Annual Financial Report 12/31/1991

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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 1991 Page 13 of 18 PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon death of eligible members. Benefits are established by State Statute, and vest after three years of credited service. The defined retirement benefits are based on a member's average catary 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 Coordinated and Basic members. The retiring member receives the higher of step -rate benefit accrual formula (Method 1) or a level accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic member is 2 percent of average salary for each of the first 10 years of service and 23 percent for each remaining year. For a Coordinated member, the annuity accrual rate is 1 percent of average salary for each of the first 10 years and 1.5 percent for each remaining year. Using Method 2, the annuity accrual rate is 2.5 percent of average salary for Basic members and 13 percent for Coordinated members. For PEPFF members, the annuity accrual rate is 23 percent for each year of service. For PERF members whose annuity is calculated using Method 1, and for all PEPFF members, a full annuity is available when age plus years of service equal 90. There are different types of annuities available to members upon retirement. A normal annuity is a lifetime annuity that ceases upon the death of the retiree. No survivor annuity is payable. There are also various types of joint and survivor annuity options available which will reduce the monthly normal annuity amount, because the annuity is payable over joint lives. Members may also leave their contributions in the fund upon termination of public service, in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, but before retirement benefits begin. Contributions Required and Contributions Made Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. The City makes annual contributions to the pension plans equal to the amount required by State Statutes. According to Minnesota Statutes Chapter 356215, Subd. 4(g), the date of full funding required for the PERF and the PEPFF is the year 2020. As part of the annual actuarial valuation, PERA's actuary determines the sufficiency of the statutory contribution rates towards meeting the required full funding deadline. The actuary compares the actual contribution rate to a "required" contribution rate. Current combined statutory contribution rates and actuarially required contribution rates for the plans are as follows: PERF (Basic and Coordinated Plans) PEPFF Statutory Rates: Required Employees Employer Rates 4.44% 4.81% 10.04% 8.00% 12.00% 17.56% Total contributions made by the City during fiscal year 1991 were: Amount Percentage of Covered Payroll Employees Employer Employees Employer PERF $27,915 $29,565 4.44% 4.81% PEPFF 30,903 46,354 8.00% 12.00% Totals $58,818 $75,919 The City's contribution for the year ended June 30, 1991 to the PERF represented .029 percent of total contributions required of all participating entities. For the PEPFF, contributions for the year ended June 30, 1991, represented .175 percent of total contributions required of all participating entities.