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<br />CITY OF ARDEN HILLS, MINNESOTA
<br />NOTES TO FINANCIAL STATEMENTS
<br />DECEMBER 31, 2004
<br />
<br />Note 4: DEFlNED BENEFlT PENSION PLAN - STATEWIDE
<br />
<br />A. Plan Description
<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 and
<br />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 by
<br />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 members, and benefits to survivors upon death of
<br />eligible members. Benefits are established by Minnesota statute, and vest after three years of credited service. The
<br />defmed retirement benefits are based on a member's highest average salary for any five snccessive years of allowable
<br />service~ age, and years of credit at termination of service.
<br />
<br />Two methods are used to compute benefits for PERF's Coordinated and Basic Plan members. The retiring member
<br />receives the higher of a step-rate benefit accrual fommla (Method I) or a level accrual formula (Method 2), Under
<br />Method I, the annuity accrual rate for a Basic Plan member is 2.2 percent of average salary for each of the first 10
<br />years of service and 2.7 percent for each remaining year, The annuity accrual rate for a Coordinated Plan member is
<br />1.2 percent of average salary for each of the first 10 years and 1.7 percent for each remaining year, Under Method 2,
<br />the annnity accrual rate is 2.7 percent of average salary for Basic Plan members and 1.7 percent for Coordinated Plan
<br />members for each year of service. A reduced retirement annuity is also available to eligible members seeking early
<br />retirement
<br />
<br />There are different types of annuities available to members upon retirement, A single-life annnity is a lifetime
<br />annnity that ceases upon death of the retiree--no survivor annuity is payable. There are also various types of joint
<br />and survivor annnity options available which will be payable over joint lives. Members may also leave their
<br />contnbutions in the fimd upon termination of public service, in order to qualify for a deferred annnity at retirement
<br />age, Refimds of contributions are available at any time to members who leave public service, but before retirement
<br />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 />bound by the provisions in effect at the time they last terminated their public service.
<br />
<br />PERA issues a publicly available fmancial report that includes financial statements and required supplementary
<br />information for PERF and PEPFF. That report may be obtained on the web at nmpera.org, by writing to PERA, 60
<br />Empire Drive #200, St. Paul, Minnesota, 55103-2088 or by calling (651) 296-7460 or 1-800-652-9026,
<br />
<br />B, Funding Policy
<br />
<br />Minnesota statutes, cbapter 353 sets the rates for employer and employee contributions. These statutes are
<br />established and amended by the State legislature, The City makes annnal contributions to the pension plans equal to
<br />the amount required by Minnesota statutes. PERF Basic Plan members and Coordinated Plan members are required
<br />to contribute 9.1 0 percent and 5.10 percent, respectively, of their annual covered salary. PEPFF members were
<br />required to contnbute 6.20 percent of their annual covered salary. The City is required to contnbute the following
<br />percentages of annual covered payroll: 11.78 percent for Basic Plan PERF members, 5.53 percent for Coordinated
<br />Plan PERF members, and 9.30 percent for PEPFF members. The City's contributions to the PERF for the years
<br />ending December 31,2004,2003 and 2002 were $61,421, $57,633, and $52,340, respectively. The City's
<br />contributions were equal to the contractually required contnbutions for each year as set by :Minnesota statute.
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