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<br />Funding Ratios <br /> <br />Funding ratios explain how well funded a plan is by showing the relationship between its <br />assets and liabilities. High ratios can reflect low benefit levels in comparison to pension plan <br />surpluses. Low ratios may signal the need for greater contributions. The ERFD relief Board <br />believes that it has fiduciary responsibilities to both the membership and to the Council. The <br />responsibility to the membership is to seek the highest financially sound benefit level. The <br />responsibility to the Council is to not expose the city to any financial risk associated with <br />mandatory contributions. The board believes that a funding ratio around one hundred <br />percent represents that important balance. One hundred percent means that there exists an <br />asset dollar for every dollar of liability. The Relief Association was 98.9% funded for 2004. <br />We project the benefit level of $4,000 being 99.2% funded for 2005. <br /> <br />Action Requested <br /> <br />The Association is requesting that the Council approve an increase in the benefit level for <br />2006 to $4,175 per each year of service. Using the State schedules we project the 2006 <br />increase to be 101.2% funded. <br /> <br />Since the State of Minnesota provides the basic funding for relief association, the State <br />Auditor maintains strict oversight of the management of funds through reporting and <br />statutes. By August 1 st each year, all Associations must file reports that estimate the income <br />for the prior year and compare the income to the accrued liability of the fund. <br /> <br />The Relief Association membership thanks the Council for its past and future support. <br /> <br />Sincerely, <br /> <br /> <br />" \ <br />