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CITY OF LAKE ELMO, MINNESOTA NOTES TO THE BASIC FINANCIAL STATEMENTS DECEMBER 31, 2024 59 NOTE 3 DEFINED BENEFIT PENSION PLANS – STATEWIDE (Continued) Benefits Provided PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can only 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. When a member is “vested,” they have earned enough service credit to receive a lifetime monthly benefit after leaving public service and reaching an eligible retirement age. Members who retire at or over their Social Security full retirement age with at least one year of service qualify for a retirement benefit. General Employees Plan Benefits General Employees Plan requires three years of service to vest. 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 General Plan members. Members hired prior to July 1, 1989, receive the higher of the Step or Level formulas. Only the Level formula is used for members hired after June 30, 1989. Under the Step formula, General Plan members receive 1.20 percent of the highest average salary for each of the first 10 years of service and 1.70 percent for each additional year. Under the Level formula, General Plan members receive 1.70 percent of highest average salary for all years of service. For members hired prior to July 1, 1989 a full retirement benefit is available when age plus years of service equal 90 and normal retirement age is 65. Members can receive a reduced requirement benefit as early as age 55 if they have three or more years o f service. Early retirement benefits are reduced by 0.25 percent for each month under age 65. Members with 30 or more years of service can retire at any age with a reduction of 0.25 percent for each month the member is younger than age 62. The Level formula allows General Plan members to receive a full retirement benefit at age 65 if they were first hired before July 1, 1989 or at age 66 if they were hired on or after July 1, 1989. Early retirement begins at age 55 with an actuarial reduction appli ed to the benefit. Benefit increases are provided to benefit recipients each January. The postretirement increase is equal to 50 percent of the cost- of-living adjustment (COLA) announced by the SSA, with a minimum increase of at least 1 percent and a maximum of 1.50 percent. The 2024 annual increase was 1.50 percent. Recipients that have been receiving the annuity or benefit for at least a full year as of the June 30 before the effective date of the increase will receive the full increase. Recipients receiving th e annuity or benefit for at least one month but less than a full year as of the June 30 before the effective date of the increase will rec eive a prorated increase. Police and Fire Plan Benefits Benefits for Police and Fire Plan members hired before July 1, 2010, are vested after three years of service. Members hired o n or after July 1, 2010, are 50 percent vested after five years of service and 100 percent vested after ten years. After five y ears, vesting increase by 10 percent each full year of service until members are 100 percent vested after ten years. Police and Fir e Plan members receive 3 percent of highest average salary for all years of service. Police and Fire Plan members receive a ful l retirement benefit when they are age 55 and vested, or when their age plus their years of service equals 90 or greater if the y were first hired before July 1, 1989. Early retirement starts at age 50, and early retirement benefits are reduced by 0.417 p ercent each month members are younger than age 55. Benefit increases are provided to benefit recipients each January. The postretirement increase is fixed at 1 percent. Recipie nts that have been receiving the annuity or benefit for at least 36 months as of the June 30 before the effective date of the inc rease will receive the full increase. Recipients receiving the annuity or benefit for at least 25 months but less than 36 months as of the June 30 before the effective date of the increase will receive a prorated increase. Contributions Minnesota Statutes Chapter 353, 353E, 353G, and 356 set the rates for employer and employee contributions. Contribution rates can only be modified by the State Legislature.