02/09/1998 Council Packet - Laserfiche WebLink

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Proposed 1998 Firefighter Pension Increase There is a pension plan for the members of the Centennial Fire District that is funded by monies from the state of Minnesota, the cities, and investment earnings. The money from the state, which is a percentage of fire insurance paid into the state, accounts for about 30 percent of the income. The money from the cities, which is a budget item for the Centennial Fire District, accounts for about 11 percent of the income. The remaining 59 percent are earnings on investments. In 1996, the fund had enough money in the fund to increase the pension amount to $2400 per year of service for the firefighters. At that time, even with the increase, there was some over - funding. At the present time there is sufficient funding to support an increase to $3000 per year of service, still leaving some over - funding. When a pension increase is requested, we always look to see how Centennial Fire compares to the communities around us. There are charts attached that compare pension levels, city contribution, state aid received, and runs per year. The proposed increase would put us fourth in pension level, sixth in city contribution, fourth in state aid received, and second in run volume. There are also projections attached for the years up to 2001. These projections are all very conservative figures. The income is projected low and the obligation is on the high side. These projections show that even with the benefit increase we will not use up the unused amount by the end of the projection period. The earnings on these charts are projected at the rate of 5 percent. A chart is attached to show our investment earnings history over the last five years. It has been an average of 13.1 percent earnings. The state requires the relief association to project the future at a 5 percent earnings rate and include this in an annual funding formula to determine the cities contribution. Using this formula, there would be a required increase in city funding. However, any actual earnings over 6.25 percent would eliminate any increased funding. The members of the department fully understand that the cities are not going to increase the amount of the cities contributions above the planned contributions. If there ended up being a shortfall in the future, the benefits could be effected negatively. The board of directors for the relief association feel that the fund will have sufficient income to support the increase. The request to the steering committee is that you approve the increase with the understanding that the cities contribution will not exceed the planned amounts.