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<br />CITY OF ARDEN HILLS, MINNESOTA
<br />NOTES TO FINANCIAL STATEMENTS
<br />DECEMBER 31,2001
<br />
<br />DEFINED BENEFIT PENSION PLANS - STATEWIDE
<br />
<br />A. Plan Deseription
<br />
<br />All full-time and certain part-time employees of the City are covered by defined benefit plans administered by the
<br />Public Employees Retirement Association of Minnesota (PERA). PERA administers the Public Employees
<br />Retirement Fund (PERF), which is a cost-sharing, multiple-employer retirement plan, This plan is established
<br />and administered in accordance with Minnesota Statutes, Chapters 353 and 356,
<br />
<br />PERF members belong to either the Coordinated Plan or the Basic Plan, Coordinated Plan members are covered
<br />by Social Security and Basic Plan members are not. All new members must participate in the Coordinated Plan,
<br />
<br />PERA provides retirement benefits as well as disability benefits to mcmbers, and benefits to survivors upon death
<br />of eligible members, Benefits are established by State Statute, and vest after three years of credited service, The
<br />defined retirement 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 tennination of service.
<br />
<br />Two methods are used to compute benefits for PERF's Coordinated and Basic Plan mernbers, The retiring
<br />member receives the higher of a step-rate benefit accrual formula (Method 1) or a level accrual formula (Method
<br />2), Under Method I, the annuity accrual rate for a Basic Plan member is 2,2 percent of average salary for each of
<br />the fIrst 10 years of service and 2.7 percent for each remaining year. The annuity accrual rate for a Coordinated
<br />Plan member is 1.2 percent of average salary for each of the first 10 years and 1.7 percent for each remaining
<br />year. Under Method 2, the annuity accrual rate is 2,7 percent of average salary for Basic Plan members and 1.7
<br />percent for Coordinated Plan members for each year of service. A reduced retirement annuity is also available to
<br />eligible members seeking early retirement.
<br />
<br />There are different types of annuities available to members upon retirement. A normal annuity is a lifetime
<br />annuity that ceases upon the death Dfthe retiree - - no survivor annuity is payable. There are also various types of
<br />joint and survivor annuity options available which will reduce the monthly normal annuity amount, because the
<br />annuity is payable over joint lives, Members may also leave their contributions in the fund upon termination of
<br />public service in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available
<br />at any time to members who leave public service, but before retirement benefits begin.
<br />
<br />The benefit provisions stated in the previous paragraphs of this section are current provisions and apply to active
<br />plan participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are
<br />bowld by the provisions in effect at the time they last terminated their public service,
<br />
<br />PERA issues a publicly available [mancial report that includes [mancial statements and required supplementary
<br />information for PERF and PEPFF. That report may be obtained by writing to PERA, 60 Empire Drive, Suite
<br />200, St. Paul, Minnesota 55103-1855 or by calling 651-296-7460 or 1-800-652-9026.
<br />
<br />B. Fnnding Policy
<br />
<br />Minnesota Statutes Chapter 353 sets the rates for employer and employee contributions. These statutes are
<br />established and amended by the state legislature, The City makes annual contributions to the pension plans equal
<br />to the amount required by state statutes, PERF Basic Plan members and Coordinated Plan members are required
<br />to contribute 8,75 percent and 4.75 percent, respectively, of their annual covered salary, The City is reqnired to
<br />contribute the following percentages of annual covered payroll: 11.43 percent for Basic Plan PERF members,
<br />and 5,18 percent for Coordinated Plan PERF members, Members and employers contribution rates for Basic and
<br />Coordinated members will increase by 0.35 percent effective January 2002, The City's contributions to the
<br />PERF for the years ending December 31,2001,2000, and 1999 were $43,560, $42,624, and $40,214,
<br />respectively. The City's contributions were equal to the contractually required contributions for each year as set
<br />by state statute,
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