $95,266 reported as deferred outflows of resources related to pensions resulting from City contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability during 2018. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: 2. PEPFF Pension Costs Year Ended December 31, 2018 2019 2020 2021 2022 Thereafter Pension Ex_E!:nse $100,060 163,129 {10,618) {112,188) At December 31, 2017, the City reported a liability of $3,469,806 for its proportionate share of the PEPFF's net pension liability. The net pension liability was measured as of June 30, 2017 and the total pension liability used to calculate the net pension liability was determined by an actuarial IV-29