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CITY OF ARDEN HILLS, MINNESOTA I NOTES TO FINANCIAL STATEMENTS DECEMBER 31, ]997 I . Note 4: DEFINED BENEFIT PENSION PLANS - STATEWIDE - CONTINUED PERA provides retirement benefits as well as disability benefits to members, and benefits to survivors upon I death of eligible members. Benefits are establisbed by State Stalute 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. I Two methods are used to compute benefits for PERF's Coordinated and Basic Plan members. The retiring member receives the higher of a slep-rate benefit accrual formula (Method I) or a level accrual formula (Method 2). Under Method ], the annuity accrual rate for a Basic Plan member who retires before July], 1997 is 2% of . average salary for each of the first 10 years of service and 2.5% for each remaining year. The annuity accrual rate for Basic members who retire on or after July 1, 1997 is 2.2% of average salary for each of the first 10 years of service and 2.7% for each remaining year. For a Coordinated Plan member ho retires before July 1, 1997, the I annuity accrual rate is 1 % of average salary for each of the first 10 years and 1.5% for each remaining year. For Coordinated members \vho retire on or after July 1, J 997, the annuity accrual rates increase by .2% (to 1.2 % of average salary for each of the first]O years and 1.7% for each remaining year). Under Method 2, the annuity accrual rate is 2.5% of average salary for Basic Plan members and 1.5% for Coordinated Plan members who . retire before July 1, 1997. Annuity accrual rates increase 0.2% for members who retire on or after July 1, 1997. For PEPFF members, the annuity accrual rate is 2.65% for each year of service for members retiring before July 1, 1997. Effective July I, 1997, the annuity accrual rate is increased to 3,0%. For all PEPFF members and for PERF members whose annuity is calculated using Method], a full annuity is available when age plus years . of service equal 90. 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 nomlal annuity is a lifetime annuity that ceases upon the death of the retiree -- no survivor annuity is payable. There are also various types I 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 termination 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 services, 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, PERF issues a publicly available financial report that includes financial statements and required supplementary information for PERF and PEPFF. That report may be obtained by writing to PERA, 514 St. Peter Street, #200, . St. Paul, Minnesota, 55102 or by calling (612) 296-7460 or 1-800-652-9026. B. Funding Policy J\1innesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are I 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. PEPFF members are required to contribute 7.60% of their annual covered salary. The City of Arden Hills is required to contribute the following percentages of annual covered payroll: 10.73% for Basic Plan PERF members, 4.48% for Coordinated Plan PERF members, and 11.40% for PEPFF members. The City's contributions to the Public I Employees Retirement Fund for the years ending December 31, 1997 and 1996 were $33,67] and $28,578, respectively. The City's contributions were equal to the contractually required contributions for each year as set by state statutes, . I . I -18- .