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06-12-23-R
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06-12-23-R
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-39- <br />NOTE 7 – DEFINED BENEFIT PENSION PLAN – STATE-WIDE <br />A.Plan Descriptions <br />The City participates in the following cost-sharing, multiple-employer defined benefit pension plan <br />administered by the PERA of Minnesota. The PERA’s defined benefit pension plan is established and <br />administered in accordance with Minnesota Statutes, Chapters 353 and 356. The PERA’s defined benefit <br />pension plan is a tax qualified plan under Section 401(a) of the Internal Revenue Code. <br />General Employees Retirement Fund (GERF) <br />All full-time and certain part-time employees of the City are covered by the GERF. The GERF <br />members belong to the Coordinated Plan. Coordinated Plan members are covered by Social Security. <br />B.Benefits Provided <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 />GERF Benefits <br />Benefits are based on a member’s highest average salary for any five successive years of allowable <br />service, age, and years of credit at termination of service. Two methods are used to compute benefits <br />for the PERA’s Coordinated Plan members. Members hired prior to July 1, 1989, receive the higher <br />of Method 1 or Method 2 formulas. Only Method 2 is used for members hired after June 30, 1989. <br />Under Method 1, the accrual rate for Coordinated Plan members is 1.2 percent for each of the first <br />10 years of service, and 1.7 percent for each additional year. Under Method 2, the accrual rate for <br />Coordinated Plan members is 1.7 percent for all years of service. For members hired prior to July 1, <br />1989, a full annuity is available when age plus years of service equal 90, and normal retirement age is <br />65. 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 />Benefit increases are provided to benefit recipients each January. The post-retirement increase is <br />equal to 50.0 percent of the cost of living adjustment (COLA) announced by the Social Security <br />Administration, with a minimum increase of at least 1.0 percent and a maximum of 1.5 percent. <br />Recipients that have been receiving the annuity or benefit for at least a full year as of the June 30 <br />before the effective date of the increase, will receive the full increase. Recipients receiving the <br />annuity or benefit for at least one month, but less than a full year as of the June 30 before the effective <br />date of the increase, will receive a reduced prorated increase. For members retiring on January 1, <br />2024 or 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 are <br />exempt from the delay to normal retirement. <br />C.Contributions <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 />GERF Contributions <br />Coordinated Plan members were required to contribute 6.50 percent of their annual covered salary in <br />fiscal year 2022, and 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, 2022, were $143,623. The <br />City’s contributions were equal to the required contributions as set by state statutes.
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