4.1 ERMUSR 04-14-2020 - Laserfiche WebLink

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Elk River Municipal Utilities Elk River, Minnesota Notes to the Financial Statements December 31, 2019 Note3:Defined Benefit Pension Plans - Statewide A.Plan Description The Utilitiesparticipates 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 accordancewith 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 EmployeesRetirement Plan(GERP) All full-time and certain part-time employees of the Utilitiesare covered by the General Employees Retirement Plan (GERP). GERP members belong to the Coordinated Plan. Coordinated Plan members are covered by Social Security. B.Benefits Provided PERA provides retirement, disability and death benefits. Benefit provisions are established by statestatute and can only be modified by the state Legislature. 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. GERP Benefits GERP benefits are based on a member’s highest average salary for any five successive years of allowable service, age, andyears of credit at termination of service. Two methods are used to compute benefits for PERA's Coordinated Plan members. Members hired priorto July 1, 1989 receive the higher of Method 1 or Method 2 formulas. Only Method 2 is used for members hired after June 30, 1989. Under Method 1, the accrual rate for Coordinated members is 1.2 percent of average salary for each of the first 10 years of service and 1.7 percent of average salary for each additional year. Under Method 2, the accrual rate for Coordinated members is 1.7 percent for average salary for all years of service. For members hired prior to July 1, 1989 a full annuity is available whenage plus years of service equal 90 and normal retirement age is 65. For members hired on or after July 1, 1989 normal retirementage is the age for unreduced Social Security benefits capped at 66. Annuities, disability benefits and survivor benefits are increased effective every January 1. Beginning January 1, 2019, the postretirement increase will be equal to 50 percent of the cost-of-living adjustment (COLA) announced by the SSA, with a minimum increase of at least 1 percent and a maximum of 1.5 percent. Recipients that have been receiving the annuity or benefit for at least a full year as of the June 30 before the effective date of the increase will receive the full increase. For recipients receiving the annuity or benefit for at least one month but less than a full year as of the June 30 before the effective date of the increase will receive a reduced prorated increase. For members retiring on January 1, 2024, or later, the increase will be delayed until normal retirement age (age 65 if hired prior toJuly 1, 1989, or age 66 for individuals hired on or after July 1, 1989). Members retiring under Rule of 90 are exempt from the delay to normal retirement. C.Contributions Minnesota statuteschapter 353 sets the rates for employer and employee contributions.Contribution rates can only be modified by the state Legislature. General Employees Fund Contributions Coordinated Planmembers were required to contribute 6.50 percent of their annual covered salary in fiscal year 2019and the Utilities was required to contribute 7.50 percent for Coordinated Plan members. The Utilitiescontributions to the General Employees Fundfor the years ending December 31, 2019,2018and 2017were$285,668,$265,424, and $257,780, respectively.The Utilitiescontributions were equal to therequired contributions for each year as set by state statute. 41 131