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" ~`~"'~~`''~ ~ STATE OF MINNESOTA <br />'~ [. e', .~y. <br />+. ~ ~J <br />;,~.~.~-`. OFFICE OF THE STATE AUDITOR <br />~~;~, v <br />~~; ~~ '''' "" _`J SUITE 500 <br />"=~~'' `V 525 PARK STREET <br />REBF.,CCA OTTO SAINT PAUL, MN 55103-2139 <br />STATE AiJDITOR <br />(651)296-2551 (Voice) <br />(651)296-4755 (Fax) <br />state.auditor@state.mn.us (E-mail) <br />I-800-627-3529 (Relay Service) <br />Statement of Position <br />Required Municipal Contributions to Volunteer Firefighters' Pension <br />Plans <br />State law requires a municipality to pay a minimum annual contribution to the special <br />fund of its affiliated volunteer fire relief association, unless the special fund is fully <br />funded or fire state aid is sufficient to cover the municipal obligation. ~ The special fund <br />is a fund established and maintained within a relief association to pay service pensions to <br />retiring members. A pension plan is "fully funded" when there are sufficient assets to <br />cover future liabilities. <br />The funded status of a special fund is affected primarily by changes to benefit levels (i.e., <br />liabilities increase) and by investment gains or losses (i. e., assets increase or decrease). <br />Benefit increases and investment losses decrease a fund's assets, thereby increasing the <br />likelihood that a municipal contribution will be required. A decrease in the funded status <br />will also likely increase the size of the required contribution. <br />Whether a municipal contribution is required and the amount of the required contribution <br />is determined by using a statutory formula. The formula varies depending on whether the <br />plan is a lump sum plan or a monthly service pension plan.2 <br />°-,-~ Lump Sum Plans <br />For lump sum plans, the minimum required municipal contribution equals the financial <br />requirements of the special fund minus I) the amount of fire state aid to be received <br />during the following calendar year; and 2) the amount of any contributions to the special <br />fund from the active members of the relief association to be received during the following <br />calendar year. In addition, five percent annual interest on the assets is also subtracted.3 <br />~ Minn. Stat. § 69.772, subd. 3 & 4; Minn. Stat. § 69.773, subd. 5. In some instances, a municipal <br />contribution may be triggered even though the pension plan is fully funded. <br />2 See Minn. Stat. § 69.772, subd. 3 (for lump sum service pensions) and Minn. Stat. § 69.773, subd. 5 (for <br />monthly service pensions). There is no required municipal contribution for a defined contribution plan. <br />s Minn. Stat. § 69.772, subd. 3(d). <br />Reviewed: July 2010 <br />Revised: July 2010 <br />2009-2001 <br />This Statement of Position is not legal advice and is subject to revision. <br />An Equal Opportunity Employer <br />