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CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2013 Note 6 DEFINED BENEFIT PENSION PLANS — STATEWIDE A. PLAN DESCRIPTION All full-time and certain part-time employees of the City of Lino Lakes are covered by defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota (PERA). PERA administers the General Employees Retirement Fund (GERF) and the Public Employees Police and Fire Fund (PEPFF) which are a cost-sharing, multiple -employer retirement plan. This plan is established and administered in accordance with Minnesota Statutes, Chapter 353 and 356. GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. All police officers, firefighters and peace officers who qualify for membership by statute are covered by the PEPFF. 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 highest average salary 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 and Basic Plan 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 Plan member is 2.2% of average salary for each of the first 10 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 10 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 1.7% for Coordinated Plan members for each year of service. For PEPFF members, the annuity accrual rate is 3.0% for each year of service. For GERF and PEPFF members hired prior to July 1, 1989 whose annuity is calculated using Method I, a full annuity is available when age plus years of service equal 90. Normal retirement age is 65 for Basic and Coordinated members hired prior to July 1, 1989. Normal retirement age is the age for unreduced Social Security benefits capped at 66 for coordinated members hired on or after July 1, 1989. A reduced retirement annuity is also available to eligible members seeking early retirement. There are different types of annuities available to members upon retirement. A single -life 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 be 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. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active plan participants. 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. PERA issues a publicly available financial report that includes financial statements and required supplementary information for GERF and PEPFF. That report may be obtained on the Internet at www.mnpera.org, by writing to PERA at 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088 or by calling (651) 296-7460 or 1-800-652-9026. CITY OF LINO LAKES, MINNESOTA NOTES TO FINANCIAL STATEMENTS December 31, 2013 Note 6 DEFINED BENEFIT PENSION PLANS — STATEWIDE (CONTINUEDZ B. FUNDING POLICY Minnesota Statutes, Chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the state legislature. The City makes annual contributions to the pension plans equal to the amount required by state statutes. GERF Basic Plan members and Coordinated Plan members are required to contribute 9.10% and 6.25% respectively, of their annual covered salary. PEPFF members were required to contribute 9.6% of their annual covered salary in 2012. The City is required to contribute the following percentages of annual covered payroll: 11.78% for Basic Plan members, 7.25% for Coordinated Plan members, and 14.4% for PEPFF members. The City's contributions to the General Employees Retirement Fund for the years ended December 31, 2013, 2012, and 2011 were $160,392, $164,317, and $187,186, respectively. The City's contributions to the Public Employees Police & Fire Fund for the years ended December 31, 2013, 2012, and 2011 were $290,737, $315,541, and $285,356, respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statute. Note 7 METROPOLITAN COUNCIL ENVIRONMENTAL SERVICES During 1971, the Metropolitan Waste Control Commission (MWCC) was organized to provide for consolidation of the sanitary sewer collection, treatment and disposal in the seven county metropolitan area surrounding Minneapolis and St. Paul. Previously, these operations were maintained by the city governments on an individual or collective basis. The MWCC merged with the Metropolitan Council during 1994 to form Metropolitan Council Wastewater Services (MCWS) and is now called the Metropolitan Council Environmental Services (MCES). The MCES bills the City annually based upon estimated volume and budgeted costs. The City follows the accounting policy of recognizing these charges as an expense of the sewer utility operation in the year for which they are billed. Note 8 STEWARDSHIP COMPLIANCE AND ACCOUNTABILITY A. DEFICIT FUND BALANCES The City has deficit fund balances at December 31, 2013 as follows: Dedicated Parks 2Ist Ave. Extension 1-13 Tax Increment Financing 1-11 Improvement and Utility Revenue Refunding Bonds 2010 G.Q. Improvement Bonds 2005A Fund Balance Deficit $ (444,279) (29,455) (770,196) (47,879) (2,101,738) The City intends to fund these deficits through future tax levies, special assessment levies, tax increments, transfers from other funds, and various other sources.