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IV-31CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December31,2018 Note 7 DEFINED BENEFIT PENSION PLANS -PERA A. PLAN DESCRIPTION The City participates in the following cost-sharing multiple-employer defined benefit pensioo plans administered by the Public Employees Retirement Associatioo of Minnesota (PERA). PERA's defined benefit pensioo plans are established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERA's defined benefit pensioo plans are tax qualified plans under Sectioo 401(a) of the Internal Revenue Code. I. General Employees Retirement Fund (GERF) All full-time (with the exceptioo of employees covered by PEPFF) and certain part-time employees of the City are covered by the General Employees Retirement Fund (GERF). GERF members belong to the Coordinated Plan. Coordinated Plan members are covered by Social Security. 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 local relief associations that elected to merge with and transfer assets and administration to PERA. B. BENEFITS PROVIDED PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can ooly be modified by the state legislature. 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 oo a member's highest average sala,y 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 members. Members hired prior to July I, 1989, receive the higher of Method I or Method 2 formulas. Only Method 2 is used for members hired after June 30, 1989. Under Method I, the accrual rate for Coordinated members is 1.2% for each of the first ten years and I. 7% for each additional year. Under Method 2, the accrual rate for Coordinated Plan members is I. 7% for all years of service. The accrual rates for former Minneapolis Employees Retirement Fund (MERF) members is 2.0"/o for each of the first IO years of service and 2.5% for each additional year. 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. For members hired oo or after July I, 1989 normal retirement age is the age for unreduced Social Secwity benefits capped at 66. Beginoing January I, 2019, benefit recipients will receive a future annual increase equal to 50 percent of the Social Security Cost of Living Adjustment, not less than 1.0 percent and not more than 1.5 percent. For retirements oo or after January I, 2024, the first benefit increase is delayed until the retiree reaches Normal Retirement Age (not applicable to Rule of90 retirees, disability benefit recipients, or survivors). A benefit recipient who has been receiving a benefit for at least CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2018 12 full mooths as of June 30 will receive a full increase. Members receiving benefits for at least ooe month but less than 12 full months as of June 30 will receive a pro rata increase. 2. PEPFF Benefits Benefits for the PEPFF members first hired after June 30, 2010, but before July 1, 2014, vest on a prorated basis from 50"/o after five years up to I 00"/o after ten years of credited service. Benefits for PEPFF members first hired after June 30, 2014, vest oo a prorated bases from 50% after ten years up to 100% after twenty years of credited service. The annuity accrual rate is 3% of average sala,y 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. Beginning in 2019, the COLA will be fixed at I percent. Under funding measurements from 2017, the 2.5 percent COLA trigger was never expected to occur and was subsequently removed from law. Post retirement increases are given each year except for annuitants who have been receiving a benefit for only 31 to 41 mooths. These annui-will receive a prorated amount of the increase oo a sliding scale. C. CONTRIBUTIONS Minnesota Statutes Chapter 353 sets the rates for employer and employee cootributions. Cootribution rates can oo1y be modified by the state legislature. I. GERF Cootributioos Coordinated Plan members were required to cootribute 6.5% of their annual covered sala,y in fiscal year 2018; the City was required to contribute 7.5% for Coordinated Plan members. The City cootributions to the GERF for the year ended December 31, 2018 were $202,526. The City contributions were equal to the required contributions as set by state statute. 2. PEPFF Cootn'butions Legislation increased both employee and employer contributioo rates in the Police and Fire Plan. Employee rates increased from I 0.80 percent of pay to 11.30 percent and employer rates increase from 16.20 percent to 16.95 percent on Janua,y I, 2019. On January 1, 2020 employee rates increase to 11.80 percent and employer rates increase to 17. 70 percent. The City cootributions to the PEPFF for the year ended December 31, 2018 were $420,821. The City cootributions were equal to the required contributioos as set by state statute. D. PENSION COSTS I. GERF Pensioo Costs At December 31, 2018, the City reported a liability of $2,113,632 for its proportiooate share of GERF's net pensioo liability. The City's net pensioo liability reflected a reductioo due to the State of Minnesota's cootributioo of$16 millioo to the fund in 2018. The State ofMinnesota is considered a non-employer cootributing entity and the state's cootribution meets the definition ofa special fimding situation. The State of Minnesota's proportionate share of the net pensioo liability associated with the City totaled $69,419. The net pensioo liability was measured as of June 30,
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