Annual Financial Report 12/31/1986

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CITY OF LINO LAKES, MINNESOTA Page 14 of 19 NOTES TO FINANCIAL STATEMENTS December 31, 1986 Note 2 - DETAIL NOTES ON ALL FUND AND ACCOUNT GROUPS (Continued) RETIREMENT PLANS (Continued) COORDINATED MEMBERS - 1% of the average salary over the highest five suc- cessive years on which deductions were paid for each of the first 10 years and 1 -1/2% of said "average salary" for the period thereafter. POLICE AND FIRE MEMBERS - 2 -1/2% of the average salary over the highest five successive years on which deductions were paid for each of the first 25 years and 2% of said "average salary" for the period thereafter. PERA also provides death and disability benefits. Pension benefits are funded from member and employer contributions and income from investment of fund assets. Public Employees Retirement Fund members belong to either the Basic or Coordinated Plan. Coordinated members are covered by Social Security and Basic members are not. All new members of the Public Employees Retirement Fund must participate in the Coordinated Plan. Current contribution rates for the funds are as follows: Additional Employee Employer Employer Public Employees Retirement Fund: Basic Plan 8% 8% 2 -1/2% Coordinated Plan 4% 4% 1/4% Public Employees Police and Fire Fund 8% 12% Upon termination, regardless of years of service, if not rehired in a PERA- covered position, all salary deductions will be refunded, with interest at 5% compounded annually. The City made employer contributions of $39,614 (7.2 percent of current year covered payroll) and employees contributed $30,332 (5.5 percent of current year covered payroll). Minnesota Statutes, Section 356.215, Subd. 4, provides the annual actuarial valuations of plan benefits shall be computed in accordance with the entry age normal cost (level normal cost) method. This method is a standardized disclo- sure measure of the accrued pension benefit obligation. The actuarial present value (APV) is the discounted amount of benefits estimated to be payable in the future as a result of employee services to date, computed by attributing an equal benefit amount (including the effects of projected salary increases) to each year of credited and expected future employee service. In the calculation of normal cost and accrued liabilities of the benefit plan, the actuary uses an 8 percent interest rate assumption and assumes an annual growth rate of 6 -1/2 percent in member's salary. The unfunded accrued liabilities of $848,142,000 in the Public Employees Retirement Fund and $41,917,000 in the Public Employees Police and Fire Fund as of June 30, 1986, are the amounts by which reserves required to fund plan benefits exceed the assets of the funds calculated as follows: