5.3. ERMUSR 04-12-2016 - Laserfiche WebLink

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ELK RIVER MUNICIPAL UTILITIES ELK RIVER,MINNESOTA NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31,2015 Note 3: DEFINED BENEFIT PENSION PLANS-STATEWIDE A. Plan description The Utilities participates in the following cost-sharing multiple-employer defined benefit pension plans administered by the Public Employees Retirement Association of Minnesota(PERA). PERA's defined benefit pension plans are established and administered in accordance with Minnesota statutes,chapters 353 and 356. PERA's defined benefit pension plans are tax qualified plans under Section 401 (a)of the Internal Revenue Code. General Employees Retirement Fund(GERF) All full-time and certain part-time employees of the Utilities are covered by the General Employees Retirement Fund (GERF). GERF members belong to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic Plan members are not. The Basic Plan was closed to new members in 1967. All new members must participate in the Coordinated Plan. B. Benefits provided PERA provides retirement,disability and death benefits. Benefit provisions are established by Minnesota statute and can only be modified by the state legislature. Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. Members in plans that are at least 90 percent funded for two consecutive years are given 2.5 percent increases. Members in plans that have not exceeded 90 percent funded,or have fallen below 80 percent,are given 1 percent increases. The benefit provisions stated in the following 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. GERF benefits Benefits are based on a member's highest average salary for any five successive years of allowable service,age,and years of credit at termination of service.Two methods are used to compute benefits for PERA's Coordinated and Basic Plan members.The retiring member receives the higher of a step-rate benefit accrual formula(Method 1)or a level accrual formula(Method 2).Under Method 1,the annuity accrual rate for a Basic Plan member is 2.2 percent of average salary for each of the first ten 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 the first ten 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 members hired prior to July 1, 1989,a full annuity is available when age plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989,normal retirement age is the age for unreduced Social Security benefits capped at 66. C. Contributions Minnesota statutes,chapter 353 sets the rates for employer and employee contributions. Contribution rates can only be modified by the state legislature. GERF contributions Basic Plan members and Coordinated Plan members were required to contribute 9.10 percent and 6.50 percent, respectively,of their annual covered salary in calendar year 2015. The Utilities was required to contribute 11.78 percent of pay for Basic Plan members and 7.50 percent for Coordinated Plan members in calendar year 2015. The Utilities contributions to the GERF for the years ending December 31,2015,2014 and 2013 were$230,074,$203,953 and $185,983,respectively. The Utilities contributions were equal to the contractually required contributions for each year as set by Minnesota statute. 138