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CITY OF ELK RIVER, MINNESOTA <br />NOTES TO THE FINANCIAL STATEMENTS <br />DECEMBER 31, 2017 <br />57 <br />NOTE 9: DEFINED BENEFIT PENSION PLANS – STATE-WIDE <br />A.Plan Description <br />The City participates in the following cost-sharing multiple-employer defined benefit pension plans administered by the <br />Public Employees Retirement Association of Minnesota (PERA). PERA’s defined benefit pension plans are established <br />and administered in accordance with Minnesota statutes, chapters 353 and 356. PERA’s defined benefit pension plans <br />are tax qualified under section 401 (a) of the Internal Revenue Code. <br />1.General Employees Retirement Fund (GERF) <br />All full-time and certain part-time employees of the City of Elk River are covered by the GERF. GERF members belong <br />to either the Coordinated Plan or the Basic Plan. Coordinated Plan members are covered by Social Security and Basic <br />Plan members are not. The Basic Plan was closed to new members in 1967. All new members must participate in the <br />Coordinated Plan. <br />2.Public Employees Police and Fire Fund (PEPPF) <br />The PEPFF, originally established for police officers and firefighters not covered by a local relief association, now <br />covers all police officers and firefighters hired since 1980. Effective July 1, 1999, the PEPFF also covers police officers <br />and firefighters belonging to a local relief association that elected to merge with and transfer assets and administration to <br />PERA. <br />B.Benefits Provided <br />PERA provides retirement, disability, and death benefits. Benefit provisions are established by state statute and can only <br />be modified by the state legislature. <br />Benefit increases are provided to benefit recipients each January. Increases are related to the funding ratio of the plan. <br />Members in plans that are at least 90% funded for two consecutive years are given 2.5% increases. Members in plans <br />that have not exceeded 90% funded, or have fallen below 80%, are given 1% increases. <br />The benefit provisions stated in the following paragraphs of this section are current provisions and apply to active plan <br />participants. Vested, terminated employees who are entitled to benefits but are not receiving them yet are bound by the <br />provisions in effect at the time they last terminated their public service. <br />1.GERF Benefits <br />Benefits are based on a member’s highest average salary for any five successive years of allowable service, age, and <br />years of credit at termination of service. Two methods are used to compute benefits for PERA’s Coordinated and Basic <br />Plan members. The retiring member receives the higher of a step-rate benefit accrual formula (Method 1) or a level <br />accrual formula (Method 2). Under Method 1, the annuity accrual rate for a Basic Plan member is 2.2% of average <br />salary for each of the first 10 years of service and 2.7% for each remaining year. The annuity accrual rate for a <br />Coordinated Plan member is 1.2% of average salary for each of the first 10 years and 1.7% for each remaining year. <br />Under Method 2, the annuity accrual rate is 2.7% of average salary for Basic Plan members and 1.7% for Coordinated <br />Plan members for each year of service. For members hired prior to July 1, 1989, a full annuity is available when age <br />plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989, normal <br />retirement age is the age for unreduced Social Security benefits capped at 66.