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05-26-2020-R
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05-26-2020-R
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<br />-38- <br />NOTE 6 – DEFINED BENEFIT PENSION PLAN – STATE-WIDE (CONTINUED) <br /> <br />B. Benefits Provided <br /> <br />The PERA provides retirement, disability, and death benefits. Benefit provisions are established by state <br />statutes and can only be modified by the State Legislature. Vested, terminated employees who are entitled <br />to benefits but are not receiving them yet, are bound by the provisions in effect at the time they last <br />terminated their public service. <br /> <br />GERF Benefits <br /> <br />Benefits are based on a member’s highest average salary for any five successive years of <br />allowable service, age, and years of credit at termination of service. Two methods are used to <br />compute benefits for the PERA’s Coordinated Plan members. Members hired prior to July 1, <br />1989, receive the higher of Method 1 or Method 2 formulas. Only Method 2 is used for members <br />hired after June 30, 1989. Under Method 1, the accrual rate for Coordinated Plan members is <br />1.2 percent of average salary for each of the first 10 years of service, and 1.7 percent of average <br />salary for each additional year. Under Method 2, the accrual rate for Coordinated Plan members <br />is 1.7 percent of average salary for all years of service. For members hired prior to July 1, 1989, a <br />full annuity is available when age plus years of service equal 90, and normal retirement age is 65. <br />For members hired on or after July 1, 1989, normal retirement age is the age for unreduced Social <br />Security benefits capped at age 66. <br /> <br />Annuities, disability benefits, and survivor benefits are increased effective every January 1. <br />Beginning January 1, 2019, the post-retirement increase will be equal to 50.0 percent of the cost <br />of living adjustment (COLA) announced by the Social Security Administration, with a minimum <br />increase of at least 1.0 percent and a maximum of 1.5 percent. Recipients that have been <br />receiving the annuity or benefit for at least a full year as of June 30 before the effective date of <br />the increase, will receive the full increase. For recipients receiving the annuity or benefit for at <br />least one month, but less than a full year as of the June 30 before the effective date of the <br />increase, will receive a reduced prorated increase. For members retiring on January 1, 2024 or <br />later, the increase will be delayed until normal retirement age (age 65 if hired prior to July 1, <br />1989, or age 66 for individuals hired on or after July 1, 1989). Members retiring under Rule of 90 <br />are exempt from the delay to normal retirement. <br /> <br />C. Contributions <br /> <br />Minnesota Statutes, Chapter 353 sets the rates for employer and employee contributions. Contribution <br />rates can only be modified by the State Legislature. <br /> <br />GERF Contributions <br /> <br />Coordinated Plan members were required to contribute 6.50 percent of their annual covered salary in <br />fiscal year 2019. The City was required to contribute 7.50 percent for Coordinated Plan members. <br />The City’s contributions to the GERF for the year ended December 31, 2019, were $121,063. The <br />City’s contributions were equal to the required contributions as set by state statutes. <br /> <br />D. Pension Costs <br /> <br />GERF Pension Costs <br /> <br />At December 31, 2019, the City reported a liability of $1,205,274 for its proportionate share of the <br />GERF’s net pension liability. The net pension liability was measured as of June 30, 2019, and the <br />total pension liability used to calculate the net pension liability was determined by an actuarial <br />valuation as of that date.
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