5.1. ERMUSR 05-08-2012 - Laserfiche WebLink

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ELK RIVER MUNICIPAL UTILITIES ELK RIVER, MINNESOTA NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2011 AND 2010 Note 3: DEFINED BENEFIT PENSION PLANS-STATEWIDE-CONTINUED Two methods are used [o compute benefits for PERA's Coordinated and Basic Plan members. The retiring member receives the higher of step-rate benefit accrual formula (Method I) or a level accrual formula (Method 2). Under Method I, the annuity accrual rate for a Basic Plan member is 2.2 percent of average salary for each of the first 10 years of service and 2.7 percent for each remaining year. The annuity accrual rate for a Coordinated Plan member is 1.2 percent of average salary for each of [he firs[ 10 years and 1.7 percent for each remaining year. Under Method 2, the annuity accrual rate is 2.7 percent of average salary for Basic Plan members and 1.7 percent for Coordinated Plan members for each year of service. For all GERF members hired prior to July 1, 1989 whose annuity is calculated using Method 1, a full annuity is available when age plus years of service equal 90. Normal retirement age is 65 for Basic and Coordinated members hired prior to July 1, 1989. Normal retirement age is [he age for unreduced Social Security benefits capped a[ 66 for Coordinated members hired on or after July I, 1989. A reduced retirement annuity is also available to eligible members seeking early retirement. There are different types of annuities available to members upon retirement. Asingle-life annuity is a lifetime annuity that ceases upon death of the retiree--no survivor annuity is payable. There are also various types ofjoint and survivor annuity options available which will be payable overjoint lives. Members may also leave their contributions in [he fund upon termination of public service, in order to qualify for a deferred annuity at retirement age. Refunds of contributions are available at any time to members who leave public service, 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 no[ receiving them ye[, are bound by the provisions in effect at the time they last terminated their public service. PERA issues a publicly available financial report that includes financial statements and required supplementary information for GERF. That report may be obtained on the Interne[ a[ www.mnpera.org, by writing to PERA, 60 Empire Drive #200, St. Paul, Minnesota, 55103-2088 or by calling (651) 296-7460 or I-800-652-9026. B. Funding policy Minnesota statutes, chapter 353 sets the rates for employer and employee contributions. These statutes are established and amended by the State legislature. The Utilities makes annual contributions to the pension plans equal to the amount required by Minnesota statutes. GERF Basic Plan members and Coordinated Plan members were required to contribute 9.1 percent and 6.2 percent, respectively, of [heir annual covered salary in 2011. In 201 I, the Utilities was required to contribute the following percentages of annual covered payroll: 11.78 percent for Basic Plan GERF members and 7.25 percent for Coordinated Plan GERF members. The Utilities' contributions to [he General Employees Retirement Fund for the years ending December 31, 2011, 2010 and 2009 were $160,459, $153,634, and $144,641, respectively. The Utilities' contributions were equal to the contractually required contributions for each year as set by Minnesota statute. 48