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- _____n_________ ----------- I CITY OF ARDEN HILLS, MINNESOTA .' NOTES TO FINANCIAL STATEMENTS I DECEMBER 31, 1996 Note 4, DEFINED BENEFIT PENSION PLANS - STATEWIDE A. Plan Description , All full-time and certain part-time employees of the City are covered by defined benefit plans administered by I the Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees Retirement Fund (pERF) which is a cost-sharing, multiple-employer retirement plan. This plan is established and administered in accordance with Minnesota Statutes, Chapters 353 and 356. PERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered I by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan. PERA provides retirement benefits as well as disability benefils to members, and benefils to survivors upon I death of eligible members. Benefils 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 tennination of service. Two methods are used to compote benefils for PERF's Coordinated and Basic Plan members. The retiring I member receives the higher of the step-rate benefit accrual formula (Method I) or a level accrual formula (Method 2). Under Method 1, the annuity accruaI rate for a Basic Plan member is 2.0 percent of average salary I for each of the first 10 years of service and 2.5 percent for each remaining year. For a Coordinated Plan member, the annuity accrual rate is 1.0 percent of average salary for each of the first 10 years and 1.5 percent for each remaining year. Using Method 2, the annuity accrual rate is 2.5 percent of average salary for Basic Plan members and 1.5 percent for Coordinated Plan members. For PERF members whose annuity is calculated us~ Method I, a full annuity is available when age plus years of service equal 90. A reduced retirement annuity is I also available to eligible members seeking early retirement. There are different types of annuities available to members upon retirement. A normal annuity is a lifetime I 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 reduce the monthly normal annuity amount, because the annuity is payable Over joint lives. Members may also leave their contributions in the fund upon tennination of public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are I available at any time to members who leave public service, but before retirement benefils begin. The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active I plan partieipanls. Vested, tenninated employees who are entitled to benefils but are not receiving them yet are bound by the provisions in effect at the time they last tenninated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary I information for PERF. That report may be obtained by writing to PERA, 514 St. Peter Street, #200, St. Paul, Minnesota 55102 or by ca11ing (612) 296-7460 or 1-800-652-9026. B. Fuoding Policy I Minnesota Statutes Chapter 353 sets the rates for employer and employee contnbutions. 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. PERF Basic Plan members and Coordinated Plan members are I required to contribute 8.23% and 4.23%, respectively, of their annual covered salary. The City is required to contribute 4.48% for Coordinated Plan PERF members. The City's contributions for the years ending December 31, 1996, and 1995 were $28,578 and $28,198, respectively, equal to the contractually required I contributions for each year as set by state statute. -, -18- I